Benami Attachment during CIRP: Why NCLT Cannot Replace the Benami Act’s Appellate Forum
C&C Law Chambers | Insolvency and Benami Law | 4 September 2026
The Supreme Court has held that orders made under the Prohibition of Benami Property Transactions Act, 1988 cannot be challenged before the National Company Law Tribunal or National Company Law Appellate Tribunal merely because the owner is undergoing insolvency. The decision separates the Insolvency and Bankruptcy Code’s resolution jurisdiction from the Benami Act’s public-law adjudication and appellate structure.
In K. V. Sasikala v. Deputy Commissioner of Income Tax (Benami Prohibition), decided on 24 February 2026, Justices P.S. Narasimha and Atul S. Chandurkar dismissed appeals arising from parallel benami and insolvency proceedings involving Padmaadevi Sugars Limited and connected entities.
How the dispute arose
Benami authorities alleged that promoters of the corporate debtor transferred their entire shareholding to a beneficial owner through an intermediary for approximately ₹450 crore in demonetised currency. A provisional attachment was initiated under Section 24 of the Benami Act and was subsequently continued or confirmed within that statutory process.
Meanwhile, the company entered corporate insolvency resolution proceedings and later liquidation. The resolution professional and liquidator approached the NCLT to lift the attachment, relying on the moratorium under Section 14, the liquidation bar in Section 33(5), the NCLT’s residuary jurisdiction under Section 60(5), immunity under Section 32A, and the IBC override in Section 238.
The jurisdictional distinction
The Supreme Court treated both enactments as special laws but asked what each statute is designed to decide. The IBC reorganises the debtor’s affairs through collective insolvency. The Benami Act identifies alleged benami property through its own notice, attachment, adjudication, confiscation and appellate framework.
An NCLT can decide questions arising out of or relating to insolvency, but Section 60(5) is not a licence to sit in appeal over an order made by a statutory authority exercising a distinct public-law power. If the attachment is erroneous, the challenge must ordinarily proceed through the remedies created by the Benami Act.
Moratorium versus sovereign action
The decision maintains the distinction between creditor enforcement aimed at recovery and State action directed at identifying or confiscating tainted property. Section 14 ordinarily restrains suits, proceedings and enforcement against the corporate debtor during CIRP. It does not automatically transform every sovereign proceeding concerning allegedly tainted property into a prohibited creditor recovery.
This does not mean that every attachment under every penal statute automatically prevails over the IBC. The authority, statutory object, stage, nature of the property and applicable immunity must be analysed. The present holding concerned the Benami Act’s self-contained machinery and the impermissibility of using NCLT as an alternative appellate forum.
Section 32A requires its own conditions
Section 32A can protect a corporate debtor and its property from specified consequences after an approved resolution plan results in the required change in management or control, subject to statutory exclusions and cooperation duties. It is not a universal pre-approval mechanism for nullifying every public-law attachment during CIRP. The provision’s timing and conditions must be proved rather than assumed.
Practical implications
A resolution professional should promptly identify the exact benami order, the property affected, limitation for appeal and the competent forum. Merely filing an application before NCLT risks losing time in the forum that lacks appellate jurisdiction.
The resolution plan should disclose the attachment and allocate risk without promising title that the insolvency forum cannot deliver. Information memoranda and bidder due diligence should distinguish corporate ownership from freely transferable title.
Benami authorities, conversely, remain bound by notice, recorded-reason, adjudication and appeal safeguards under Sections 24, 26, 46 and the related provisions. Characterising action as sovereign does not immunise an unlawful order; it identifies the forum in which legality must be tested.
What the ruling does not establish
The judgment does not make attached property automatically benami. It does not decide that an authority wins on merits merely because NCLT lacks jurisdiction. It does not eliminate Section 32A or Section 238. It holds that those IBC provisions cannot be used to bypass the Benami Act’s competent authorities and appellate hierarchy in the circumstances considered.
Conclusion
The central lesson is one of institutional competence. Insolvency jurisdiction is broad but not boundless. A liquidator may be responsible for maximising value, yet cannot ask NCLT to perform the appellate task Parliament assigned to a different statutory forum.
Sources
K. V. Sasikala v. Deputy Commissioner of Income Tax (Benami Prohibition), Supreme Court judgment dated 24 February 2026, arising from Diary No. 30995 of 2022, especially paragraphs 1–3 and the jurisdictional analysis: https://api.sci.gov.in/supremecourt/2022/30995/30995_2022_6_1501_68838_Judgement_24-Feb-2026.pdf
Prohibition of Benami Property Transactions Act, 1988: https://upload.indiacode.nic.in/showfile?actid=AC_CEN_2_2_00032_198845_1517807326369&filename=a1988-45.pdf&type=actfile
Insolvency and Bankruptcy Code, 2016, Sections 14, 32A, 33, 60 and 238: https://ibbi.gov.in/legal-framework/act
This article provides general legal information, not advice concerning any particular attachment or insolvency.
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