Supreme Court stays "perverse" release of attached benami shares in Som Distilleries case

The Supreme Court on May 7 stayed an interim order passed by the Madhya Pradesh High Court that had enabled the release and sale of equity shares in Som Distilleries Breweries & Wineries Ltd. (SDBWL) worth around ₹350 crore, which are alleged to be benami assets [Union of India & Ors. vs. Bana Singh & Ors.].A bench comprising Justices Abhay S Oka and Ujjal Bhuyan also expressed serious concern over the High Court's decision, which had also allowed the substitution of the alleged benami shares by attaching shares held by the alleged beneficial owners of the benami assets instead. "How can such an order be passed? .... The order borders on perversity.", remarked Justice Oka during the hearing..The case involves allegations that eight Benamidars, including employees and associates of the Som Group, have been holding 1.2 crores of public listed shares of Som Distilleries. The real ownership of these shares were attributed to Jagdish Kumar Arora, promoter-director of Som Distilleries.These shares were provisionally attached by the Income Tax Department’s Benami Prohibition Unit (BPU), Bhopal, under the Prohibition of Benami Property Transactions Act, 1988 (PBPT Act).A plea was then filed before the Madhya Pradesh High Court challenging the validity of the PBPT Act itself by those whose shares were attached. .On March 27 this year, the High Court granted the petitioners interim relief by directing the release of the attached shares that the BPU had claimed to benami assets. Instead, the High Court ordered that an equivalent number of shares held by Jagdish Kumar Arora and Som Distilleries be attached instead. Upon such a swap, the provisionally attached shares can be released and disposed of, the Court said. This direction was challenged by the BPU before the Supreme Court. The Central government has argued that the High Court’s direction effectively allowed the disposal of benami property, which is prohibited under the Act, risking irreversible financial loss to the exchequer. Senior Advocate Mukul Rohatgi, representing Som Distilleries, countered that the shares in question were purchased as early as 2008, well before a 2016 amendment to the PBPT Act under which the shares were attached. Rohatgi argued that Som Distilleries was being unfairly targeted. .The bench remained unmoved by Rohatgi's submissions, and expressed reservations about the High Court’s decision that had allowed a “full swap” of benami assets without proper legal sanction.It proceeded to stay the High Court's interim order, but clarified that the High Court may continue to hear the writ petition before it. Notably, the Centre has also pointed out that the validity of the PBPT Act is already pending consideration before the top court itself, after it recalled its own 2022 ruling in Union of India vs. Ganpati Dealcom. .Additional Solicitor General N Venkataraman and advocates Raj Bahadur Yadav, Shashank Bajpai, V Chandrashekhara B and Amit Sharma V represented the Central government. Apart from Senior Advocate Mukul Rohatgi, Senior Advocate Sumit Nema and advocates Krishna Dev Jagarlamudi, Piyush Parashar, Gagan Tiwari, Arun Dwivedi, N. Sai Vinod, Chanakya Sharma, Kanu Garg also appeared for the respondents (Som Distilleries and its shareholders)..[Read Order]