SUPREME COURT CLARIFIES IBC vs BENAMI ACT JURISDICTION IN S RAJENDRAN CASE
CASE SUMMARY – The Supreme Court in S. Rajendran vs. Deputy Commissioner of Income Tax (Benami Prohibition) (2026 INSC 187) held that attachment orders under the Benami Act cannot be challenged before NCLT under the Insolvency and Bankruptcy Code. The Court ruled that Benami proceedings are sovereign actions in rem and governed by a self-contained statutory framework. Property held benami does not form part of the liquidation estate under Section 36 IBC. Section 14 moratorium and Section 60(5) IBC do not override confiscatory proceedings. The Court dismissed the appeals with costs, reinforcing the supremacy of special penal statutes over insolvency forums in matters of confiscation.
| ASPECTS | DETAILS |
| Case Title | S. Rajendran vs. Deputy Commissioner of Income Tax (Benami Prohibition) & Ors. |
| Introduction | The case examines whether attachment orders passed under the Prohibition of Benami Property Transactions Act, 1988 can be challenged before NCLT/NCLAT under the Insolvency and Bankruptcy Code, 2016 (IBC). |
| Factual Background | Corporate debtor (Padmaadevi Sugars Ltd.) allegedly transferred 100% shares in a benami transaction for ₹450 crores in demonetized currency. Benami authorities provisionally attached properties under Section 24 of the Benami Act. Meanwhile, CIRP and later liquidation commenced under IBC. Liquidator challenged attachment before NCLT. |
| Legal Issues | 1. Can NCLT/NCLAT review attachment under Benami Act?
2. Does Section 14 (moratorium) IBC bar Benami proceedings? 3. Does Section 60(5) IBC give jurisdiction to NCLT? 4. Which statute prevails in case of conflict – IBC or Benami Act? |
| Applicable Law |
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| Analysis | The Court held Benami Act is a self-contained special legislation with its own adjudicatory hierarchy. Proceedings under it are sovereign actions in rem. IBC jurisdiction cannot extend to reviewing penal confiscatory actions. NCLT cannot exercise judicial review over public law actions. Property held benami does not form part of liquidation estate under Section 36 IBC. |
| Conclusion | Appeals dismissed. Attachment orders under Benami Act cannot be challenged before NCLT/NCLAT. Remedy lies within Benami statutory framework. |
| Current Scenario | Law clarified: Insolvency proceedings cannot override sovereign confiscation under Benami Act. Liquidators must approach Benami appellate authorities. |
“IBC cannot be used as a shield to protect tainted assets from sovereign confiscation.”
SOURCE – SUPREME COURT OF INDIA
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