Standard Of 'Reason To Believe' In Benami Act Is Stricter Than 'Reasonable Suspicion' Under BNSS: Delhi High Court

The Delhi High Court has held that the standard of 'reason to believe' prescribed under Section 24 of the Benami Act is higher than 'reasonable suspicion' under Section 35 of BNSS which empowers a police officer to arrest a person for alleged involvement in a cognizable offence.For context, Section 24 of the Prohibition Of Benami Property Transactions Act, 1988 empowers an Initiating Officer to issue notice, on the basis of material in his possession and reason to believe, that any person is a Benamidar in respect of a property.In the case at hand, Petitioner had challenged notice and provisional attachment order issued by the Initiating Officer on reason to believe that he was a Benamidar of bogus transactions by a searched entity.A division bench of Justices V. Kameswar Rao and Vinod Kumar observed that the Benami Act makes Benami transactions a criminal offence. Therefore, one can take benefit of the definition of expression “reason to believe” as found in Bharatiya Nyaya Sanhita, 2023.In Section 35 of BNSS, a police officer is empowered to arrest a person on reasonable suspicion, which may lead him to believe a person to be involved in a cognizable offence. The Court said,“Whereas a reasonable suspicion may be a reason for a police officer to believe criminal involvement of a person under BNSS, the Benami Act makes the precondition more stringent. In Section 24 of the Benami Act, only on the basis of some material in his possession, the Initiating Officer can form a belief of a person being Benamidar in respect of a property. Standard of basis of belief is on higher pedestal in the Benami Act than the belief under BNS and BNSS (earlier IPC and Cr.P.C.) but it falls short of 'prima-facie case' which is a standard for a Judicial or Quashi Judicial Authority for proceeding against a person under respective laws.”Therefore, the Court added, “Section 24 (1) of the Benami Act does not burden an Initiating Officer to first work out a prima facie case before issuing a show cause notice or give opportunity of hearing and cross examining the witnesses to notice.”The Court also held that whenever a notice issued by an Initiating Officer under Section 24 of the Benami Act is challenged, the Court has to direct its attention to the material in possession of the Initiating Officer.“This would be an objective inquiry and Court can ask as to what is the material in possession of the Initiating Officer. However, while entering into this inquiry, the Court would not go into the question of sufficiency or quality of the material in possession of the Initiating Officer,” it said.In the present case, the Court noted that the Initiating Officer was having in his possession Excel sheets containing details of bogus transactions and their amounts against certain names including one Shyamsundar, which corroborated the statements of beneficial owners. Therefore, in the present case, first condition is satisfied. The second aspect of the inquiry would be as to whether the Initiating Officer had reasons to believe that the petitioner is a Benamidar.“This part is subjective in nature and should be seen from the angle of Initiating Officer. The Courts cannot substitute their own wisdom with the logic and reasoning of Initiating Officer, though the Court can examine relevance of reasons vis a vis material seized, which persuaded the Initiating Officer to issue a notice under Section 24 (1) of the Benami Act,” the Court held.Finally stating that it is enough that the Initiating Officer seized some material and on the basis of such material he formed an opinion, the Court dismissed the plea.Appearance: Mr. Nitin Kanwar, Ms. Parul Kanwar, Mr. Rajiv Kumar, Mr. Dushyant Nayak, Mr. Shivam Jain and Mr.Jitendra Kumar, Advocates for Petitioner; Mr. Shlok Chandra, Sr. Standing Counsel, Ms. Naincy Jain, Jr. Standing Counsel and Ms. Madhavi Shukla, Jr. Standing Counsel, Advocates for RespondentsCase title: Shyamsundar Sharma v. ACIT/ Initiating Officer, Benami Prohibition Unit-2, Delhi & Anr.Citation: 2025 LiveLaw (Del) 1596Case no.: W.P.(C) 17000/2025Click here to read order

Standard Of 'Reason To Believe' In Benami Act Is Stricter Than 'Reasonable Suspicion' Under BNSS: Delhi High Court

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