Purchase of Shares in company under Liquidation not deemed Benami Property Ownership: Supreme Court condones delay in filing Civil Appeal [Read Judgement]

The Supreme Court of India has held that the purchase of shares in a company under liquidation does not automatically confer ownership of benami property to the company itself. The ruling came in response to a case where P. Eswaramoorthy challenged a judgment by the National Company Law Appellate Tribunal, Chennai, in a Civil Appeal.

The issue revolved around the ownership of Benami property allegedly held by a company undergoing liquidation. The significant point of contention was whether a company under liquidation could be considered the owner of Benami property merely because someone had purchased its shares.

The petitioner, P. Eswaramoorthy, was represented by Mr. C. Aryama Sundaram, Mr. B. Dhanaraj, Mr. G. Ananda Selvam, Mr. Mayilsamy K., Mr. Sanchit Maheshwari and Mr. Anand Dilip Landge while the respondent revenue, the Deputy Commissioner of Income Tax (Benami Prohibition) was not represented by anyone.

The petitioner argued that the purchase of shares in a company under liquidation should not automatically lead to the assumption that the company itself owned the benami property. It was contended that the ownership of shares should not be conflated with direct ownership of assets and therefore, the benami property provisions should not apply.

During the proceedings, the Court acknowledged the delay in filing the appeal and duly condoned the same.

The Supreme Court issued notices in the matter and tagged it with another related case C. Ramasubramaniam v. the Deputy Commissioner of Income Tax (Benami Prohibition) & Ors. The court clarified that it had not stayed the appellate proceedings.

The two-Judge bench comprising Justice Sanjiv Khanna and Justice S.V.N. Bhatti stated “Delay condoned. Learned Senior Advocate appearing for the appellant submits that in this case, the company which is under liquidation is not the owner of any benami property. Purchase of the shares in a company under liquidation does not make the company itself the owner of the benami property.”

The Court further directed that notice shall be served to all parties involved through various modes, including dasti, to ensure that all parties were informed of the development.

The Supreme Court clarified that it had not issued a stay on the appellate proceedings, meaning that the proceedings in the National Company Law Appellate Tribunal would continue as per the prevailing legal procedures.

The bench clarified the distinction between ownership of shares in a company and direct ownership of assets, particularly in the context of benami property.

To Read the full text of the Order CLICK HERE

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