Allahabad High Court Quashes Unreasoned Summoning in Benami Case: Emphasizes Judicial Scrutiny

Introduction

In the case of Keshav Lal v. Union of India[i], the Hon’ble High Court of Allahabad addressed critical issues regarding the summoning of an accused under the Prohibition of Benami Property Transactions Act, 1988 (‘PBPT Act’). The Court examined whether the summoning order adhered to the legal standards established by the Hon’ble Supreme Court of India, particularly regarding the need for judicial application of mind. The High Court ultimately held that the summoning order lacked sufficient reasoning or examination of the allegations and was contrary to the law. It remanded the matter to the lower court to issue a fresh, reasoned order. This case highlights the importance of treating summoning as a process requiring careful judicial consideration rather than a mechanical step.

Brief Facts

• On 19.04.2017, a search and seizure operation was conducted under s. 132 of the Income-tax Act, 1961 (‘IT Act’). During this operation, Rs. 10.74 crores in cash was found in the possession of the Appellant’s wife.

• The authorities assumed that the cash was the beneficial property of the Appellant, alleging it had been accumulated through the misuse of his official position. Based on this assumption, the Initiating Officer (‘IO’) attached the cash under s. 24(4) of the PBPT Act, treating it as benami property.

• The Adjudicating Authority upheld this attachment and issued a show-cause notice (SCN) to the Appellant, indicating that prosecution would be initiated against him. However, during the proceedings, the Interim Board of Settlement (‘IBS’) issued an order determining that the cash belonged to the Appellant’s wife and not to him.

• Despite the IBS order, a complaint was filed against the Appellant, and the Principal Director of Income-tax (Investigation) issued a sanction order, resulting in the lower court issuing a summoning order.

• The Appellant challenged the summoning order, arguing that it lacked a reasoned judicial application of mind. The Appellant relied upon various rulings asserting that the issuance of summons requires a thoughtful examination of the allegations rather than a mechanical procedure.

Held

• The High Court set aside the impugned summoning order, observing that it had been issued without adherence to proper legal principles. The Court observed that the lower court had mechanically issued the summoning order instead of carefully examining the facts, allegations, and evidence. It failed to provide any reasoned basis or sufficient explanation for why it was taking cognizance of the case and summoning the Appellant.

• Furthermore, the High Court referred to the Hon’ble Supreme Court’s judgments in Lalankumar Singh v. State of Maharashtra[ii], Pepsi Foods Ltd. v. Judicial Magistrate[iii], and Mehmood UL Rehman v. Khazir Mohammad Tunda[iv], which emphasize the necessity of providing reasons for summoning orders. It emphasized that issuing a summoning order in criminal proceedings is not a mere formality but a serious judicial action that requires the court to apply its mind, assess whether there is a prima facie case, and provide reasons for its decision. The lower court did not meet this standard, merely summarising the complaint without legal reasoning.

• Due to these deficiencies, the High Court quashed the summoning order and remanded the case to the lower court. The lower court was directed to reconsider the matter, provide both parties an opportunity to present their arguments, and issue a fresh, well-reasoned order based on judicial scrutiny. Additionally, the Court mandated that the fresh order be issued within sixty days, ensuring that the legal process is followed with due attention to judicial reasoning.

Our Analysis

This judgment highlights the importance of adhering to established legal principles when issuing summoning orders, particularly under the PBPT Act. The High Court emphasized that such orders are not mere procedural steps but significant judicial actions with serious legal consequences for the accused. Therefore, the judiciary must exercise caution and ensure such orders are issued only after thoroughly considering the facts and evidence.

Moreover, the High Court reiterated that courts must not act mechanically by simply accepting the contents of a complaint. Instead, they are required to apply their minds, conduct an independent review of the material before them, and provide a reasoned basis for their decisions. The High Court’s decision to quash the summoning order reflects its insistence on a higher standard of judicial diligence.

By stressing fairness, transparency, and adherence to legal norms, the High Court reinforced the principle that legal proceedings should protect the rights of the accused. A summoning order in a criminal case has significant implications, as it initiates the legal process against an individual. Therefore, the judicial system must ensure such actions are justified and grounded in proper legal reasoning. This decision serves as a reminder that courts must maintain the integrity of the legal process by applying the law fairly and thoughtfully, upholding the rule of law, and safeguarding the rights of all parties involved.

End Note

[i] [2024] 166 taxmann.com 218 (Allahabad)[14-08-2024].

[ii] 2022 SCC Online SC 1383.

[iii] (2015) 12 SCC 420.

[iv] (1998) 5 SCC 749.

Authored by Siddharth Jha, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.