The Supreme Court has affirmed that property attachments made under the Prohibition of Benami Property Transactions Act, 1988 cannot be assailed before insolvency tribunals during corporate insolvency proceedings. Dismissing an appeal against a ruling of the National Company Law Appellate Tribunal, the Court held that remedies against such attachment must be pursued strictly within the framework of the Benami law, reinforcing the boundaries between insolvency jurisdiction and anti-benami proceedings.
The dispute arose from insolvency proceedings against Padmaadevi Sugars Ltd, whose immovable properties were provisionally attached in November 2019 by the Deputy Commissioner of Income Tax (Benami Prohibition) under Section 24(1) of the 1988 Act. The attachment was later confirmed by the Competent Authority in November 2021. At the time, corporate insolvency resolution proceedings were pending under the Insolvency and Bankruptcy Code, 2016, and a moratorium under Section 14 was in force.
The Resolution Professional, followed by the Liquidator after liquidation was ordered in April 2021, approached the National Company Law Tribunal seeking release of the attached properties, arguing that the moratorium and overriding effect of the IBC barred such action. The NCLT declined relief, and the NCLAT upheld that view, ruling that the Benami Act constitutes a complete statutory code with its own adjudicatory mechanism.
A Bench of Justice P.S. Narasimha and Justice Atul Chandurkar endorsed that reasoning, making it clear that insolvency forums cannot be used to sidestep the appellate structure under the Benami law. “We have upheld the findings of NCLT and NCLAT,” Justice Narasimha stated, effectively confirming that Sections 32A and 60(5) of the IBC cannot be invoked to nullify attachment orders passed under the 1988 Act. The appeal was accordingly dismissed.
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