Benami Transactions: Demonetized currency retained monetary value for conversion within prescribed timelines and so it is “property” under the BPTA
Recently, Appellate Tribunal delivered a judgement on November 5, 2024, in case of Nitin Gupta vs. IO, Delhi highlights crucial aspects of the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act), particularly concerning demonetized currency found in checking.
Case Background:
The appeal pertained to cash seized during demonetization in 2016. The appellants, including BO, contended that the seized sum of ₹3.7 crore was held in trust and did not qualify as “benami property.”
They argued that the provisions of Section 2(9)(A) of the PBPT Act, which define “benami transactions,” excluded fiduciary arrangements from its purview.
The cash, held by associates was allegedly entrusted for safekeeping but was found to have been channeled through shell companies to evade restrictions on demonetized notes.
Tribunal’s Findings
1. Fiduciary Capacity:
The appellants claimed the cash was held in trust by the associates. However, the Tribunal ruled that the arrangement did not qualify as a fiduciary capacity under Section 2(9)(A)(ii). It concluded that the money’s purpose—converting demonetized cash into valid currency—was illegal and therefore disqualified it from being considered a genuine trust arrangement.
2. Demonetized Cash as Property:
The appellants argued that demonetized currency lacked fair market value and could not be classified as “property” under Sections 2(16) and 2(26). The Tribunal dismissed this claim, noting that demonetized currency retained monetary value for conversion within prescribed timelines and thus constituted “property” under the Act.
3. Procedural Compliance:
The Tribunal addressed the appellants’ contention that they were denied proper notice under Section 24(2) regarding their classification as beneficial owners. It clarified that initial notices under Section 24(1) sufficed when the identity of the beneficial owner was unknown. During adjudication, Nitin Gupta admitted ownership, leading to his rightful classification as the beneficial owner.
Key Takeaways
Definition of Property: Even assets like demonetized cash, with restricted usage, are considered property if they can be monetized within legal frameworks.
The copy of the order is as under:
