Supreme Court of India
S. Rajendran vs The Deputy Commissioner Of Income Tax … on 24 February, 2026
Author: Pamidighantam Sri Narasimha
Bench: Pamidighantam Sri Narasimha
2026 INSC 187 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7140 of 2022
S. RAJENDRAN ….APPELLANT(S)
VERSUS
THE DEPUTY COMMISSIONER OF
INCOME TAX (BENAMI PROHIBITION) & ORS.….RESPONDENT(S)
WITH
CIVIL APPEAL NO. 6971 OF 2025
WITH
CIVIL APPEAL NO. 6661 OF 2023
WITH
CIVIL APPEAL NO. 6662 OF 2023
JUDGMENT
1. The present batch of appeals arises out of the impugned judgments
and orders dated 18.08.2022 and 13.03.2023 passed by the National
Company Law Appellate Tribunal, Chennai bench (hereinafter referred to
as “NCLAT”). By the said impugned orders, the NCLAT declined to
interfere with the decision of the National Company Law Tribunal
Signature Not Verified
(hereinafter referred to as “NCLT”) and refused to adjudicate the
Digitally signed by
KAPIL TANDON
Date: 2026.02.24
17:49:18 IST
Reason:
appellant- liquidators’ applications challenging the provisional attachment
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orders passed by the authorities under the Prohibition of Benami Property
Transactions Act, 1988, (“Benami Act”), holding that the NCLT lacks
jurisdiction to entertain such challenges and that the remedy lies
exclusively before the competent forum constituted under the Benami Act.
Accepting the concurrent findings of NCLT and NCLAT, we have held that
orders passed under Benami Act cannot be questioned before authorities
under the Insolvency and Bankruptcy Code, 2016 (“IBC”). For the reasons
to follow, we dismiss these appeals.
I. Factual Background:
2. For the sake of convenience, we shall refer to the factual matrix of
the lead appeal. The facts in the connected appeals, though pertaining to
distinct corporate entity, are substantially similar in their material
particulars and give rise to identical questions of law.
3. When an illegal sale, in the nature of a benami transaction came to
light, investigation by the authorities under the Benami Act revealed that
the promoters of the corporate debtor, M/s Padmaadevi Sugars Ltd.,
formerly S.V. Sugar Mills Ltd., the “Patel Group,” had transferred their
100% shareholding to the beneficial owner, V.K. Sasikala, through an
intermediary, an advocate named Mr. S. Senthil, for a consideration of
approximately Rs. 450 Crores, paid in demonetised high-value currency
notes. As investigation concluded into commission of offence, authorities
2
invoked Section 24 of the Benami Act and issued a show cause notice
dated 01.11.2019.
4. The genesis of the controversy as portrayed in the show cause
notice lies in search and seizure operation conducted under Section 132
of the Income Tax Act, 1961 in November 2017 against V.K. Sasikala and
her associates. During these operations, incriminating documents that
were unearthed contained explicit references to asset purchases made
during the demonetization period i.e. November-December 2016, through
entries marked “Patel: Sugar 386 + Bank Loan” and “Sugar Mill,
Kancheepuram”. Further, investigation identified advocate S. Senthil as
the intermediary who, upon confrontation, admitted under oath to
authoring these notes at the dictation of V.K. Sasikala for purchasing these
properties using demonetised currency.
5. The documentary trail was further corroborated by a subsequent
search on 18.11.2017 at a serviced apartment used by the intermediary,
where authorities recovered the original share certificates of M/s S.V.
Sugar Mills Ltd. now Padmaadevi Sugars Ltd. standing in the names of
the Patel family members, alongside an unsigned Memorandum of
Understanding (MoU). Confronted with this, Shri Hitesh Shivgan Patel,
representing the management of the corporate debtor, recorded a sworn
statement admitting that the Patel Group had negotiated the sale of the
sugar factory and assumed bank liabilities for a total consideration of Rs.
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450 Crores. Crucially, he admitted that this consideration was received
entirely in demonetised currency between November and December
2016, and that they had signed a blank MoU to effectuate this transfer.
6. In the meanwhile, the corporate debtor M/s Padmaadevi Sugars Ltd.
was subjected to corporate insolvency resolution proceedings (CIRP) on
the basis of an application instituted by the financial creditors. The
application was admitted by the NCLT on 15.10.2018 and the moratorium
commenced. However, after the failure of the resolution process, NCLT
proceeded further and passed an order for the liquidation of corporate
debtor on 20.04.2021. We may mention at this very stage that in so far as
the other set of appeals arising out of M/s Senthil Papers and Board Pvt.
Ltd., the CIRP commenced on 14.11.2017, and order of liquidation was
passed on 14.02.2019.
7. Returning to the proceedings under the Benami Act, based on the
crystallization of the evidence as discussed above, the authorities issued
a show cause notice dated 01.11.2019 under Section 24(1) of the Benami
Act to the RP, representing the corporate debtor, characterizing it as the
benamidar and the transaction as a “benami transaction”. The rationale
provided was that while the beneficial owner, V.K. Sasikala, had paid the
full consideration of Rs. 450 Crores and obtained physical possession of
the share certificates through her agent, the legal title to the shares and
the underlying assets (the sugar plant and machinery) was deliberately
4
not transferred in the records. This arrangement was allegedly designed
to mask the true ownership while holding the property for the immediate
or future benefit of the beneficial owner. This was followed up by a
provisional attachment order on 01.11.2019 under Section 24(3) of the
Benami Act, attaching the immovable properties of the corporate debtor,
including the factory land and plant machinery.
8. In view of the fact that the corporate debtors came to be represented
by their respective liquidators, the Adjudicating Authority under the
Benami Act also issued notices under Section 26(3) confirming the
attachment of the property held benami by corporate debtor for and on
behalf of the beneficiary V.K. Sasikala.
9. The provisional attachment order dated 01.11.2019, was initially
challenged by the RP on the ground that it is void ab initio due to the
moratorium under Section 14 of the IBC. However, as the corporate debtor
was ordered into liquidation on 20.04.2021, application filed by the RP
was rendered infructuous. Consequently, the liquidator filed a fresh
application seeking a stay on the attachment order and to enable the
liquidation process to continue on the ground that the attached properties
formed part of the liquidation estate.
10. The NCLT took up the application and by its order dated 25.04.2022,
in the case of Padmaadevi Sugars, held that the challenge to the order of
attachment under the Benami Act must be before the statutory authorities
5
under that Act and not before the authorities under the IBC. In other words,
NCLT held that such an application is not maintainable under IBC. Similar
orders were passed by NCLT even in case of M/s Senthil Papers on
29.03.2022.
11. Despite the clear and categorical order dated 25.04.2022 of the
NCLT, the appellants filed an application for clarification about the forum
before which the application is to be filed. Disposing the application, the
NCLT, by order dated 14.06.2022, held that the parties can approach the
authorities under the Benami Act for lifting the attachment, thereby
reaffirming that it lacked jurisdiction to sit in appeal over decisions of
Benami Authorities.
12. Even after the order dated 25.04.2022 and the clarificatory order
dated 14.06.2022, instead of invoking proceedings under Benami Act, the
appellant liquidator filed an appeal under Section 61 of IBC before NCLAT.
By the judgments impugned before us, the appeals of M/s Padmaadevi
Sugars and M/s Senthil Papers were dismissed on 18.08.2022 and
13.03.2023 respectively.
II. Analysis of the Impugned Orders:
13. The concurrent findings of NCLT and the NCLAT, while dismissing
the applications for staying the attachment order under the Benami Act
can be summarised as follows;
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13.1 Firstly, both forums proceeded on the premise that the Benami Act,
is a special legislation constituting a self-contained code. The NCLAT, in
particular, placed heavy reliance on its earlier decision in Kiran Shah,
Resolution Professional of KSL and Industries Ltd. v. Enforcement
Directorate1 relating to Prevention of Money Laundering Act, 2002, to hold
that when a statute provides hierarchy of adjudicatory mechanisms,
namely, the Adjudicating Authority, the Appellate Tribunal, and the High
Court, an aggrieved party, even if it is a liquidator or RP, must exhaust the
remedies in that special statute. It is further held that IBC cannot be
converted into a parallel appellate forum to review the validity of
attachment orders passed by a competent authority under a specialised
enactment, as doing so would render the appellate machinery of the
Benami Act otiose.
13.2 Secondly, regarding the applicability of the moratorium, the
Tribunals drew a sharp distinction between actions initiated by creditors
for the recovery of dues and sovereign actions initiated by the State for
the confiscation of tainted property. The NCLT and NCLAT held that the
protection under Section 14 of the IBC is designed to shield the corporate
debtor from the depletion of assets by individual creditors seeking to
enforce security interests or recover debts. Conversely, an attachment
1 2022 SCC OnLine NCLAT 2.
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under the Benami Act constitutes a sovereign function exercised in the
public interest to prohibit and punish benami transactions. Since the
Benami proceedings are not in the nature of debt recovery but rather a
statutory forfeiture of property held illegally, the moratorium under the IBC
does not act as an automated stay against such proceedings.
13.3 Thirdly, the impugned orders held that the residuary jurisdiction
conferred upon the NCLT under Section 60(5) of the IBC is not all-
pervasive. While Section 60(5)(c) empowers the NCLT to decide
questions of law or fact “arising out of or in relation to” the insolvency
resolution, this jurisdiction does not extend to reviewing administrative or
quasi-judicial orders passed under independent public law statutes. The
NCLAT opined that determining whether a property is “benami” or not
requires a trial on the pedigree of the title and the source of funds, which
falls exclusively within the domain of the Adjudicating Authority under the
Benami Act. Consequently, a challenge to the legality of the attachment
order is not a question “arising out of” the insolvency, but one arising
dehors the insolvency, and thus falls outside the NCLT’s jurisdictional
competence.
III. Submissions of the Parties:
14. Submissions on behalf of the appellants: We have heard Mr.
Krishnan Venugopal, Mr. Sajan Poovayya, and Mr. Rajiv Shakdher, Ld. Sr.
8
Counsels appearing on behalf of the Appellants. The sum and summation
of the submissions put forth can be articulated as:
14.1 Granting precedence to proceedings under the Benami Act over
insolvency proceedings would result in removal or freezing of secured
assets from the liquidation estate. Such depletion directly undermines the
core objective of the IBC, namely maximisation of value of assets and
equitable distribution among stakeholders. The insolvency framework
cannot function effectively if key assets are carved out through parallel
attachment proceedings.
14.2 The IBC constitutes a comprehensive and self-contained “single
window” mechanism for insolvency resolution and liquidation. Section 238
embodies a broad non-obstante clause, expressly providing that the IBC
shall prevail notwithstanding anything inconsistent contained in any other
law. The language employed is of the widest amplitude and is intended to
obviate obstruction of the insolvency process by competing statutory
regimes. 2
14.3 Section 238 of the IBC came into force on 01.12.2016, subsequent
to the enforcement of Section 67 of the Benami Act on 01.11.2016. IBC is
not only the later enactment but also a specialised and exhaustive
legislation governing insolvency and liquidation. In the event of
2 Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407
9
inconsistency, the later and more comprehensive insolvency code mustprevail to ensure uniformity and certainty in the insolvency regime. 3
14.4 Upon commencement of the CIRP, Section 14(1)(a) imposes a
moratorium prohibiting institution or continuation of suits or proceedings
against the corporate debtor. Proceedings under the Benami Act,
including provisional attachment that freezes or depletes assets, squarely
fall within the ambit of “proceedings” and therefore stand interdicted during
the subsistence of the moratorium. Permitting such measures would
defeat the protective shield intended to preserve the debtor’s estate as a
going concern.
14.5 Section 32A of the IBC is pressed into service to demonstrate the
legislative intent to insulate the corporate debtor and its property from past
liabilities upon successful resolution or liquidation sale. Section 32A(2)
expressly prohibits attachment, seizure or confiscation of the property of
the corporate debtor in relation to offences committed prior to
commencement of the CIRP, once a resolution plan is approved or assets
are sold to an unconnected third party.
14.6 The IBC prescribes strict and time-bound completion of the CIRP
within 330 days. Proceedings under the Benami Act, along with the
appellate remedies thereunder, operate on significantly longer timelines.
3 Solidaire India Ltd. v. Fairgrowth Financial Services Ltd, (2001) 3 SCC 71.
10
Allowing attachment proceedings to run parallel to insolvency would stall
the CIRP, frustrate resolution, and prevent attainment of the stage
contemplated under Section 32A, namely approval of a resolution plan or
consummation of liquidation sale. The statutory balance preserves
accountability of wrongdoers under Sections 3 and 53 of the Benami Act,
while ensuring that the insolvency process itself is not derailed.
14.7 Revenue stands in the position of an operational creditor and is
bound by the waterfall mechanism under Section 53 of the IBC.
14.8 On facts, it is contended that the alleged “taint” arising from
shareholders’ funds utilised for share acquisitions in 2016 cannot be
imputed to immovable properties of the corporate debtor that were lawfully
acquired between 1995 and 2013. The company is a distinct juristic entity
and its property cannot be treated as that of its shareholders. 4
14.9 Section 60(5) vests the NCLT with exclusive jurisdiction over all
questions of law or fact arising out of or in relation to the insolvency or
liquidation process. The NCLT is therefore the competent forum to
examine and, where warranted, set aside attachments that interfere with
the orderly conduct of liquidation and distribution of the estate, thereby
preserving the primacy and integrity of the IBC framework.5
4 Bacha F. Guzdar v. Commissioner of Income Tax, Bombay (1954) 2 SCC 563
5 Indian Overseas Bank v. RCM Infrastructure Ltd (2022) 8 SCC 516
11
15. Submissions on behalf of the Respondent: Appearing on behalf
of respondent/Revenue, we have heard Ld. A.S.G. Mr. S. Dwarakanath
opposing the submissions of the appellants. He would submit that;
15.1 The Benami Act is a self-contained code for identification,
attachment and confiscation of benami property, with exclusive jurisdiction
vested in its authorities. The IBC does not override this regime or
empower the NCLT to revisit such findings
15.2 Sections 24–27, 46, and 49–50 of the Benami Act establish a
complete adjudicatory and appellate framework, reinforced by the
overriding effect under Section 67. The NCLT’s residuary jurisdiction
cannot bypass this specialised statutory mechanism.
15.3 Once property is provisionally attached and confirmed under
Section 27, it vests in the Central Government, subject to appeal. The
NCLT cannot nullify such statutory vesting through insolvency
proceedings or indirectly challenge sovereign action under a penal law.
15.4 Under Section 36 of the IBC, only assets beneficially owned by the
corporate debtor form part of the liquidation estate. Benami property, held
in a fiduciary capacity without beneficial interest, is excluded and never
becomes distributable in liquidation.
15.5 Section 36(3)(e) further recognises that property “subject to
determination by a court or authority” forms part of the estate only to the
extent of such determination. Once an authority under Benami Act
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declares the debtor a benamidar, beneficial ownership stands negated
and insolvency cannot convert such property into distributable assets for
creditors.
15.6 Confiscation under the Benami Act is a sovereign penal act, not
debt recovery. Upon vesting under Section 27, property passes absolutely
to the State and falls outside the Section 53 waterfall, which presupposes
debtor ownership.
15.7 Section 32A applies only upon approval of a resolution plan or
liquidation sale and does not cure defective title or legitimise benami
property. Section 14 moratorium protects the debtor’s estate from creditor
action, not sovereign in rem proceedings under penal statutes
15.8 The Benami Act governs determination and confiscation of benami
property, while IBC governs insolvency resolution of assets beneficially
owned by the debtor. Where property stands attached and vested under
the Benami Act, it lies outside the liquidation estate and outside NCLT
jurisdiction.
IV. Analysis and Conclusions:
16. The question that arises for consideration is whether, the legality
and validity of an order of attachment under Benami Act can be challenged
before the statutory tribunals under IBC. The enquiry should legitimately
commence with appreciating the scope and ambit of the Benami Act as
well as IBC.
13
17. Scheme of the Benami Act: Historically, benami transactions
constituted a recognised and prevalent mode of holding property in India
and were not, per se, unlawful. Such transactions involved the purchase
of property in the name of one person while the consideration was
furnished by another, the latter being the real owner. The practice was
both recognised as a custom and given legislative recognition through
Sections 81 and 82 of the Indian Trusts Act, 1882. However, benami
transactions came to be misused for the concealment of ownership,
evasion of public revenues, and defeating creditors’ claims. In 1976, the
Parliament attempted to address the issue through the introduction of
Section 281A of the Income-Tax Act, 1961, which barred the institution of
suits in respect of benami properties. Further, the Parliament repealed the
aforementioned provisions of the Indian Trusts Act, which had earlier
facilitated the enforcement of benami arrangements. To address the issue
more comprehensively, the President promulgated the Benami
Transactions (Prohibition of the Right to Recover Property) Ordinance on
19.05.1988, pursuant to the recommendations of the Law Commission.
The Ordinance barred suits, claims, and defences based on benami
ownership. In this background, to replace the said Ordinance and
incorporate the recommendations of the Law Commission in its 130th
Report, the Benami Transactions (Prohibition) Act, 1988, was enacted. It
prohibited the entering into of benami transactions and rendered them an
14
offence, and provided for the acquisition of benami properties without
compensation, thereby extinguishing the rights arising from such
transactions and preventing undue enrichment through the mere lending
of one’s name.
17.1 However, in its unamended form, the Benami Act had merely 9
sections. Experience in the administration of the unamended Act revealed
significant structural deficiencies in its original framework. Although
enacted to prohibit benami holdings and enable acquisition of such
property without compensation, the statute lacked critical operational
mechanisms, including an express provision for vesting of confiscated
property in the Central Government, a structured appellate remedy
against orders of attachment or confiscation, conferment of civil court
powers upon authorities for effective adjudication, and adequate rule-
making authority. The absence of these features rendered enforcement of
the Act difficult. Comprehensive amendment therefore became necessary
to transform the Act from a declaratory prohibition into an effective
confiscatory and adjudicatory regime, with a defined procedure for
attachment, adjudication, vesting and appeal, thereby strengthening the
statutory response to benami transactions.
17.2 The Statement of Objects and Reasons of the Amending Act makes
it succinctly clear as to why a sea of changes were brought in, thereby
expanding the old Act from 9 Sections to now 70 Sections divided in 8
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Chapters. The relevant portion of Statement of Objects is reproduced
below for ready reference:
“Statement of Objects and Reasons Amending Act 43 of
2016.—
The Benami Transactions (Prohibition) Act, 1988 was enacted to
prohibit benami transactions and the right to recover property
held benami. The said Act, inter alia, provides that—(a) all the
properties held benami shall be subject to acquisition by such
authority in such manner and after following such procedure as
may be prescribed; (b) no amount shall be payable for the
acquisition of any property held benami; (c) the purchase of
property by any person in the name of his wife or unmarried
daughter for their benefit would not be benami transaction; (d)
the securities held by a despository as registered owner under
the provisions of the Depositories Act, 1996 or participant as an
agent of a depository would not be benami transactions.
2. During the administration of the Benami Transactions
(Prohibition) Act, 1988, it was found that the provisions of the
aforesaid Act are inadequate to deal with benami transactions as
the Act does not—(i) contain any specific provision for vesting of
confiscated property with Central Government; (ii) have any
provision for an appellate mechanism against an action taken by
the authorities under the Act, while barring the jurisdiction of a
civil court; (iii) confer the powers of the civil court upon the
authorities for its implementation; and (iv) provide for adequate
enabling rule making powers.
3. In view of the circumstances stated above,
comprehensive amendments to the Benami Transactions
(Prohibition) Act, 1988 has become necessary in order to prohibit
holding property in benami and restrict right to recover or transfer
property held benami and also to provide a mechanism and
procedure for confiscation of property held benami. It is,
therefore, felt necessary to bring comprehensive amendments to
the Benami Transactions (Prohibition) Act, 1988 to deal with
benami transactions.”17.3 In its post-amendment avatar, Benami Act, by virtue of Section 2(9)
defines a benami transaction. While Section 3 prohibits entering into
benami transactions and renders such conduct punishable, Section 4 bars
16
any suit, claim or defence to enforce rights in respect of property heldbenami. The definition clause further defines ‘beneficial owner’ under
Section 2(12), ‘property’ under Section 2(26) and ‘transfer’ under Section
2(29).
17.4 Section 5 declares that property which is the subject matter of a
benami transaction is liable to confiscation by the Central Government.
The statutory intent is thus to invalidate both the transaction and any
derivative civil claims, while exposing the property itself to State action.
17.5 Chapter IV embodies the machinery provisions of the enactment
and delineates the course to be followed before property is divested.
Section 24 empowers the Initiating Officer, upon forming a reasoned belief
that a person is a benamidar, to issue notice and, with the requisite
approval, provisionally attach the property so as to prevent its alienation
pending inquiry. The matter is then placed before the Adjudicating
Authority under Section 26, which, after notice and hearing to the
concerned parties, records a finding as to whether the property is benami
in nature.
17.6 If such a finding is returned, Section 27 provides for confiscation of
the property, and sub-section (3) makes it clear that upon confiscation the
property vests absolutely in the Central Government, free from all
encumbrances and without compensation. Section 29 enables the
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Administrator to take possession and deal with the confiscated property
in accordance with law. The statutory progression, starting from issuance
of notice, to provisional attachment, to adjudication, and finally to
confiscation and possession, reflects a structured process in which
deprivation of title follows only upon compliance with the prescribed
safeguards.
17.7 The Act also establishes a distinct adjudicatory hierarchy and
demarcates jurisdictional boundaries. Section 45 bars the jurisdiction of
civil courts in respect of matters that the authorities or the Appellate
Tribunal are empowered to determine. Section 46 provides for appeals to
the Appellate Tribunal against orders of the Adjudicating Authority, with a
further appeal to the High Court on questions of law. Section 53 prescribes
stringent punishment for benami transactions entered into to defeat law,
avoid statutory dues or defraud creditors. While Section 60 clarifies that
the provisions of the Act are in addition to, and not in derogation of, any
other law, Section 67 confers overriding effect in the event of
inconsistency. The legislative scheme thus discloses a complete code. 6
18. Insolvency and Bankruptcy Code, 2016: Preamble of the IBC
states that the objects of the IBC are “… to consolidate and amend the
laws relating to reorganization and insolvency resolution of corporate
6 Kailash Assudani v. Commissioner of Income Tax, 2017 SCC OnLine MP 2384;
18
persons, partnership firms and individuals in a time-bound manner for
maximization of value of assets of such persons and to promote
entrepreneurship, availability of credit and balance the interest of all
stakeholders including alteration in the order of priority of payment of
Government dues.” Hence, the scope and ambit of IBC is to speed up the
process providing for insolvency , and achieving maximisation of value of
the asset of the entity undergoing CIRP. 7
18.1 Expounding the core principles of the IBC, this Court in Swiss
Ribbons (P) Ltd. v. Union of India8noted;
“27. … The Code is first and foremost, a Code for reorganisation
and insolvency resolution of corporate debtors. Unless such
reorganisation is effected in a time-bound manner, the value of
the assets of such persons will deplete. Therefore, maximisation
of value of the assets of such persons so that they are efficiently
run as going concerns is another very important objective of the
Code. This, in turn, will promote entrepreneurship as the persons
in management of the corporate debtor are removed and
replaced by entrepreneurs. When, therefore, a resolution plan
takes off and the corporate debtor is brought back into the
economic mainstream, it is able to repay its debts, which, in turn,
enhances the viability of credit in the hands of banks and
financial institutions. Above all, ultimately, the interests of all
stakeholders are looked after as the corporate debtor itself
becomes a beneficiary of the resolution scheme – workers are
paid, the creditors in the long run will be repaid in full, and
shareholders/investors are able to maximise their investment.
Timely resolution of a corporate debtor who is in the red, by an
effective legal framework, would go a long way to support the
development of credit markets. Since more investment can be
7 Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018) 1 SCC 407.
8 (2019) 4 SCC 17.
19
made with funds that have come back into the economy,
business then eases up, which leads, overall, to higher economic
growth and development of the Indian economy. What is
interesting to note is that the Preamble does not, in any manner,
refer to liquidation, which is only availed of as a last resort if there
is either no resolution plan or the resolution plans submitted are
not up to the mark….
28. It can thus be seen that the primary focus of the legislation is
to ensure revival and continuation of the corporate debtor by
protecting the corporate debtor from its own management and
from a corporate death by liquidation. The Code is thus a
beneficial legislation which puts the corporate debtor back on its
feet, not being a mere recovery legislation for creditors. The
interests of the corporate debtor have, therefore, been bifurcated
and separated from that of its promoters/those who are in
management. Thus, the resolution process is not adversarial to
the corporate debtor but, in fact, protective of its interests….”
18.2 The legislative scheme of IBC has also been explained in Embassy
Property Developments (P) Ltd. v. State of Karnataka9 in following
manner;
“11. It is beyond any pale of doubt that the IBC, 2016 is a
complete code in itself. As observed by this Court in Innoventive
Industries Ltd. v. ICICI Bank [it is an exhaustive code on the
subject-matter of insolvency in relation to corporate entities and
others. It is also true that the IBC, 2016 is a single Unified
Umbrella Code, covering the entire gamut of the law relating to
insolvency resolution of corporate persons and others in a time-
bound manner. The Code provides a three-tier mechanism,
namely, (i) the NCLT, which is the adjudicating authority, (ii)
the NCLAT, which is the appellate authority, and (iii) this Court as
the final authority, for dealing with all issues that may arise in
relation to the reorganisation and insolvency resolution of
corporate persons. Insofar as insolvency resolution of corporate
debtors and personal guarantors are concerned, any order
passed by the NCLT is appealable to NCLAT under Section 61 of
the IBC, 2016 and the orders of the NCLAT are amenable to the
appellate jurisdiction of this Court under Section 62…..”
9 (2020) 13 SCC 308
20
18.3 It is, hence, evident that the IBC constitutes a self-contained and
exhaustive code governing all facets of insolvency resolution and
liquidation of corporate persons. The legislative intent is to ensure that
issues relating to the insolvency estate, its preservation, management and
distribution are determined within the framework and hierarchy
contemplated by the Code.
19. The above analysis demonstrates that both, the Benami Act and the
IBC, are special legislations operating within distinct yet potentially
intersecting fields. The Benami Act is concerned with identifying and
extinguishing benami holdings through a confiscatory mechanism, while
the IBC is directed at resolution and liquidation of assets belonging to a
corporate debtor within a time-bound framework. The present controversy
arises at the point where property subjected to proceedings under the
Benami Act is asserted to form part of the liquidation estate under the IBC.
The issue, therefore, is not one of abstract supremacy, but of determining
whether the two enactments can be harmoniously construed, and, if not,
which statutory regime must prevail in the limited sphere of conflict. It is in
this backdrop that the apparent inconsistency between the two statutory
regimes requires examination.
20. Two Conflicting Statutory Regime: It has been argued by the
appellants that IBC being a special statue must prevail over Benami Act
21
and hence NCLT is competent to adjudicate upon a challenge made to
attachment proceedings under Benami Act by virtue of it being a special
as well as later law. To this extent, reliance is placed on Solidaire India
Ltd. v. Fairgrowth Financial Services Ltd. 10 At the same time, it must be
borne in mind that the Benami Act is also a special legislation aimed at
prohibiting and penalising benami transactions. What therefore must be
seen is the dominant purpose and object of both the enactments.
20.1 In a recent decision, this Court had the occasion to examine the
competing application of two special statutes. Analysing the position of
law, in State Bank of India v. Union of India11 summarised the principles
to be followed in case there is a conflict between two statutory regimes.
The relevant paragraphs are as under:
“64. When confronted with a situation where two statutory
enactments appear to operate in conflict, this Court is enjoined
to interpret the concerned legislations in a manner that gives
effect to both, to the extent such reconciliation is reasonably
possible. Only where such harmonious construction is not
feasible does the Court proceed to determine which enactment
must prevail. Conflicts of this nature may arise either between a
general statute and a special statute, or between two statutes
each possessing a special character. Over time, this Court has
evolved settled principles to guide the resolution of such inter se
inconsistencies which are as;
(I) Where two enactments are attracted to the same factual
matrix, the initial inquiry must be directed towards determining
whether either statute is general or special in relation to the
subject-matter in issue. This determination is not made in the
abstract, but by examining the dominant subject-matter of the
statute, viewed through the prism of its legislative intent. An10 (2001) 3 SCC 71.
11 2026 INSC 153. (Hereinafter, SBI)
22
enactment may, depending on the context, operate as a general
law for certain purposes and as a special law for others. The
optimal outcome is achieved where each statute is allowed to
function within its designated sphere, without trenching upon the
field occupied by the other. 12 Bearing this in mind, the provisions
of both enactments must be scrutinised to assess whether they
can be construed in a manner that permits harmonious
construction. 13
(II) Where it is evident that one enactment is intended to function
as a special law governing a defined subject, while the other is a
general law operating in a broader or overlapping domain, the
established principle embodied in the maxim generalia
specialibus non derogant applies. In such circumstances, the
general provision must give way to the special provision. 14
(III) In an eventuality where the contestation is between two
special enactments, both having non-obstante clauses, the
general rule is that later enactment must prevail over the earlier
one. 1512 LIC of India v. DJ Bahadur, (1981) 1 SCC 315. Relevant paragraph is as follows:
“52. In determining whether a statute is a special or a general one, the focus must be on the
principal subject-matter plus the particular perspective. For certain purposes, an Act may be general
and for certain other purposes it may be special and we cannot blur distinctions when dealing with finer
points of law. In law, we have a cosmos of relativity, not absolutes — so too in life….
57. What is special or general is wholly a creature of the subject and context and may vary with
situation, circumstances and angle of vision. Law is no abstraction but realises itself in the living setting
of actualities. Which is a special provision and which general, depends on the specific problem, the
topic for decision, not the broad rubric nor any rule of thumb. The peaceful coexistence of both
legislations is best achieved, if that be feasible, by allowing to each its allotted field for play. Sense and
sensibility, not mechanical rigidity gives the flexible solution……”13 Gobind Sugar Mills Ltd. v. State of Bihar, (1999) 7 SCC 76. Relevant paragraph is as fllows:
“10. While determining the question whether a statute is a general or a special one, focus must
be on the principal subject-matter coupled with a particular perspective with reference to the intendment
of the Act….”14 State of Gujarat v. Patel Ramjibhai Danabhai, (1979) 3 SCC 347; Commercial Tax Officer, Rajasthan
v. Binani Cements Ltd., (2014) 8 SCC 319; Vodafone Idea Cellular Ltd. v. Ajay Kumar Agarwal, (2022)
6 SCC 496
15 Sarwan Singh v. Shri Kasturi Lal, (1977) 1 SCC 750. Relevant portion of the judgment is as follows:
“20…..When two or more laws operate in the same field and each contains a non-obstante
clause stating that its provisions will override those of any other law, stimulating and incisive problems
of interpretation arise. Since statutory interpretation has no conventional protocol, cases of such conflict
have to be decided in reference to the object and purpose of the laws under consideration….
21. For resolving such inter se conflicts, one other test may also be applied though the
persuasive force of such a test is but one of the factors which combine to give a fair meaning to the
language of the law. That test is that the later enactment must prevail over the earlier one…..”
23
(IV) However, this is not an absolute rule. In the event of a conflict
between special acts, the dominant purpose of both statutes
would have to be analyzed to ascertain which one should prevail
over the other. The primary effort of the interpreter must be to
harmonise, not excise. 16 Hence, where both the enactments
have the non obstante clause then in that case, the proper
perspective would be that one has to see the subject and the
dominant purpose for which the special enactment was made
and in case the dominant purpose is covered by that
contingencies, then notwithstanding that the Act might have
come at a later point of time still the intention can be ascertained
by looking to the objects and reasons. 17”
(emphasis supplied)
20.2 On behalf of the appellants, it was urged that in present case, IBC,
being the later and more comprehensive insolvency legislation, must
therefore govern in the event of conflict on basis of the principle of leges
posteriores priores contrarias abrogant. However, the fact that, the
property which is sought to be included in the liquidation estate has been
provisionally attached for being a benami property, cannot be lost sight of.
20.3 Benami Act is a complete and self-contained code governing
identification, provisional attachment, adjudication and confiscation of
16 S. Vanitha v. Deputy Commissioner, Bengaluru Urban District & Ors. (2021) 15 SCC 730. Relevant
portion of the judgment is as follows:
“34…Principles of statutory interpretation dictate that in the event of two special acts containing
non obstante clauses, the later law shall typically prevail. In the present case, as we have seen, the
Senior Citizen‟s Act 2007 contains a non obstante clause. However, in the event of a conflict between
special acts, the dominant purpose of both statutes would have to be analyzed to ascertain which one
should prevail over the other. The primary effort of the interpreter must be to harmonise, not excise….”
17 Bank of India v. Ketan Parekh, (2008) 8 SCC 148. Relevant portion of the judgment is as follows:
“28. …But cases might arise where both the enactments have the non obstante clause then in
that case, the proper perspective would be that one has to see the subject and the dominant purpose
for which the special enactment was made and in case the dominant purpose is covered by that
contingencies, then notwithstanding that the Act might have come at a later point of time still the
intention can be ascertained by looking to the objects and reasons….”24
benami property, supported by a distinct appellate hierarchy. Exclusivejurisdiction over such determinations is conferred upon authorities
constituted under the Benami Act. The IBC neither displaces this statutory
mechanism nor empowers the NCLT to reopen findings rendered
thereunder.
20.4 This Court in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta 18 has held
that when proceedings are to be initiated dehors the insolvency of the
corporate debtor, the RP must approach the relevant competent authority.
The Court held:
“74. Therefore, we hold that the RP can approach NCLT for
adjudication of disputes that are related to the insolvency
resolution process. However, for adjudication of disputes that
arise dehors the insolvency of the corporate debtor, the RP
must approach the relevant competent authority. For instance,
if the dispute in the present matter related to the non-supply
of electricity, the RP would not have been entitled to invoke
the jurisdiction of NCLT under IBC. However, since the dispute
in the present case has arisen solely on the ground of the
insolvency of the corporate debtor, NCLT is empowered to
adjudicate this dispute under Section 60(5)(c) of IBC.”.
(emphasis supplied)
20.5 Further, in SBI (supra) resolving the apparent conflict between the
IBC regime and regime under telecommunication laws, this Court
observed that;
“66. The scope and ambit of IBC is to speed up the process
providing for insolvency 19, and achieving maximisation of value
of the asset of the entity undergoing CIRP. The focus is on the
18 (2021) 7 SCC 209
19 Innoventive Industries Ltd. v. ICICI Bank & Anr. (2018) 1 SCC 407.
25
company. On the other hand, Telegraph Act, Wireless
Telegraphy Act and TRAI Act forms a complete and exhaustive
code for all matters relating to telecom sector…..
67. The statutory regime under IBC cannot be permitted to
make inroads into telecom sector and re-write and restructure
the rights and liabilities arising out of administration, usage, and
transfers of spectrum which operate under exclusive legal
regime concerning telecommunications. The disharmony
caused by applying IBC to the telecom sector which operates
under a different legal regime was never intended by the
Parliament.
68. Statutory interpretation adopted by the corporate debtors for
applying IBC to the material resource of the nation, the spectrum
by referring to it as an asset in its books of account, the License
Agreement, Tripartite Agreement, or the Spectrum Trading
Guidelines is like the tail wagging the dog. Statutory
interpretation cannot be based on a myopic approach of reading
the definition clauses out of its context. Merely because
spectrum can be treated as an “asset” on the basis of certain
attributes, such as possession and usage, lease and
assignment, claim and liability or credit and debt, the entirety of
the telecom sector cannot be brought under the sweep of IBC.
The two statutes have different subjects to deal with, different
purposes to subserve, different laws to abide, protect different
rights and create different liabilities. It is necessary for the
constitutional courts to recognise their respective provinces and
to ensure that they operate with harmony and without conflict.”
(emphasis supplied)
20.6 What emerges from the foregoing analysis is that the jurisdiction of
authorities under IBC cannot be expansively construed so as to trench
upon fields that are founded in public law domain. Where the subject
matter of the dispute pertains to the exercise of sovereign statutory power,
particularly in relation to determination of legality of title, attachment, or
confiscation and vesting thereof, the adjudicatory fora under the IBC must
necessarily yield to the specialised mechanism created by such statute.
26
Proceedings under Benami Act squarely fall within the public law domain.
They are not in the nature of inter se disputes between private parties
concerning proprietary rights, nor are they recovery proceedings capable
of being subsumed within insolvency resolution. The Benami Act
represents a sovereign exercise aimed at identifying and extinguishing
benami transactions. The attachment and eventual confiscation of
property thereunder operate in rem and culminate in vesting of the
property in the Central Government free from encumbrances. Such
consequences are penal and deterrent, rooted in statutory illegality, and
are enforced through a distinct adjudicatory hierarchy whose jurisdiction
is expressly insulated from ordinary civil fora. In similar circumstances
when proceedings under MMDR Act were sought to be interdicted by
invoking IBC, this Court in Embassy Property (supra) rejected the
argument and held as under;
“29. Therefore as rightly contended by the learned Attorney
General, the decision of the Government of Karnataka to refuse
the benefit of deemed extension of lease, is in the public law
domain and hence the correctness of the said decision can be
called into question only in a superior court which is vested with
the power of judicial review over administrative action. The
NCLT, being a creature of a special statute to discharge certain
specific functions, cannot be elevated to the status of a superior
court having the power of judicial review over administrative
action…..
37….. But a decision taken by the Government or a statutory
authority in relation to a matter which is in the realm of public
law, cannot, by any stretch of imagination, be brought within the
fold of the phrase “arising out of or in relation to the insolvency
resolution” appearing in clause (c) of sub-section (5)…..
27
40. If NCLT has been conferred with jurisdiction to decide all
types of claims to property, of the corporate debtor, Section
18(1)(f)(vi) would not have made the task of the interim
resolution professional in taking control and custody of an asset
over which the corporate debtor has ownership rights, subject to
the determination of ownership by a court or other authority. In
fact an asset owned by a third party, but which is in the
possession of the corporate debtor under contractual
arrangements, is specifically kept out of the definition of the term
“assets” under the Explanation to Section 18. This assumes
significance in view of the language used in Sections 18 and 25
in contrast to the language employed in Section 20. Section 18
speaks about the duties of the interim resolution professional
and Section 25 speaks about the duties of resolution
professional. These two provisions use the word “assets”, while
Section 20(1) uses the word “property” together with the word
“value”. Sections 18 and 25 do not use the expression “property”.
Another important aspect is that under Section 25(2)(b) of the
IBC, 2016, the resolution professional is obliged to represent and
act on behalf of the corporate debtor with third parties and
exercise rights for the benefit of the corporate debtor in judicial,
quasi-judicial and arbitration proceedings. Sections 25(1) and
25(2)(b) reads as follows:
“25. Duties of resolution professional.—(1) It shall be the
duty of the resolution professional to preserve and protect
the assets of the corporate debtor, including the continued
business operations of the corporate debtor.
(2) For the purposes of sub-section (1), the resolution
professional shall undertake the following actions:
(a) ***
(b) represent and act on behalf of the corporate debtor
with third parties, exercise rights for the benefit of the
corporate debtor in judicial, quasi-judicial and arbitration
proceedings;”
(emphasis supplied)
This shows that wherever the corporate debtor has to exercise
rights in judicial, quasi-judicial proceedings, the resolution
professional cannot short-circuit the same and bring a claim
before NCLT taking advantage of Section 60(5).
41. Therefore in the light of the statutory scheme as culled
out from various provisions of the IBC, 2016 it is clear that
wherever the corporate debtor has to exercise a right that falls
outside the purview of the IBC, 2016 especially in the realm of
28
the public law, they cannot, through the resolution professional,
take a bypass and go before NCLT for the enforcement of such
a right.”
(emphasis supplied)
20.7 In view of the above discussion, permitting the NCLT to examine the
correctness of attachment or adjudication under the Benami Act by
invoking Section 60(5) of the IBC would amount to elevating it to the status
of a judicial review forum over sovereign action, a course expressly
disapproved in the line of authority commencing from Embassy Property
(supra) and consistently reiterated thereafter. The IBC, concerned as it is
with insolvency resolution and value maximisation of lawfully owned
assets, cannot be employed as a mechanism to dilute or override statutory
proceedings undertaken in the public law sphere for confiscation of tainted
property.
20.8 The properties in question, having been provisionally attached and
confirmed by the Adjudicating Authority under the Benami Act, stand
vested in the Central Government under Section 27, subject to statutory
appeal. Those determinations remain operative. The NCLT cannot, in
exercise of insolvency jurisdiction, disregard or nullify a statutory vesting
effected under another enactment. The IBC does not provide an indirect
route to challenge sovereign acts validly undertaken under a penal
statute.
29
21. A more fundamental objection is raised with reference to Section 36
of the IBC. The liquidation estate comprises only assets beneficially
owned by the corporate debtor. Property held benami is, by definition, held
in a fiduciary or representative capacity for the real owner. Section
36(4)(a)(i) excludes assets held in trust for third parties from the liquidation
estate. In Controller of Estate Duty, Lucknow v. Aloke Mitra20 this Court
reiterated that a benamidar possesses no beneficial interest and that title
vests in the person who provided consideration. Where the corporate
debtor is merely an ostensible holder, the property never forms part of its
estate and cannot be administered in liquidation.
22. Section 36(3)(e) further recognises that property “subject to
determination by a court or authority” forms part of the estate only to the
extent of such determination. Once the Adjudicating Authority under the
Benami Act has concluded that the corporate debtor is a benamidar,
beneficial ownership stands negated. The legality and validity of such
determinations are subject matter of appeal under the provisions of
Benami Act alone. Insolvency proceedings cannot be utilised to convert
property held for another into distributable assets for creditors. The IBC
contemplates distribution of the debtor’s estate, not assets impressed with
a trust or held on behalf of a third party.
20 (1981) 2 SCC 121
30
23. The reliance placed on Section 32A and the moratorium under
Section 14 is answered on statutory grounds. Section 32A is event-based
and triggered only upon approval of a resolution plan or completion of a
liquidation sale to an unconnected third party. Absent such approval, the
immunity does not arise. The provision does not validate defective title nor
retrospectively convert benami property into assets of the corporate
debtor.
24. Likewise, the moratorium under Section 14 is intended to preserve
the debtor’s estate for orderly resolution; it does not interdict sovereign
proceedings in rem for attachment or confiscation under penal statutes.
Such proceedings are distinct from creditor enforcement and proceed on
an independent statutory footing. The contention of the appellants that the
attachment order is impermissible as the moratorium under Section 14 of
the Act commenced on 15.10.2018 is not acceptable because the
mandate of moratorium must be understood in the context of the
applicability of the Act. The moratorium is intended to protect the
corporate debtor from “creditor actions” aimed at debt recovery, not to
shield “tainted assets” from sovereign actions against crime. In any event
of the matter, the liquidator would have power and jurisdiction to deal with
the property only when the corporate debtor has a beneficial interest in
the said property.
31
25. Mr. Dwarakanath, also brought to our notice certain questionable
transactions including statement of witnesses that were recorded. We are
not inclined to examine the facts of the case in detail in order to ensure
that the appellants’ remedies are not prejudiced in any way.
26. Returning to the facts of the case, 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 IBC. We have
no doubt in our mind that such invocation is not bonafide and is actually
intended to circumvent and interdict the procedures contemplated under
the Benami Act. Further, filing of 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.
27. Under these circumstances, the appeals have to be dismissed with
exemplary costs.
28. For the reasons stated above, all the appeals are dismissed with
costs quantified at Rs. 5 lakhs each. The amount shall be deposited with
32
the Supreme Court Advocates on Record Association (SCAORA) within
four weeks from the date of passing of this judgment.
……………………………….J.
[PAMIDIGHANTAM SRI NARASIMHA]
……………………………….J.
[ATUL S. CHANDURKAR]
NEW DELHI;
FEBRUARY 24, 2026
33
