Deific Abode Llp vs Union Of India & Ors
2021 Latest Caselaw 2788 Cal

16.04.2021
SD                (Via Video Conference)

                     WPA 11123 of 2020
                      Deific Abode LLP
                              Vs.
                     Union of India & Ors.

                             With
                     WPA 11127 of 2020
                   Oswell Conclave Pvt. Ltd.
                             Vs.
                    Union of India & Ors.

                             With
                     WPA 11132 of 2020
                    Oval Conclave Pvt. Ltd.
                              Vs.
                     Union of India & Ors.

                             With
                     WPA 11135 of 2020
                      Trinity Abode LLP
                              Vs.
                     Union of India & Ors.

                             With
                     WPA 11136 of 2020
                 Sunflower Synergies Pvt. Ltd.
                              Vs.
                  State of West Bengal & Ors.

                             With
                      WPA 7880 of 2021
               Himalya Vyaapar Pvt. Ltd. & Anr.
                             Vs.
                    Union of India & Ors.

                             With
                      WPA 8532 of 2021
             Shree Prakash Tracon Pvt. Ltd. & Anr.
                              Vs.
                     Union of India & Anr.

                             With

                      WPA 8906 of 2021
                              2




            Himalya Vyapaar Pvt. Ltd. & Anr.
                          Vs.
                 Union of India & Ors.


Mr. J.P. Khaitan
Mr. Ratnanko Banerjee
Mrs. Manju Agarwal
Mr. Bajrang Manot
Mr. Sourab Seth
Mr. Kanishk Kejriwal
Mr. S. Chakraborty
Ms. Sweta Mohanty  ,




                          .... for the petitioners.

Mr. Y.J. Dastoor
Mr. Smarajit Roy Chowdhury
Mr. Soumen Bhattacharjee
                       ... for the Union of India.

Mr. Dhiraj Kumar Trivedi
                       ... for the Respondent.

1. For the purpose of stating the facts, I shall

specifically refer to W.P.A No. 7880 of 2021. Needless

to mention, all the petitioners are similarly placed, and

the decision herein shall cover all the writ petitions. By

taking the recourse of filing these writ applications

under Article 226 of the Constitution of India, the writ

petitioners have assailed a set of show cause notices

issued under sub-section (3) of Section 24 of the

Prohibition of Benami Property Transactions Act, 1988

(hereinafter referred to as the „1988‟ Act).

2. Shorn of unnecessary details, the petitioners

contend that the impugned show cause notices have

been issued under the 1988 Act. The said impugned

notices under the 1988 Act, as per the contention of

the petitioners, do not record any reasons as mandated

by law.

3. The fundamental point of contention, as

advanced by Mr. Khaitan, learned Senior Advocate,

appearing on behalf of the petitioners, is the

unconscionable and illegal 'retrospective

applicability' of the 1988 Act, leading to these

proceedings.

4. As per the arguments advanced by Mr. Khaitan,

the impugned proceedings could not have been

initiated under the said 1988 Act as the amendment

Act of 2016 to the said 1988 Act had come into force

on November 1, 2016 and the immovable property,

which has been designated as a benami property under

the 1988 Act was purchased much prior to the coming

into force of the said amendment Act on November 1,

2016.

5. When the matter was last taken up, Mr. Khaitan

had conspicuously drawn my attention to the Division

Bench judgment of this Court rendered in M/s.

Ganpati Dealcom Pvt. Ltd v. Union of India (WPO

No. 687 of 2017) dated December 12, 2019, which had

interpreted the amendment Act of 2016 to the

1988 Act to be prospective in nature, and had also

ruled that in the absence of enabling procedural rules

under the 1988 Act when the immovable property was

purchased, the respondent authorities could not

initiate any proceedings in respect of the same. In

other words, what was to be noted was the fact that

while the 1988 Act entered the statute books, no

procedural rules were framed under Section 8 of the

1988 Act for the declaration of the benami property,

rendering the 1988 Act effective, merely on paper. As a

result, in spite of the amendment Act of 2016 which

introduced the definitions of "benami property" and

"benami transaction", in sub-sections of (8) and (9) of

Section (2) of the 1988 Act, such amendment would

not be applicable in respect of transactions pertaining

to immovable properties, which predated the

implementation of the amendment Act of 2016.

6. Mr. Khaitan had also placed his reliance on the

judgment rendered by the Bombay High Court in

Joseph Isharat v. Rozy Nishikant Gaikwad

reported in 2017 (5) ABR 706 as well as the judgment

rendered by the Rajasthan High Court in Niharika

Jain v. Union of India & Ors., reported in 2019 SCC

Online Raj 1640 to buttress that both these High

Courts had returned similar findings of law as laid

down in M/s. Ganpati Dealcom Pvt. Ltd (supra), in so

far as the operation of the amendment Act of 2016 to

the 1988 Act was concerned, that is, such amendment

Act of 2016 would apply prospectively.

7. However, Mr. Khaitan had fairly brought to my

notice that the Division Bench ruling rendered in M/s.

Ganpati Dealcom Pvt. Ltd (supra) had been assailed

before the Hon‟ble Supreme Court vide a Special Leave

Petition bearing SLP (C) No. 2784/2020 wherein the

Apex Court had passed the following order dated

February 3, 2020:

     "                     ORDER
     Issue notice.

Mr. Ankit Anandraj Shah. Learned counsel accepts notice on behalf of respondent.

In the meantime, the operation of the impugned order in so far as it holds the 2016 amendment of the Benami Transactions Act, 1988 was prospective in nature, shall remain stayed."

(Emphasis supplied)

8. I had accordingly requested Mr. Khaitan to place

before me pertinent precedents elucidating the legally

permissible procedure to be followed by me, when it

came to the binding nature of the dictum rendered by

the Division Bench in M/s. Ganpati Dealcom Pvt. Ltd

(supra) and the resultant effect of the order of stay

dated February 3, 2020, imposed by the Supreme

Court on the same, in the SLP (C) No. 2784/2020.

9. Subsequent to my request, Mr. Khaitan placed

his reliance on the following precedents:

i. Pijush Kanti Chowdhury v. State of West

Bengal reported in (2007) 3 CHN 178,

ii. Niranjan Chatterjee v. State of West Bengal

reported in 2007 SCC Online Cal 283,

iii. Viswapriya (India) Limited v. Government of

Tamil Nadu reported in (2015) 4 LW 33, and

iv. Shree Chamundi Mopeds Ltd. v. Church of

South India Trust Association, Madras,

(1992) 3 SCC 1.

10. Dealing with Shree Chamundi Mopeds Ltd.

(supra), first, the Hon‟ble Supreme Court had

explained the difference between an order of stay of

operation of an impugned order and the quashment of

an impugned order, in the following words:

"10. ..[W]hile considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the Appellate Authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the

Appellate Authority would be restored and it can be said to be pending before the Appellate Authority after the quashing of the order of the Appellate Authority. The same cannot be said with regard to an order staying the operation of the order of the Appellate Authority because in spite of the said order, the order of the Appellate Authority continues to exist in law and so long as it exists, it cannot be said that the appeal which has been disposed of by the said order has not been disposed of and is still pending..."

(Emphasis supplied)

11. Subsequently, a Division Bench of this Court in

Pijush Kanti Chowdhury (supra), while framing the

following question of law - simply because in an

application for grant of special leave, the Supreme

Court has stayed the operation of an order passed by

the Division Bench of this Court declaring a statutory

provision as ultra vires the Constitution of India as an

interim measure imposing further conditions in those

cases, whether a citizen who is not a party to the

previous litigation can be deprived of the benefit of the

doctrine of precedent in resisting the action of the

State on the ground that it could not invoke the ultra

vires provision of the Statute against him - noted inter

alia, the above observation of the Supreme Court in

Shree Chamundi Mopeds Ltd(supra) and finally laid

down the law in the following terms:

"Therefore, the effect of the order of stay in a pending appeal before the Apex Court does not amount to „any declaration of law‟ but is only binding upon the parties to the said proceedings

and at the same time, such interim order does not destroy the binding effect of the judgment of the High Court as a precedent because while granting the interim order, the Apex Court had no occasion to lay down any proposition of law inconsistent with the one declared by the High Court which is impugned."

12. The same Division Bench comprising Bhaskar

Bhattacharya and Kishore Kumar Prasad, JJ. which

had laid down the law in Pijush Kanti Chowdhury

(supra) reiterated the same view in Niranjan

Chatterjee (supra). This case-law, therefore, does not

require further elaboration.

13. The Madras High Court did have an occasion to

consider the judgment rendered in Pijush Kanti

Chowdhury (supra) in Viswapriya (India) Limited

(supra). It had also noted the Supreme Court‟s

observation recorded in Shree Chamundi Mopeds

Ltd. (supra) as well and had in its considered opinion

chosen to follow the same, in contradistinction to the

judgment of the Delhi High Court (discussed below)

which had differed with the law laid down in Pijush

Kanti Chowdhury (supra).

14. The Delhi High Court in Alka Gupta v. Medical

Council of India, reported in (2014) 5 HCC (Del) 386,

had upon considering Pijush Kanti Chowdhury

(supra) ruled the following:

"This Court with utmost humility would like to state that it is not in agreement with the view expressed by the Calcutta High Court in Pijush Kanti Chowdhury case, as it is of the opinion that once a stay order has been passed by a superior court, the order of the lower court ceases to operate till the stay order is in effect. In fact, the judgment of the Supreme Court in Shree Chamundi Mopeds Ltd. v. Church of South India Trust Assn. itself lays down that stay of an operation of an order means that the order would not be operative."

(Emphasis supplied)

15. From the above discussion what becomes

abundantly clear is that while the law laid down by the

Division Bench of this Court in Pijush Kanti

Chowdhury (supra) has been followed by the Madras

High Court in Viswapriya (India) Limited (supra), the

Delhi High Court had differed with the same in Alka

Gupta (supra). Needless to state that while both these

High Courts were not bound by the law laid down by

the Division Bench ruling of this Court as they were

persuasive in nature considering the jurisdictions of

both these constitutional courts and the operability of

their judgments, the same does not apply to this

Court, as the doctrine of precedent strict sensu, applies

herein.

16. In Bijon Mukherjee v. State of West Bengal,

reported in (2018) 4 CHN 454, I had the occasion

to examine in detail the doctrine of precedent and

therefore, based on the same, I have no hesitation in

stating that I am bound by the decision of the Division

Bench rendered in Pijush Kanti Chowdhury (supra)

and subsequently reiterated in Niranjan Chatterjee

(supra). In pursuance of the decision of Pijush Kanti

Chowdhury (supra), notwithstanding the operation of

stay of the order of the Division Bench of this Court

rendered in M/s. Ganpati Dealcom Pvt. Ltd (supra), I

am bound to follow the same, as per the doctrine of

precedent applicable.

17. Based on such understanding of the law, I shall

now also proceed to consider the relevance of the

decisions rendered in Joseph Isharat (supra) and

Niharika Jain (supra).

18. The Bombay High Court in Joseph Isharat

(supra) had considered the amendment Act of 2016 to

the 1988 Act as prospective in its application on the

following terms:

"7. What is crucial here is, in the first place, whether the change effected by the legislature in the Benami Act is a matter of procedure or is it a matter of substantial rights between the parties. If it is merely a procedural law, then, of course, procedure applicable as on the date of hearing may be relevant. If, on the other hand, it is a matter of substantive rights, then prima facie it will only have a prospective application unless the amended law speaks in a language "which expressly or by clear intention, takes in even pending matters". Short of such

intendment, the law shall be applied prospectively and not retrospectively.

8. As held by the Supreme Court in the case of R. Rajagopal Reddy v. Padmini Chandrasekharan4, Section 4 of the Benami Act, or for that matter, the Benami Act as a whole, creates substantive rights in favour of benamidars and destroys substantive rights of real owners who are parties to such transaction and for whom new liabilities are created under the Act. Merely because it uses the word "it is declared", the Act is not a piece of declaratory or curative legislation. If one has regard to the substance of the law rather than to its form, it is quite clear, as noted by the Supreme Court in R. Rajagopal Reddy, that the Benami Act affects substantive rights and cannot be regarded as having a retrospective operation. The Supreme Court in R. Rajagopal Reddy also held that since the law nullifies the defences available to the real owners in recovering the properties held benami, the law must apply irrespective of the time of the benami transaction and that the expression "shall lie" in Section 4(1) or "shall be allowed" in Section 4(2) are prospective and apply to the present (future stages) as well as future suits, claims and actions only. These observations clearly hold the field even as regards the present amendment to the Benami Act. The amendments introduced by the Legislature affect substantive rights of the parties and must be applied prospectively."

(Emphasis supplied)

19. The decision of the Bombay High Court was

assailed by way of a Special Leave Petition bearing SLP

(C) No. 12328/2017 wherein by an order dated April

28, 2017, such SLP was dismissed at the threshold. Be

that as it may, it does not mean that the judgment

rendered in Joseph Isharat (supra), has been

affirmed as a result of such dismissal. It is axiomatic to

state that such an order passed in a SLP at the

threshold without detailed reasons does not constitute

any declaration of law or constitute as a binding

precedent. If any precedent be needed for such

enunciation of law, one may refer to paragraph 4 of the

Supreme Court‟s judgment rendered in Union of India

v. Jaipal Singh reported in (2004) 1 SCC 121.

20. Subsequently, the ruling rendered in Joseph

Isharat (supra) was also considered by the learned

Single Judge in Niharika Jain (supra). The Rajasthan

High Court was also seized of a similar case as this

Court wherein proceedings were initiated under

Section 24 of the 1988 Act as amended by the

amendment Act of 2016. Upon a detailed examination,

the Court had ruled the following:

"93. For the reason aforesaid and in the backdrop, of the settled legal proposition so also in view of singular factual matrix of the matters herein; this Court has no hesitation to hold that the Benami Amendment Act, 2016, amending the Principal Benami Act, 1988, enacted w.e.f. 1st November, 2016, i.e. the date determined by the Central Government in its wisdom for its enforcement; cannot have retrospective effect.

94. It is made clear that this Court has neither examined nor commented upon merits of the writ applications but has considered only the larger question of retrospective applicability of the Benami Amendment Act, 2016 amending the

original Benami Act of 1988. Thus, the authority concerned would examine each case on its own merits keeping in view the fact that amended provisions introduced and the amendments enacted and made enforceable w.e.f.1 November 2016; would be st

prospective and not retrospective."

21. The order of the learned Single Judge was

subsequently appealed before the Division Bench in a

cluster of intra-court writ appeals. These appeals,

along with the intra-court writ appeal of Niharika

Jain bearing D.B. Special Appeal Writ No. 1328/2019,

were admitted by the Division Bench comprising

Indrajit Mahanty, C.J. and Inderjeet Singh, J. by an

order dated December 17, 2019 and was last heard on

January 28, 2020. The records available on the e-

courts server showcases that no further hearings have

taken place since then and the appeals remain

pending, awaiting the Division Bench‟s consideration.

And therefore, the order of the learned Single Judge

still stands on both limbs.

22. Thus, in my considered opinion, deciding the

relevance of the applicability of the ratio of the

decisions rendered in Joseph Isharat (supra), and

Niharika Jain (supra) by the Bombay High Court and

Rajasthan High Court respectively, on this Court is an

important question which needs a comprehensive

answer.

23. The law enunciated by Full Bench of the Supreme

Court in Valliama Champaka Pillai v. Sivathanu

Pillai reported in (1979) 4 SCC 429, has clearly laid

down that the decision of one High Court is not a

binding precedent on another High Court. The Court in

that case, was seized of with the lis as to whether the

decision of the erstwhile Travancore High Court could

be made a binding precedent on the Madras High

Court on the basis of the principle of stare decisis. The

Apex Court had ruled definitively that such a decision

can at best have persuasive value and such a

decision does not enjoy the force of a binding precedent

on the Madras High Court.

24. The Bombay High Court in Commissioner of

Income Tax v. Thana Electric Supply Ltd., reported

in (1994) 206 ITR 727 had considered an important

question in the interpretation of the Income Tax Act,

1961 which is worth consideration. The Division

Bench, in Thana Electric Supply Ltd. (supra) was

seized of with the question of interpreting if one High

Court (in this case, the Bombay High Court), while

interpreting an All-India Statute, was bound to follow

the decision of any other High Court and to decide the

question accordingly, even if its own view is considered

contrary thereto, in view of the practice followed by the

Court in such matters. The Division Bench had also

relied on Valliama Champaka Pillai (supra), and

laid down some emerging propositions post analyzing

some leading precedents dealing with the concept of

ratio decidendi and obiter dicta as follows:

"20. From the foregoing discussion, the following propositions emerge:

(a) The law declared by the Supreme Court being binding on all courts in India, the decisions of the Supreme Court are binding on all courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, of course, the ratio of the decision and not every expression found therein.

(b) The decisions of the High Court are binding on the subordinate courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. It does not extend beyond its territorial jurisdiction.

(c) The position in regard to the binding nature of the decisions of a High Court on different Benches of the same court may be summed up as follows:

(i) A single judge of a High Court is bound by the decision of another single judge or a Division Bench of the same High Court. It would be judicial impropriety to ignore that decision. Judicial comity demands that a binding decision to which his attention had been drawn should neither be ignored nor overlooked. If he does not find himself in agreement with the same, the proper procedure is to refer the binding decision and direct the papers to be placed before the Chief Justice to enable him to constitute a larger Bench to examine the question (see Food Corporation of India v. Yadav Engineer and Contractor, (1982) 2 SCC 499 : AIR 1982 SC 1302).

(ii) A Division Bench of a High Court should follow the decision of another Division Bench

of equal strength or a Full Bench of the same High Court. If one Division Bench differs from another Division Bench of the same High Court, it should refer the case to a larger Bench.

(iii) Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of the earlier decisions.

(d) The decision of one High Court is neither binding precedent for another High Court nor for courts or Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect. By no amount of stretching of the doctrine of stare decisis, can judgments of one High Court be given the status of a binding precedent so far as other High Courts or Courts or Tribunals within their territorial jurisdiction are concerned. Any such attempt will go counter to the very doctrine of stare decisis and also the various decisions of the Supreme Court which have interpreted the scope and ambit thereof. The fact that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by virtue of article 141 of the Constitution."

(Emphasis supplied)

25. Therefore, the decisions rendered in Joseph

Isharat (supra), and Niharika Jain (supra) by the

Bombay High Court and Rajasthan High Court

respectively, based on proposition (d) laid down in

Thana Electric Supply Ltd. (supra), can at best be

described to be possessing a high persuasive value

before this Court but it does not possess the character

of a binding precedent.

26. Accordingly, based on the extensive discussion

in the foregoing paragraphs, these salient principles

emerge:

i. As per the law laid down in Shree Chamundi

Mopeds Ltd (supra) by the Supreme Court, the

effect of an interim order staying the operation

of an impugned order and the quashment of an

impugned order are considerably different from

one another. While the former merely ensures

that the order impugned would not be operative

from the date of the passing of the order of stay,

without annihilating the said impugned order

from existence, the latter ensures that such

quashment results in the restoration of the

position as it stood on the date the impugned

order was passed, with the impugned order

ceasing to exist in the eyes of the law.

ii. Quashment of such impugned order would

revive the appeal before the appellate authority

and would be considered pending before such

appellate authority, awaiting the appellate

authority‟s fresh consideration.

iii. As per the law laid down in Pijush Kanti

Chowdhury (supra) and reiterated in Niranjan

Chatterjee (supra) by the Division Bench of this

Court, in cases where an appeal remains

pending before the Supreme Court and an order

of stay remains operative in such a pending

appeal, such stay of order does not amount to

any „declaration of law‟ under Article 141 of the

Constitution of India but is merely binding upon

the parties to the said proceedings.

iv. Such an order of stay, which is interim in

nature, does not obliterate the binding effect of

the judgment of the concerned High Court as a

precedent for the reason that while granting the

interim order of stay of such order of the High

Court, the Supreme Court had no opportunity

to lay down any proposition of law which was in

variance to the one declared by the High Court,

which is impugned before the Supreme Court.

v. Accordingly, if a learned Single Judge of this

Court is seized with the question of applicability

of a Division Bench judgment which is subject

to an order of stay in a pending appeal before

the Supreme Court, the learned Single Judge is

to apply the ratio as laid down by the Division

Bench of this Court, as per the doctrine of

precedent.

vi. As per the law enunciated in Valliama

Champaka Pillai (supra), the decision of one

High Court is not a binding precedent on

another High Court.

vii. As per the law laid down in Thana Electric

Supply Ltd. (supra), the decision of one High

Court is neither binding precedent for another

High Court nor for courts or Tribunals outside

its own territorial jurisdiction. It is well-settled

that the decision of a High Court will have the

force of binding precedent only in the State or

territories on which the court has jurisdiction.

In other States or outside the territorial

jurisdiction of that High Court it may, at best,

have only persuasive effect. By no amount of

stretching of the doctrine of stare decisis, can

judgments of one High Court be given the status

of a binding precedent so far as other High

Courts or Courts or Tribunals within their

territorial jurisdiction are concerned. Any such

attempt will go counter to the very doctrine of

stare decisis and also the various decisions of

the Supreme Court which have interpreted the

scope and ambit thereof.

27. Based on the above principles that emerge, I am

of the view that the Bombay High Court judgment in

Joseph Isharat (supra) and the Gujarat High Court

decision in Niharika Jain (supra) are not binding on

this Court even though they are having persuasive

effect. As already concluded earlier, the Division Bench

Judgment in M/s. Ganpati Dealcom Pvt. Ltd (supra)

is binding upon this Court even though the operation

of the said judgment has been stayed by the Supreme

Court. Accordingly, I am prima facie of the opinion that

the writ petitioners are entitled to interim orders at this

stage. However, I am of the further view that the

Revenue is to be protected as the matter is sub-judice

before the Supreme Court. Accordingly, the following

interim orders are passed:

A. The reference referred to in Section 24(5) of the

1988 Act shall not be treated as final and shall

only be treated as provisional during the whole

period, the writ applications are pending before

this Court.

B. Subject to its result, the reference will be treated

as final. Thereafter, time to pass the adjudication

order under Section 26(7) of the 1988 Act will

start to run. Hence, it follows that the

respondent authorities will not take any further

steps in the matter till the disposal of these writ

applications.

C. The writ petitioners shall not sell, otherwise

transfer, deal with, encumber or part with

possession of the subject properties till the

disposal of these writ applications.

28. The respondent authorities are granted a period of

six weeks to file their affidavits-in-opposition from

date. Affidavits-in-reply, if desired to be submitted by

the writ petitioners, be submitted within a period of

two weeks thereafter.

29. All parties are to act on the official website copy

of this order.

(Shekhar B. Saraf, J.)