Sale is incomplete due to partial payment and the lack of a completed sale deed, the property could not be considered as being held benami 

ORDER

1. This Order disposes of the Appeal Nos. FPA-PBPT-855/HYD/2019, FPA-PBPT-897/HYD/2019 and FPA-PBPT-901/HYD/2019 filed under Section 46(1) of the Prohibition of Benami Property Transactions Act, 1988 (PBPTA) by M/s North Star Homes, Shri Rachakonda Srinivas Rao and M/s. Padmanabha Marktech Pvt. Ltd. respectively against the Order dated 25.06.2019 (Impugned Order) under Section 26 (3) of PBPTA passed by the Ld. Adjudicating Authority in Reference No.R-884/2018. The Impugned Order confirmed the Provisional Attachment Order (PAO) dated 28.05.2018, under Section 24 (4) (b) (i) of the PBPTA passed by the Initiating Officer (IO) of the BPU, Hyderabad.

2. We note the following relevant details of the case:

Reference No.884/2018

Beneficial Owner: Rachakonda Srinivas Rao

Benamidar: M/s Padmanabha Marktech Pvt Ltd.

Interested Parties: M/s North Star Homes Transaction amount: Total consideration to be paid was Rs. 2,35,00,000/- out of which M/s Padmanabha Marktech Pvt. Ltd. paid only Rs. 1,94,00,000/. Appellant was liable to execute the final sale deed on receipt of full consideration on payment of remaining unpaid amount.

3. Ld. Counsels for the Appellants informed that the Initiating Officer (IO) and Deputy Commissioner of Income Tax (Benami Prohibition), Hyderabad, filed Reference No. 884/2018 before the Ld. Adjudicating Authority on 08.06.2018 concerning M/s Padmanabha Marktech Pvt. Ltd. (Benamidar), Sh. Rachakonda Srinivas Rao (Beneficial owner), and M/s North Star Homes (interested party) following the Provisional Attachment Order (PAO) dated 28.05.2018 with respect to the property “Commercial Apartment bearing Unit/Shop No.2 in Ground & First Floor, with super built-up area of 4130 Sq. ft. including the right in common areas along with undivided share of land admeasuring 162.722 square yards, out of total land admeasuring 1720 square yards and four car parking slots in the commercial complex constructed in No.10-2-277/A situated at Entrenchment Road, Marredpally, Secunderabad.” The part consideration of Rs.1,94,00,000/- out of total consideration of Rs.2,35,00,000/- was purportedly paid. It seems that in the impugned Order another property has been inadvertently mentioned. This was pointed out by the Ld. Counsels for the Appellants and not disputed by the Ld. Counsel for the Respondent.

4. Ld. Counsels for the Appellants argued that Sh. Rachakonda cannot be termed as beneficial owner as the subject property was never owned or held by him. M/s. Padmanabha Marktech Pvt. Ltd. entered into an Agreement of Sale with M/s North Star Homes to purchase the impugned property worth Rs.2,35,00,000/-. They argued that at all times the beneficial interest in the impugned property only vested with M/s North Star Homes and the Respondent Department was fully cognizant of this fact. The beneficial interest in the impugned property will pass on to M/s Padmanabha Marktech Pvt. Ltd. only after it makes full payment and the sale deed is executed and registered in its name.

5. Ld. Counsels for the Appellants have contended that the Ld. Adjudicating Authority has wrongly confirmed the Provisional Attachment of the impugned property. The alleged Benamidar is not the owner of the said property u/s 26(3) of PBPTA. Moreover, Agreement to Sale is merely an executor contract. The title of the property and the possession is with M/s North Star Homes. Shri Rachakonda contended that the provisions of the PBPTA are not applicable to the impugned property as there was only contemplation to purchase/invest in the same and that too before the enactment of amendment to the Benami Act which was made enforceable only from 1^st November, 2016. It was also contended that the Respondent BPU, Hyderabad failed to establish that the funds for the said transaction were provided by Shri. Rachakonda.

6. Ld. Counsels for the Appellants submitted that the Reference No.884/2018 dated 08.06.2018 u/s 24(5) of the PBPTA, made by the IO is bad in law. Moreover, PBPTA is not applicable to this case as the agreement of sale for the purchase of the impugned property was of earlier period with all future benefits accruing to the prospective buyer only upon completion of construction and transfer of title. The agreement to sale was not finally executed and converted in the form of sale, till date. Since the amended PBPTA came into force only from 1^st November 2016, hence, there is no scope for retrospective application of the punitive law. Ld. Counsels also contended that the alleged Benamidar directly entered in an Agreement of Sale with M/s North Star Homes to purchase the property for which requisite consideration was paid from own sources through proper and valid banking channels. Ld. Counsel for Shri Rachakonda, the BO, submitted that the alleged Benamidar entered into direct agreement to sale with M/s North Star Homes to purchase the impugned property for an agreed consideration. Ld. Counsel for M/s North Star Homes further submitted that mere agreement to sell does not confer title on property. Since the alleged Benamidar had not paid the entire sale consideration, title had not been transferred to the said purchaser. Section 54 of the Transfer of Property Act, 1882 states that the Agreement to Sale neither creates any title nor any interest in the immovable property, which is also a settled law by the Hon’ble Supreme Court of India in several cases. Ld. Counsels for the Appellants have prayed for the quashing of the impugned order.

7. Ld. Counsel for the Respondent argued that Information was received by Anti Corruption Bureau, Central Investigation Unit, Hyderabad, Telangana (ACB) with regard to the purchase of the aforementioned property in which Agreement of Sale was said to be made between M/s. Padmanabha Marktech Pvt. Ltd. and M/s North Star Homes. While the purchase consideration was paid through cheques, the investigation revealed the cash had been deposited in the bank account of M/s Padmanabha Marktech Pvt. Ltd. which was subsequently transferred to the account of M/s North Star Homes through 31 cheques.

8. Ld. Counsel for the Respondent contended that since M/s. Padmanabha Marktech Pvt. Ltd. is a company which had become almost dysfunctional. Smt. Savitramma and Shri P Karunakar were appointed at the instance of Shri Rachkonda Srinivasa Rao, as Managing Director and Director respectively of the Company. The Company had no sources to make any investment. Shri P. Karunakar had given statement under Section 164 Cr.PC. that Smt. Savitramma had given 100 blank signed cheques of the Company’s bank account to Shri R. Kanishka, who is the Son of Rachkonda Srinivasa Rao, which in turn were used to pay Rs.1,94,00,000/- in 31 cheques to M/s North Star Homes. Ld. Counsel contended that the Ld. Adjudicating Authority has clearly brought on record the background and the circumstances in which the whole transaction was made by Sri Rachakonda Srinivas Rao, who was a government servant. Shri Rao introduced his unaccounted/ill gotten money and parked the same in the name of M/s Padmanabha Marktech Pvt. Ltd. by giving it a color of genuine legitimate investment circumventing the law. In view of the above, Ld. Adjudicating Authority correctly confirmed the Provisional Attachment of the impugned property. Ld. Counsel for the Respondent prayed for dismissal of the Appeals.

9. We have considered the rival submissions and the material on record. It is an admitted fact that only partial payment has been made by the alleged Benamidar to the interested party M/s North Star Homes. The partial payment was made on signing of Agreement of Sale. Section 54 of the Transfer of Property Act, 1882 is reproduced below: –

Section 54. “Sale” defined. —

“Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.

Sale how made. —

Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.

In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.

Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.

Contract for sale. —

A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property It is therefore obvious that the contract of Agreement to Sale does not bestow any interest in or charge of such property.

10. We find that in several judgments the Hon’ble Supreme Court has held that an Agreement to Sale does not create an interest or charge in favor of the proposed vendee in the suit property. In the Judgment dated 25.08.2004 the Hon’ble Supreme Court in the matter of Rambhau Namdeo Gajre versus Narayan Bapuji Dhotra (dead) through LRS. [(2004) 8 SCC 614] stated the aforementioned in the following paragraphs:-

“13. The agreement to sell does not create an interest of the proposed vendee in the suit property. As per Section 54 of the Act, the title in immovable property valued at more than Rs 100 can be conveyed only by executing a registered sale deed. Section 54 specifically provides that a contract for sale of immovable property is a contract evidencing the fact that the sale of such property shall take place on the terms settled between the parties, but does not, of itself, create any interest in or charge on such property. It is not disputed before us that the suit land sought to be conveyed is of the value of more than Rs 100. Therefore, unless there was a registered document of sale in favour of Pishorrilal (the proposed transferee) the title of the suit land continued to vest in Narayan Bapuji Dhotra (original plaintiff) and remain in his ownership. This point was examined in detail by this Court in State of U.P. v. District Judge [(1997) 1 SCC 496] and it was held thus : (SCC pp. 499500, para 7)

“7. Having given our anxious consideration to the rival contentions we find that the High Court with respect had patently erred in taking the view that because of Section 53-A of the Transfer of Property Act the proposed transferees of the land had acquired an interest in the lands which would result in exclusion of these lands from the computation of the holding of the tenure-holder transferor on the appointed day. It is obvious that an agreement to sell creates no interest in land. As per Section 54 of the Transfer of Property Act, the property in the land gets conveyed only by registered sale deed. It is not in dispute that the lands sought to be covered were having value of more than Rs 100. Therefore, unless there was a registered document of sale in favour of the proposed transferee agreement-holders, the title of the lands would not get divested from the vendor and would remain in his ownership. There is no dispute on this aspect. However, strong reliance was placed by learned counsel for Respondent 3 on Section 53-A of the Transfer of Property Act. We fail to appreciate how that section can at all be relevant against the third party like the appellant State. That section provides for a shield of protection to the proposed transferee to remain in possession against the original owner who has agreed to sell these lands to the transferee if the proposed transferee satisfies other conditions of Section 53-A. That protection is available as a shield only against the transferor, the proposed vendor, and would disentitle him from disturbing the possession of the proposed transferees who are put in possession pursuant to such an agreement. But that has nothing to do with the ownership of the proposed transferor who remains full owner of the said lands till they are legally conveyed by sale deed to the proposed transferees. Such a right to protect possession against the proposed vendor cannot be pressed in service against a third party like the appellant State when it seeks to enforce the provisions of the Act against the tenure-holder, proposed transferor of these lands.” (emphasis supplied)

There was no agreement between the appellant and the respondent in connection with the suit land. The doctrine of part-performance could have been availed of by Pishorrilal against his proposed vendor subject, of course, to the fulfilment of the conditions mentioned above. It could not be availed of by the appellant against the respondent with whom he has no privity of contract. The appellant has been put in possession of the suit land on the basis of an agreement of sale not by the respondent but by Pishorrilal, therefore, the privity of contract is between Pishorrilal and the appellant and not between the appellant and the respondent. The doctrine of partperformance as contemplated in Section 53-A can be availed of by the proposed transferee against his transferor or any person claiming under him and not against a third person with whom he does not have a privity of contract.”

11. In the Judgment dated 22.08.1995, the Hon’ble Supreme Court in the matter of Namdeo versus Collector, East Neemar, Khandwa & Ors. [(1995) 5 SCC 598] held that an agreement of sale does not convey any right, title or interest. The relevant paragraph is reproduced below: –

“6. The further contention is that there was an agreement of sale by Devi Prasad with the appellant in the year 1969 and that sale deed was executed in 1974, it dates back to the date of agreement and, therefore, the Act is inapplicable. We find no force in the contention. An agreement of sale does not convey any right, title or interest. It would create only an enforceable right in a court of law and parties could act thereon. The right, title and interest in the land of Devi Prasad stood extinguished only on execution and registration of the sale deed and admittedly it was done in 1974. Therefore, the sale deeds are within the prohibited period.”

12. We note that out of the total sale consideration of Rs.2.35 Crores for the impugned property only Rs.1.94 Crores was paid by the alleged Benamidar. The interested party M/s North Star Homes has also maintained that the Benamidar has not acquired any rights, interest and title to the impugned property. Therefore M/s North Star Homes continue to remain owner and in possession of the impugned property. In view of this, the applicability of Section 2 (9) (A) is doubtful as neither the impugned property was transferred to the alleged Benamidar nor the impugned property was held by the alleged Benamidar. Even if we accept that there were cash infusions into the bank accounts of the alleged Benamidar, there is no evidence on record as to show that such infusions were made by the Beneficial Owner.

13. In view of the aforementioned discussions, we find that neither the property which has been provisionally attached is Benami nor the transaction which has occurred with respect to the impugned property is Benami. We therefore set aside the Impugned Order.

14. We allow the Appeals Nos. FPA-PBPT-855/HYD/2019, FPA-PBPT-897/HYD/2019 and FPA-PBPT-901/HYD/2019 and dispose of the Applications accordingly.