Bombay High Court
Imperial Exim (India) Pvt.Ltd vs State Of Maharashtra on 24 December, 2013
Bench: S.C. Dharmadhikari, G.S. Patel
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
CRIMINAL WRIT PETITION N0. 1435 OF 2011
Imperial Exim (India) Pvt.Ltd.
A company incorporated under
the Companies Act, 1956 having
its registered office at 427,
Arun Chambers, 4th floor,
Tardeo, Mumbai 400 034. .. Petitioner
V/S.
1]
The State of Maharashtra.
2] The Competent Authority,
SAFEMA/NDPS Mumbai,
Mittal Court, C Wing,
3rd floor, Nariman Point,
Mumbai 400 021.
WITH
CRIMINAL WRIT PETITION NO. 121 OF 2012
Imperial Exim (India) Ltd.
A company incorporated under
the Companies Act, 1956 having
its registered office at 427,
Arun Chambers, 4th floor,
Tardeo, Mumbai 400 034. .. Petitioner
Versus
1] Union of India
::: Downloaded on - 06/01/2014 04:09:56 :::
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2] The Competent Authority
SAFEMA/NDPS Mumbai,
Mittal Court, C Wing,
3rd floor, Nariman Point,
Mumbai 400 021.
3] Jai Vishwanath Hiremath
292, Jupiter, 41, Cuffe Parade,
Mumbai 400 005
4] Sugandha Jai Hiremath
292, Jupiter, 41, Cuffe Parade,
Mumbai 400 005
5]
State of Maharashtra .. Respondents
Mr.P.K.Dhakephalkar, Senior Advocate with
Srivastav, Zaid Ansari and Ms.S.T.Shaikh i/b.
M/s.S.K.Srivastav and Co. for petitioners
Mrs.A.S.Pai, APP for State of Maharashtra
Mr.Sharan Jagtiani and Mr.S.U.Mehta i/b. Malvi
Ranchoddas & Co. for respondent Nos. 3 and 4 in
W.P. 121 of 2012.
CORAM: S.C.DHARMADHIKARI &
G.S.PATEL, JJ.
RESERVED ON: 29th October 2013.
PRONOUNCED ON: 24th December 2013.
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JUDGMENT : (Per Dharmadhikari, J.)
These two petitions involve challenge to the same order
and common arguments were, therefore, canvassed. They were
heard together and are being disposed of by this common judgment.
2. In the light of the earlier orders of the Division Bench,
particularly, that the petitions have to be disposed of at the stage of
admission itself, we grant Rule in each of these petitions and with
the consent of Advocates appearing for parties, dispose them off
finally by this common judgment.
3. In Criminal Writ Petition No.1435/2011, the petitioner is
a private limited company incorporated under the Indian Companies
Act, 1956 having its registered office at the address mentioned in the
cause title. It impugns an order dated 31 st March 2011 passed by the
Appellate Tribunal for Forfeited property, New Delhi Camp at
Mumbai.
4. By this order, the Appellate Tribunal has disposed of two
appeals. As far as the petitioner's appeal is concerned, it is
dismissed. The appeal preferred by the respondent Nos. 3 and 4 in
companion writ petition being Writ Petition No.121 of 2012 has been
partly allowed.
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5. The facts leading to filing of these petitions can be briefly
summarised as under:-
On or about 26th March 1993, a deed of convenience was
executed by and between the parties whose names are particularly
mentioned in para 4 of the memo of petition No.1435 of 2011 in
respect of property situate at village Kashid, Taluka Murud Janjira,
District Raigad.
6. The second respondent to the above petition, issued a
show cause notice to one Iqbal Mohammed Memon on 9 th May 1995.
The allegations are that on or about 2 nd September 1994, an order of
detention was issued against one Iqbal Memon @ Iqbal Mirchi under
section 3(1) of the Prevention of Illicit Traffic in Narcotic Drugs and
Psychotropic Substances Act, 1988. (for short "The Prevention Act").
The allegations are that this Iqbal Mirchi referred to as the Affected
Party No.1 (AP-1 for short) was then a citizen of India, residing in
Mumbai. He left India some time in 1990. Since then, he has been
residing in London.
7. On the basis of the order of detention issued and further
that being not revoked or quashed by any court of competent
jurisdiction, by virtue of sections 68-A(2)(e) of Narcotic Drugs and
Psychotropic Substances Act, 1985 (for short "NDPS Act"), the
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properties illegally acquired by AP-1 are liable for forfeiture under
the said Act. It was mentioned in the show cause notice that one
Mrs.Heena Kauser @ Heena Iqbal Memon @ Heena Kausar Kasif is
the wife of A.P.1. Therefore, she also falls within the ambit of said
provisions of NDPS Act. After referring to the other Affected Parties,
the notice recites that the order under section 68-F(1) of the NDPS
Act freezing the properties of the Affected parties was issued by the
Deputy Commissioner of Police, Narcotics Cell C.B. C.I.D. Mumbai by
an order dated 23rd March 1995 and the same was confirmed on 19th
April 1995. Copy of the said order of freezing has been annexed as
Annexure A to the petition.
8. The show cause notice then refers to the various accounts
with State Bank of India, Santacruz (West) Branch, Union Bank of
India, Juhu Tara Road, Mumbai branch and directs that the law
prohibits holding of illegally acquired properties by the persons
covered by section 68A of the NDPS Act. The competent authority,
therefore, stated that several opportunities were given to AP-1 to
AP--3 to furnish proof regarding source of acquisition of properties
mentioned in para-6 of the show cause notice. Since, no explanation
or any written statement has been received that the competent
authority alleged that he has reason to believe, particularly, in view
of AP-1's notorious international image of being a drug trafficker that
the properties mentioned in paras-6 and 7 of the show cause notice
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have been acquired out of the illegal source of earnings of AP-1, 2
and 3. They have no known source of income and the other two
A.Ps. namely A.P.2 and A.P.3 appeared to be associates of A.P.1 in the
investment of properties. Therefore, the show cause notice calling
upon the A.Ps. to show cause as to why the properties mentioned
therein should not be forfeited to the Central Government under
section 68(1) of the NDPS Act free from encumbrance, was issued.
9. The petitioner submits that these allegations are false
and baseless and what has been then narrated is that the said Iqbal
Mirchi was not indulging in any nefarious or criminal activities but
was gainfully and lawfully employed in the Imperial Suits Hotel,
Dubai, United Arab Emirates (UAE) for short Imperial Hotel, UAE
since 1992. On or about 11 th July 1992 an employment contract
came to be made between the said Imperial Hotel UAE and the said
A.P.1, through Government of UAE. Since the official language of
UAE is Arabic and all official work is conducted in the said language,
a translated copy of the original contract of employment has been
annexed to the petition as Annexure "B".
10. Thereafter, what the petitioner alleges is that the said
AP-1 had also been gainfully and lawfully employed with Imperial
Express General Trading (LLc) since 1992 and has withdrawn salary
in the sum of UAE Dhs.20,000/- and which is evidenced vide
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Annexure "D".
11. From his lawful earnings, on or about 20 th March 1993,
AP-1 transferred a sum equivalent to 2 lakh U.A.E. Dirhams to the
account of petitioner, viz., AP-.2, through, proper banking channels.
Out of this money, the petitioner purchased the land which has been
sought to be illegally and unlawfully forfeited by the respondents.
12. This property was purchased in the year 1993 for a sum
of Rs.66 lakhs. The funds for the same were received from the salary
of Iqbal Memon @ Iqbal Mirchi a non resident abroad. As per the
certificate of the Chartered Accountant at Dubai, duly certified by
Consular High Commission of India dated 7th May 2006, the amounts
debited are out of the salary of the said Iqbal Mirchi who was non
resident at that time. The source of sum of Rs.62,69,281 is,
therefore, fully explained and certifying that the A.P.1 is Director of
Family Board of Imperial Group of Companies, Dubai that the said
funds were transferred from his account to the petitioner's account
on 20th March 1993.
13. On or about 30th December 2003, by a sale deed of that
date, the petitioner sold a part of the said piece or parcel of
agricultural land admeasuring 0.62 hectares falling under S.No.71
Hissa 4-B and S.No.53, Hissa 1-B to one Jai Hiremath and Sugandha
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Jai Hiremath for a total consideration of Rs.54,26,190/-.
14. The consideration was paid for this part or parcel of land
by demand draft dated 22nd December 2003 issued by the Deutche
Bank, AG. The sale deed was registered with the office of Sub-
Registrar of Assurances, Shriwardhan on 30th December 2003.
15. The contention of the petitioner is that the sum of this
demand draft was deposited by the petitioner in the bank account
held with Bank of India, Tardeo Branch, Mumbai on 31st December
2003. However, on 2nd January 2004, the petitioners received from
its banker a cheque return memo dated 2 nd January 2004, namely,
issued by the Deutche Bank, indicating that the said draft was
returned on account of "payment having been stopped by the
purchaser against the court order receipt", although, there was no
court order, according to the petitioner. Thereafter, enquiries were
made and what has been stated by the petitioner is that one Senior
Inspector of Police, Crime Detection Branch, Mumbai addressed a
letter to the bankers of the purchasers which was received by the
said Deutche Bank and that is how the payment was stopped. It is
thus clear that not only the payment was stopped by the purchasers
but their account was credited with the cheque amount.
16. It is in these circumstances, that the correspondence
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started with the said Senior Inspector and which revealed that a
freezing order dated 13th January 2004 was issued. That was
confirmed by respondent No.2 to this petition namely the competent
authority by an order dated 22nd January 2004. The writ petition
was filed by the petitioners in this court being Criminal Writ Petition
No.30 of 2004, being aggrieved by this freezing order and that
petition was disposed of by an order dated 20 th January 2006, a copy
of which is at Annexure H to the petition paper book. A reading of
the petition reveals that though at one place it is stated that the
amount was credited in the account of the purchasers Hiremath but
what essentially this pleading indicates is that the purchasers having
instructed their own bankers to stop payment no amount was
transferred from the account of the said purchasers with their
bankers and that is how, on account of the development noted above,
the consideration was not parted with at all. The sale deed also
came to be cancelled.
17. Therefore, the petitioners have alleged that merely a
detention order under NDPS Act being issued ipso facto will not
empower the competent authority to issue show cause notice. In
reply to the show cause notice, the petitioners raised all these
contentions. However, an order was passed on this show cause
notice by the competent authority forfeiting the property. That
order is dated 16th June 2006.
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18. An appeal was filed before the appellate tribunal being
the Appellate Tribunal for forfeited property at New Delhi. It is the
case of the petitioner that during the pendency of the appeal, several
documents came to their notice and were thus, produced as
additional documents. That is how the tribunal accepted the
application for filing of additional documents and remanded the
matter back to the competent authority. In the meanwhile, the
petitioners filed a suit against the said Jai Hiremath and Sugandha
Hiremath on Original Side of this Court being Suit No.3131 of 2008
for declaring the sale deed as duly cancelled and for other reliefs.
The suit is still pending. On re-hearing, the competent authority
once again confirmed the show cause notice and directed forfeiture
of the properties. That order was passed on 19 th May 2009 and a
copy of the same is Annexure "K" to this petition.
19. Being aggrieved and dis-satisfied with this order, the
petitioners filed an appeal being FPA No.ND-9/Bom/09 before the
Appellate Tribunal, Forfeited Property, New Delhi. The petitioners
state that number of documents were filed so also written
submissions. Mr.Iqbal Memon and the purchases Jai and Sugandha
Hiremath filed their appeals before the Tribunal. By a common order
dated 31st March 2011, the said Appellate Tribunal rejected the
appeal of the petitioners.
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20. In the light of the rejection of the said appeal, the
competent authority issued an order dated 21st April 2011 to hand
over the property to it within 30 days from the receipt of the said
letter.
21. Being aggrieved and dis-satisfied with the order of
appellate authority dated 31st March 2011 and the consequential
notice that this petition has been filed. The second Writ petition
being Writ Petition No.121 of 2012 has been filed against that part of
the order of the appellate authority, whereunder, the appellate
authority has allowed the appeal No.FPA-ND-20/Bom/2006 filed by
the respondent Nos. 3 and 4 in Writ Petition No.121 of 2012 namely
the Hiremaths.
22. Mr.Dhakephalkar, learned Senior Counsel appearing for
the petitioners in both the petitions submitted that the impugned
order is wholly illegal, arbitrary and vitiated by non application of
mind. He took us through the reasons which have been assigned by
both the competent authority and the tribunal and submitted that
the essential and basic foundation is lacking. There is no nexus
between the illegally acquired property and the income from drug
trafficking. The money or proceeds should be received from such
acts. Mr.Dhakephalkar submits that the impugned orders are also
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vitiated for breach of principles of natural justice. An order was
passed specifically by the appellate authority and a copy of which is
at pages 96 and 97 of the paper-book in Writ Petition No.121 of
2012. That order dated 16th September 2009 allowed the Misc.
Application for additional evidence. The tribunal held that sufficient
cause is made out for placing the additional evidence on record, the
documents were neither in possession when the order was passed,
nor they could be obtained despite diligent search. In these
circumstances, sufficient cause is made out for placing these
documents on record and that is why an order of remand was made
by the appellate authority. After remand, the competent authority
was obliged to consider these documents. Mr.Dhakephalkar submits
that the AP-2 which is a company, purchased the property initially.
The notice has been issued to this AP-2. The evidence was produced
by this AP-2. If the evidence was produced by this Affected Party,
then, the competent authority was obliged to consider the impact
and effect of all the documents produced including the additional
documents. No opportunity was given to substantiate the arguments
based on these documents and they are completely shut out. If they
are shut out by the competent authority, then, the order of remand
has not been given due regard and weightage. The order thus has
not been complied with and the final order of the competent
authority should have been interfered with by the appellate
authority. Mr.Dhakephalkar then submits that the order passed
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suffers from non application of mind because at more places than
one, the conclusions arrived at are untenable in law. The tribunal
and the appellate authority have both failed to take into account the
fact that the company has purchased the property. Unless and until
there is a nexus or link established between the proceeds from the
crime received allegedly by the said Iqbal Memon and the company,
the tribunal as also the competent authority could not have arrived
at a conclusion that the transaction is tainted or vitiated because the
money involved therein being received from criminal activities. This
finding should not have been rendered without adverting to the two
enactments namely the Narcotic Drugs and Psychotropic Substances
Act, 1985 and N.D.P.S. Forfeiture Act and Smugglers And Foreign
Exchange Manipulators (Forfeiture of Property) Act, 1976
(SAFEMA).
23. The conclusions arrived at and particularly by the
appellate authority are vitiated in law. The direction while allowing
the appeal of the Hiremaths partly is beyond the jurisdiction and
power of the competent authority and the tribunal. Mr.
Dhakephalkar has taken us through section 68-B(g), Section 68-B(a)
and section 68-F(g) and Section 68-H so also section 68-I of the
NDPS Act and submitted that if the law postulates vesting of
property in the Central Government and prior thereto it is freezed,
then, the competent authority has no power to sell or authorise a
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sale in favour of the Hiremaths inasmuch as the property is forfeited
and vests in the Central Government. In these circumstances, both
conclusions of the authority namely that there is a link between
illegal activity of the detenue and the holder of the property so also
the property deserved to be handed over to Hiremaths are patently
illegal and untenable. There is no cogent and satisfactory material
for holding that there is any nexus. Once there is no nexus, insofar
as the proceeds of the crime and the dealings or transactions in
immovable property, then, the presumption that the properties are
acquired from the proceeds of criminal activities cannot be
recorded. For all these reasons, Mr.Dhakephalkar submits that the
orders under challenge be set aside and the petitions be allowed.
24. Mr.Dhakephalkar places heavy reliance on the judgment
of the Supreme Court in the case of Aslam Mohammad Merchant
v. Competent Authority and others reported in (2008) 14 SCC 186
in support of his submissions.
25. The contesting respondents in other petition so also
learned APP contended that there is nothing irregular or illegal about
the impugned orders and they should be sustained. They submitted
that the petition is not an appeal and this court cannot go into the
disputed questions of fact. The conclusions arrived at are consistent
with the documents and materials placed on record. The petitions
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therefore, be dismissed. Additionally, Mr.Jagtiani, learned Counsel
appearing for the purchasers, submits that section 68-A(2)(d)(f)
defines the term "Holder". A transferee in good faith for adequate
consideration, is therefore, protected and once he is covered by the
enactment or the definition, then, subsequent provisions of Chapter
V-A and, particularly, section 68-I would contemplate adjudication of
all matters and issues. A conjoint reading of these provisions in the
NDPS Act shows that a bonafide purchaser for value without notice
stands outside Chapter V-A of the NDPS Act, 1985. This concept is
expressly excluded and, therefore, the Appellate Tribunal rightly held
that the transaction with Hiremaths was lawful. All findings of the
Tribunal are within its jurisdiction so also within the ambit and scope
of its powers. The tribunal has not transgressed its limits nor
travelled beyond its powers, authority and jurisdiction in law in
issuing the direction which is impugned in Writ Petition N9o.121 of
2012.
26. Mr.Jagtiani further submits that the pendency of civil suit
is no bar for the tribunal to record the above findings. For all these
reasons and when there is a conveyance deed on record, the tribunal
rightly held that the title is transferred absolutely. Even the show
cause notice refers to the same. For all these reasons, the petition
deserves to be dismissed.
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27. Mr.Dhakephalkar in rejoinder had submitted that in the
event, this Court is of the opinion that there is no merit in the
contentions of the petitioners, then, it may consider the alternate
prayer of the petitioners for remand of the proceedings and in that
event, the petitioners can produce the relevant and necessary
material to show whether any relief can be granted as claimed by
Mr.Jagtiani. It can also consider whether the transaction can be
saved. In fact, this course was also suggested and strictly without
prejudice to the above noted contentions by Mr.Jagtiani.
28.
With the assistance of the learned Counsel appearing for
parties, we have perused both the petitions and their annexures,
including the impugned orders carefully. We have also perused the
affidavits placed on record. We have also perused the relevant legal
provisions and the decisions brought to our notice.
29. The definition of the term "illegally acquired property" is
found in section 68-B(g) and it reads as under:
"68-B. Definitions.-- In this Chapter, unless the
context otherwise requires,--
(a) to (f) ..... ..... ..... ..... ..... .....
(g) "illegally acquired property", in relation to
any person to whom this Chapter applies, means,-
(i) any property acquired by such person,
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whether before or after the commencement of this
Chapter, wholly or partly out of or by means of any
income, earnings or assets derived or obtained from or
attributable to the contravention of any provisions of
this Act; or
(ii) any property acquired by such person,
whether before or after the commencement of this
Chapter, for a consideration, or by any means wholly
or partly traceable to any property referred to in sub-
clause (i) or the income or earnings from such
property,
and includes--
(A) any property held by such person
which would have been, in relation to any previous
holder thereof, illegally acquired property under this
clause if such previous holder had not ceased to hold
it, unless such person or any other person who held
the property at any time after such previous holder or,
where there are two or more such previous holders,
the last of such previous holders is or was a transferee
in good faith for adequate consideration;
(B) any property acquired by such person,
whether before or after the commencement of this
Chapter, for a consideration, or by any means, wholly
or partly traceable to any property falling under item
(A), or the income or earnings therefrom;"
30. The term "property" is defined in section 68-B(h) and
section 68-B(i) defines the term "relative".
31. Then, coming to the important section, viz. Section 68-C,
it reads as under:
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"68C. Prohibition of holding illegally acquired
property.-- (1) As from the commencement of this
Chapter, it shall not be lawful for any person to whom
this Chapter 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 Chapter:
Provided that no property shall be forfeited
under this Chapter if such property was acquired, by a
person to whom this Act applies, before a period of six
years from the date he was arrested or against whom a
warrant or authorisation of arrest has been issued for
the commission of an offence punishable under this
Act or from the date the order or detention was issued,
as the case may be.
32. Section 68-H and 68-I read as under:
68-H. Notice of forfeiture of property.-- (1) If,
having regard to the value of the properties held by
any person to whom this Chapter applies, either by
himself or through any other person on his behalf, his
known sources of income, earnings or assets, and any
other information or material available to it as a result
of a report from any officer making an investigation
under section 68-E or otherwise, the competent
authority has reason to believe (the reasons for such
belief to be recorded in writing) that all or any of such
properties are illegally acquired properties, it may
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serve a notice upon such person (hereinafter referred
to as the person affected) calling upon him within a
period of thirty days specified in the notice 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 Chapter.
(2) Where a notice under sub-section (1) to any
person specifies any property as being held on behalf
of such person by any other person, a copy of the
notice shall be served upon such other person:
Provided that no notice for forfeiture shall be
served upon any person referred to in clause (cc) of
sub-section 68-A or relative of a person referred to in
that clause or associate of a person referred to in that
clause or holder of any property which was at any
time previously held by a person referred to in that
clause.
68-I. Forfeiture of property in certain cases.-- (1)
The competent authority may, after considering the
explanation, to the show cause notice issued, under
section 68H 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:
Provided that if the person affected (and in a
case where the person affected holds any property
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specified in the notice through any other person such
other person also) does not appear before the
competent authority or represent his case before it
within a period of thirty days specified in the show-
cause notice, the competent authority may proceed to
record finding under this sub-section ex parte on the
basis of evidence available before it.
(2) Where the competent authority is satisfied
that some of the properties referred to in show cause
notice are illegally acquired properties but is not able
to identify specifically such properties, then, it shall be
lawful for the competent authority to specify the
properties which, to the best of its judgment, are
illegally acquired properties and record a finding
accordingly under sub-section (1).
(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 Chapter, stand forfeited to the Central
Government free from all encumbrances.
Provided that no illegally acquired property of
any person who is referred to in clause (cc) of sub-
section (2) of Section 68-A or relative of a person
referred to in that clause or associate of a person
referred to in that clause or holder of any property
which was at any time previously held by a person
referred to in that clause shall stand forfeited.
(4) Where any shares in a company stand
forfeited to the Central Government under this
Chapter, then, the company shall, notwithstanding
anything contained in the Companies Act, 1956 or the
skn 21/39 1435.11-wp--
articles of association of the company, forthwith
register the Central Government as the transferee of
such shares.
33. Section 68-J states that in any proceeding in this Chapter,
the burden of proving that any property specified in the notice served
under section 68-H is not illegally acquired property shall be on the
person affected. Section 68-O provides for appeal against the order
passed under section 68-E or section 68-I or sub-section (1) of
section 68-K or section 68-L To our mind, therefore, there is a
complete scheme when a property derived from or used in illicit
traffic is to be forfeited. That property which is derived from or
used in illicit traffic is required to be forfeited because the funds from
which it is derived are not legitimate. That cannot be said to be a
legal or legitimate source of income enabling the party to purchase
or deal in property. That a property which is derived from the
proceeds of crime must be forfeited to the Government and this is
the mandate of this provision.
34. Mr.Dhakephalkar, therefore, does not dispute that
Chapter V-A of the NDPS Act applies to a case where the property is
derived from or used in illicit traffic. He does not dispute that a
show-cause-notice was issued in terms of the legal provisions and
thereafter a competent authority passed the order. We do not see
how the order passed in this case could be termed as vitiated by any
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error of law apparent on the face of record.
35. Mr.Dhakephalkar placed heavy reliance upon the
judgment of the Hon'ble Supreme Court in case of Aslam
Mohammad Merchant v. Competent Authority and others
(supra). It is important to bear in mind that this judgment was
rendered by the Supreme Court in the case of very person, viz, Iqbal
Mirchi. The provisions of Chapter- VA were construed in the
backdrop of the preventive detention of Iqbal Mohammad Memon @
Iqbal Mirchi. The appellants before the Supreme Court being the
relatives of said Iqbal Mirchi were issued with notice directing them
to show cause as to why the properties mentioned in the show cause
notice should not be forfeited being illegally acquired properties.
The relatives showed cause and filed reply to the show-cause-notice
denying the allegations. Thereafter they were heard and the
competent authority passed an order forfeiting some of the
properties belonging to the appellants therein. The appeal was also
dismissed by the Appellate Tribunal. A writ petition was also
dismissed by this Court.
36. Thereafter, the rival contentions have been noted by the
Hon'ble Supreme Court and after the Act was analyzed by it
completely, the Supreme Court referred to the nature of the
proceedings in paras- 19 and 20 of its judgment and thereafter the
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Supreme Court framed the core issues in para-25. The Supreme
Court made the observations, relied upon by Mr.Dhakephalkar, in
paras-31 to 35 and which read as under:
"31. Once the notice to show cause is found to be
satisfying the statutory requirements which are
condition precedent therefor, a valid proceeding can
be said to have been initiated for forfeiture of the
property. Only in a case where a valid proceeding has
been initiated, the burden of proof that any property
specified in the notice is not illegally acquired
property, would be on the "person" affected.
32. Before, however, an order of forfeiture can be
passed, the Competent Authority must not only comply
with the principles of natural justice, he is also
required to apply his mind on the materials brought
before him. It is also necessary that a finding that all or
any of the properties in question were illegally
acquired properties is recorded.
33. The competent authority has a vast power as is
provided under Section 68-R of the Act. He is not
bound by any finding of any officer or authority under
any other law as the same would not be conclusive for
the purpose of any proceeding under the said chapter.
34. Analysis of the aforementioned provisions clearly
establish that a link must be found between the
property sought to be forfeited and the income or
assets or properties which were illegally acquired by
the person concerned.
skn 24/39 1435.11-wp--
35. We may, however, at this juncture also notice
that during the course of the proceedings, the learned
advocate of the appellants by a letter dated 19.2.2000
requested the competent authority to supply the
reasons for issuing the notice. In response thereto, the
prescribed authority by a letter dated 23.2.2000,
stated that the reasons had been incorporated in the
respective show cause notices. Evidently, therefore, no
other reason was available for being supplied."
37. The Supreme Court thereafter in paras- 40 to 44 referred
to the judgments cited. The observations made in para-47, which
Mr.Dhakephalkar would rely, must be read in the backdrop of the
factual position. Before us, there is no dispute that the link or nexus
is traced between the holders of the properties proceeded against
and illegal activities of detenue. One cannot find fault with the
show-cause-notice.
38. We are not in agreement with Mr.Dhakephalkar that
because the proceedings were remitted back to the competent
authority that the competent authority could have recorded any
different finding. The competent authority has, after the remand,
referred to all the materials and concluded that firstly the private
limited company cannot be allowed to present evidence on behalf of
Iqbal Mirchi to show that the amount was legally earned by him in
U.A.E. The petitioners seem to be hurt by the finding of the
competent authority in its order that it is not a proxy proceeding.
skn 25/39 1435.11-wp--
39. However, that attempt was made to show that the
earnings of AP-1 were legal is apparent. The documents that were
produced even after remand would go to show that these documents
were only zerox copies. One of them was a zerox copy of the English
translation of employment contract. The documents produced on
remand have been considered and not brushed aside.
Mr.Dhakephalkar would complain that they have been referred to
only for the sake of discussion but not duly considered. We are not
impressed by this submission because the words or phrases of this
nature are not conclusive. Ultimately, one must find whether there
is application of mind and due consideration of the materials
produced. In such adjudication, the materials produced in defence
and to discharge the burden on the petitioner, have not only been
noted but properly considered. The findings of fact based on such
materials are not vitiated inasmuch as the materials do not indicate
any genuine contract of employment from which the AP-1 could have
earned a legal income. They were nothing but contracts with some
associates and acquaintances. They could not be termed as genuine
and there is a observation that the books of accounts were not
produced to show that the income from legal source was deposited
in genuine accounts. Therefore, the findings recorded by the
competent authority in para-11 of the impugned order and equally in
para-12 cannot be said to be perverse. It is not correct to urge that
skn 26/39 1435.11-wp--
there is no consideration of the materials produced and, particularly,
on remand. That adequate and proper opportunity was not given to
defend is, therefore, incorrect and erroneous reading of the
impugned order. Even if the proceedings were to be decided de
novo on remand, we feel that they have been decided as such. No
document or material which was produced by the petitioner was
discarded and, therefore, the criticism by the petitioner that the
evidence on their part was shut out is not substantiated by the
record. The record indicates otherwise.
40.
Once we do not find any substance in the arguments of
Mr. Dhakephalkar, then this is not a fit case for interference with the
concurrent findings of fact recorded against the petitioner. The
property has been rightly forfeited.
41. However, we are in agreement with Mr.Dhakephalkar
that the Appellate Tribunal could not have exceeded its authority in
passing the further order and direction. In that regard what the
Appellate Tribunal has done must be noticed. The Appellate
Tribunal while dealing with the appeals from both parties before
passing its final order, in para-10, was highly impressed with the
argument of Hiremaths that they have purchased the property and,
more particularly, described hereinabove located at Shrivardhan.
They claimed to have paid consideration for the same. They relied
skn 27/39 1435.11-wp--
on the sale-deed executed in their favour. They also claimed that a
demand draft was handed over to AP-2, viz. petitioner- private
limited company on 30th December 2003 before freezing order was
issued. Hiremath's claim that they were totally unaware of the
freezing order and the property cannot be forfeited as they are the
transferees in good faith for adequate consideration covered by the
last clause in section 68-A(2)(f). The contentions had been noted
and what the appellate authority holds and concludes is that the
property may have been transferred by AP-1 after a temporary order
of freezing under section 68-F(1) and, therefore, the transfer may be
illegal and the transferee cannot claim right or locus standi.
However, the transfer of the property was before the freezing order.
The argument is that before the second freezing order dated 2 nd
January 2004, the transaction was concluded and the registration
was over on 30th December 2003.
42. This finding of the Appellate Tribunal is in the teeth of
the contrary contention and stand of the respondent and difficult to
sustain. The competent authority held that even though the demand
draft was handed over on 30th December 2003 and the conveyance
deed was registered, but the consideration did not pass in favour of
the vendor. The sale was not complete on 30th December 2013.
skn 28/39 1435.11-wp--
43. The competent authority thus rendered a finding
consistent with the mandate flowing from Chapter V-A. This was not
a case where the Appellate Tribunal was required to go into the issue
as to whether the transaction was complete on the execution of the
deed and its registration. Such a finding would completely render
the provisions of Chapter V-A otiose, redundant and nugatory. Once
the sums or funds by which the property was purchased by AP-2 was
not known or legal source of income but was tainted, then, it is such
property which is liable to be forfeited and confiscated. That
property may have been dealt with by the very person who claims to
own it. However, the ownership is based on a dubious claim and
that the property was derived by means not from a legal or known
source of income but otherwise. Therefore his claim of ownership
itself is doubtful and suspicious. He cannot be held to be a person
with absolute title to the property or complete ownership. In this
case, AP-2 was dealing in a property which was frozen. That
freezing order was passed on 2nd January 2004. He does not claim
that the deal with Hiremaths was complete on registration. Rather
Mr.Dhakephalkar argued before us that the competent authority has
no power to sell or authorize a sale in favour of the Hiremaths. The
property could not have been claimed by Hiremaths and there is a
suit on title pending in the Court. The competent authority has
recorded a finding of fact that AP-1 had no known source of income
other than the proceeds of crime. The present petitioner did not
skn 29/39 1435.11-wp--
prove the legality of its transaction with AP-1. It had produced no
evidence to indicate that AP-1 itself had purchased the property from
some legal income. AP-1 failed to rebut the charges and allegations
in the show-cause-notice. The petitioner was not permitted to lead
evidence with regard to the sources of income of AP-1 and rightly so.
In such circumstances, the finding that Hiremaths were transferees of
the properties in good faith for adequate consideration could not
have been rendered by the Appellate Tribunal. The Appellate
Tribunal travelled much beyond its power in this case to render a
finding that the transaction was complete.
44. The Appellate Tribunal relied upon the demand draft but
it overlooked that the Investigation Officer addressed a letter dated
1st January 2004 for stopping the payment. The Deutsche Bank
complied with the request and did not make payment against the
demand draft dated 2nd January 2004 and communicated the reasons
for not making the payment to Bank of India, Tardeo Road Branch.
The Bank of India had presented this demand draft to the Deutsche
Bank. The amount of money represented by the demand draft was
not credited to the account of the petitioner- appellants. It is in these
circumstances, and when the Appellate Tribunal was aware that the
consideration had not passed, it could not have issued the directions
which are issued by it in para-12 of the impugned order.
skn 30/39 1435.11-wp--
45. The findings in this behalf read as under:
"12. ..... ..... From the submission of the
appellant, it is also clear that the amount of money
represented by the demand draft, i.e., Rs.54,26,190/-
was also credited to the account of the appellants.
The appellants had also requested by petition dated
23.12.2010 that order may be issued to deposit this
amount with the Competent Authority but as no such
order was issued to the appellants, the money has
remained with the appellant. In these circumstances,
the amount of Rs.54,26,190/- is charge on the
property and, therefore, the appellants should obtain
fresh demand draft of Rs.54,26,190/- prepred in
favour of the competent Authority and deposit the
same with the Competent Authority within one month
from the date of receipt of this order. If this direction
is not complied with, the Competent Authority is
entitled to realize the above amount from the
appellants by selling the property in question or
otherwise. In other words, the Competent Authority
is entitled to forfeit the amount of Rs.54,26,190/- as it
is payable to AP2 for selling the part of illegally
acquired property to a bona fide purchaser. As the
amount of Rs.54,26,190/- remained with the appellant
from 2004 to this date, they are also liable to pay
simple interest calculated at the rate of 6% per
annum from 01.01.2004, the date of stop payment
letter to the date when fresh demand draft is prepared
by the appellant as per the direction above. Another
demand draft representing the interest component is
to be got prepared favouring the Competent Authority
and deposit the same along with the demand draft of
Rs.54,26,190/- with the Competent Authority. Hence,
appeal EPA-ND-20/BOM/2006 is partly allowed
subject to the above conditions."
skn 31/39 1435.11-wp--
46. The above referred findings would go to show that the
Appellate Tribunal has foisted a deal or transaction on the petitioner-
private limited company which it was not willing to accept and
honour. There is a serious dispute as to whether any rights are
created in favour of Hiremaths by virtue of the alleged sale-deed and
handing over of the demand draft. That is a subject matter of a
pending suit between two private parties. The competent authority
as also the Appellate Tribunal were obliged to go by mandate of
Chapter V-A and not pass any order beyond the same. In the given
facts and circumstances, when the petitioner- private limited
company before us is not ready and willing to go ahead with the
transaction and has made its stand clear, then, the above reproduced
directions cannot be sustained.
47. Even if we cannot accept the argument of Shri Jagtiani
that a conjoint reading of the provisions, viz. Chapter V-A is
necessary still in this case, it is not proved that the Hiremaths are
bonafide purchasers for value without notice. For the reasons that
we have assigned above Hiremaths cannot claim that they stand
outside Chapter V-A. The transaction with them cannot be given
any legitimacy nor can be termed as legal. The conveyance could
not have been perfected nor any rights created in favour of
Hiremaths by sale-deed. The Appellate Tribunal was therefore in
skn 32/39 1435.11-wp--
complete error in relying upon the versions of the Hiremaths alone
and holding that the transaction with them needs to be saved.
48. Mr.Jagtiani's argument would mean that the term
forfeiture will get a restricted meaning. Section 68-F provides for
seizure or freezing of illegally acquired property. Crime does not pay
and the benefits or fruits from a crime cannot be enjoyed is the
intent in making such stringent provisions.
49. We have deliberately referred to the scheme of the Act
and reproduced sections 68-H and 68-I to impress upon the parties
that legislative mandate is that there is forfeiture to the Central
Government free of encumbrances. The Act envisages that forfeiture
should be absolute and the Central Government is not bound by any
encumbrances on the property. Thus, no question arises in the given
facts and circumstances to save the transaction between the
Hiremaths and original AP-2. That AP-2 failed to demonstrate that
the property was acquired by AP-1 from known or legal source of
funds is clear. That AP-1 did not contest the proceedings, namely,
the show-cause-notice and the findings of the competent authority
bind him is undisputed. Once AP-1 derives property by using
proceeds from the crime, viz. dealing in narcotic drugs then, his
property is liable to be forfeited. Those dealing with this property
cannot be heard to say that AP-1 may not contest the proceedings but
skn 33/39 1435.11-wp--
they are innocent and, therefore, they need to be protected or their
rights should not be affected. AP-2, the petitioner before us could
not substantiate that the property was acquired by known sources of
income. Therefore, it dealt with the property not independently but
to assist AP-1 in his misdeeds. That AP-2 is the associate of AP-1 is
also by now clear. In such circumstances, when Hiremaths deal with
AP-2, that the transaction of this nature cannot be saved. The
Central Government should not be burdened with such transaction
or else the words "stand forfeited free from encumbrances"
appearing in subsection (3) of section 68-I would be meaningless.
The word "forfeiture" has to be given its plain and ordinary meaning.
Equally, these further words indicate that there should not be any
fetter on the Central government when it forfeits the property. The
word encumbrance or incumbrance means a claim, lien or liability
attached to the property. It is a burden which the Central
Government ought not carry with it. The term "forfeiture" means
something surrendered as penalty. Forfeiting means loosing right to
be or deprived of or pay as penalty. In R.S.Joshi v. Ajit Mills Ltd.,
AIR 1977 SC 2279, the Hon'ble Supreme Court has interpreted the
word "forfeiture" thus:
"17. ..... ..... In the present case, the narrow issue
is as to whether the forfeiture clause in Section 37(1)
is bad because of the besetting sin of colourability. If it
is a punitive measure to protect public interest in the
enforcement of the fiscal legislation, it falls squarely
skn 34/39 1435.11-wp--
within the area of implied powers. Therefore, the finer
point stressed by Shri Kaji is that the expression
forfeiture is a ritualistic recital to cover up a secret
design to snatch from the traders sums which cannot
be reached at except by the device of forfeiture. In
frank fact, it is not a measure of penalty but an oblique
methodology to do an illegitimate thing which is
beyond the legislature's legitimate reach. We have
therefore, to examine this short point in the light of
the decisions of this Court.
18. Coming to 'forfeiture', what is the true character
of a 'forfeiture'? Is it punitive in infliction, or merely
another form of exaction of money by one from
another. If it is penal, it falls within implied powers. If
it is an act of mere transference of money from the
dealer to the State, then it falls outside the legislative
entry. Such is the essence of the decisions which we
will presently consider. There was a contention that
the expression 'forfeiture' did not denote a penalty.
This, perhaps, may have to be decided in the specific
setting of a statute. But, speaking generally, and
having in mind the object of Section 37 read with S.
46, we are inclined to the view that forfeiture has a
punitive impact. Black's Legal Dictionary states that 'to
forfeit' is to lose, or lose the right to, by some error
fault, offence or crime, 'to incur a penalty'. 'Forfeiture',
as judicially annotated, is 'a punishment annexed by
law to some illegal act or negligence ......', 'something
imposed as a punishment for an offence or
delinquency. The word, in this sense, is frequently
associated with the word 'penalty'. According to Black's
Legal Dictionary.
"The terms 'fine', 'forfeiture', and 'penalty', are
often used loosely, and even confusedly; but when a
discrimination is made, the word 'penalty' is found to
skn 35/39 1435.11-wp--
be generic in its character, including both fine and
forfeiture. A 'fine' is a pecuniary penalty, and is
commonly (perhaps always) to be collected by suit in
some form. A 'forfeiture' is a penalty by which one
loses his rights and interest in his property."
More explicitly, the U.S. Supreme Court has explained
the concept of 'forfeiture' in the context of statutory
construction. Chief Justice Taney, in the State of
Maryland vs. The Baltimore & Ohio RR Co. (1846) 11
L ed 714 at p.722 observed :
"And a provision, as in this case, that the party
shall forfeit a particular sum, in case he does not
perform an act required by law, has always, in the
construction of statutes, been regarded not as a
contract with the delinquent party, but as the
punishment for an offence. Undoubtedly, in the case of
individuals, the word forfeit is construed to be the
language of contract, because contract is the only
mode in which one person can become liable to pay a
penalty to another for breach of duty, or the failure to
perform an obligation. In legislative proceedings,
however, the construction is otherwise, and a
forfeiture is always to be regarded as a punishment
inflicted for a violation of some duty enjoined upon
the party by law; and such, very clearly is the meaning
of the word in the act in question."
19. The same connotation has been imparted by our
Court too. A Bench has held (Bankura Municipality v.
Lalji Raja &Sons, AIR 1953 SC 248, 250) :
"According to the dictionary meaning of the
word 'forfeiture' the loss or the deprivation of goods
has got to be in consequence of a crime, offence or
breach of engagement or has to be by way of penalty
of the transgression or a punishment for an offence.
Unless the loss or deprivation of the goods is by way of
skn 36/39 1435.11-wp--
a penalty or punishment for a crime, offence or breach
of engagement it would not come within the definition
of forfeiture."
This word 'forfeiture' must bear the same meaning of a
penalty for breach of a prohibitory direction. The fact
that there is arithmetical identity, assuming it to be so,
between the figures of the illegal collections made by
the dealers and the amounts forfeited to the State
cannot create a conceptual confusion that what is
provided is not punishment but a transference of
funds. If this view be correct, and we hold so, the
legislature, by inflicting the forfeiture, does not go
outside the crease when it hits out against the dealer
and deprives him, by the penalty of the law, of the
amount illegally gathered from the customers. The
Criminal Procedure Code, Customs & Excise Laws and
several other penal statutes in India have used diction
which accepts forfeiture as a kind of penalty. When
discussing the rulings of this Court we will explore
whether this true nature of 'forfeiture' is contradicted
by anything we can find in S. 37(1), 46 or 63. Even
here we may reject the notion that a penalty or a
punishment cannot be cast in the form of an absolute
or no-fault liability but must be preceded by mens rea.
The classical view that 'no mens rea, no crime' has
long ago been eroded and several laws in India and
abroad, especially regarding economic crimes and
departmental penalties, have created severe
punishments even where the offences have been
defined to exclude mens rea. Therefore, the
contentions that Section 37(1) fastens a heavy liability
regardless of fault has no force in depriving the
forfeiture of the character of penalty."
skn 37/39 1435.11-wp--
50. To our mind, therefore, the forfeiture means vesting of
the property, in this case, in the Central government free of
encumbrances. If that vests absolutely and without any burden or
encumbrances, then, it is not possible to sustain the order of the
Appellate Tribunal to the above extent and by accepting the
contention of Mr.Jagtiani. All sections and sub-sections of Chapter
V-A have to be read together and harmoniously. So read, they
empower and enable the authorities to forfeit the property in the
Central Government so as to vest it in it absolutely. That is how the
legislative mandate would be fulfilled or else those who are
beneficiaries of crime or misdeeds would escape the clutches of law.
They would be able to enjoy the property which is acquired by
dubious means or not by sources which can be said to be known or
legal. It is in that light that the legislature incorporates a rather
drastic provision and which requires an interpretation so as to fulfill
the object and purpose sought to be achieved.
51. As a result of the above discussion, the finding of the
Appellate Tribunal in the appeals of Hiremaths cannot be sustained.
It is quashed and set aside. Writ Petition No.1435/2011 is dismissed
and rule is discharged. No order as to costs.
skn 38/39 1435.11-wp--
52. As a result of above discussion, Writ Petition
No.121/2012 is allowed partially. Rule is thus made partially
absolute but without any order as to costs.
53. After the judgment was pronounced, both the learned
Counsel appearing for petitioner as also Mr.Jagtiani appearing for
respondent Nos. 3 and 4 in W.P.121 of 2012 pray that there is an ad-
interim order passed on 18th October 2011 and which is passed in
W.P.1435 of 2011. The learned Advocate for petitioner in both the
petitions claims that the said order is passed on the footing that
physical possession of the immovable property is with the private
limited company namely Imperial Exim India Pvt. Ltd. Mr.Jagtiani
relied upon the conveyance deed and the recitals therein to urge that
the Hiremaths have been put in physical possession of a part of the
property.
54. After having held that the property is forfeited by the
Central Government and which forfeiture partakes the character of
the land vesting in the Government without any fetter or burden,
then, the statutory operation cannot be stayed consequent upon
passing of the above order by us.
55. However, as far as the physical possession of the
land/property is concerned, let the respondent No.2 or the
skn 39/39 1435.11-wp--
competent authority who has issued the show cause notice not take
physical possession of the land in pursuance of the orders passed by
the appellate tribunal and for a period of eight weeks from today, if
not already taken. However, we clarify that order does not mean
that either petitioners or the Hiremaths are in physical possession.
(G.S.PATEL, J.) (S.C.DHARMADHIKARI, J.)
