The instant appeal is directed against the judgment and order dated 19 April, 2007 passed by learned Single Judge of the High Court of Karnataka at Bangalore upholding the order passed by the competent authority under Section 7 read with 19(1) of the Smugglers and Foreign Exchange Manipulators(Forfeiture of Property) Act, 1976(hereinafter being referred to as the “Act, 1976”) dated 31 December, 1997. After affording opportunity of hearing, the competent authority, in the first instance, passed an order of forfeiture against the first appellant firm forfeiting M/s. Subsequently, the Appellate Tribunal for Forfeited Property, New Delhi(hereinafter being referred to as the “Tribunal”) dismissed the appeal and upheld the order of forfeiture passed by the competent authority on 7 September, 1999 and, thereafter, the writ petition filed at the instance of the appellants also came to be dismissed by judgment and order dated 19 April, 2007 which became a subject matter of challenge in appeal before us.
Also Read: https://newslaw.in/case-type/civil/regularization-of-village-level-workers-in-tamil-nadu/
(ii)
The competent authority ought to have applied Section 9 of the Act, 1976 in the present case and should have provided an option to the appellants to pay fine in lieu of forfeiture, taking into consideration the fact that the appellants had disclosed source of more than 50% cost incurred in construction of the theatre. The appellants have failed to discharge the said burden, in consequence of which the finding recorded by the competent authority duly supported with the material on record justify and support the order of forfeiture passed by the competent authority dated 31 December, 1997. 2(P.M.Saheeda) failed to disclose any source of their capital contribution in the first appellant firm and have failed to disclose any books of accounts for the expenditure in construction of the subject theatre and also failed to disclose any bank account from which money was disbursed for building the said theatre. (iv) There was no delay which could be attributed to the authority for the reason that proceedings were initiated in the first instance against the appellant firm by issuance of show cause notice dated 13 January, 1977 and since then the proceedings were continued one after the other. The Act, 1976 has been enacted by the Parliament with an object to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto.
Section 2(2) gives a long list of different categories of persons to whom the Act applies and includes as defined in Section 2(2)(b) that every person in respect of whom an order of detention has been made under the COFEPOSA and also includes every associate of a person referred to in clause (a) or clause (b) as defined in sub-clause(d) read with Explanation 3, which refers to an associate and covers all individuals who had been or is a member, partner or director of an association of persons including association, body, partnership firm or private company, etc. (2) The persons referred to in sub-section (1) are the following, namely: – (a) every person- (i) who has been convicted under the Sea Customs Act, 1878 (8 of 1878), or the Customs Act, 1962 (52 of 1962), of an offence in relation to goods of a value exceeding one lakh of rupees ; or (ii) who has been convicted under the Foreign Exchange Regulation Act, 1947 (7 of 1947), or the Foreign Exchange Regulation Act, 1104 1973 (46 of 1973), of an offence, the amount or value involved in which exceeds one lakh of rupees; or (iii) who having been convicted under the Sea Customs Act, 1878 (8 of 1878), or the Customs Act, 1962 (52 of 1962), has been convicted subsequently under either of those Acts ; or (iv) who having been convicted under the Foreign Exchange Regulation Act, 1947 (7 of 1947), or the Foreign Exchange Regulation Act, 1973 (46 of 1973), has been convicted subsequently under either of those Acts ; (b) every person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974); Provided that- (i) such order Explanation 1.- Explanation 2.- Explanation 3.-For the purposes of clause (d), “associate”, in relation to a person, means- (i) any individual who had been or is residing in the residential premises (including outhouses) of such person; (ii) any individual who had been or is managing the affairs or keeping the accounts of such person; (iii) any association of persons, body of individuals, partnership firm, or private company within the meaning of the Companies Act, 1956 ( 1 of 1956), of which such person had been or is a member, partner or director; (iv) any individual who had been or is a member, partner or director of an association of persons, body of individuals, partnership firm or private company referred to in clause (iii) at any time when such person had been or is a member, partner or director of such association, body, partnership firm or private company; (v) any person who had been or is managing the affairs, or keeping the accounts, of any association of persons, body of individuals, partnership firm or private company referred to in clause (iii); (vi)….
it may serve a notice upon such person (hereinafter referred to as the person affected) calling upon him within such time as may be specified in the notice, which shall not be ordinarily less than thirty days, to indicate the sources of his income, earnings or assets, out of which or by means of which he has acquired such property, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties, as the case may be, should not be declared to be illegally acquired properties and forfeited to the Central Government under this Act. (1) The competent authority may, after considering the explanation, if any, to the show- cause notice issued under section 6, and the materials available before it and after giving to the person affected (and in a case where the person affected holds any property specified in the notice through any other person, to such other person also) a reasonable opportunity of being heard, by order, record a finding whether all or any of the properties in question are illegally acquired properties. (1) Where the competent authority makes a declaration that any property stands forfeited to the Central Government under section 7 and it is a case where the source of only a part, being less than one-half of the income, earnings or assets with which such property was acquired has not been proved to the satisfaction of the competent authority, it shall make an order giving an option to the person affected to pay, in lieu of forfeiture, a fine equal to one and one-fifth times the value of such part.
(2) Before making an order imposing a fine under sub- section (1), the person affected shall be given a reasonable opportunity of being heard, (3) Where the person affected pays the fine due under sub- section (1), within such time as may be allowed in that behalf, the competent authority may, by order, revoke the declaration of forfeiture under section 7 and thereupon such property shall stand released.”
Taking into consideration the scope and ambit of Act, 1976 of which a detailed reference has been made, forfeiture proceedings could be initiated under Section 6 in reference to such illegally acquired properties by such persons who are covered under Section 2 read with the explanation, appended thereto, by a show cause notice and after due compliance of principles of natural justice, the power vests in the competent authority to pass an order of forfeiture of the property in exercise of power under Section 7 of the Act 1976.
The respondents have initiated the proceedings serving show cause notice under Section 6 of forfeiture of the property which was taken from ill-gotten gains to the first appellant firm and its partners(Appellant nos. Saheeda) and her minor son contributed Rs.5.20 lakhs.
5.20 lakhs in the partnership firm, no explanation was tendered about the source of funds infused in the partnership firm.
Also Read: https://newslaw.in/case-type/civil/judgment-on-execution-of-lease-deed-for-remaining-land/
Saheeda) which claimed that the land was purchased by her for Rs.33,000/- in the year 1969 from her own funds generated through wedding gifts in support of which no proofs was produced, and with land, the value of the theatre would work out to be Rs.25.12 lakhs. There was no document placed on record which could justify that Rs.12 lakhs was invested in the construction of theatre. The learned Single Judge of the High Court revisited the factual matrix on record and returned a finding that no documentary evidence was placed by either of the appellants, during the proceedings initiated by the competent authority, who are under an obligation to prove in terms of Section 8 of the Act 1976. That apart, as regards the submissions made by the counsel for the appellants to impose fine in lieu of forfeiture, as contemplated under Section 9 of the Act 1976, after noticing the argument advanced by the appellants before the High Court, a categorical finding has been recorded as to why the appellants are not entitled to seek protection of Section 9 of the Act 1976, which is as follows: “The argument of petitioners’ counsel is, major contribution is from the petitioners and that the land in question was acquired in the year 1969 prior to the entering into a partnership agreement out of the borrowings of 2 petitioner Saheeda and that land in question ought not have been taken into consideration to forfeit the same, and as such, the Competent Authority and the Appellate Tribunal ought to have taken note of the same into consideration only to impose fine and not to forfeit the property and also the land in question should be available to the petitioners and it should not be the subject matter of forfeiture.
In this regard, it appears the Competent Authority as well as the Appellate Tribunal having noted the transaction and also having noted that there is no explanation offered by the 2 petitioner properly regarding acquisition of the land in question for Rs.33,000/- in the year 1969, and also having doubted the unsigned agreement between the 2 petitioner and N.A. That apart, if the value of the land is taken only of Rs.33,000/-, the total value of the land and building work out at Rs.25,20,000/-, and as such, the major part of the investment still remains unexplained. Later that came to be set aside in the year 1991 and fresh forfeiture proceedings were initiated pursuant to show cause notice under Section 6 of the Act dated 16 October, 1994 which finally culminated into passing of order of the competent authority on 31 December, 1997 and on dismissal of appeal, the writ petition was preferred at the instance of the appellants and the matter reached to this stage. Pending application(s), if any, shall stand disposed of.
Case Title: M/S PLATINUM THEATRE Vs. COMPETENT AUTHORITY SMUGGLERS AND FOREIGN EXCHANGE MANIPULATORS (FORFEITURE OF PROPERTY), ACT, 1976 (2023 INSC 273)
Case Number: C.A. No.-004369-004369 / 2009
