IBC Cannot Override Benami Act Attachment – NCLT Lacks Jurisdiction | SC

Case Details: S. Rajendran vs. Deputy Commissioner of Income-tax [2026] 183 taxmann.com 685 (SC)

Judiciary and Counsel Details

• Pamidighantam Sri Narasimha & Atul S. Chandurkar, JJ.
• Sajan Poovayya, Rajiv Shakdher, Krishnan Venugopal, Krishnan Venugopal, Sr. Advs., Bharadwajaramasubramaniam R., Diwaagar R.S., Priyadarshi Banerjee, Rishabh Singhle, Ms Leelavathi P., Ms Shrinithi S.R., Gokulnath S., Ms Vibha Shyam, Ms Raksha Agrawal, Harshvardhan Sharma, B. Dhanaraj, G. Ananda Selvam, Habib Muzaffar, Karan Khetani, Jonathan Ivan Rajan, Ms Sangamithra Loganathan, Krishnan Agarwal, Ms Elamathi M.S., Harnoor Singh, Labeeb Faaeq, Ms Nandini Kaushik, Siddharth Venugopal, Ms Umang Motiyani, Ms Prakriti Rastogi, Ms Aryama Singh Rajput, Advs., Sujoy Chatterjee, Anand Dilip Landge & Shivendra Singh, AORs for the Petitioner.
• S. Dwarakanath, A.S.G., Rajat Nair, Zoheb Hussain, Mrs. Gargi Khanna, Mrs. Madhulika Upadhyay Aor, Shashank Bajpai, Rajat Vaishnaw, Prabhakar Yadav, H. Siddharth Bhandari, Mudit Bansal, S. Vijay Adithya, Abhyudey Kabra, K. Gowtham Kumar, Vishwaditya Sharma, Ms Deeksha Gupta, Ms Harsha Tripathi, Ms Kanishka Singh, Subornadeep Bhattacharjee, K. Shiva, Rohan Dewan, Ms Aakriti Priya, Udayaditya Banerjee, Ms Suganya T.S., Parikshit Pitale, Krishnan Agarwal, Ms Elamathi M.S., Harnoor Singh, Labeeb Faaeq, Ms Nandini Kaushik, Siddharth Venugopal, Ms Umang Motiyani, Ms Prakriti Rastogi, Ms Aryama Singh Rajput, Advs., Raj Bahadur Yadav, Ms Madhulika Upadhyay, Balaji Srinivasan, Shivendra Singh, P.S. Sudheer, Ms Aanchal Tikmani, AORs & P.B. Suresh, Sr. Adv. for the Respondent.

Facts of the Case

A search was conducted under section 132 of the Income-tax Act. The search revealed that the promoters of the corporate debtor had transferred their 100 per cent shareholding to the beneficial owner, V, through an intermediary, for a consideration paid in demonetised high-value currency notes. Proceedings were initiated under the Prohibition of Benami Property Transactions Act, 1988 (Benami Act), and provisional attachment orders were passed attaching the immovable properties of the corporate debtor.

Meanwhile, the corporate debtor underwent the Corporate Insolvency Resolution Process (CIRP) and was later ordered into liquidation under the IBC Act. The liquidator challenged the provisional attachment before the NCLT, contending that the properties formed part of the liquidation estate and that the moratorium under section 14 of the IBC barred such attachment. The NCLT dismissed the application, and the matter reached the Supreme Court.

Supreme Court Held

The Supreme Court held that the Benami Act is concerned with identifying and extinguishing benami holdings through a confiscatory mechanism. At the same time, the IBC is directed toward the resolution and liquidation of a corporate debtor’s assets within a time-bound framework. The Act also establishes a distinct adjudicatory hierarchy and demarcates jurisdictional boundaries. Section 45 bars the jurisdiction of civil courts in respect of matters that the authorities or the Appellate Tribunal are empowered to determine. Section 46 provides for appeals to the Appellate Tribunal against orders of the Adjudicating Authority, with a further appeal to the High Court on questions of law.

Section 53 prescribes stringent punishment for benami transactions entered into to defeat the law, avoid statutory dues or defraud creditors. While section 60 clarifies that the provisions of the Act are in addition to, and not in derogation of, any other law, section 67 confers overriding effect in the event of inconsistency. The legislative scheme thus discloses a complete code. It was argued that in the present case, the IBC, being the later and more comprehensive insolvency legislation, must govern in the event of a conflict.

However, the property sought to be included in the liquidation estate had been provisionally attached for being a benami property, which cannot be overlooked. The Benami Act is a complete and self-contained code governing identification, provisional attachment, adjudication and confiscation of benami property, supported by a distinct appellate hierarchy. Exclusive jurisdiction over such determinations is conferred upon authorities constituted under the Benami Act. The IBC neither displaces this statutory mechanism nor empowers the NCLT to reopen findings rendered thereunder. Insolvency proceedings cannot be utilised to convert property held for another into distributable assets for creditors. The IBC contemplates distribution of the debtor’s estate, not assets impressed with a trust or held on behalf of a third party.

Accordingly, the Court held that the section 14 moratorium does not bar sovereign attachment under the Benami Act and applies only to creditor recovery actions where the corporate debtor has a beneficial interest. The appellants’ invocation of the IBC to challenge the attachment was misconceived and amounted to an abuse of process, and the appeals were therefore dismissed with exemplary costs.

List of Cases Reviewed

• Order of NCLAT, Chennai in CAAT (CH) (I)-292-2022 order dated 18-8-2022
• CAAT (CH) (I)-188-2022 order dated 13-3-2023 (para 26) affirmed
• State Bank of India v. Union of India [2026] 183 taxmann.com 418 (SC) (para 20.7)
• Embassy Property Developments (P.) Ltd. v. State of Karnataka [2019] 112 taxmann.com 56 (SC) (para 20.7) followed

List of Cases Referred to

• Kiran Shah v. Enforcement Directorate 2022 SCC OnLine NCLAT 2 (para 13.1)
• Innoventive Industries Ltd. v. ICICI Bank Ltd. [2017] 84 taxmann.com 320/143 SCL 625 (SC) (para 14.2)
• Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. [2001] 30 SCL 59 (SC) (para 14.3)
• Bacha F. Guzdar v. CIT (1954) 2 SCC 563 (para 14.8)
• Indian Overseas Bank v. Radhey Infra Solutions (P.) Ltd. [2025] 179 taxmann.com 328 (SC)/[2025] 190 SCL 712 (SC) (para 14.9)
• Kailash Assudani v. CIT [2017] 87 taxmann.com 361 (Madhya Pradesh) (para 17.7)
• Swiss Ribbons (P) Ltd. v. Union of India [2019] 101 taxmann.com 389 (SC)/[2019] 152 SCL 365 (SC) (para 18.1)
• Embassy Property Developments (P.) Ltd. v. State of Karnataka [2019] 112 taxmann.com 56 (SC)/[2020] 157 SCL 445 (SC) (para 18.2)
• State Bank of India v. Union of India [2026] 183 taxmann.com 418 (SC) (para 20.1)
• Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta [2021] 125 taxmann.com 150 (SC)/[2021] 167 SCL 241 (SC) (para 20.4)
• Controller of Estate Duty, Lucknow v. Aloke Mitra (1981) 2 SCC 121 (para 21).