S. Rajendran v. Deputy Commissioner of Income Tax (Benami Prohibition) 2026 INSC 187 - IBC - Benami Act - Attachment Order

Insolvency and Bankruptcy Code 2016 - Section 60(5) - Prohibition of Benami Property Transactions Act, 1988 - The NCLT cannot, in exercise of insolvency jurisdiction, disregard or nullify a statutory vesting effected under another enactment. The IBC does not provide an indirect route to challenge sovereign acts validly undertaken under a penal statute - Permitting the NCLT to examine the correctness of attachment or adjudication under the Benami Act by invoking Section 60(5) would amount to elevating it to the status of a judicial review forum over sovereign action, The IBC, concerned as it is with insolvency resolution and value maximisation of lawfully owned assets, cannot be employed as a mechanism to dilute or override statutory proceedings undertaken in the public law sphere for confiscation of tainted property- Benami Act is a complete and self-contained code governing identification, provisional attachment, adjudication and confiscation of benami property, supported by a distinct appellate hierarchy. Exclusive jurisdiction over such determinations is conferred upon authorities constituted under the Benami Act. The IBC neither displaces this statutory mechanism nor empowers the NCLT to reopen findings rendered thereunder. (Para 20)

Insolvency and Bankruptcy Code 2016 - Section 36 - Prohibition of Benami Property Transactions Act, 1988 - Property held benami is, by definition, held in a fiduciary or representative capacity for the real owner. Section 36(4)(a)(i) excludes assets held in trust for third parties from the liquidation estate -A benamidar possesses no beneficial interest and that title vests in the person who provided consideration. Where the corporate debtor is merely an ostensible holder, the property never forms part of its estate and cannot be administered in liquidation - Once the Adjudicating Authority under the Benami Act has concluded that the corporate debtor is a benamidar, beneficial ownership stands negated. The legality and validity of such determinations are subject matter of appeal under the provisions of Benami Act alone. Insolvency proceedings cannot be utilised to convert property held for another into distributable assets for creditors. The IBC contemplates distribution of the debtor’s estate, not assets impressed with a trust or held on behalf of a third party. (Para 21-22)

Insolvency and Bankruptcy Code 2016 - Section 32A - is event-based and triggered only upon approval of a resolution plan or completion of a liquidation sale to an unconnected third party. Absent such approval, the immunity does not arise. The provision does not validate defective title nor retrospectively convert benami property into assets of the corporate debtor. (Para 23)

Insolvency and Bankruptcy Code 2016 - Section 14- The moratorium under Section 14 is intended to preserve the debtor’s estate for orderly resolution; it does not interdict sovereign proceedings in rem for attachment or confiscation under penal statutes. Such proceedings are distinct from creditor enforcement and proceed on an independent statutory footing - The moratorium is intended to protect the corporate debtor from "creditor actions" aimed at debt recovery, not to shield "tainted assets" from sovereign actions against crime. (Para 24)