HC dismisses appeals preferred by Sasikala’s benamis in ₹1,674.50-crore demonetised currency transactions

Judges say there is no requirement under law to permit cross examination of witnesses at the preliminary stage itself

The Madras High Court has dismissed all writ appeals preferred by the alleged ‘benamidars’ of All India Anna Dravida Munnetra Kazhagam former interim general secretary V.K. Sasikala against the refusal of a single judge to interfere with an inquiry initiated by the Income Tax department into a group case of her having used ₹1,674.50 crore in demonetised currency notes to buy several malls and mills across the State in November 2016.

Justices R. Mahadevan and J. Sathya Narayana Prasad dismissed the appeals and held that the appellants had not made out any case for interfering with the orders passed by Justice Anita Sumanth on October 25, 2021. The Division Bench held that the I-T department need not provide an opportunity to the appellants to cross examine the witnesses at the preliminary stage under Section 24 of Prohibition of Benami Property Transaction Act of 1988.

The question of violation of principles of natural justice would not arise at all in the absence of any provision of law or compelling circumstances warranting the department to permit cross examination, the Bench said. It also recorded the submission of M. Sheela, Special Public Prosecutor (Income Tax), that the question of providing an opportunity to cross examine the witnesses would arise only during the adjudication proceedings.

Authoring the verdict, Justice Mahadevan pointed out that Section 24 of the 1988 Act required only recording of prima facie opinion with respect to the ‘benami’ nature of a transaction. In order to arrive at such an opinion, the department could rely upon the statements recorded from certain witnesses. However, it was not necessary that those witnesses must be subjected to cross examination even at the preliminary stage, he said.

Though the appellants claimed that the transaction in which they had entered into was not at all a ‘benami’ transaction and that the I-T department had wrongly initiated the proceedings against them under the 1988 Act, the judges said that those arguments on the merits of the case could be placed before the adjudicating authority. They also refused to interfere with the provisional attachment of the properties involved in the transaction.

It was the case of the I-T department sleuths that Ms. Sasikala had used ₹1,911 crore of demonetised currency notes not only to purchase several shopping malls, commercial complexes and mills across Tamil Nadu but also to lend ₹237 crore to government contractor T.S. Kumarasamy of Tiruchengode-based Christy Friedgram Industry which supplied provisions for the nutritious meal scheme in government schools.

The beneficiaries of the deal had faked their business accounts to deposit the demonetised currency notes in their bank accounts since the Centre had permitted such deposits till December 30, 2016. They had signed MoUs agreeing to sell their properties but the sale deeds did not get executed at all after she got imprisoned in the disproportionate assets case in February 2017. Hence, the department termed them as benami transactions.