The Delhi High Court clarified that when the Initiating Officer has written in detail as to the reasons are to believing that the petitioner is a Benamidar, this opinion cannot be tinkered with by the Court, especially when the petitioner has an efficacious remedy before an Adjudicating Officer under Section 26 of the Benami Act.
From the perusal of the Show Cause Notice and the attachment order, the Court found that the identity of the petitioner was revealed not only through the contents in the Pen drive seized by the Benami Prohibition Officer during the course of search by the Income Tax Department, but also in the statement of beneficial owners.
As far as the contention of the petitioner regarding the definition of Benami transaction under Section 2 (9) of the Benami Act, the Court said that it would not like to enter into the complexities of the merit and evidence of the case. Further, as far as the previous approval of the Approving Authority in writing for provisionally attaching the property is concerned, the Court clarified that there is no statutory requirement that a copy of such approval by the Approving Authority should be supplied to Benamidar or Beneficial owner along with the attachment order.
The Division Bench comprising Justice V Kameswar Rao and Justice Vinod Kumar refused to consider the validity of the show cause notice issued by the Initiating Officer, Benami Prohibition Unit, observing that they cannot enter into the question of standard of proof in accordance with Bharatiya Sakshya Adhiniyam, 2023, and it is enough that the Initiating Officer seized of some material and based on such material he formed an opinion.
The Bench referred to the expression “has reason to believe” as occurring in Section 24 of the Benami Act, and observed that the Benami Act provides a quasi-judicial mechanism, hierarchy and procedure to deal with Benami transactions, which is civil in nature. Since Benami transactions are also punishable as a criminal offence, the Bench also referred to the definition of this expression as found in Section 2(29) of Bharatiya Nyaya Sanhita, 2023 (BNS), which is equivalent to Section 26 of the IPC, as well as in Section 35 of Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), which is equivalent to Section 41(1)(b) of the CrPC.
The Bench explained that in Section 35 of BNSS, a police officer is empowered to arrest a person on reasonable suspicion, which may lead him to believe a person to be involved in a cognizable offence. Whereas a reasonable suspicion may be a reason for a police officer to believe criminal involvement of a person under BNSS, the Benami Act makes the precondition more stringent.
In Section 24 of the Benami Act, the Bench pointed out that based only on some material in his possession, the Initiating Officer can form a belief of a person being a Benamidar in respect of a property. Thus, the standard of basis of belief is on a higher pedestal in the Benami Act than the belief under BNS and BNSS, but it falls short of ‘prima-facie case’, which is a standard for a Judicial or Quasi-Judicial Authority for proceeding against a person under respective laws.
Therefore, the Bench emphasised that Section 24 (1) of the Benami Act does not burden an Initiating Officer to first work out a prima-facie case before issuing a show cause notice, and he is empowered either to continue with the provisional attachment made under Section 24 (3) of the Benami Act or revoke such provisional attachment with prior approval of the Approving Authority.
Briefly, the petitioner runs a business of Goods Transport Services in the name of Shyam Air Couriers since 2009 and has been providing goods courier services since 2014 to Vestige Marketing Pvt Ltd. (VMPL), a marketing company that deals in FMCG and health-related products. A major portion of VMPL’s expenditure pertains to commission payments to the members. In 2023, a search action under Section 132 of the Income Tax Act was conducted on VMPL, its auditors and related entities, which unearthed Excel sheets titled “Bogus Expenses Employee-Wise” in a pen drive.
It was found that in lieu of the payment made by VMPL Group through the banking channel towards the bogus bills, the cash was returned to the auditors, which indicated the accommodation entries. The Excel sheet titled “Bogus Expenses Employee-Wise” discovered in a pen drive also listed ‘Shyamsundar Choudhary’ receiving bogus payments. Accordingly, the Initiating Officer of Benami Prohibition Unit (respondent) issued Show Cause Notices to the petitioner to explain as to why said property should not be treated as Benami. Thereafter, the respondent provisionally attached the bank accounts of the petitioner.
Cases Distinguished:
Central Bureau of Investigation vs. V.C. Shukla and Ors. [MANU/SC/0168/1998]
Directorate of Enforcement through Deputy Director vs. Poonam Malik [2025 SCC OnLine Del 8397]
Appearances:
Advocates Nitin Kanwar, Parul Kanwar, Rajiv Kumar, Dushyant Nayak, Shivam Jain and Jitendra Kumar, for the Petitioner
Senior Advocate Shlok Chandra, along with Advocates Naincy Jain and Madhavi Shukla, for the Respondent
