contents · 2020. 3. 14. · macquarie bank limited vs shilpi cable technologies ltd..... 274 b.k....

Economic Laws – Elective paper – CASE STUDIES

CA A.K.S. Krishnan M.Com, FCA 1

Contents CASE STUDY 1 – RERA & Competition Act ......................................................................... 6

CASE STUDY 2 – FEMA, RERA, PMLA, IBC & Benami .................................................... 16

CASE STUDY 3 – PMLA & Competition.............................................................................. 26

CASE STUDY 4 – PMLA, FEMA & Benami ......................................................................... 36

CASE STUDY 5 – FEMA, IBC, RERA, & Benami ................................................................ 47

CASE STUDY 6 – IBC & FEMA ............................................................................................. 58

CASE STUDY 7 – Competition .............................................................................................. 70

CASE STUDY 8 - Competition ............................................................................................... 78

CASE STUDY 9 - IBC .............................................................................................................. 92

CASE STUDY 10 – FEMA & Benami................................................................................... 105

CASE STUDY 11 – FEMA & PMLA .................................................................................... 117

CASE STUDY 12 – IBC & Competition .............................................................................. 127

CASE STUDY 13 – RERA & Benami ................................................................................... 134

CASE STUDY 14 – FEMA & PMLA .................................................................................... 145

CASE STUDY 15 – IBC & Competition .............................................................................. 154

CASE STUDY 16 - Benami.................................................................................................... 163

CASE STUDY 17 – FEMA, RERA & Benami ...................................................................... 170

CASE STUDY 18 - Competition ........................................................................................... 183

CASE STUDY – 19 – IBC ....................................................................................................... 195

CASE STUDY – 20 – IBC ....................................................................................................... 200

CASER STUDY – 21 – IBC .................................................................................................... 204

CASE STUDY 22 – Competition Act ................................................................................... 207

CASE STUDY 23 - FEMA ...................................................................................................... 210

CASE STUDY 24 – FEMA ..................................................................................................... 213

CASE STUDY – 25 – PMLA .................................................................................................. 215

CASE STUDY 26 - Benami & FEMA ................................................................................... 218

CASE STUDY 27 – RERA & PMLA ..................................................................................... 231

CASE STUDY 28 – IBC & Competition Act ....................................................................... 243

RECENT CASE LAWS .............................................................................................................. 254

COMPETITION ACT ............................................................................................................... 254

Mahindra Electric Mobility Limited & Ors. vs. CCI & Another ......................................... 254

Competition Commission of India vs M/s Fast Way Transmission.................................... 255



Rajasthan Cylinders and Containers Limited vs UOI .......................................................... 257

Umar Javeed and Google LLC ............................................................................................... 259

House of Diagnostics LLP and Esaote Asia Pacific Diagnostic Pvt. Ltd ............................ 260

Anti competitive conduct in the Dry-Cell Batteries Market in India .................................. 261

Fx Enterprise Solutions India Pvt. Ltd. and Hyundai Motor India Limited ...................... 263

CCI vs Bharti Airtel Ltd ......................................................................................................... 264

Real Estate (Regulation & Development) Act, 2016 .............................................................. 266

M/s M3M India Pvt. Ltd. & Anr. v. Dr. Dinesh Sharma & Anr ........................................... 266

Jatin Mavani vs Rare Township Pvt. Ltd. ............................................................................. 267

Lavasa Corporation Limited vs Jitendra Jagdish Tulsiani .................................................. 267

Neelkamal Realtors Suburban Pvt. Ltd. and anr vs UOI ..................................................... 269

Simmi Sikka v. M/s Emaar MGF Land Ltd. .......................................................................... 270

Insolvency & Bankruptcy Code, 2016 ..................................................................................... 272

Swiss Ribbons Pvt. Ltd. & Anr. V. Union of India & Ors. ................................................... 272

Pioneer Urban Land and Infrastructure Ltd and Anr vs Union of India ........................... 273

Macquarie Bank Limited vs Shilpi Cable Technologies Ltd................................................ 274

B.K. Educational Services Pvt. Ltd. vs. Parag Gupta and Associates ................................. 276

State Bank of India vs. V. Ramakrishnan .............................................................................. 276

Mobilox Innovations Private Limited vs. Kirusa Software Private Limited ...................... 278

K. Sashidhar vs. Indian Overseas Bank & Ors ..................................................................... 279

Prevention of Money Laundering, 2002 .................................................................................. 281

Directorate of Enforcement v. Deepak Mahajan .................................................................. 281

M/s. PMT Machines Ltd. vs The Deputy Director, Directorate of Enforcement, Delhi ..... 282

B.K. Singh vs Suraj Pal @ Chacha .......................................................................................... 283

Chhagan Chandrakant Bhujbal vs. Union of India and Ors ............................................... 284

Dalmia Cement Bharat Ltd. Vs State of AP, Hyderabad ..................................................... 286

Financial Intelligence Unit-IND vs Corporation Bank......................................................... 287

Smt. K. Sowbaghya vs Union of India .................................................................................. 289

B. Rama Raju v. Union of India ............................................................................................. 290

J. Sekar and others v. ED ........................................................................................................ 291

Foreign Exchange Management Act, 2002 .............................................................................. 293

IDBI Trusteeship Services Limited v. Hubtown Ltd ............................................................ 293

Cruz City I Mauritius Holdings v. Unitech Limited ............................................................ 294



NTT Docomo Inc. v. Tata Sons Ltd ....................................................................................... 295

Venture Global v. Tech Mahindra ......................................................................................... 297

Mr. S. Bhaskar vs Enforcement Directorate FEMA .............................................................. 298

Union of India & Ors vs M/s Premier Limited ..................................................................... 299

Vodafone International Holding (VIH) v. Union of India (UOI) ........................................ 301

Kanwar Natwar Singh vs Director Of Enforcement & Anr ................................................. 303

S.K. Sinha, Chief Enforcement Officer vs Videocon International Ltd. .............................. 304

Prohibition of Benami Property Transactions Act, 1988 ....................................................... 307

Mangathai Ammal (Died) Through Lrs vs Rajeswari .......................................................... 307

Smt. P.Leelavathi vs V.Shankarnarayana Rao ...................................................................... 308

G. Mahalingappa vs G.M. Savitha ......................................................................................... 309

Meenakshi Mills, Madurai v. CIT .......................................................................................... 310

Sh. Amar N. Gugnani Vs. Naresh Kumar Gugnani (Through Legal Heirs) .............. 311

Pawan Kumar Gupta Vs. Rochiram Nagdeo ........................................................................ 312

Bhim Singh v. Kan Singh ....................................................................................................... 313

Valliammal (D) By Lrs vs Subramaniam & Ors ................................................................... 315

Niharika Jain W/o Shri Andesh Jain Vs Union of India ....................................................... 316

OTHER CONCEPT BASED QUESTIONS ............................................................................. 318

INSOLVENCY AND BANKRUPTCY CODE, 2016 ............................................................. 318

Sec. 4 – Application of this part ............................................................................................. 322

Sec. 5 - Definitions. ................................................................................................................. 325

Sec. 7 - Initiation of corporate insolvency resolution process by financial creditor. ......... 327

Sec. 8 & 9 - Insolvency resolution by operational creditor .................................................. 332

Sec. 10 - Initiation of corporate insolvency resolution process by corporate applicant .... 337

Sec. 11 - Persons not entitled to make application. .............................................................. 338

Sec. 12 - Time-limit for completion of insolvency resolution process ................................ 339

Sec. 14 – Moratorium .............................................................................................................. 340

Sec. 17 - Management of affairs of corporate debtor by interim resolution professional. 342

Sec. 18 – Duties of Interim Resolution Professional ............................................................. 343

Sec. 22. Appointment of Resolution professional ................................................................. 344

Sec. 27 - Replacement of resolution professional by committee of creditors ..................... 345

33. Initiation of liquidation .................................................................................................... 347

34. Appointment of liquidator and fee to be paid ................................................................ 348



53. Distribution of proceeds from the sale of liquidation assets ........................................ 352

55 - Fast Track Corporate Insolvency Resolution Process ................................................... 355

59. Voluntary winding up of corporates .............................................................................. 356

SAMPLE MCQ FROM IBC .................................................................................................... 361

FOREIGN EXCHANGE MANAGEMENT ACT, 1999 ........................................................ 367

Sec. 2 - Residential Status ....................................................................................................... 367

Sec. 5 - Current account transaction ...................................................................................... 372

Sec. 6 – Capital Account transaction ..................................................................................... 384

Sec. 7 – Exports rules .............................................................................................................. 392

Sec. 8 & 9 - Repatriation ........................................................................................................ 397

Sec. 11 - 13 Penalty .................................................................................................................. 398

Sec 12 - Inspection ................................................................................................................... 399

Sec. 14 – 16 Adjudication ........................................................................................................ 400

Sec. 19 - Appeal ....................................................................................................................... 401

SAMPLE MCQ QUESTIONS FROM FEMA......................................................................... 403

PREVENTION OF MONEY LAUNDERING ACT, 2002 ..................................................... 407

Why PMLA ............................................................................................................................. 407

Sec. 2 – Definition ................................................................................................................... 407

Sec. 3 & 4 - Punishment ......................................................................................................... 410

Sec. 8 – Attachment of property ............................................................................................ 413

Sec. 12 – Obligation of banking companies .......................................................................... 413

Sec. 25, 26, 42 – Appellate Tribunal ....................................................................................... 415

Sec. 43- 47 – Special Court ...................................................................................................... 417

Sec. 45. Offences to be Cognizable and Non Bailable .......................................................... 418

Sec. 57. Letter of request to contracting state in certain cases ............................................. 418

Sec. 63. Punishment for false information or failure to give information, etc .................... 420

70. Offences by companies ..................................................................................................... 420

SAMPLE MCQ QUESTION FROM PMLA .......................................................................... 422

COMPETITION ACT, 2002 ........................................................................................................ 424

Definitions ............................................................................................................................... 424

Sec. 3 - Anti-competitive agreements .................................................................................... 427

Sec. 4 - Abuse of dominant position ...................................................................................... 433

Sec. 5 - Combination ............................................................................................................... 435



Sec. 8 Composition of Commission ....................................................................................... 436

Sec. 10 - Term of office of Chairperson and other Members ............................................... 436

Sec. 11 - Resignation, removal and suspension of Chairperson and other members ........ 439

Sec. 12 - Restriction on employment of Chairperson and other Members in certain cases .................................................................................................................................................. 440

Sec. 15 -Vacancy, etc. not to invalidate proceedings of Commission ................................. 441

Sec. 19 - Inquiry into certain agreements and dominant position of enterprise ................ 441

Sec. 36 - Power of Commission to regulate its own procedure ........................................... 442

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CASE STUDY 1 – RERA & Competition Act

Mr. Bhanu Pratap Taneja is a leading real estate developer based in Delhi. In the last decade,

his company Garvit Bhoomi Developers Pvt. Limited having registered office in Bhikaji Cama

Place, New Delhi, had successfully developed four housing projects – two in Gurgaon and

one each in Jaipur and Lucknow. They had a robust management team. Having been the name

behind developing more than five thousand luxurious apartments with modern amenities,

they had the reputation of delivering the projects well within the promised time.

In the beginning of the year 2015, they launched another project in Indirapuram, UP by the

name Omega Capetown Residency in which 1000 residential units consisting of 2BHK and

3BHK apartments were to be developed. They were to be completed in all respects by January

2018 and delivered to the consumers by that date. This project was being carried on smoothly

when the Real Estate (Regulation and Development) Act, 2016 came to be enacted w.e.f. 1st

May, 2016. Section 3, which was enacted later w.e.f. 1st May 2017. Since Omega Capetown

Residency consisted of 1,000 residential units, it was required to be registered and so the

company submitted the requisite documents with concerned authorities.

As the application for registration was found to be complete in all respects, the Omega

Capetown Residency Project was granted registration by RERA (UP) within the statutory

period and was provided with a registration number including a log-in ID for assessing the

website of the Authority and to create webpage.

In the meantime, Mr. Taneja was approached by some of the influential developers that an

understanding had been reached among them to control the price of apartments to be built by

them. However, because of legal tangles such understanding could not be brought into

writing and it was also not intended to be enforced by legal proceedings. Mr. Taneja did not

agree to the proposal because even though the understanding was not in writing and it was

not intended to be enforceable by legal proceedings, it was still illegal as per the Competition

Act, 2002. This revelation made by Mr. Taneja discouraged the intending developers and they

desisted from being a party to this proposal.

Mr. Taneja’s son Garvit, who was a commerce graduate and holder of law degree, had a

college friend Rohit whose father Mr. Dev Kumar dealt in sale, purchase and renting of

properties under the title ‘Dev Property Dealers’ from the Yusuf Sarai market. Since Rohit had

joined his father’s business, it was thought prudent to convert the existing proprietary

business into a registered partnership firm titled as ‘Dev & Sons Property Dealers’. Because

of the enactment of Real Estate Act, Rohit consulted his friend Garvit regarding its

implications in case of real estate agents. Accordingly, the firm was got registered as real estate

agent with the help of Garvit’s legal advisor.

Further, Garvit made a proposal to Rohit and his father that they could associate themselves

with his Omega Capetown Residency, a registered RERA project in Indirapuram for

facilitating sale of apartments which they readily accepted. Garvit also cautioned them that as

per the Act, since their firm was now a registered real estate agent they were not supposed

to facilitate sale/purchase of any plot, apartment or building in a real estate project being


sold by the promoter in any planning area, if such project was not registered with RERA of

the concerned State.

In addition, Garvit’s legal advisor told them that as required by Section 10, a registered real

estate agent would maintain and preserve proper books of accounts and other necessary

documents. Further, such agent would not involve himself in any unfair trade practice like

making a false statement regarding services to be provided by him. He would also not permit

the publication of any advertisement whether in any newspaper or otherwise of services that

were not intended to be offered. Besides, the agent would also have to help the intending

buyers in getting the required information and documents to which they were entitled, at the

time of booking of any property.

Rohit had a friend Tarun whose father Dr. Sreenivas Sharma was a surgeon in a government

hospital and was residing in a rented government flat in the hospital campus itself. He had an

intense desire to have a luxurious flat of his own. Tarun had joined IBM after doing MBA from

IIFT, New Delhi. So, with the combined salary of both, they decided to buy a flat. Tarun

contacted Rohit to help him in searching a suitable apartment for his family. In turn, Rohit

informed him that one particular 3BHK flat at an ideal location was available in Omega

Capetown Residency in Indirapuram as the original allottee had withdrawn from the scheme;

otherwise the booking under this project was already full. Dr. Sharma got interested in the

information and went to the Omega Capetown Residency along with his family to see the

concerned apartment. He liked its strategic location and gathered more information regarding

sanctioned plan, layout plan along with the other specifications, etc. He then asked for stage-

wise time schedule of completion of the project and also enquired regarding provision of

water, sanitation and other amenities. Since, Rohit personally knew Garvit and his father Mr.

Taneja - the promoters of the project - Dr. Sharma and his family had a lively and fruitful

meeting with them. Subsequently, he and his son jointly entered into an agreement for sale

with the promoters of the project and made payment of 75% of the cost of the apartment, while

remaining 25% of the cost was to be paid at the time when the apartments were ready for

occupation.

A few months after booking the apartment, Dr. Sharma got a notice from the promoters of

Omega Capetown Residency that due to unforeseen circumstances they were not in a position

to complete the project and needed the allottees’ consent for transferring of their majority

rights and liabilities to another reputed developer M/s. Sai Developers Pvt. Limited of New

Delhi. In case any of the allottees was not agreeable to this proposal he could get his money

refunded. Since Dr. Sharma was very much attached to the location of the flat, he accepted the

proposal after enquiring with Rohit and his father. He also learnt that 95% of the allottees had

already given their written permission. Further, the Authority had given its written approval

to the proposal for transfer and completion of Project by M/s. Sai Developers Pvt. Limited. Dr.

Sharma was also assured by Mr. Bhanu Pratap Taneja, the erstwhile promoter with whom he

had earlier interacted satisfactorily, that all the pending obligations would be fulfilled by the

new developer and in no case the date of completion of the project would be extended;

otherwise it would attract penalty. It was also disclosed by Mr. Taneja that the new promoter


would rectify any structural defect if it occurred within a period of five years from the date of

handing over the possession of the apartments. Dr. Sharma, thus felt relieved.

M/s. Sai Developers completed the project on time and received Completion Certificate from

the Competent Authority. As per the agreement for sale, Dr. Sharma made payment of the

remaining 25% of the cost. Thereafter, he received Occupancy Certificate and took physical

possession of the apartment well before two months since the allottees were supposed to take

physical possession within statutory period of two months from the issue of Occupancy

Certificate. He was also given other necessary documents and plans, including that of

common areas. He also became a member of the RWA formed by the allottees. In the

meantime, the promoter executed a registered conveyance deed in favour of each of the

allottees along with the undivided proportionate title in the common areas to the RWA.

I. Multiple Choice Questions

1. Registration of a real estate project shall not be required –

(a) where the area of land proposed to be developed does not exceed five hundred square

meters or the number of apartments proposed to be developed does not exceed eight.

(b) where the area of land proposed to be developed does not exceed five thousand square

meters or the number of apartments proposed to be developed does not exceed eighty.

(c) where the area of land proposed to be developed does not exceed two hundred fifty square

meters or the number of apartments proposed to be developed does not exceed four.

(d) where the area of land proposed to be developed does not exceed three hundred square

meters or the number of apartments proposed to be developed does not exceed three.

2. Who is required to submit a copy of duly obtained approvals and commencement

certificate for getting the project registered with RERA:

(a) Allottee

(b) Promoter

(c) Real Estate Agent

(d) None of the above

3. A registered real estate agent shall -

(a) Facilitate the sale/purchase of any plot, apartment or building, being sold by the promoter

in any planning area, which is registered with the Authority;

(b) maintain and preserve prescribed books of account, records and documents;

(c) not involve himself in any unfair trade practices

(d) All of the above.

4. The promoter is required to rectify any structural defect if it occurs within a period of -----

years from the date of handing over the possession of the apartments to allottees –

(a) Two years

(b) Three years

(c) Four years

(d) Five years


5. Registration of on-going project for which completion certificate is yet to be received is

mandatory -

(a) Yes, if the area of land (developed or to be developed) exceeds five hundred square meters

or the number of apartments (developed or to be developed) exceeds eight.

(b) No, irrespective of the area of land or the number of apartments

(c) Can’t say


6. A real estate developer can leave the project mid-way by selling that project to another

developer if he has taken a written approval of ---------- of allottees along with approval of the

Authority.

(a) 2/3rd

(b) 1/3rd

(c) 3/4th

(d) 1/4th

7. The time limit within which an allottee is required to take physical possession of the

apartment after issue of occupancy certificate is -

(a) one month

(b) two months

(c) three months

(d) four months

8. A certificate certifying that the real estate project has been developed according to the

sanctioned plan, layout plan and specifications as approved by the competent authority under

the local laws is called -

(a) Commencement Certificate

(b) Completion Certificate

(c) Occupancy Certificate


9. The flat purchased by Dr. Sharma jointly with his wife Mrs. Neelima Sharma though funded

by him would be held as ‘benami transaction’ under the Prohibition of Benami Property

Transactions Act, 1988 -

(a) Yes

(b) No

(c) Can’t say


10 As per the Competition Act, 2002 ‘Agreement’ includes any arrangement or understanding

or action in concert:

(a) Whether or not, such arrangement, understanding or action is formal or in writing; or


(b) Whether or not such arrangement, understanding or action is intended to be enforceable

by legal proceedings.

(c) Whether or not, such arrangement, understanding or action is formal or in writing; or

whether or not such arrangement, understanding or action is intended to be enforceable by

legal proceedings.

(d) None of the above.

II. Descriptive Questions

1. (i) Examine the following given aspects with reference to the allottee in the situation given

in the case study :

(a) Rights exercised by Dr. Sharma as an allottee.

(b) Duties fulfilled by Dr. Sharma as an allottee.

(c) Right which was not exercised by him and duty which was not required to be fulfilled by

Dr. Sharma.

(ii) The promoters of Omega Capetown Residency transferred majority of rights and

liabilities to Sai DeveIopers Pvt Ltd. for the completion of the project. Advise as to the validity

of such transfer of a real estate project to a Sai Developer’s Pvt Ltd in the case study?

2. In the given case study Omega Capetown Residency has got itself registered under the Real

Estate Regulatory Authority, as it consisted of 1,000 residential units. However, if Omega

Capetown Residency consisted of only 250 residential units, then was it necessary to get itself

registered under the Real Estate (Regulation and Development) Act, 2016: if yes, name the

various important documents and declarations which are required to be submitted by a ‘real

estate developer’ while registering a project with the Real Estate Regulatory Authority (RERA)

having only 250 residential units and not 1,000 residential units.

3. Mr. Bhanu Pratap Taneja was approached by some of the influential developers to join their

association so as to reach an understanding whereby they could inflate the price of the

apartments built by them. Even though the deal was in favour of Mr. Bhanu Pratap Taneja, he

rejected the proposal from other developers. In the light of the provisions of the Competition

Act, 2002, discuss whether the decision of Mr. Bhanu Pratap Taneja is lawful?


Solution:

1. (a) [Hints: Refer Section 3 of the Real Estate (Regulation and Development) Act, 2016]

2. (b) [Hint: Refer Section 4 (2) (c) of the Real Estate (Regulation and Development) Act, 2016]

3. (d) [Hint: Refer Section 10 of the Real Estate (Regulation and Development) Act, 2016]

4. (d) [Hint: Section 14 (3) of the Real Estate (Regulation and Development) Act, 2016]

5. (a); [Hint: Refer Section 3 of the Real Estate (Regulation and Development) Act, 2016. It may

not be mandatory in a particular State if the State has granted exemption to such on-going

project]

6. (a); [Hint: Section 15 of the Real Estate (Regulation and Development) Act, 2016. It is to be

noted that if a consumer or his family holds more than one unit in the project then he will be

considered as one consumer only]

7. (b); [Hint: Refer Section 19 (10) of the Real Estate (Regulation and Development) Act, 2016]

8. (b); [Hint: Refer Section 2 (q) of the Real Estate (Regulation and Development) Act, 2016]

9. (b); [Hint: Refer Section 2 (9) (iii) of the Prohibition of Benami Property Transactions Act,

1988]

10. (c). [Hint: According to Section 2 (b) of the Competition Act, 2002, ‘Agreement’ includes

any arrangement or understanding or action in concert:

(i) Whether or not, such arrangement, understanding or action is formal or in writing; or

(ii) Whether or not such arrangement, understanding or action is intended to be enforceable

by legal proceedings.]

II. ANSWERS TO DESCRIPTIVE QUESTIONS

1. (i) (a) With reference to Section 19 of the Real Estate (Regulation and Development)

Act, 2016, Dr. Sharma, as an allottee, exercised the following rights:

(I) Obtained the information relating to sanctioned plans, layout plans along with the

specifications as approved by the competent authority.

(II) Demanded to know stage-wise time schedule of completion of the project, including the

provisions for water, sanitation, electricity and other amenities.

(III) Claimed physical possession of the said apartment.

(IV) Obtained the necessary documents and plans, including that of common areas, after

getting the physical possession of the apartment from the promoter.

(b) With reference to Section 19 of the Real Estate (Regulation and Development)

Act, 2016, Dr. Sharma, as an allottee, fulfilled the following duties:


(i) Made necessary payments within the time as specified in the agreement for sale.

(ii) Became a member of the RWA formed by the allottees.

(iii) Took physical possession of the apartment within a period of two months from the issue

of Occupancy Certificate.

(iv) Participated towards registration of the conveyance deed of the apartment.

(c)

(i) With reference to Section 19 of the Real Estate (Regulation and Development) Act, 2016, Dr.

Sharma, as an allottee, did not exercise the following right:

The right to claim the refund of amount paid along with prescribed rate of interest. It was so

because the promoter was able to give possession of the apartment in accordance with the

terms of agreement for sale.

(ii) With reference to Section 19 of the Real Estate (Regulation and Development) Act, 2016,

Dr. Sharma, as an allottee, was not required to fulfill the following duty:

The duty to pay interest at prescribed rate for delay in making any payment. It was so because

he had made the payments in accordance with the terms of agreement for sale.

(ii) As per section 15 of the Real Estate (Regulation and Development) Act, 2016, a promoter

is permitted to transfer his majority rights and liabilities in respect of a real estate project to a

third party.

The provisions given below are to be adhered to by the promoter for transfer:

(a) Obtain prior written consent from two-third of allottees. Such consent will not include the

consent given by the promoter.

(b) Also obtain prior written approval of the Authority.

Note: It is to be ensured that such transfer shall not affect the allotment or sale of the

apartments, plots or buildings, as the case may be, in the real estate project developed by the

promoter.

(i) After obtaining the required consent of both allottees and the Authority, the new promoter

shall be required to independently comply with all the pending obligations under the

provisions of the Act or the rules and regulations made thereunder.

(ii) The new promoter is also required to comply with the pending obligations as per the

agreement for sale entered into by the erstwhile promoter with the allottees.

(iii) Further, the new promoter must note that any transfer so permitted shall not result in

extension of time to him to complete the real estate project.


Note: In case of default, he shall be liable to the consequences for delay, as per the provisions

of the Act or the rules and regulations made thereunder.

Since in the given case study , 95% of the allottees had already given their written permission.

Further, the Authority had given its written approval to the proposal for transfer and

completion of Project by M/s. Sai Developers Pvt. Limited in compliance with the

requirements given in the said provisions. Such transfer of a real estate project to a Sai

Developer’s Pvt Ltd. is valid.

2. According to proviso to section 3 of the Real Estate (Regulation and Development) Act,

2016, projects that are on going on the date of commencement of the Act, and for which the

completion certificate has not been issued, the promoter of the project are required to make

and application to the concerned Authority for the registration of the said project within a

period of 3 months from the date of commencement of the Act.

Further, the section provides that no registration of real estate project shall be required where

the area of land proposed to be developed does not exceed 500 square meters or the number

of the apartments proposed to be developed does not exceed 8 inclusive of all phases.

Hence, the Act requires registration of on-going projects where completion certificate was yet

to be obtained as well as new projects, if the area to be developed exceeded 500 sq. mtrs. or

apartments to be built under the project exceeded eight. Thus, registration of Omega

Capetown Residency was must with the Real Estate Regulatory Authority of UP (RERA, UP),

as consisted of 1,000 residential units.

Further, even if Omega Capetown Residency consisted of only 250 residential units (i.e. more

than 8 units), it will be compulsory to get itself registered under the Act. The process of

registering a project with the Real Estate Regulatory Authority (RERA) which consists of 1,000

units or 250 units is same which is given under section 4 of the Act.

With reference to Section 4, various important documents and declaration required to be

submitted while registering a project with RERA are as under:

• Details of the project such as name, address, type, names and photographs of the promoters,

etc.

• Details of the project which were already launched by the real estate developer in the

preceding 5 years and their present status.

• Approvals and commencement certificates obtained from the competent authority for each

phase of the project separately.

• Sanctioned layout plan, the development plan for the project and details of basic facilities

being made available like drinking water, electricity etc.

• Proforma of allotment letter, agreement for sale and conveyance deed to be signed with the

consumers.


• Location of the project with clear demarcation of the land for the project.

• Number, type and carpet areas of units to be sold.

• The details of open areas if any like terraces, balconies etc.

• Details of associated engineers, contractors, architects and intermediaries in the project.

• a declaration, duly supported by an affidavit, stating the following important matters:

o that the promoter has a legal title to the land and it is free from all encumbrances along with

legally valid documents;

o the time period required for completion of the project;

o that seventy per cent. of the amount realised from the allottees, from time to time, shall be

deposited in a separate escrow account and shall be used only for the purpose of completion

of project;

o that the promoter shall get his accounts audited within six months after the end of every

financial year by a chartered accountant in practice; and shall take all the pending approvals

on time from the competent authorities; etc.

3. According to section 2(b) of the Competition Act, 2002, ‘Agreement’ includes any

arrangement or understanding or action in concert:

(i) Whether or not, such arrangement, understanding or action is formal or in writing, or

(ii) Whether or not such arrangement, understanding or action is intended to be enforceable

by legal proceedings.

Further, section 2(c) of the Competition Act, 2002, "Cartel" includes an association of

producers, sellers, distributors, traders or service providers who, by agreement amongst

themselves, limit, control or attempt to control the production, distribution, sale or price of,

or, trade in goods or provision of services.

An association for the welfare of the trade or formed for any other purpose not mentioned in

the aforesaid definition will not be a cartel Thus, it is only when an association, by agreement

amongst themselves, limits control or attempts to control the production, distribution, sale or

price of, or, trade in goods or provision of services, that it will be a cartel.

Hence, an agreement which prohibits an enterprise or person or their association for entering

into an agreement in respect of production, supply, distribution, storage, acquisition or

control of goods or services, which causes or is likely to cause an appreciable adverse affect

on competition. Such agreements entered in contravention of the above are void. These

agreements are presumed to have an appreciable adverse affect on competition.


Here, in the given situation, the agreement between Mr. Bhanu Pratap Taneja and other

builders would have fallen into the ambit of section 2(b) and 2(c) of the Competition Act,

2002 as the aim of the association was to increase the price of the apartments. Thus, such an

association would be void.


CASE STUDY 16 - Benami

Mr. Mukesh Kumar, a wealthy merchant, having inherited his business from his forefathers,

ran a reputed jewellery shop titled as M/s. Kumarsons Jewarat in Dariba Kalan at old Delhi.

He had two daughters Reena and Ritika who were married and happily settled. He also had

three sons. Customers from far and near came to his shop to purchase gold ornaments, gold

coins and other items made of gold and silver. He then thought of expanding his business and

thereby purchased a shop on ground floor in up-scale South Extension area of South Delhi.

The payment of Rs. 3.20 crore was made by cheque and title deeds of the property were

registered in his name after making payment of appropriate stamp duty.

The eldest son Dheeraj Kumar managed the jewellery shop in old Delhi while the second son

Prashant Kumar helped him in new shop opened at South Extension. The youngest son Ronit

Kumar was undergoing a two-year jewellery designing course from Manchester Metropolitan

University, UK.

Mr. Mukesh Kumar was desirous of purchasing a residential property in New Friends Colony,

a high-end area of South Delhi. For this purpose, he engaged a property dealer and within a

month was able to finalise a house on ground floor. It was registered in his name and payment

towards purchase consideration, stamp duty etc. to the extent of Rs. 7.20 crore was made by

cheque. After purchasing the property he felt content and happy that he was the owner of a

property which was situated in a prime area of Delhi. He spent some funds in renovating the

bungalow, furnished it properly and thereafter gave it on lease to a nationalized bank for the

purpose of Guest House where bank’s officials visiting Delhi could be accommodated.

Time flew by. Encouraged by the loyalty of the customers he entered into diamond jewellery

business also at his South Extension shop. He entrusted this section independently to his

second son Prashant Kumar.

During the course of the years, he accumulated lots of funds which he wanted to invest safely

with a view to earn higher returns. He, therefore, consulted his close friend Mr. Roopesh Dutt

who was a practicing lawyer. He advised him to purchase properties in UP or Rajasthan

because investment in properties was a safe bet and over a period of time it would give higher

returns also. Mr. Dutt also told Mr. Mukesh regarding existence of the Benami Transactions

(Prohibition) Act, 1988 which was recently renamed as the Prohibition of Benami Property

Transactions Act, 1988 (PBPT Act). The re-naming of the Act was done by enacting the Benami

Transactions (Prohibition) Amendment Act, 2016 with effect from 1st November, 2016. He

also apprised him of that benami transaction provisions were attracted to any property,

shares, debentures, fixed deposits and bank accounts if they were held by one person for

another who actually paid for the transaction. Anyway, he purchased a plot in Greater

NOIDA for Rs. 65 lacs in the name of his wife Mrs. Rama Devi by paying lesser amount of

stamp duty as a relaxation was given to the women. His wife was a homely lady with a

religious bent of mind. Her time was spent in running the house and looking after the needs

of her family. In her spare time she used to read religious books.


His youngest son Ronit, who also did a part time job in the hospitality sector besides studying

for his jewellery designing course in the UK used to remit his savings into his NRE Account

maintained in India. As Mr. Mukesh Kumar was always enterprising in nature, he was

contemplating to use those funds also for investment in property. Ronit was also agreeable to

this proposition. They searched for a suitable property in Dwarka area of Delhi. As luck would

have it, their neighbour Mr. Narain had a society flat in Dwarka which he wanted to sell. Mr.

Mukesh Kumar came to know of this fact and arranged a visit to the flat along with his two

sons. It was an east-facing flat and they liked the location. By this time Ronit had also come to

India for a short duration. The matter was discussed at length and all agreed to pay Rs. one

crore and ten lacs to Mr. Narain being the amount demanded by him. To fund Rs. 1.10 crore,

Ronit contributed Rs. 10 lacs from his NRE account while his elder brothers Dheeraj and

Prashant agreed to pay Rs. 20 lacs each. Dheeraj arranged funds by taking pre-mature

payment of his two fixed deposits kept in the bank while Prashant sold his quoted shares in

NSE. They managed to procure a cheque of Rs. 30 lacs from somewhere while remaining Rs.

30 lacs were paid in cash by Mr. Mukesh Kumar. The property got registered for Rs. 80 lacs

jointly in the names of all the three brothers and accordingly stamp duty was paid.

Mr. Mukesh Kumar still had lot of spare funds for investments but such funds were not shown

as his income from business while filing the income tax returns from time to time. He had a

trusted cook by the name Rampal in his family who would follow the instructions of his

master tooth and nail without judging the consequences of following such instructions. Mr.

Mukesh Kumar was keen to purchase another property in Rajasthan with a view to rent it out

to some wealthy person. His close friend Mr. Vinay Seth informed about availability of a

commercial property in Jaipur. After negotiations with the owner, he purchased the same for

Rs. 52.45 lacs in the name of Rampal who could barely sign without knowing the import of

signing the documents. Mr. Mukesh Kumar was of the opinion that he would get the property

transferred in his name from Rampal after some time. Within no time the property was let out

to an influential person at a handsome rent.

I. Objective Type Questions (2 marks each)

Select the most appropriate answer from the options given for each question:

1. Mr. Ram, a NRI, purchased a flat for Rs. 30, 00, 000 and paid 20,00,000 in by account payee

cheque of his own account and rest in cash. The registry was done at a value of Rs. 20,00,000

which was paid by cheque. State the correct statement in the light of the given facts:

(a) Said transaction is benami transaction due to Registry made on partial price of the

property.

(b) Due to partial payment of cash, the said transaction is benami transaction.

(c) Mr. Ram paid the consideration and owned the property in his name , so it is not a benami

transaction.

(d) Both (a) & (b)

2. Benami Property is -

(a) any property which is not the subject matter of a benami transaction.


(b) any property which is the subject matter of a benami transaction and also includes the

proceeds from such property.

(c) any property which is not the subject matter of a benami transaction and also does not

include the proceeds from such property.


3. A person who finances the deal in respect of benami property:

(a) is not the beneficial owner of the property

(b) is the beneficial owner of the property

(c) is not the possessor of the property


4. How much of the property purchased in Dwarka could be considered as Benami Property:

(a) Rs. 30 lacs

(b) Rs.60 lacs

(c) Rs. 80 lacs

(d) Rs. 1.10 crore

5. Benamidar is -

(a) a fictitious person who does not make payment

(b) a person in whose name the benami property is transferred or held but he does not make

payment

(c) a person who lends his name but does not make any payment.

(d) All of the above

6. Beneficial Owner is -

(a) a person, whether his identity is known or not, for whose benefit the benami property is

held by a benamidar.

(b) a person, who is benamidar and holds the property.

(c) Both (a) and (b)

(d) person who is valid legal holder of the property.

7 Under which Act, Ronit is maintaining his NRE account-

(a) Prevention of Money Laundering Act, 2002

(b) Real Estate (Regulation and Development) Act, 2016

(c) Foreign Exchange Management Act, 1999

(d) Prohibition of Benami Property Transactions Act, 1988

8 Why does a person enter into a Benami transaction?

(a) To avoid statutory dues

(b) To avoid payment to creditors

(c) To defeat the provisions of any law.

(d) All of the above


9 According to Section 53 of the Act who shall be punishable in the case where Mr. Mukesh

Kumar purchased property in the name of his cook Rampal:

(a) Rampal

(b) Mukesh Kumar

(c) Vinay Seth

(d) Both (a) and (b)

10 Can Mukesh Kumar get the property purchased in name of his cook Rampal, re-transferred

in his name:

(a) Yes, he can.

(b) No, he cannot.

(c) Yes, he can if Rampal agrees


II Descriptive Questions (10 marks each)

Q.1 (a) Can the property purchased by Mr. Mukesh Kumar in the name of his wife Mrs. Rama

Devi be considered as ‘Benami Property’? Justify. (6 Marks)

(b) Whether the property purchased in the name of Rampal by Mr. Mukesh Kumar can be

considered as ‘Benami Property’. State with reasons. (4 Marks)

Q.2 Identify beneficial owner and benamidar in all the above property transactions taken

place in this case study. (10 Marks)

S. No. Property Transaction at

1 South Extension

2 New Friends Colony

3 Greater NOIDA

4 Dwarka

5 Jaipur

Mr. Raj entered into a purchasing of a property in the name of his wife. This transaction was

made in consultation with his legal counsel. He suggested him various ways of nonpayment

of statutory dues levied on the transaction. Examine the following given legal situations –

Who shall be liable in the above transaction? Punishment to levied

What formality shall be required for the sanction of the punishment? (10 Marks)


Ans:

MCQ’S

1: (c)

2 (b)

3 (b)

4 (a)

5 (d)

6 (a)

7 (c)

8 (d)

9 (d)

10 (b)

Descriptive Answers

Ans. 1(a) The property so purchased in the name of Mrs. Rama Devi, whether a ‘Benami

Property’ or not, will depend upon the facts/motive/intention of Mr. Mukesh Kumar for

purchasing property in such a way.

The property would be considered as benami property-

• If the intention to purchase property was only to save stamp duty; and

• It was intended not to give any ownership benefitto his wife.

Additionally, it is also to be proved in case of benami property that the owner of the property

was not aware of, or, denied knowledge of such ownership.

The property would not be considered as benami property-

• If the intention was to give ownership rights to Mrs. Rama Devi i.e. gifting of property to

her; and

• his wife was fully aware of purchase of property in her name by her husband.

In this case, as per the facts, the payment of lesser stamp duty is consequential to purchase of

property in the name of a woman. Hence, the property purchased on the name of Mrs. Rama

Devi is not a Benami Property.

Answer 1(b) Yes. It is certainlya case of benami property. The reasons are:

(i) The consideration for the property had not been given by Rampal though title deeds of the

property were registered in his name.

(ii) Rampal was not aware that the property was purchased in his name.

(iii) Rampal was not the real owner of the property since he did not make payment.


(iv) The intention of Mr. Mukesh Kumar was to utilize his undisclosed funds without

involving himselfas owner of such funds and to enjoy benefits (i.e. rent) emanating from such

property.

S.

No.

Property

Transactionat Beneficial Owner Benamidar

1 South

Extension Mukesh Kumar N. A.

2 New Friends

Colony Mukesh Kumar N. A.

3 Greater

NOIDA

(i) Mukesh Kumar,

if his intention was

not to give

ownership rights to

his wife.

(i) Rama Devi

(ii) Rama Devi, if his

intention was to give

ownership rights to

his wife.

(ii) N. A.

4 Dwarka All his three sons

Benami property to extent of

Rs. 30 lacs - Fictitious person

from whom the cheque was

obtained is Benamidar.

5 Jaipur Mukesh Kumar Rampal

Answer 3

As per section 53 of the Prohibition on Benami Property Transactions Ac t, 1988, where any

person enters into a benami transaction in order to defeat the provisions of any law or to avoid

payment of statutory dues or to avoid payment to creditors, the beneficial owner, benamidar

and any other person who abets or induces any person to enter into the benami transaction,

shall be guilty of the offence of benami transaction.

Whoever is found guilty of the offence of benami transaction referred to above shall be

punishable with rigorous imprisonment for a term which shall not be less than one year, but

which may extend to seven years and shall also b e liable to fine which may extend to twenty-

five per cent of the fair market value of the property.


Accordingly, following are the answers:

(a) Mr. Raj, beneficial owner, his wife being benamidar and the legal counsel who

abets/induces Mr. Raj, to enter into a benami transaction, all the three will be liable under

section 53 .

(b) All, in the given c ase entered into a benami transaction with a motive to avoid payment

of statutory dues, are liable for rigorous imprisonment for a term which shall not be less than

one year, but which may extend to seven years and shall also be liable to fine which may

extend to twenty-five per c ent of the fair market value of the property.

(c) As per section 55, no prosecution shall be instituted against any person in respect of any

offence committed under sec tions 53 without the previous sanction of the Board(CBDT).

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