NCLT Cannot Review Benami Attachment Orders: Supreme Court Dismisses Liquidators’ Appeals with Costs:

NCLT Cannot Review Benami Attachment Orders: Supreme Court Dismisses Liquidators’ Appeals with Costs The appeals arose from orders of the National Company Law Appellate Tribunal affirming the view of the National Company Law Tribunal that provisional attachment under the Benami Act cannot be challenged before IBC forums. In the lead case of M/s Padmaadevi Sugars Ltd., investigation revealed an alleged transfer of 100% shareholding to V.K. Sasikala for about Rs. 450 crores in demonetised currency. Following a 2017 search under Section 132 of the Income Tax Act, proceedings under Section 24 of the Benami Act were initiated and properties were provisionally attached on 01.11.2019. The company entered CIRP and later liquidation. The Resolution Professional and liquidator sought to stay the attachment before the NCLT, claiming protection under Section 14 of the IBC. The NCLT and NCLAT rejected the plea, holding that remedies lay under the Benami Act. The liquidators appealed to the Supreme Court of India. Issue Before SC: Whether attachment orders under the Prohibition of Benami Property Transactions Act, 1988 can be challenged before NCLT/NCLAT by invoking Sections 14, 32A and 60(5) of the IBC. Apex Court Decided: The Hon'ble Supreme Court upheld the NCLT and NCLAT rulings and dismissed the appeals with costs. It held that the Benami Act is a self-contained special statute providing its own mechanism for attachment, adjudication and confiscation, and the NCLT has no jurisdiction to examine such sovereign actions. The Court clarified that the IBC and the Benami Act operate in seperate spheres, insolvency resolution versus penal confiscation. Proceedings under the Benami Act are actions in rem leading to the vesting of property in the Central Government and cannot be stayed under Section 60(5) of the IBC. Further, under Section 36 of the IBC, only assets beneficially owned by the corporate debtor form part of the liquidation estate. Property held benami does not qualify. Sections 14 and 32A do not bar sovereign penal proceedings or cure defective title. Therefore, the Court dismissed all appeals and imposed costs of Rs. 5 lakhs in each appeal payable within four weeks. To Read Full Judgment, Download PDF Given Below