S. Rajendran v. The Deputy Commissioner of Income Tax (Benami Prohibition) & Ors. (Neutral Citation: 2026 INSC 187) was decided by the Supreme Court of India on 24 February 2026 by a Bench comprising Justice P. S. Narasimha and Justice Atul S. Chandurkar. The case concerned whether provisional attachment orders passed under the Prohibition of Benami Property Transactions Act, 1988 could be challenged before the NCLT or NCLAT during insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. The Supreme Court held that the Benami Act is a self-contained statutory regime with its own adjudicatory mechanism and that insolvency tribunals lack jurisdiction to examine the legality of attachment orders passed under it. The Court clarified that the moratorium under Section 14 IBC does not bar sovereign confiscatory proceedings, that benami property does not form part of the liquidation estate under Section 36 IBC, and that the residuary jurisdiction under Section 60(5) IBC cannot be invoked to bypass specialised statutory remedies.

Legal Issue

Whether the legality and validity of an order of attachment under the Prohibition of Benami Property Transactions Act, 1988 can be challenged before the National Company Law Tribunal (NCLT) or National Company Law Appellate Tribunal (NCLAT) under the Insolvency and Bankruptcy Code, 2016 (IBC).

Brief Facts

The case arose from a series of appeals challenging provisional attachment orders issued under the Prohibition of Benami Property Transactions Act, 1988. The promoters of M/s Padmaadevi Sugars Ltd. (formerly S.V. Sugar Mills Ltd.) had transferred their entire shareholding to V.K. Sasikala through an intermediary for ?450 crores, paid in demonetised currency during November–December 2016. Investigations revealed incriminating documents, share certificates, and admissions confirming the benami nature of the transaction. Authorities issued a show cause notice (01.11.2019) under Section 24 of the Benami Act and provisionally attached the corporate debtor’s assets, including factory land and machinery. Meanwhile, insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) had commenced, leading to liquidation. The liquidators challenged the attachment before NCLT/NCLAT, arguing that the moratorium under Section 14 IBC and the overriding clause under Section 238 IBC barred such proceedings. Both tribunals dismissed the applications, holding that Benami Act proceedings are sovereign in nature and outside IBC jurisdiction.

Judgment

The Supreme Court upheld the concurrent findings of the NCLT and NCLAT, ruling that orders passed under the Benami Act cannot be questioned before insolvency tribunals under the IBC. The Court emphasized that the Benami Act is a self-contained code with its own adjudicatory hierarchy, and challenges to attachment orders must be pursued within that statutory framework. It clarified that the moratorium under Section 14 IBC protects against creditor actions, not sovereign confiscatory proceedings, and that property held benami does not form part of the liquidation estate under Section 36 IBC. The residuary jurisdiction of NCLT under Section 60(5) IBC was held not to extend to reviewing quasi-judicial orders under independent statutes.

What makes this judgment important is its clear demarcation of jurisdiction between insolvency law and penal/confiscatory statutes. By holding that IBC cannot override sovereign actions under the Benami Act, the Court reinforced the principle that insolvency proceedings deal only with assets beneficially owned by the debtor, while tainted or illegally held assets fall outside the liquidation estate. This ruling provides crucial clarity for liquidators, resolution professionals, and creditors, ensuring that insolvency processes are not used to bypass penal statutes or undermine sovereign confiscatory powers. It also strengthens the integrity of the insolvency framework by preventing misuse of IBC as a parallel appellate forum against specialised statutory regimes.

Access the Official Judgement here

Case Name

S. Rajendran v. The Deputy Commissioner of Income Tax (Benami Prohibition) & Ors.

Neutral Citation

2026 INSC 187

Date

24 February 2026

Bench

Justice Pamidighantam Sri Narasimha
Justice Atul S. Chandurkar