TMI Blog2023 (3) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... Liquidator /Petitioner, under Section 33 (2) of the I B Code, 2016, for Liquidation of the Corporate Debtor, a Liquidation Order, was passed on 14.02.2019. It appears that the Appellant / Petitioner / Liquidator (pending the Liquidation Proceeding), had received a Notice dated 01.11.2019, from the Respondent, to Show Cause, as per Section 24(1) of the The Prohibition of Benami Property Transactions Act, 1988, as to why the Property being the proportionate share of the Land, owned by the Corporate Debtor, out of the total extent of 889.82 Acres, where the factory of the Corporate Debtor, was located, should not be treated as Benami Property, and that, any Reply ought to be provided on or before 21.11.2019. The Respondent, also had issued a Provisional Attachment Order dated 01.11.2019, as per Section 24(3) of the Act, 1988. The crystalline stand of the Appellant / Liquidator is that, there was no Cash Inflows into the Company, either in the form of Cash or Cheque, from the Promoters of the Company or others, and the same is evidenced from the Disclosure on Specified Bank Notes, given by the Statutory Auditor, in his Report for the Financial year 2016-17, filed with the Minis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal), under the I B Code, 2016. In short, the Appellant / Liquidator, cannot take umbrage, either under the ingredients of Section 32A, coupled with Section 60(5) of the I B Code, 2016. This Tribunal, taking note of the divergent contentions advanced on either side, considering the fact that Liquidator, cannot bypass a remedy, provided under The Benami Transactions (Prohibition) Act, 1988, in assailing the Order, passed by the Adjudicating Authority, before the Appellate Tribunal, under the PBPT Act, 1988, keeping in mind of the surrounding facts and circumstances of the case, in a holistic fashion, comes to a resultant conclusion that the view arrived at, by the Adjudicating Authority (National Company Law Tribunal, Division Bench II, Chennai), in dismissing the MA/1373/2019 and MA/1372/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017, through its Impugned Order, dated 29.03.2022, is free from Legal Infirmities. Appeal dismissed. - Company Appeal (AT) (CH) (INS) No. 188 of 2022 Company Appeal (AT) (CH) (INS) No. 189 of 2022 - - - Dated:- 13-3-2023 - [ Justice M. Venugopal ] Member ( Judicial ) And [ Shreesha Merla ] Member ( Technical ) For the Appellant : Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no sale of property of the Corporate Debtor consequent to any Resolution Plan. 17. Moreover, the provisional attachment made by the Respondents comes under the statute of Prohibition of Benami Property Transaction Act, 1988 which in itself has stipulated the due process with respect to attachment of property under Section 7 of the same. The contention of the Applicant that both being special act The Insolvency and Bankruptcy Code, 2016 should prevail over The Prohibition of Benami Property Transaction Act, 1988 as per the general principle for construction does not hold in the instant case. 18. However, in the present circumstances, as there is nothing to stop the Applicant / Liquidator herein to proceed under the relevant provision to revive the provisional attachment. And that, this Adjudicating Authority having not found any conflict between the two statutes as there is no bar in selling the property of the Corporate Debtor solely on the ground that the Corporate Debtor is under Liquidation. And that the Liquidator is also not barred by the code to add the said property into the liquidation estate. The applicant / Liquidator herein is open to approach the appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not acquired out of any alleged Benami Transactions . 8. The contention advanced on behalf of the Appellant is that there is no evidence is available to exhibit that the Promoters , brought the money into the Corporate Debtor out of Rs.400/- Crores, during the Demonetisation Time , and this aspect was not looked into by the Adjudicating Authority . Further, the Adjudicating Authority , should have been any Asset , under the Attachment , shall not be made part of the Liquidation Estate , and thus had erred in stating that the I B Code, 2016, does not bar the inclusion of the Assets , into the Liquidation Estate . 9. The plea of the Appellant is that the Adjudicating Authority ( Tribunal ), had committed an error, in directing the Appellant to claim the Relief of raising the Attachment , over the Corporate Debtor s Assets , before any other Forum , though the NCLT , is duly vested with the Jurisdiction , to set aside such Attachment . Moreover, the Adjudicating Authority ( Tribunal ), should have declared that the Assets of the Corporate Debtor , cannot be said to be the Assets , acquired out of the proceeds of the Benami Properties , in the lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , had not received the purported sum of Rs.400/- Crores and despite the same, the Respondent , had failed to release the Provisional Attachments , passed against the Corporate Debtor . 15. The Learned Counsel for the Appellant, refers to the Judgment of this Tribunal , dated 09.04.2021 in Comp. App (AT) (INS.) No. 575 of 2019, in The Directorate of Enforcement v. Sh. Manoj Kumar Agarwal 2 Ors. wherein at Paragraph 41, it was observed as under: 41. . If hindrance is being created by the attachment or by taking over the possession, it would be a question of priority arising out of or in relation to the insolvency resolution or liquidation proceedings of the Corporate Debtor and such question can be decided by the Adjudicating Authority under Section 60 (5) (c) of IBC which reads as under: 60..... (5).... (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code. 16. According to the Appellant, the inapplicability of the Embassy Judgment , passed by the Hon ble Supreme Court, was mentioned in Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that only such property which are derived or obtained directly or indirectly as a result of a criminal activity can be regarded as proceeds of crime and there should be some materials to suggest formation of opinion in regard to reason to believe that the properties are proceeds of crime . 21. The Learned Counsel for the Appellant, adverts to the Judgment of the Appellate Tribunal (Prohibition of Benami Property Transactions Act, 1988) dated 31.10.2018 (in FPA-PMLA-2173/MUM/2018) in Bank of India v. The Deputy Director, Directorate of Enforcement, Mumbai, wherein, at Paragraph Nos. 11, 12 and 40, it is categorically observed that the Properties , already mortgaged to the Banks , much before the alleged offence, has to be released. 22. The Learned Counsel for the Appellant comes out with a plea, that the Corporate Debtor , had availed numerous Loans and Working Capital Facility , from the Financial Creditors / Banks , and the attached properties of the Corporate Debtor , were mortgaged , to the Banks , as Collateral Securities , to the facilities availed. Hence, the properties of the Corporate Debtor , which are not involved in the alleged Offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istent contained in any other enactment, including the Income Tax Act. 28. The Learned Counsel for the Appellant submits that in Bank of India v. The Deputy Director, Directorate of Enforcement, Mumbai, the Appellate Tribunal , in its Judgment dated 31.10.2018, had observed that the I B Code, 2016, overrides the Proceedings of PMLA, because of the reasons that the Properties are mortgaged with the Bank and hence the Provisional Attachment , is quashed, and hence, the I B Code, 2016, overrides the Proceedings of the Prohibition of Benami Property Transactions Act, 1988, especially, on the Mortgage Properties of the Corporate Debtor . 29. In conclusion, the Learned Counsel for the Appellant takes a stand that the I B Code, 2016, was enacted with a Prime Aim , that the Insolvency Resolution of the Corporate Debtor , in a time bound manner for Maximisation of Value of its Assets , and balance the interests of all the Stakeholders , including Alteration in the Order of priority of payment of Government Dues . In fact, the provisions of the I B Code, 2016, will prevail over any Act , in which, the Government claims priority, touching upon the Assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty under sub-section (3) of section 26 holding such property to be a benami property, the Adjudicating Authority shall, after giving an opportunity of being heard to the person concerned, make an order confiscating the property held to be a benami property: Provided that where an appeal has been filed against the order of the Adjudicating Authority, the confiscation of property shall be made subject to the order passed by the Appellate Tribunal under section 46: Provided further that the confiscation of the property shall be made in accordance with such procedure as may be prescribed. (2) Nothing in sub-section (1) shall apply to a property held or acquired by a person from the benamidar for adequate consideration, prior to the issue of notice under sub-section (1) of section 24 without his having knowledge of the benami transaction. (3) Where an order of confiscation has been made under sub-section (1), all the rights and title in such property shall vest absolutely in the Central Government free of all encumbrances and no compensation shall be payable in respect of such confiscation. (4) Any right of any third person created in such property with a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon'ble Supreme Court in Jeydayal Poddar V Bibi Hazre reported in 1974 SCC Page 3. It comes to be known that the 'provisional Attachment' dated 01.11.2019 was affirmed on 10.11.2021 by the 'Competent Authority,' under Section 24 (3) of 'The Benami Transactions (Prohibition) Act, 1988'. Also, it is crystalline clear that the Applicant / Appellant cannot embark upon a method to avoid / evade / supplant or circumvent the procedural hierarchy, as envisaged under the 'The Benami Transactions (Prohibition) Act, 1988', to be fulfilled by an aggrieved / affected person. To put it succinctly, the Applicant / Resolution Professional of M/s. Padmaadevi Sugars Ltd. cannot take umbrage under Section 60 (5) of the Insolvency Bankruptcy Code, 2016 etc., in preferring an Application in MA(IBC)/05(CHE)/2020 in CP (IB) No.768(CHE)/2018 before the Adjudication Authority' (National Company Law Tribunal, Division Bench - II, Chennai), for the latent and patent reason that the 'procedural wrangle' is to be adhered to and followed by the 'Aggrieved / affected parties' which cannot be 'shaked' or 'shackled with' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Madras dated 25.10.2021 in W.P. Nos. 8146 to 8150, etc., wherein at Paragraph 76 to 78, it is observed and held as under: 76. The challenge to the impugned orders under Section 24(4) fails and the respondents are directed to proceed in line with Sections 25 and 26 forthwith. All writ petitions are dismissed. The petitioners were protected during the pendency of these Writ Petitions by virtue of an undertaken given by learned Standing Counsel for the respondents that there would be no escalation of the matter to the stage of adjudication. With the passing of this order that undertaking does not continue any longer. 77. The respondents will continue with adjudication under Section 25 and complete proceedings in light with the mandate of that Section. Notices under Section 26 of the PBPT Act will be issued within a period of 30 days from date of issue of these orders accompanied with all material that the respondents rely on and proceedings under Section 26 shall be conducted scrupulously in line with the mandate thereof. 78. The petitioners shall be afforded full opportunity to put forth all contentions before the adjudicating authority who shall take note of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 (22 of 1996) and any other person as may be notified by the Central Government for this purpose; (iii) any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual; (iv) any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint-owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual; or (B) a transaction or an arrangement in respect of a property carried out or made in a fictitious name; or (C) a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership; (D) a transaction or an arrangement in respect of a property where the person providing the consideration is not traceable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ostensible transferee but another and in the other, where the term is inaccurately applied, the sale to the benamidar is fictitious and the title of the transferor is not intended to pass. The fundamental difference between these two classes is that while in the former title vests in the transferee, in the latter it remains with the transferor, and when a dispute arises the question as to who paid the consideration becomes relevant only with respect to the former class while in the latter the only question is whether any consideration was paid at all. 51. Moreover, the concept of Benami , is explained by the Hon ble Supreme Court of India in Thakur Bhim Singh (Dead) by Lrs. v. Thakur Kan Singh, reported in 1980, 3 SCC, Page 72, and the same is as under: Two kinds of benami transactions are generally recognized in India. Where a person buys a property with his own money but in the name of another person without any intention to benefit such other person, the transaction is called benami. In that case, the transferee holds the property for the benefit of the person who has contributed the purchase money, and he is the real owner. The second case which is loosely term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference of the case to the Adjudicating Authority , within 15 days of Provisional Attachment , ordered by him. 55. Rule 5 of The Prohibition of Benami Property Transaction Rules, 2016 (Appendix III) provides, that the Initiating Officer , shall provisionally Attach , any Property , in the manner provided in 2nd Schedule of Income-tax Act, 1961. Adjudication of Benami Property : 56. To be noted, that Section 26 of the Act, 1988, clarifies that (a) While Attachment , can be made on prima facie coming to the conclusion in regard to the Benami Nature of Property, it cannot be confiscated without an Adjudication . (b) Sub-section 1 (2), protects an innocuous purchaser of Benami Property , who made the Purchase , for an adequate consideration, without having knowledge of its Benami nature, before the Notice , under Section 24(1) of the Act. (c) Sub-section 2(3) of the Section 26 of the Act, provides for Vesting of Confiscated Benami Property. Section 27 of the Act, pertains to Confiscation and Vesting of Benami Property . Non-obstante Clause: 57. It is pointed out that there should be a clear inconsistency , between the two, before giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fere when he has not acted in a Bonafide manner or he acted, in a way that no reasonable Liquidator , could have acted. He cannot involve Aliens , while dealing with the Liquidator s Affairs . Appraisal: 66. At the outset, this Tribunal points out that the Appellant / Liquidator of M/s. Senthil Paper Boards Private Ltd., Coimbatore, had filed an MA/1373/2019 in MA/1130/CAA/2019 in CP/612/IB/CB/2017, before the Adjudicating Authority ( Tribunal ), seeking the Reliefs of Interim Stay , of the Order of Provisional Attachment dated 01.11.2019, made in File No. IO/PBPT/Senthil Papers Boards / 216, pending consideration of the above Application, and to set aside the Order of Provisional Attachment , dated 01.11.2019, made in the aforesaid File. 67. The Appellant / Petitioner / Liquidator, had preferred MA/1372/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017 (before the Adjudicating Authority / Tribunal ), seeking to (a) grant Interim Stay, over the operations of the Provisional Attachment Order , dated 01.11.2019, made in File No. IO/PBPT/Senthil Papers Boards / 210, and (b) Set aside the Order of Provisional Attachment , dated 01.11.2019, made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant / Petitioner / Liquidator , preferred MA/1130/CCA/2019 in CP/612/IB(CB)/2017, for convening the Meeting of both Secured and Unsecured Creditors , in regard to the proposed Scheme and the said Application , was Allowed on 08.11.2019, by the Adjudicating Authority . 72. It appears that the Appellant / Petitioner / Liquidator (pending the Liquidation Proceeding), had received a Notice dated 01.11.2019, from the Respondent, to Show Cause , as per Section 24(1) of the The Prohibition of Benami Property Transactions Act, 1988, as to why the Property being the proportionate share of the Land, owned by the Corporate Debtor , out of the total extent of 889.82 Acres, where the factory of the Corporate Debtor , was located, should not be treated as Benami Property , and that, any Reply ought to be provided on or before 21.11.2019. The Respondent, also had issued a Provisional Attachment Order dated 01.11.2019, as per Section 24(3) of the Act, 1988. 73. The Appellant / Petitioner gave his Reply dated 20.11.2019, pointing out that the Notice , issued was not warranted against the Assets of the Corporate Debtor , and as to how the Provisional Attachment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Old High Denomination Notes , were given to Senthil Group, Coimbatore, for the purchase of a Paper Mill, in Coimbatore District, belonging to Senthil Group, by Smt. Sasikala, through her Intermediaries. 78. Later, a Service Apartment at Room No.302, Shylee Nivas Service Apartments, Nutech Lushington, Old No. 41, New No. 76, Block-II, 1st Main Road, CIT Nagar, Nandanam, Chennai 35, was searched on 18.11.2017 (based on source information), during which many Original Memorandum of Understandings, Land Documents, Share Certificates, etc., were found and seized. 79. It is the stand of the Respondent that the seized material included Share Certificates of M/s. Saradha Papers and Boards Private Limited (Erstwhile name of M/s. Senthil Papers and Boards Private Limited) in the names of Shri. T.N. Vetrivel, Shri. A. Senthil Kumar, Shri. O. Arumugasamy, Shri. T.N. Mariya Gouder and Shri. M. Palanisamy. Further, a Memorandum of Understanding , mentioning the details of Sale of Assets of M/s. Senthil Papers and Boards Private Limited, along with its Paper Mill 830 Tonnes Per Day, running business and 15 MW cogeneration Power Plant, etc., where M/s. Senthil Paper and Boards Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions , are not confined to purchases only , and can extend to other Modes of Transfer , as well. The Burden to establish Benami , lies on a Person , who asserts so. The relevant circumstances were (i) Source of Consideration (ii) The nature of Possession of Property (iii) The Motives, if any (iv) The position of the Parties (v) The custody of Title Deed and (vi) The conduct of Parties in dealing with the Property, after Sale. 84. An existence of Fiduciary Relationship , is to be determined on the basis of facts and circumstances of the individual case, as per decision of the Hon ble Supreme Court of India in Marcel Martins V. M Printer Ors., AIR 2012 1987. 85. In so far as the Revocation of the Attachment , effected by the Respondent / Department is concerned, The Prohibition of Benami Property Transactions Act, 1988 , has a Viable , Effective and Efficacious Hierarchy , to be resorted to , and the Appellant , is to take Recourse , to that Remedy . Even an Appeal , is provided, under the Act, 1988, for Redressal of Grievances , suffered by an Aggrieved Person , as opined by this Tribunal . 86. A mere running of the eye of the ingredients of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 32A, coupled with Section 60(5) of the I B Code, 2016. 92. One cannot brush aside a candid fact, when a particular enactment / statute, showers certain rights , obligations , determination of remedies , then, recourse to be done by a person and also that a public law remedy, under The Prohibition of Benami Property Transactions Act, 1988 , cannot be claimed, before an Adjudicating Authority ( Tribunal ), under the I B Code, 2016, as held by this Tribunal . 93. It cannot be lost sight off, Section 67 of The Prohibition of Benami Property Transactions Act, 1988 , provides for a non-obstante clause, which runs to the following effect: 67. Act to have overriding effect.__ The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force. 94. In the instant case, it transpires that the Respondent / Department , had effected the Provisional Attachments , on 01.11.2019. As a matter of fact, the Liquidation Order , in respect of the Corporate Debtor , was passed by the Adjudicating Authority ( Tribunal ), on 14.02.2019. The other vital fact that emerges is that, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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