SC upholds NCLAT order on attachment under Benami Act

The Supreme Court on Tuesday upheld an order of NCLAT that said that attachment under the Prohibition of Benami Property Transactions Act, 1988 (Benami Act) can be challenged only before the authorities provided under that act. A bench of justices PS Narasimha and Atul Chandurkar dismissed an appeal challenging the National Company Law Appellate Tribunal (NCLAT) judgement and imposed costs of Rs 5 lakh each on the petitioners.

“We are of the opinion that the appellants could not have challenged the attachment order passed under the Benami Act before the statutory authorities under the Insolvency and Bankruptcy Code. We have no doubt in our mind that such an invocation is not bona fide and is actually intended to circumvent and interdict the procedures contemplated under the Benami Act. “Further, filing of an appeal before NCLAT, despite the finding that the appropriate forum is not NCLT, but the statutory authorities under the Benami Act, leaves no doubt that it is a complete abuse of the process.

The appellants have taken the precious time of the NCLT, NCLAT and also of this Court when the position of law is amply clear and there was no doubt whatsoever about the availability of the statutory remedies under the Benami Act,” the bench said.

The top court directed that the amount shall be deposited with the Supreme Court Advocates on Record Association within four weeks from today.

The judgement came on appeals challenging the order passed by the NCLAT, Chennai bench, which declined to interfere with the decision of the National Company Law Tribunal.

The NCLAT had refused to adjudicate the liquidators’ applications challenging the provisional attachment orders passed by the authorities under the Prohibition of Benami Property Transactions Act, 1988, holding that the NCLT lacks jurisdiction to entertain such challenges.