Case Note & Summary
The petitioner, a beneficial owner in an alleged benami transaction, filed a writ petition under Articles 226 and 227 of the Constitution of India before the Karnataka High Court challenging an order dated 30.07.2025 passed by the Initiating Officer under the Prohibition of Benami Property Transactions Act, 1988 and a subsequent notice dated 26.08.2025 issued by the Adjudicating Authority. The proceedings originated from a show cause notice issued under Section 24(1) of the Act to an alleged Benamidar, with a copy marked to the petitioner as the beneficial owner. The notice did not explicitly state that the beneficial owner was required to file a reply or explanation. The petitioner contended that the orders were passed in violation of principles of natural justice as he was not afforded an opportunity to be heard. The revenue argued that under Section 24(2) only marking of a copy was mandated, and Section 24(2A) merely enabled the beneficial owner to reply but did not oblige the revenue to call upon him. The Court examined Section 24(1), (2) and (2A) of the Act. It noted that Sub-section (2A), inserted with effect from 01.10.2024, provides that a beneficial owner to whom a copy of the notice is issued may furnish an explanation or submissions. The Court, however, held that while the section recognises the right, it is imperative from the perspective of natural justice that the notice specifically call upon the beneficial owner to reply. The impugned notices only marked a copy without any such direction, thereby prejudicing the petitioner. Consequently, the Court allowed the writ petition, quashed the orders dated 30.07.2025 and 26.08.2025, and directed that the petitioner be permitted to reply to the original show cause notice within 15 days. If the reply is filed, the Initiating Officer shall consider it and pass fresh orders under Section 24. The Court further directed that in future, any notice issued under Section 24(1) and marked to a beneficial owner must categorically state that the beneficial owner is also required to submit a reply within the time specified.
Headnote
A) Benami Transactions - Notice Under Section 24 - Requirement to Call Upon Beneficial Owner to Reply - Prohibition of Benami Property Transactions Act, 1988, Sections 24(1), 24(2), 24(2A) - The Initiating Officer issued a show cause notice to the alleged Benamidar under Section 24(1) and marked a copy to the beneficial owner under Section 24(2), but did not explicitly call upon the beneficial owner to furnish a reply. The Court, interpreting Section 24(2A) (inserted by Amendment Act 15 of 2024 w.e.f. 01.10.2024), held that while the section recognizes the beneficial owner's right to reply, natural justice requires that the notice specifically state that the beneficial owner is also required to submit an explanation. The impugned orders were quashed, and the petitioner was granted 15 days to reply; future notices must expressly call upon the beneficial owner to respond. (Paras 6-13)
Issue of Consideration
Whether there is a requirement specifically for the revenue to call upon the beneficial owner to reply to a notice issued to the Benamidar under sub-Section (1) of Section 24 of the Prohibition of Benami Property Transactions Act, 1988?
Final Decision
Writ petition allowed. The order dated 30.07.2025 (Annexure-C) and notice dated 26.08.2025 (Annexure-D) are quashed. Petitioner permitted to reply to the show cause notice within 15 days. If reply received, the Initiating Officer shall consider it and pass orders under Section 24. In default, the authority may proceed. The Court further directed that in future, any notice issued under Section 24(1) and marked to the beneficial owner must categorically state that the beneficial owner is also required to reply.
Law Points
- Legal points not extracted
- principles of natural justice
- statutory interpretation
- Prohibition of Benami Property Transactions Act
- 1988 Section 24(2A)
- right to be heard
- show cause notice
