Introduction:

The Allahabad High Court has delineated the criteria for invoking the Prohibition of Benami Property Transactions Act, 1988, emphasizing the need for substantial evidence before declaring a transaction as benami. In a recent judgment, the Court underscored the importance of a valid “reason to believe” backed by cogent material before initiating proceedings under the Act.

Arguments of Both Sides:

The petitioner challenged a show cause notice issued under Section 24(1) of the Act, contesting the basis of the notice solely on the statement of a contractor. The respondent authorities argued that the initiation of proceedings was justified, citing the petitioner’s construction activities for her son-in-law as a benami transaction. However, the petitioner contended that the notice lacked substantive evidence beyond the contractor’s statement.

Court’s Judgement:

The Allahabad High Court, drawing on precedents and legal principles, held that a mere statement without corroborating material cannot constitute a valid “reason to believe” under Section 24(1) of the Act. The Court emphasized the necessity of sufficient and relevant evidence to justify the initiation of benami property proceedings. Furthermore, the Court invalidated the provisional attachment order under Section 24(3), citing a lack of evidence to support the apprehension of property alienation.