High Court Ensures Beneficial Owner’s Right to Reply in Benami Notices
The Karnataka High Court has directed that Initiating Officers under the Prohibition of Benami Property Transactions Act, 1988 must, in any notice issued under sub-Section (1) of Section 24, explicitly call upon the beneficial owner to furnish an explanation or submission within the specified timeframe.
Justice Suraj Govindaraj issued the direction while allowing a petition filed by Nara Suryanarayana Reddy, the beneficial owner of a Benami property.
Background of the Case
A notice had been issued to a Benamidar, stating that he was holding the property on behalf of the petitioner-beneficial owner under Section 24(1). The Benamidar replied, and subsequent orders were passed. The beneficial owner challenged the orders, arguing that:
- The notice failed to explicitly call upon the beneficial owner to respond.
- Natural justice principles were violated as the petitioner was not given an opportunity to reply before orders were passed.
The respondents contended that marking a copy of the notice to the beneficial owner was sufficient, and it was optional for the beneficial owner to reply within the period specified for the Benamidar.
Court’s Observations
The Bench noted that under Section 24(2), a copy of the notice must be sent to the beneficial owner if his identity is known, and Amendment Act No. 15 of 2024 inserted Section 24(2A), effective from October 1, 2024, which provides that:
“The Benamidar or the beneficial owner shall furnish explanation or submission within the period specified in the notice or within such period extended by the Initiating Officer, not exceeding three months from the end of the month in which the notice was issued.”
Upon reviewing the notice in the present case, the Court found:
- The notice referred to the beneficial owner and marked a copy, but
- There was no explicit call to the beneficial owner to reply.
“Section 2A recognises the right of the beneficial owner to reply to the notice under Section 24(1). The impugned notice fails to call upon the beneficial owner to respond,” the Court observed.
Court Direction
The High Court held that Initiating Officers must:
- Issue notices under Section 24(1) to the Benamidar.
- Mark a copy of the notice to the beneficial owner under Section 24(2).
- Explicitly call upon the beneficial owner to furnish explanation or submission, within the timeframe specified.
The Court noted that explicitly stating this in the notice would prevent technical objections and delays.
Allowing the petition, the Court directed:
“The petitioner is permitted to reply to the notice under Section 24(1) issued to the Benamidar, which has been marked to the beneficial owner, within 15 days from today.”
Case Details
- Case Title: Nara Suryanarayana Reddy v. Initiating Officer & Others
- Case No.: WRIT PETITION NO. 107184 OF 2025
- Court: Karnataka High Court
- Bench: Justice Suraj Govindaraj
- Counsel for Petitioner: Advocate Gangadhar J M
- Counsel for Respondents: Advocates M. Thirumalesh & D. Roopa
