S. Rajendran v. Deputy Commissioner of Income Tax (Benami Prohibition) & Ors.

 Background

Appeals by liquidators challenging provisional attachment under the Benami Act during CIRP/liquidation.

Properties of the corporate debtor (Padmaadevi Sugars Ltd. and connected entities) were provisionally attached under s. 24(3) Benami Act, 1988, and later confirmed under s. 26, on allegations of benami acquisition funded through demonetisedcurrency. Meanwhile, CIRP commenced under the IBC, 2016, culminating in liquidation.

The liquidator challenged the attachment before NCLT invoking ss. 14, 32A & 60(5) IBC. NCLT and NCLAT held they lacked jurisdiction. The liquidators appealed.

 

Issues Framed

1. Whether legality of attachment under the Benami Act can be adjudicated by NCLT/NCLAT under the IBC.
2. Whether ss. 14, 32A & 238 IBC override proceedings under the Benami Act.
3. Whether attached property forms part of the liquidation estate under s. 36 IBC.
 

Court’s Reasoning

1. Distinct Statutory Domains

• The Benami Act is a complete code governing identification, attachment, adjudication and confiscation of benamiproperty.
• Upon confiscation under s. 27 Benami Act, property vests absolutely in the Central Government.
• The IBC governs insolvency resolution of assets beneficially owned by the corporate debtor.

Applying principles from SBI v. Union of India (2026 INSC 153), the Court held that when two special statutes operate, the dominant purpose must be examined; harmonious constructionis preferred.

 

2. Public Law Character of Benami Proceedings

• Proceedings under the Benami Act are sovereign actions in rem, not creditor recovery proceedings.
• Following Embassy Property and Gujarat Urja, disputes dehors insolvency, particularly in public law domain, cannot be adjudicated under s. 60(5) IBC.
• Permitting NCLT to review attachment orders would convert it into a judicial review forum over sovereign action, which is impermissible.
 

3. Liquidation Estate under s. 36 IBC

• Only assets beneficially owned by the corporate debtor form part of the liquidation estate.
• A benamidar has no beneficial interest; such property does not vest in the debtor.
• s. 36(3)(e) IBC recognises exclusion of property subject to determination by competent authority.
 

4. Moratorium and s. 32A IBC

• s. 14 IBC protects against creditor actions, not sovereign confiscation proceedings.
• s. 32A IBC is event-based and does not validate defective title or retrospectively convert benami property into debtor’s asset.
 

Decision / Disposition

Appeals dismissed with exemplary costs of ₹5 lakhs each.
Attachment orders under the Benami Act cannot be challenged before NCLT/NCLAT.

 

Ratio

Orders of provisional attachment and confiscation under the Benami Act, 1988, being sovereign public law actions culminating in statutory vesting under s. 27, cannot be challenged before NCLT/NCLAT under ss. 14, 32A or 60(5) IBC; property held benami does not form part of the liquidation estate under s. 36 IBC

 

 

Case Details

Citation: 2026 INSC 187 
Decided on: 24 February 2026
Case Title: S. Rajendran v. Deputy Commissioner of Income Tax (Benami Prohibition) & Ors.
Court: Supreme Court of India
Bench: Pamidighantam Sri Narasimha & Atul S. Chandurkar, JJ.

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