In what appears to be the first decision of the Adjudicating Authority (‘Authority’) (u/s 71 of the Prohibition of Benami Property Transaction Act, 1988 - ‘Act’), New Delhi, passed recently for the region of Madhya Pradesh and Chhattisgarh, the news is not good for the Tax Department’s drive against Benami transactions. The order u/s 26(3) of the Act, in Ref No: R-71/2017 titled ‘Sh. Sunder Lal Kol & Ors’., has received headlines and extensive coverage in the local newspaper of Bhopal. The newspaper has also stated that the local officers are angry and that they feel that the comments of the Authority have been very harsh.

The Act has been strictly applied by the Tax Department in its efforts to prohibit Benami transactions. The figures speak for themselves – till 30th June 2018, provisional attachments had been made in more than 1600 Benami transactions involving Benami properties valued at over Rs. 4,300 crores. The Adjudicating Authority has chosen to be strict in applying the provisions of the Act with respect to the Tax Department.

The facts in brief are that properties were allegedly bought by a Benamidar – a person of meagre means staying in a slum area, on behalf of a Beneficial Owner, being a company. The Benami Prohibition Unit (BPU), Bhopal had collected extensive evidence to support its case. A large part of the Benami transactions which have been investigated by the Tax Department are typically like this.

So, what went wrong? Three things as per the Adjudicating Authority.

1. In this case, as is normal, the properties were attached provisionally u/s 26(3) by the Initiating Officer (‘IO’) (with the previous approval of the Approving Authority). Later, within the 90 days period, he passed an order (with the prior approval of the Approving Authority) u/s 24(4) continuing the provisional attachment till the passing of the order by the Authority. Thereafter, as per section 24(5), he was to draw up a statement of the case and refer it to the Authority within 15 days from the attachment order. However, the statement was filed after 15 days.

The Authority held that when a statute requires a thing to be done as provided in the statute, the thing must be done or performed in the manner prescribed and in no other manner. In the    present case, there was a default in referring the statement of the case to the Authority within 15 days from the date of the attachment. Hence, the reference could not have been said to have been filed or referred to the Authority within the time limit specified in the Act.

The Authority further stated that by now it is a certain law that an action to be taken in a manner as provided by a statute, must be taken, done or performed in the manner prescribed and in no other manner. Relying on the Hon’ble Supreme Court case of Babu Verghese v/s Bar Council of Kerala [(1999) 3 SCC 422], the Authority held that it is the basic principle of law long settled that if the manner of doing a particular act is prescribed under any statute, the act must be done in that manner or not at all. This rule had been applied by the Hon’ble Supreme Court in Rao Shiv Bahadur Singh v. State of Vindh Pradesh (AIR 1954 SC 322), Deep Chand v. State of Rajasthan (AIR 1961 SC 1527), and State of U.P. v. Singhara Singh (AIR 1964 SC 358). This rule had since been recognized as a salutary principle of administrative law.

The Authority relied on other case law as well to hold that that if a statute had conferred a power to do an act and had laid down the method in which that power had to be exercised, it necessarily prohibited the doing of the act in any other manner than that which had been prescribed. The principle behind the rule was that if this were not so, the statutory provision might as well not have been enacted.

In view of the breach of law, the Authority held that the reference being time-barred could not be said to have been filed in accordance with law.

2. The second indictment was with reference to the provisional attachment order u/s 24(4). The Authority noted it was passed in a most cryptic manner. The IO had not specified under what provisions of section 24(4) such order of provisional attachment had been passed by him.

Reads the order – “It is provided by the PBPT Act that where the provisional attachment has been already made under section 24(3), the IO is required to pass an order continuing the provisional attachment of the property with the prior approval of the Approving Authority, till the passing of the order by the Adjudicating Authority under section 26(3). Thus, in the event where an order is already passed in terms of section 24(3) of PBPT Act, the provisional attachment order is required to be passed under section 24(4)(a) (i). In the event where no order is passed in terms of section 24(3) of PBPT Act, the provisional attachment order is required to be passed under section 24(4)(b) (i).  The IO ought to have been careful to specify the particular provision under which it is deemed fit by the IO to pass the Order.”

The Authority held that the IO and the Approving Authority had failed to apply their mind on this legal provision. Consequently, the order passed in breach of the statutory provisions was rendered illegal. Such order, therefore, could not be upheld.

3. The most significant deficiency in the said order found by the Authority was that there were no reasons whatsoever specified in the said order by the IO. The approval granted was also examined. Even the Approving Authority had accorded approval simply by stating that approval for issue of provisional attachment under section 24(4) of PBPT Act was accorded. Thus, no reasons had been formulated, stated and conveyed to the affected parties in the said provisional attachment order passed u/s 24(4).

Reads the order – “In this regard the observations and conclusions stated by the Hon’ble Supreme Court of India in the case of Kranti Associates v Masood Ahmed Khan (2010) 9 SSC 496 are relevant in which the legal position was summarized as under:

a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such decisions affect anyone prejudicially.

b. A quasi-judicial authority must record reasons in support of its conclusions.

c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must not only be done, it must also appear to be done as well.

d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial and quasi-judicial or even administrative power.

e. Reasons re-assure that discretion has been exercised by the decision maker on relevant grounds and by disregarding extraneous considerations.

f. Reasons have virtually become as indispensable a component of a decision-making process as observing principles of natural justice by judicial, quasi-judicial and even by administrative bodies.

g. Reasons facilitate the process of judicial review by superior Courts.
h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is in favor of reasoned decisions based on relevant facts. This is virtually the life blood of judicial decision making justifying the principle that reason is the soul of justice.

i. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities who deliver them. All these decisions serve one common purpose-which is to demonstrate by         reason that the relevant factors have been objectively considered. This is important for sustaining the litigants' faith in the justice delivery system.

j. Insistence on reason is a requirement for both judicial accountability and transparency.

k. If a judge or a quasi-judicial authority is not candid enough about his/her decision-making process then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or to principles of incrementalism.

l. Reasons in support of decisions must be cogent, clear and succinct. A pretense of reasons or `rubber-stamp reasons' is not to be equated with a valid decision-making process.

m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers. Transparency in decision making not only makes the judges and decision makers less prone to errors but also makes them subject to broader scrutiny. (See David Shapiro in Defense of Judicial Candor (1987) 100 Harvard Law Review 731-737).

n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision making, the said requirement is now virtually a component of human rights and was considered part of Strasbourg Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of Human Rights which requires "adequate and intelligent reasons must be given for judicial decisions".

o. In all common law jurisdictions, judgments play a vital role in setting up precedents for the future. Therefore, for development of law, requirement of giving reasons for the decision is of the essence and is virtually a part of "Due Process".

The Authority concluded by relying on the Hon’ble Supreme Court’s observation in the case of State of Rajasthan Vs. Rajendra Prasad Jain- “‘Reason’ is the heartbeat of every conclusion and without the same it becomes lifeless”.

Based on the above reasons, the Authority held that the provisional attachment order did not formulate, describe and convey the reasons for the conclusion of attaching the properties provisionally under section 24(4). Such order, therefore, could not be sustained as legal. The Authority thought it necessary not to go into the merits of the matter in view of the illegalities in the order, though it did remark that, regarding the contentions of the defendants, there appeared to be some intrinsic truth therein.

The appeal against the Authority’s order must be filed before the Appellate Tribunal within 45 days of the order’s date u/s 46(1). It is interesting to note that, u/s 46(2), the Act allows the Tribunal to condone delay in filing appeal if it is satisfied that the appellant was prevented by sufficient cause from filing it in time. No such provision, however, exists for the Adjudicating Authority. Can, or would, the Tax Department, to protect the interests of the revenue (since the properties now stand unattached and can be alienated), provisionally attach the property again u/s 24(3) followed by section 24(4), this time scrupulously following proper procedure as per the Authority's order? Does law permit it? We will have to wait and watch.

The deficiencies pointed out by the Authority are timely and will certainly be taken care of by the BPUs hereinafter so that technical issues, which are avoidable if proper homework is done, do not derail the substantive case that the BPUs build-up and which needs to be fought on merits.