Narayan Vittappa Kudva vs Union Of India (Uoi) And Anr.
2001 Latest Caselaw 751 Bom

JUDGMENT

S.A. Bobde, J.

1. The petitioner, who claims to be a tenant of premises forfeited under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, in short "SAFEMA", has filed the present Petition challenging the order dated 15th January, 1998 passed by the respondent No. 2, the Competent Authority constituted under the SAFEMA directing the petitioner to handover the property in his possession to Competent Authority under the SAFEMA i.e. respondent No. 2 within ten days of the receipt of the Order. The order has been passed on the basis that it is illegally acquired property of one Gawde.

2. The property in question is a building consisting of ground plus one floor admeasuring about 580 sq. ft. known as Ganesh Bhuvan situate on a Plot or piece of land admeasuring 64.1 sq. mtrs. City Survey No. 1103, Plot No. 38-B, Sub-Plot No. 19, T-95, Hira Buwa Gawde Marg, (Juhu Tara Road) Juhu Koliwada. Bombay -- 400049, hereinafter referred to as "the property in question".

3. The petitioner claims to be a tenant of the property in question since April, 1959. His case is that he was inducted into the premises by one Gulabbai Govind Chavan and her husband Govind Raghunath Chavan. According to the petitioner, he was put in exclusive possession of the property in question as a monthly tenant. He claims to be in possession of monthly rent receipts issued by the said Chavan in his favour from about April, 1959. While the petitioner continued as a tenant, it appears that the said Chavan sold the property in question to one Laxman Narayan Gawde. The petitioner attorned his tenancy to Gawde. Petitioner claims to be in possession of the rent receipt dated 28th December, 1970 issued in his favour by Mr. Gawde in the sum of Rs. 50/- being the monthly rent for the premises for the month of December, 1970. According to the petitioner he continued paying rent to Gawde till the year 1977. It is the petitioners case that Gawde did not pass the receipts for all the rent paid by the petitioner.

4. In the year 1977 the respondent No. 1 acting under the provisions of SAFEMA declared all the properties belonging to Gawde, including the property in question as illegally acquired property. The property was declared forfeited to the respondent No. 1, Union of India under the provisions of SAFEMA. The petitioner has stated that he has paid, and continues to pay, the monthly rent of Rs. 50/- every month to the respondent No. 1 and/or respondent No. 2 Authority and claims to have the rent receipts.

5. The petitioner states that he resides with his family on the first floor and has all the necessary licences for carrying on business of Tea Shop-cum-Store-cum-Hotel on the ground floor of the premises. He claims to have been in lawful and in uninterrupted possession as a tenant, initially of Chavan, later of Gawde and then of respondent No. 1, the Central Government without any disturbance.

6. The respondent No. 2 issued a Summons dated 28th December, 1994, about seven years after the property was forfeited to the Central Government. By the Summons, the petitioner was called upon to give the list of documents, to produce certain documents mentioned in the notice. It is, however, found that notice itself does not contain the list of documents. There is a foot note to the notice which reads as follows :--

"1) Rent in arrears in respect of Plot No. 38-B, Sub-Plot No. 19 of late L. N. Gawde.

2) Possession of the above property for Public Auction,"

7. We are satisfied that this Notice is vague and improper. While a reading of the Summons shows that it is issued for the purpose of requiring the petitioner to produce certain documents, it appears to be a disguise for demanding arrears of rent in respect of the property in question and also for the rest of the property for public auction. There is no recital in the Summons calling upon the petitioner to produce evidence showing his interest in the property in question and calling upon him to show cause against his eviction. We are not able to read the foot note*reproduced above, as containing the necessary averment which could be said to have put the petitioner on notice as to the order that was contemplated by the respondents.

8. The petitioner apparently replied on 10th January, 1995 informing the respondent No. 2 that he has been residing in the property in question since about 1958 and that he has been regularly paying rent as tenant first to Chavan, then to Gawde and then to Central Government. It appears that the petitioner was not given any opportunity of presenting his case in person or of being heard. All that was communicated to him thereafter was the impugned order dated 16th January, 1995 directing the petitioner to handover the property in question of the late Shri Laxman Narayan Gawde to respondent No. 2, Competent Authority, within ten days of the receipt of the said order on the footing that the properties had already been forfeited by the Competent Authority on 9th June, 1977 and that forfeiture order had been upheld by the Appellate Tribunal. The petitioner was informed by the said order that he may purchase the property in auction.

 

 9. Having heard learned Counsel for both sides, we find the proceedings resulted in miscarriage of justice as a result of the impugned order. The SAFEMA applies, vide Section 2 to the categories of persons enumerated therein; that is, to
   

 (i)     Every person convicted under the Sea Customs Act, Foreign Exchange Regulation Act, Sea Customs Act, 1878 or the Customs Act, 1962 or the Foreign Exchange Regulation Act, 1947 for offence in relation to goods or amount exceeding one lakh of rupees or, 
 

 (ii)    Every person in respect of whom an order of detention has been under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1947 in the circumstances enumerated therein, or, 
 

 (iii)   Every person who is a relative of a person referred to in Clause (a) or Clause (b), or
 

 (iv)   Every associate of person referred to in Clause (a) or Clause (b) above, or
 

 (v)     "any holder" (hereinafter in the said Clause referred to as the present holder) of any property which was at any time previously held by a person referred to in Clause (a) or Clause (b) unless the present holder or, as the case may be anyone who held such property after such person and before the present holder, is or was a transferee in good faith for adequate consideration.  
 

 Explanation 2 -- defines relative of such a person, with which we are not concerned for the present. 
 

 Explanation 3 -- defines for the purposes of Clause the word "associate" to mean - 
   

 (i)      ............... 
 

 (ii)     ............... 
 

 (iii)    ............... 
 

 (iv)    ............... 
 

 (v)     ............... 
 

 (vi)    ............... 
 

 (vii)   where the competent authority, for reasons to be recorded in writing, considers that any properties of such person are held on his behalf by any other person, such other person.  
 

 Section 4 prohibits the holding of illegally acquired property. It reads as follows :-- 
   

 "4(1) As from the commencement of this Act, it shall not be lawful for any person to whom this Act applies to hold any illegally acquired property either by himself or through any other person on his behalf. 
 

  (2)   where   any   person   holds   any   illegally   acquired   property   in contravention of the provisions of sub-section (1), such property shall be liable to be forfeited to the Central Government in accordance with the provisions of this Act."  
 

 10. Property is defined in Section 3(l)(e) as follows :-- 
   

 3(1) In this Act, unless the context otherwise requires, -- 
 

 (e)     "property"   includes   any   interest   in   property,   movable   or immovable.  
 

 In essence, therefore, the act prohibits any person to wh6m the Act applies, from holding any illegally acquired property either by himself or through any other person on his behalf. In brief, therefore, the Competent Authority is required to see whether. 
   

 (a)     the person whose property or ancestral property is sought to be affected under the Act by way of forfeiture, is a person to whom the Act applies and
 

 (b)     whether the property is illegally acquired property within the meaning of the Act.  
 

11. As far as forfeiture of the property in question in the present case is concerned, it appears that the property which stood in Gawde's name has been found to be property liable for forfeiture under the provisions of SAFEMA and therefore forfeited by the Central Government in accordance with the provisions of the SAFEMA, the petitioner is not really concerned with the forfeiture of the property of his landlord that is Gawde to the Central Government and its vesting in the Central Government. In fact, he claims that he has, after its vesting in the Central Government paid monthly rent to the Central Government and is a tenant. It is, therefore, clear that before the petitioner's rights in the property are affected, there must be a proper enquiry as to the nature of his right, i.e. whether it is a tenancy right or otherwise and must be preceded by an appropriate show cause notice which offers the petitioner an opportunity to demonstrate his legal status as regards the property in question. There must be an order determining the petitioners status in the said property.

In the present case, we find that the impugned order does not determine whether the petitioner, is actually a tenant as claimed by him and, if so, whose tenant and what has become of his tenancy right, if any.

12. It is clear that the petitioner is found to be a tenant of the erstwhile owner i.e. Gawde whose properties have been forfeited under the SAFEMA to the Central Government and thereafter the tenant of the Central Government. The petitioner's tenancy rights can only he terminated in accordance with law. Possession of the property in question can also be taken by the Central Government in accordance with the law. In this regard, it will be useful to refer to Section 7 sub-section (3) of SAFEMA which reads as follows:--

"7(3) Where the competent authority records a finding under this Section to the effect that any property is illegally acquired property, it shall declare that such property shall, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances."

13. Mr. Patwardhan, learned Counsel for the petitioner submitted that the effect of Section 7(3) of the SAFEMA cannot be that the tenancy rights are extinguished because Section 7(3) states that the property shall vest in the Central Government "free from all encumbrances". In support of his argument, he has relied on the decision of the Apex Court in C. B. Gautam v. Union of India and Ors., reported in (7993) 1 SCC 178. We find that the case relied on by the learned Counsel for the petitioner is not of any assistance. In that case the Supreme Court struck down the expression "free from all encumbrances" in subsection (1) of Section 269UE and held that the said sub-section need to be read without the expression "free from all encumbrances" with the result the property in question would vest in the Central Government subject to such encumbrances and leasehold interests as are subsisting thereon except for such of them as are agreed to be discharged by the vendor before the sale is completed. In other words, it was held that the property would vest in the Central Government along with the encumbrances. We are concerned with a different statutory scheme under the SAFEMA.

The main purpose of the present Act, as held by the Supreme Court in Attorney General for India v. Amratlal Prajivandas and Ors., is as under :--

"43. Question No. 5 : It is contended by the counsel for the petitioners that extending the provisions of SAFEMA to the relatives, associates and other holders is again a case of overreaching or of over-breadth, as it may be called - a case of excessive regulation. It is submitted that the relatives or associates of a person falling under Clause (a) or Clause (b) of Section 2(2) of SAFEMA may have acquired properties of their own, may be by illegal means but there is no reason why those properties be forfeited under SAFEMA just because they are related to or are associates of the detenu or convict, as the case may be. It is pointed out that the definition of relative in Explanation (2) and of associates in Explanation (3) are so wide as to bring in a person even distantly related or associated with the convict/detenu, within the net of SAFEMA, and once he comes wilhin the net, all his illegally acquired properties can be forfeited under the Act. In our opinion, the said contention is based upon a misconception. SAFEMA is directed towards forfeiture of "illegally acquired properties" of a person falling under Clause (a) or Clause (b) of Section 2(2). The relatives and associates are brought in only for the purpose of ensuring that the illegally acquired properties of the convict or detenu, acquired or kept in their names, do not escape the net of the Act. It is a well-known fact that persons indulging in illegal activities screen the properties acquired from such illegal activity in the names of their relatives and associates. Sometimes they transfer such properties to them may be, with an intent to transfer the ownership and title. In fact, it is immaterial how such relative or associate holds the properties of convict/detenu - whether as a benami or as a mere name-lender or as a bona fide transferee for value or in any other manner. He cannot claim those properties and must surrender them to the State under the Act. Since he is a relative or associate, as defined by the Act, he cannot put forward any defence once it is proved that that property was acquired by the detenu whether in his own name or in the name of his relatives and associates. It is to counteract the several devices that are or may be adopted by persons mentioned in clauses (a) and (b) of Section 2(2) that their relatives and associates mentioned in clauses (c) and (d) of the said sub-section are also brought within the purview of the Act. The fact of their holding or possessing the properties of convict/detenu furnishes the link between the convict/detenu and his relatives and associates. Only the properties of the convict/detenu are sought to be forfeited, wherever they are. The idea is to reach his properties in whosoever's name they are kept or by whosoever they are held. The independent properties of relatives and friends, which are not traceable to the convict/detenu, are not sought to be forfeited nor are they within the purview of SAFEMA. We may proceed to explain what we say. Clause (c) speaks of a relative of a person referred to in Clause (a) or Clause (b) (which speak of a convict or a detenu). Similarly, Clause (d) speaks of associates of such convict or detenu. It we look to Explanation (3) which specifies who the associates referred to in Clause (d) are, the matter becomes clearer. Associates means - (i) any individual who had been or is residing in the residential premises (including outhouses) of such person [such person refers to the convict or detenu, as the case may be referred to in Clause (a) or Clause (b)]; (ii) any individual who had been or is managing the affairs or keeping the accounts of such convict/detenu; (iii) any association of persons, body of individuals, partnership firm or private company of which such convict/detenu 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 of persons, body of individuals, 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) the trustee of any trust where (a) the trust has been created by such convict/detenu; or (b) the value of the assets contributed by such convict/detenu to the trust amounts, on the date' of contribution not less than 20% of the value of the assets of the trust on that date; and (vii) where the competent authority, for reasons to be recorded in writing, considers that any properties of such convict/detenu are held on his behalf by any other person, such other person. It would thus be clear that the connecting link or the nexus, as it may be called, is the holding of property or assets of the convict/detenu or traceable to such detenu/convict. Section 4 is equally relevant in this context. It declares that as from the commencement of this Act, it shall not be lawful for any person to whom this Act applies to hold any illegally acquired property either by himself or through any other person on his behalf. AH such property is liable to be forfeited. The language of this Section is indicative of the ambit of the Act. Clauses (c) and (d) in Section 2(2) and the explanations (2) and (3) occurring therein shall have to be construed and understood in the light of the overall scheme and purpose of the enactment. The idea is to forfeit the illegally acquired properties of the convict/detenu irrespective of the fact that such properties are held by or kept in the name of or screened in the name of any relative or associate as defined in the said two explanations. The idea is not to forfeit the independent properties of such relatives or associates which they may have acquired illegally but only to reach the properties of the convict/detenu or properties traceable to him, wherever they are, ignoring all the transactions with respect to those properties. By way of illustration, take a case where a convict/detenu purchases a property in the name of his relative or associate - it does not matter whether he intends such a person to be a mere name-lender or whether he really intends that such person shall be the real owner and/or possessor thereof - or gifts away or otherwise transfers his properties in favour of any of his relatives or associates, or purports to sell them to any of his relatives or associates in all such cases, all the said transactions will be ignored and the properties forfeited unless the convict/detenu or his relative/associate, as the case may be, establishes that such property or properties are not "illegally acquired properties" within the meaning of Section 3(c). In this view of the matter, there is no basis for the apprehension that the independently acquired properties of such relatives and associates will also be forfeited even if they are in no way connected with the convict/ detenu. So far as the holders (not being relative^ and associates) mentioned in Section 2(2)(e) are concerned, they are dealt with on a separate footing. If such person proves that he is a transferee in good faith for consideration, his property - even though purchased from a convict/detenu - is not liable to be forfeited. It is equally necessary to reiterate that the burden of establishing that the properties mentioned in the show-cause notice issued under Section 6, and which are held on that date by a relative or an associate of the convict/detenu, are not the illegally acquired properties of the convict/detenu, lies upon such relative/associate. He must establish that the said property has not been acquired with the monies or assets provided by the detenu/convict or that they in fact did not or do not belong to such detenu/convict. We do not think that Parliament ever intended to say that the properties of all the relatives and associates, may be illegally acquired, will be forfeited just because they happen to be the relatives or associates of the convict/detenu. There ought to be the connecting link between those properties and the convict/detenu, the burden of disproving which as mentioned above, is upon the relative/associate. In this view of the matter, the apprehension and contention of the petitioners in this behalf must be held to be based upon a mistaken premise. The bringing in of the relatives and associates or of the persons mentioned in Clause (e) of Section 2(2) is thus neither discriminatory nor incompetent apart from the protection of Article 31-B.

That this was the object of the Act is evident from para 4 of the preamble which states; "And whereas such persons have in many cases been holding the properties acquired by them though such gains in the names of their relatives, associates and confidants". We are not saying that the preamble can be utilised for restricting the scope of the Act, we are only referring to it to ascertain the object of the enactment and to reassure ourselves that the construction placed by us accords with the said object."

Further Section 19 of the SAFEMA reads as follows:--

"19. Power to take possession. -- (1) where any property has been declared to be forfeited to the Central Government under this Act, or where the person affected has failed to pay the fine due under sub-section (1) of Section 9 within the time allowed therefor under sub-section (3) of that section, the competent authority may order the person affected as well as any other person who may be in possession of the properly to surrender or deliver possession thereof to the competent authority or to any person duly authorised by it in this behalf within thirty days of the service of the order.

(2) It any person refuses or fails to comply with an order made under sub-section (1), the competent authority may take possession of the property and may for that purpose use such force as may be necessary.

(3) Notwithstanding anything contained in sub-section (2), the competent authority may, for the purpose of taking possession of any property referred to in sub-section (1), requisition the service of any police officer to comply with such requisition."

Having regard to the provisions of Section 19 of the SAFEMA, we are of the view that it is absolutely essential for the competent authority to determine the status of a person in possession of the forfeited property. If it is found that the person in possession is a monthly tenant whose tenancy is created by a person who held the property prior to the purchase of the property by the person whose interest in it is forfeited under the SAFEMA and the Central Government has further accepted monthly rent the legal implication might be quite different.

14. In fact having regard to the provisions of the SAFEMA we are of the view that the provisions of the SAFEMA will be applicable only to the persons specified in sub-section (2) reproduced (supra). Therefore, unless the person has been convicted under the Act enumerated in sub-section 2 (a) or, if the person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1947 under subsection 2(b) or a person who is a relative of a person referred to in clauses (a) or (b) or an associate of person referred to in clauses (a) or (b) or a holder of any property which was at any time previously held by a person referred to in clauses (a) or (b) except a present holder who is or was a transferee in good faith for adequate consideration, the Act has no application. We consider this to be the plain intendment of Section 2 of SAFEMA.

15. Having regard to the facts of the present case, it is clear that the respondent No. 2 has not applied its mind as to which category of persons enumerated in Section 2, does the petitioner fall in. The respondent No. 2 has merely directed the petitioner to vacate the premises within ten days of the receipt of the impugned letter. Having regard to the plain meaning of the words in Section 2 which defines and confines applicability of the Act to the persons enumerated therein, it is not possible for us to construe the word "any other person who may be in possession of the property" to include a person to whom the Act does not apply : such as a tenant of the person whose property was forfeited. Unless of course, the tenant belongs to one of the categories enumerated in Section 2 and was found to be so by the Competent Authority. In the result, we set aside the impugned order dated 16th January, 1995 and remand the matter back to the Competent Authority to determine whether the petitioner belongs to any of the categories enumerated in Section 2 and therefore a person who is liable to be evicted under the provisions of the SAFEMA. In case the Authority finds that the petitioner belongs to one of the categories enumerated in Section 2 of the Act, the Authority shall be free to take possession from the petitioner in accordance with Section 19 of the SAFEMA. If, however, the petitioner is found to be a tenant of Shri Chavan, in view of the fact that the property has been vested in the Central Government free from all encumbrances, the respondents shall be at liberty to proceed against him under the appropriate Public Premises Eviction Act.

Rule made absolute in the above terms

In the circumstances of the case, however, there shall be no order as to costs.

P. A. to give ordinary copy of this order to the parties concerned.

Certified copy expedited.