Col. Sawai Bhawani Singh & Ors vs Union Of India & Ors
2010 Latest Caselaw 2239 Del

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*       IN THE HIGH COURT OF DELHI AT NEW DELHI


                                          Reserved on: March 8, 2010
                                      Date of judgment: April 28, 2010


+       W.P. (C) 2363/1981 & CM APPL 4202-03/91, 12656/06, 1706/10


        COL. SAWAI BHAWANI SINGH & ORS            ..... Petitioners
                         Through: Mr. Manoj Kumar Rathi, proxy
                         counsel for Mr. Kedar Nath Tripathy,
                         Advocate for P-1 & 2.
                         Mr. Shyam Moorjani, Advocate for P-3 &
                         P-4
                         Mr. D.D. Singh, Advocate for applicant in
                         CM APPL No. 12656/06.

                         versus


        UNION OF INDIA & ORS                 ..... Respondents
                           Through: Mr. S.K. Dubey with Mr. Javed
                           Akhtar and Mr. Vanshdeep Dalmia,
                           Advocates


        CORAM: JUSTICE S. MURALIDHAR

          1. Whether Reporters of local papers may be

              al lowed to see the judgment?                   Yes

          2. To be referred to the Reporter or not?            Yes

          3. Whether the judgment should be reported in

              Digest?                                         Yes

                                  JUDGMENT

28.04.2010

1. The Petitioners state that they are members of the Hindu Undivided

Family („HUF‟) of late Maharaja Sawai Man Singhji (hereafter late

„Maharaja‟). By this petition they have challenged the validity of an order

dated 31st March 1981 passed by the Department of Revenue, Ministry of

Finance, Government of India under the provisions of the Gold (Control)

Act, 1968 („GCA‟) disposing of their revision application. The impugned

order holds the confiscation of 11.512 kg of gold coins and ornaments

forming part of Lakshmi gold buried in the foundation of Moti Doongri

Palace and of 644 gold coins to be unsustainable in law. The penalty of Rs. 5

lakhs imposed on Petitioner No. 1 Col. Sawai Bhawani Singh, as the karta of

the HUF, was remitted. However, the seizure and confiscation of the

remaining gold was sustained and the fine in lieu of confiscation of such

gold was reduced from Rs. 1.5 crores to Rs. 80 lakhs. To that extent the

Petitioners were still aggrieved and therefore filed this petition.

Background Facts

2. Between 11th February 1975 and 13th June 1975, the officers of the

Income-tax Department acting under the authorization of the Director of

Inspection (Investigation), conducted searches under Section 132 of the

Income Tax Act, 1961 („IT Act‟) at various premises at Jaipur belonging to

and/or occupied by the members of the erstwhile ruling family of Jaipur,

including the petitioners. The authorized officers came across considerable

quantities of gold in the form of coins, bars, sovereigns, pieces as well as in

the form of articles/ornaments including studded and unstudded jewellery.

On coming to know of this find, the Gold Control Officers of Jaipur also

associated themselves with the search operations. They had search warrants

under Section 58 (2) of the GCA. Gold coins, sovereigns, gold bars/mohars,

studded and unstudded gold ornaments, gold biscuits with foreign markings,

primary gold, two broken pieces of articles of gold and gold

coins/mohars/sovereigns issued by different rulers of the erstwhile Indian

States were also seized from the ground pit and cupboards of the Moti

Doongri Palace (Takht-i-Shahi) and from beneath and corner of the Moti

Doongri Strong Room, Raj Bagh Palace and Rajmahal Palace. The total

quantity of gold seized was 867 kgs 961.200 gms Apart from this, 1728

silver coins weighing 19 kgs 878 gms were also seized.

The Collector's order

3. Two separate show cause notices were issued to the Petitioners under the

GCA. The first dated 22nd August 1975 was in respect of gold weighing

867.961.200 kgs and silver weighing 19.878.000 kgs. The second show

cause notice dated 3rd September 1975 was in respect of gold weighing

27.145.500 kgs and silver weighing 1.172.75 kgs. After replies were filed to

the show cause notices, the Collector of Central Excise and Customs passed

an order dated 7th February 1977 holding that the Petitioners had

contravened Sections 8 and 16 GCA and had therefore rendered themselves

liable to penal action under Section 74 GCA. A penalty of Rs. 5 lakhs was

imposed on the Petitioner No.1 Col. Sawai Bhawani Singh in his capacity as

the karta of the HUF (incidentally Col. Sawai Bhawani Singh is also arrayed

as Petitioner No. 2 herein in his individual capacity). The Collector decided

not to take any penal action against Smt. Gayatri Devi and Shri Jai Singh,

Petitioner Nos. 3 and 4 respectively, since both of them in their replies stated

that Petitioner No.1 was the karta of the HUF and as such he represented all

of them. The Collector also ordered the confiscation of the primary gold,

gold articles and gold ornaments weighing 895.106.700 kg seized from the

different palaces belonging to the parties and mentioned in the two show

cause notices under Section 71 (1) GCA. It was directed that the seized gold

would however be released and handed over to the owners on payment of a

fine of Rs. 1.50 crores in lieu of confiscation, as provided for under Section

73 GCA. The option to redeem the same had to be exercised within three

months from the date of receipt of the order. After redemption, the primary

gold, except gold mohars and other gold articles of ancient origin and

historical interest, were permitted to be sold to a licensed dealer or got

converted into ornaments. A certificate has to be furnished by the owners

within one month of taking back the gold into their possession. As regards

the gold mohars and other gold articles of ancient origin and historical

interest, they were not to be melted but registered with the competent

authorities under the Antiquities & Treasures Act, 1972.

The Administrator's order in appeal

4. Aggrieved by the above order, the Petitioner filed a Gold Control Appeal

which was disposed of by an order dated 31 st March 1980 passed by the

Gold Control Administrator („Administrator‟) under the Department of

Revenue, Ministry of Finance, Government of India. It was held by the

Administrator in the aforementioned order dated 31st March 1980 that the

source of the seized gold had been fully explained and was covered by the

gold mentioned in the Covenant of 1949 entered into by the erstwhile

Maharaja of Jaipur with the Government of India at the time of the merger

of Jaipur State with the United States of Rajasthan. It was held that the late

Maharaja who died on 24th June 1970 did receive the Jaipur coins as

„Nazrana‟. It was further held that "the source of no gold remained

unexplained" and "no gram of gold seized had absolutely any link with

smuggling." The Administrator agreed with the appellants that "there was no

need to confiscate the Lakshmi gold consisting of 11.512.400 kgms. It is

customary to place such gold beyond the reach of human beings in the

foundation of palaces. Thirdly, the four pieces of gold in Item E (1)

weighing 4.285.000 kgs are part of the photo frame and hence articles

covered by the declaration made. Further 10.856.000 kgs coins are of

numismatic value and there is no offence in possessing them." The

Administrator held that the Petitioner No.1 Col. Sawai Bhawani Singh had

no knowledge of the existence of the huge quantity of gold buried in the pit

in the strong room. However, as the karta of the HUF, he did not seem to

have taken steps to assert his authority or to discharge his responsibility.

Impliedly negativing the Appellants‟ contention that the Government was

fully aware of the existence of such gold and was expected to keep a track of

the possession of huge quantities of such gold from its own records, it was

held that "this is no excuse for the clear cut omission which is there on the

part of the karta of the HUF consisting of erstwhile ruling family of Jaipur."

Accordingly, the confiscation order was held to be justified. Nevertheless,

the fine was reduced from Rs. 1.50 crores to Rs. 1 crore. The personal

penalty of Rs. 5 lakhs on Col. Sawai Bhawani Singh, Petitioner No.1 as the

karta of the HUF was sustained.

Order of the Central Government in Revision

5. Aggrieved by the above order of the Administrator, the Petitioners filed a

revision application before the Central Government. By the impugned order

dated 31st March 1981 the Special Secretary to the Government of India,

Department of Revenue, Ministry of Finance disposed of the said revision in

the following terms:

(a) The view of the Administrator that there was no smuggling of gold

and that since the origin of the gold had been explained, the case did

not deserve to be viewed seriously, was concurred with.

(b) Merely because the late Maharaja as the karta of the HUF had

failed to declare the gold in question, it would be against the canons of

natural justice and equity if the other members of the HUF were

deprived of their legitimate share.

(c) At the highest, the entire share of the late Maharaja could be

confiscated.

(d) There was no justification for the confiscation of Lakshmi gold

which was buried at the time of construction of the palace and which

consisted of 16 gold coins, studded and unstudded gold ornaments

weighing in all 11.512 kgs.

(e) However, four pieces of gold in item E (1) which were part of the

photo frame could not be held to be covered by the declaration made

since they were not to be found in the list attached to the declaration.

The list included only hookas and gold plated articles.

(f) There was no justification for confiscation of 644 gold coins

weighing 4.281 kgs mentioned as item B (3) of the Administrator‟s

order since they were declared.

(g) After deducting the value of Lakshmi gold as well as the value of

644 gold coins, both of which were not liable for confiscation, the

value of the remaining gold worked out to about Rs. 483 lakhs. One-

sixth share of this would be slightly more than Rs. 80 lakhs. This

would be the share of the late Maharaja.

(h) Thus, while setting aside the confiscation of 11.512 kgs of gold

coins and ornaments as well as 644 gold coins weighing 4.281 kgs,

the fine in lieu of confiscation for the remaining gold was reduced

from Rs. 1.5 crores to Rs. 80 lakhs.

(i) It would be wrong to hold Petitioner No.1 as the karta of the HUF

guilty of the offence of not declaring the gold in question. He had

risked his life in the service of the nation and had been awarded the

Mahavir Chakra for his gallantry during the 1971 Indo-Pakistan

Operations. Petitioner No.1 could not be held responsible for any

contravention. The penalty of Rs. 5 lakhs imposed on him was

remitted.

Fine and penalty paid

6. It requires to be noticed that soon after the Collector passed an order dated

7th November 1977 Petitioner No. 1 Col. Sawai Bhawani Singh exercised the

option and paid the fine of Rs. 1.5 crores in lieu of confiscation. He also paid

the personal penalty of Rs. 5 lakhs and took delivery of the seized gold. He

also informed the Collector on 27th March 1978 of his compliance with the

Collector‟s directions about the disposal of the gold so released to him on

payment of fine in lieu of compensation. In the written submissions

subsequently filed by the Petitioners it has been pointed out that even the

gold which was so redeemed was sold as per the orders of the Collector and

all the proceeds realized went towards payment of taxes and repayment of

loans obtained from the bank for paying the redemption fine. Later, after the

amount of redemption fine was reduced from Rs. 1.50 crore to Rs. 80 lakhs

by the central government and the penalty amount of Rs. 5 lakhs was

remitted, those amounts were also attached by the authorities. It is stated that

even though later the confiscation was quashed in respect of the share of

gold of the Petitioners it could not give any actual benefit to them.

Therefore, the present petition was confined to the challenge to the

imposition of a fine of Rs. 80 lakhs in lieu of confiscation which has already

been paid to the Central Government.

7. During the pendency of this case, Petitioner No. 3 Rajmata Gayatri Devi

expired and her legal representatives have been brought on record.

8. At one stage it is urged before this Court that Suit No. 870 of 1986 was

pending in this Court in which the question was whether the HUF of the late

Maharaja was in existence. It was submitted that till such time the said suit

was decided, the present petition should be deferred. It was further pointed

out that Income Tax Reference No. 438 of 1983 has also been adjourned

sine die on the same ground.

9. Although the present petition was also being adjourned from time to time

for the same reason, this Court felt that the question arising for consideration

in the present petition could be decided independent of the outcome of the

suit. If the Petitioners succeeded, the said amount would become refundable

to the estate of the late Maharaja and if not, the writ petition would in any

event be dismissed. If any amount was recoverable after accounting for any

other undisputed statutory or determined legal liability the question of the

respective shares of the individual Petitioners could thereafter be decided in

accordance with the decision in Suit No. 870 of 1986.

Submissions of counsel

10. This Court has heard the submissions of Mr. Shyam Moorjani, Advocate

for Petitioner Nos. 3 and 4, Mr. Manoj Kumar Rathi, learned counsel for the

Petitioner Nos. 1 and 2 and Mr. S.K. Dubey, learned counsel for the

Respondents.

11. Among the questions raised by Mr. Moorjani, the principal one is,

whether the provisions of Sections 71, 78 and 79 GCA envisage an action

against a dead person and consequently, whether the gold falling to the share

of a dead person can be ordered to be confiscated. It is submitted that the

language in Sections 71, 78 and 79 indicated that action has to be taken only

in presenti against a living person and not against a dead person. No action

can be taken without giving a show cause notice to the owner and without

giving an opportunity of being heard. This requirement can never be fulfilled

in respect of a dead person. Reliance is placed on the decisions in

Commissioner of Income-tax Bombay v. Ellis C. Reid AIR 1931 Bombay

333, The Commissioner of Income-tax, Bombay v. James Anderson AIR

1964 SC 1761 and Commissioner of Income-tax, Bombay City -1, Bombay

v. Amarchand N. Shroff AIR 1963 SC 1448.

12. It is pointed out that the late Maharaja died on 24th June 1970 and during

his lifetime, no action was initiated under the GCA. The show cause notices

against the Petitioners were issued only on 22nd August 1975 and 3rd

September 1975 respectively. There was no legal basis to proceed against

the legal heirs of a dead person for any liability arising under the GCA for an

omission on the part of such dead person. Further, the legal heirs had

satisfactorily explained their position which had been accepted by the

authorities under the GCA as well as the Central Government. It had been

held that they could not be answerable for the omission of the late Maharaja

to make a declaration of the gold held by him. In the circumstances, there

was no justification in determining the „notional‟ share of the late Maharaja

and ordering confiscation and levying a fine in lieu of confiscation on that

basis. It is also submitted that in any event, the redemption fine to the extent

of the whole value of the 1/6th share of the late Maharaja was arbitrary and

wholly unjustified.

13. It is submitted that at the time of confiscation, between 11th February and

13th June 1975, the entire property of the late Maharaja had devolved on his

legal heirs, i.e. the Petitioners. Therefore, the property no longer remained

that of the late Maharaja. As far as the legal heirs were concerned, they had

explained their position to the complete satisfaction of the authorities.

Therefore, there was no question of confiscation of any gold said to belong

to the late Maharaja in terms of the GCA. It is pointed out that the late

Maharaja had duly declared the entire gold at the time the Covenant was

drawn up. The declared gold was listed out in the Schedule to the Covenant

of 4th April 1949 between the Maharaja and the Government of India.

Further, on 8th February 1963 the Maharaja made a declaration under the

Defence of India Rules. It is submitted that declarations so made could be

taken to be sufficient for the purposes of the GCA and the failure to make a

separate declaration under the GCA should be viewed as an irregularity at

the highest. Moreover, no sooner did the Petitioner No.1 realize that there

was gold in the possession of the legal heirs, he made a declaration under the

Voluntary Disclosure Scheme (VDS) under the Income-tax Act and the

Collector of Customs and the Gold Control Officer before the searches took

place. Therefore, the existence of the gold was in the knowledge of the

Central Government even prior to the searches. In the circumstances, there

was no justification for imposing a penalty of Rs. 80 lakhs in lieu of

confiscation.

14. Mr. S.K. Dubey, learned counsel appearing for the Respondents on the

other hand submitted that the liability to make a declaration of the gold

possessed by a person did not cease upon his death. It continued even

thereafter. The liability was in rem and not in personam. Reliance is placed

upon the decisions in Union of India v. Mustafa & Najibai Trading Co.

(1998) 6 SCC 79 and State of West Bengal v. Sujit Kumar Rana (2004) 4

SCC 129. He argued for a purposive construction of the relevant provisions

of the GCA which made the non-declaration of gold punishable in law and

the holder of the gold liable to penalty. He submitted that the petitioners had

already been given every possible relief under the orders in appeal and later

in revision. The value of the gold seized was much higher than the

redemption fine. The order in revision was a fair and reasonable one which

did not call for interference.

Can proceedings under the GCA be maintained against a dead person?

15. The conspectus of the orders passed by the authorities under the GCA,

the Administrator in appeal and the Central Government in revision show

that the area of dispute has narrowed down considerably. The impugned

order dated 31st March 1981 reveals that the Central Government had

accepted most of the contentions advanced on behalf of the Petitioners. In

effect, none of the individual legal heirs was found liable under the GCA for

any failure to make a declaration of the gold held by all of them collectively

through the karta of the HUF i.e. Petitioner No.1.

16. Significantly, the Administrator was satisfied that "the source of the gold

seized is fully explained and they are fully covered by the gold mentioned in

the covenant." The reference was to the Covenant entered into on 4th April

1949 between the Maharaja and the Government of India, a copy of which is

part of the record. Appended to the Covenant in Item 4 (b) of List 2 is a

detailing of all the movable properties of the Maharaja. Under the heading

„List of Gold Mohars, Sovereigns and Gold Bullion‟ is included 1,30,625

Jaipur Gold Mohars, 487 sovereigns, 1,031-1/2 gold coins, gold weighing

25,797 tolas and one gold piece in a mohar size. In the circumstances the

Administrator concluded that "no gram of gold seized has absolutely any

link with smuggling." If the main object of the GCA was to prevent and

punish smuggling of gold then clearly the above finding by itself should

have been sufficient for the entire proceedings to be held illegal and treated

as closed.

17. The Central Government agreed with the above finding and held that the

confiscation of the Lakshmi gold weighing 11.512.400 kgs as well as

10.858.000 kgs gold was not justified. The Central Government also agreed

that the confiscation of 644 gold coins was not justified. However, while the

Administrator in his order dated 31st March 1980 held that four pieces of

gold in Item No. E (1) weighing 4.285.000 kgs were part of the photo frame

and hence articles covered by the declaration, the Central Government

differed and held that they were not so included and therefore not declared.

It is not understood how in a revision application filed by the Petitioners,

such a finding could be rendered by the Central Government.

18. Be that as it may, no provision of the GCA has been cited either by the

Administrator or the Central Government to justify the determination of the

„nominal‟ one-sixth share of the total value of the gold as that of the late

Maharaja‟s and valuing it at "slightly more than Rs. 80 lakhs" and further

ordering that a fine to that extent should be imposed in lieu of confiscation

of the seized gold. In other words, no legal justification has been shown

either by the Administrator or the Central Government for the continuation

of the proceedings against the late Maharaja under the GCA and making him

liable thereunder five years after his death.

19. Nevertheless, in view of the submissions advanced at the bar, this Court

proposes to undertake an analysis of the provisions of the GCA to determine

if the submission on behalf of the Respondents is legally tenable. Section 8

(1) GCA states that no person shall (i) own or have in his possession,

custody or control or (ii) acquire or agree to acquire the ownership,

possession, custody or control of; or (iii) buy, accept or otherwise receive or

agree to buy or otherwise receive; any primary gold. Section 8 (2) contains a

similar provision concerning ornaments which required to be included in a

declaration and have not been so included. Section 8 (3) deals with articles

of gold. Under Section 16 of the GCA mandates that every person who

owns, or is in possession, custody or control of any article or ornament at the

commencement of the GCA shall make within thirty days from such

commencement or from such acquisition, as the case may be a declaration in

the prescribed form as to the "quantity, description and other prescribed

particulars of any article, or ornament, or both, owned, possessed, held or

controlled by him". The two provisos to Section 16 envisage situations

where such a declaration need not be made by such person.

20. The tenor of the above provisions of the GCA indicate clearly that the

liability under the GCA is of a person who is alive and not one who is dead.

The above position gets further strengthened by Section 16 (2) (e) which

states that "for the removal of doubts, it is hereby declared that the

declaration referred to in this section shall be made, in relation to any article,

or ornament, or both vested in an executor or an administrator of a will or

other testamentary disposition, by such executor or administrator".

Therefore there is no question of a dead person being made liable for making

a declaration under the GCA. It is not the case of the Respondents that there

is any Will or testamentary disposition of the late Maharaja by virtue of

which an executor or administrator was required to file any declaration. In

any event, that is not the case made out in the show cause notices.

21. The GCA does not contain any provision which indicates what should

happen if a person who was supposed to make a declaration during his life

time fails to do so and later, after his death, the said default is discovered.

The GCA also does not contain any provision whereby the liability for the

failure by the deceased person to make a declaration during his lifetime gets

transferred to his legal heirs. Under Section 16 (3) it is possible to fasten

liability on a person on whom the gold devolves for not making a

declaration. There is, under Section 99 GCA, a presumption of ownership of

the person in whose possession the gold is found. Still, there is no provision

which states that the liability of a person under the GCA survives his death.

The inescapable conclusion is that proceedings under the GCA which have

not been initiated against a person during his lifetime cannot be initiated and

continued against his estate after his life time.

22. There are other aspects which buttress the above conclusion. Section 71

of the GCA provides for confiscation of any gold in respect of which there is

a contravention of any provision of the GCA. Section 74 provides for

imposition of penalty for the same event. These provisions are located in

Chapter XIII under the heading "Confiscation and Penalties." They are of a

quasi-criminal nature and admit of strict construction particularly since they

entail severe consequences for the person in contravention. For instance,

while passing an order imposing a penalty under Section 74 for a

contravention of Section 16 GCA, the adjudicating authority can under

Section 16 (12) direct the person so penalized to make the declaration within

a particular time. The failure to do so entails a punishment with

imprisonment of a period up to two years in terms of Section 86 GCA.

Therefore, the failure to make a declaration has penal and punitive

consequences. This is the background against which the provisions in

Chapter XIV GCA which spell out the mandatory procedure that has to be

followed before any confiscation can take place or any penalty imposed have

to be viewed. Section 78 provides for a statutory adjudication by the Gold

Control Officer and Section 79 talks of "giving an opportunity to the owner

of the gold etc." Section 79 of the GCA reads as under:

"79. Giving of an opportunity to the owner of gold etc.

- No order of adjudication of confiscation or penalty shall be made unless the owner of the gold, conveyance, or animal or other person concerned is given a notice in writing -

(i) informing him of the grounds on which it is proposed to confiscate such gold, conveyance or animal or to impose a penalty; and

(ii) giving him a reasonable opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the confiscation or imposition of penalty mentioned therein and, if he so desires of being heard in the matter:

Provided that the notice and the representation referred to in this section may, at the request of the owner or other person concerned, be oral:

Provided further that where no such notice is given within a period of six months from the date of the seizure of the gold, conveyance or animal or such further period as the Collector of Central Excise or of Customs may

allow, such gold, conveyance or animal shall be returned after the expiry of that period to the person from whose possession it was seized.

Explanation - Where any fresh adjudication is ordered under this Act, the period of six months specified in the second proviso shall be computed from the date on which such order for fresh adjudication is made."

23. Although in the show cause notices in the instant case the case was that

the failure to make declaration was that of the petitioners, in the adjudication

that followed that was held to be not proved even by the authorities

themselves. The only liability found and sought to be enforced was that of

the late Maharaja who was dead five years prior to the show cause notice.

There is no provision in the GCA that permits this. Sections 71, 73 and 79 of

the GCA do not permit instituting proceedings under the GCA against a

person five years after his death much less seizing gold notionally

determined to belong to him. Also, no such determination could be arrived at

without following the mandatory procedure under Sections 78 and 79 vis-a-

vis such person. There is a plain impossibility of complying with Section 79

GCA vis-à-vis a dead person.

24. In Commissioner of Income-tax v. Ellis C. Reid the Division Bench of

the Bombay High Court while interpreting the Section 2 (2) of the Income-

tax Act 1922 and the definition of „assessee‟ under Section 2 (2) thereof,

held that it refers only to a living person and not a dead person. It was held

that in construing a taxing statute the Court is not justified in straining the

language in order to hold a subject liable to tax. It was emphasised that fiscal

statutes must be interpreted strictly in favour of the subject. The treasury

could not tax without the express permission of the legislature.

25. Likewise, in Commissioner of Income-tax, Bombay City I, Bombay v.

Amarchand N. Shroff the Supreme Court held that Section 24-B of the

Income-tax Act 1922 does not authorise levy of tax on receipts by the legal

representatives of a deceased person in the years of assessment succeeding

the year of account being the previous year in which such person died. It was

explained that Section 24 B was enacted to bring to tax after the death of a

deceased, income received during his life time. To fill up the lacuna which

was pointed out by the Bombay High Court in Commissioner of Income-tax

v. Ellis C. Reid Section 24 B had been inserted. However, it did not extend

the tax liability of the Estate of the deceased person "beyond the previous or

the account year in which that person dies."

26. Thereafter, in The Commissioner of Income-tax, Bombay v. James

Anderson AIR 1964 SC 1761 it was held that for the purpose of Section 24

B of the Income-tax Act, the legal personality of the deceased person came

to an end at the end of the account year "in which such person died and that

no tax could be levied on the dividends deemed to have been received by

him or his legal representative after the end of that year."

27. The above legal position as regards a fiscal statute should a fortiori

apply to the confiscation and penalty provisions of the GCA which are

quasi-criminal in nature. Section 85 GCA talks of punishment for illegal

possession etc. of gold. As already noticed, Section 71 talks of confiscation

of gold and Section 74 talks of liability to penalty. Therefore, unless there is

an express provision in the GCA permitting the levy and collection of

penalties and fines in lieu of confiscation from a person even after his death,

the impugned order cannot be sustained in law.

28. The decisions cited by learned counsel for the Respondent in support of

his contention that the liability under the GCA is a civil liability which is in

rem and not in personam require to be discussed next. In Union of India v.

Mustafa & Najibai Trading Co. the Supreme Court was interpreting the

provisions of the Customs Act 1962. In para 33 of the judgment a reference

was made to the earlier decision in Collector of Customs v. D. Bhoormall

(1974) 2 SCC 544 where while discussing Section 167 (8) of the Sea

Customs Act 1878, it was held that "proceedings for confiscation of

contraband goods are proceedings in rem and the penalty of confiscation is

enforced against the goods irrespective of whether the offender is known or

unknown and it is not necessary for the Customs authorities to prove that

any particular person is concerned with their illicit importation or

exportation and it is enough if the Department furnishes prima facie proof of

the goods being smuggled stocks." It was further explained that "the second

kind of penalty which is enforced against the person concerned in the

smuggling of the goods is one in personam and in the case of the said

penalty, the Department have to prove further that the person proceeded

against was concerned in the smuggling." Further, as regards the first kind of

penalty it was against the goods and it was enough that the Department

furnished "prima facie proof of the goods being smuggled stocks."

Thereafter, in para 34 it was observed as under:

"34. This distinction between the nature of the two penalties, viz., penalty in rem and penalty in personam, has been maintained in the Act. The provision regarding confiscation of goods contained in Sections 111 and 113 of the Act is a penalty in rem which is enforced against the goods, while the personal penalties imposed under Section 112 and other provisions of the Act are in the nature of penalty in personam which was enforced against the person concerned."

29. This Court is of the view that the provisions of the Customs Act

concerning confiscation and penalties do not bear comparison with the

corresponding provisions of the GCA. This is because of the language of the

relevant provisions. Section 71 read with Section 79 GCA requires the

confiscation orders to be passed only after "the owner of the gold,

conveyance, or animal or other person concerned is given a notice in

writing". While it is true that the confiscation under Section 71 of GCA is of

gold, that order confiscating the gold cannot be passed without the owner of

the gold being given under Section 79 an opportunity of being heard. The

distinction is that under the Customs Act once the goods are shown to be

smuggled for the purposes of Section 111, the goods can be straightway

confiscated. Under the GCA there is no such automatic confiscation without

complying with Section 79 GCA. In any event, in the instant case there is a

clear finding that the gold seized has not been smuggled since its source was

fully explained. This Court is therefore unable to hold that a parallel can be

drawn with the provisions of the Customs Act for interpreting the order of

confiscation under Section 71 GCA.

30. Reliance was placed by learned counsel for the Respondents on the

decision in State of West Bengal v. Sujit Kumar Rana to submit that the

proceedings under the GCA are not quasi-criminal. The above case

concerned confiscation proceedings under Section 59 G of the Forest Act

1927 as amended by the West Bengal Act 22 of 1988. In the context of those

provisions it was observed in para 43 as under:

"43. A confiscation envisages a civil liability whereas an order of forfeiture of the forest produce must be preceded by a judgment of conviction. Although indisputably having regard to the phraseology used in sub-section (2) of Section 59-A, there cannot be any doubt whatsoever that commission of a forest offence is one of the requisite ingredients for passing an order of confiscation, but the question as to whether the order of acquittal has been passed on that ground and what weight should be attached thereto is a matter which, in our opinion, should not be gone into at this stage."

31. The above decision cannot help the Respondents since phraseology of

Sections 16 and 71 GCA does not permit the extension of the liability of a

person after his death. Even if confiscation under the GCA were to be

considered to be a civil liability, it has to mandatorily be preceded by an

adjudication under Section 78 GCA which simply cannot happen in the case

of a dead person. Importantly, neither the decision in Sujit Kumar Rana nor

the decision in Mustafa & Najibai Trading Co. deal with the case of the

liability of a dead person either under the Customs Act or under the Forest

Act 1927.

32. To summarise this part of the discussion it is reiterated that proceedings

under the GCA which have not been initiated against a person during his

lifetime cannot be initiated and continued against his estate after his life

time. Absent a specific provision in the GCA that can make a dead person

liable it is not possible to sustain the impugned order dated 31 st March 1981

passed by the Central Government.

No legal justification for the fine in lieu of confiscation

33. The other issue which remains to be addressed concerns the basis on

which the central government has imposed a fine of Rs. 80 lakhs in lieu of

confiscation of the gold. This figure has been arrived at by estimating that it

represents the one-sixth „notional‟ share of the late Maharaja of the value of

the gold. However, there is no explanation why the redemption fine should

also be fixed at Rs. 80 lakhs.

34. In the first place, it must be observed that this question does not arise for

determination in view of this Court having held that the late Maharaja

cannot after his death be made liable under the GCA particularly since no

proceedings thereunder were instituted against him during his lifetime.

Secondly, there was no provision in the GCA permitting the imposition of

any penalty on a dead person for failure to comply with a provision of the

GCA. If one were to proceed on the assumption that the liability was of the

legal heirs in terms of Section 16 (3) GCA, then again as far as the present

case is concerned no such liability survives. The order of the Collector in the

present case holds that the contravention was of Sections 8 and 16 GCA but

does not hold Petitioner Nos. 3 and 4 liable to penal action under Section 74

GCA.

35. It must be recalled here that the central government has proceeded on the

footing that upon the death of the late Maharaja, the entire property devolved

on his legal heirs comprising Petitioner Nos. 2, 3 and 4. It has proceeded on

the footing that Col. Sawai Bhawani Singh as the karta of the HUF was

liable to make the declaration under the GCA as he was answerable for the

entire estate of the late Maharaja. Under Section 16 (2) (g) where the gold is

owned, possessed, held or controlled by a HUF, the declaration has to be

made by the head or karta of such family. In the instant case, the

Government has after a detailed adjudication concluded that neither the HUF

nor the individual members can be held liable. Even the penalty of Rs. 5

lakhs levied on Petitioner No.1 has been remitted.

36. In fact, the central government accepted several of the Petitioners‟

contentions in coming to the above conclusion. First, it agreed that Petitioner

No. 1 took voluntary retirement and relinquished charge of the Para

Commando Regiment only on 23rd November 1974 whereas the search took

place on 11th February 1975, only three months thereafter. This was too

short a period for him to know all the details of the vast properties and other

duties and responsibilities that he had as a karta. The central government

accepted the contention that "it would be wrong to hold Col. Bhawani Singh

guilty of the offence of not declaring the gold as the karta of the family."

The central government accepted that Col. Bhawani Singh had by serving in

the army "risked his life in spite of his parentage and position in life in the

service of the nation and so devoted was he to the cause of the country that

he was commanding the Para Commando." The central government also

agreed that "a person of such high devotion to the country‟s cause would not

go and break the laws of the country knowingly."

37. Once it was clear that none of the Petitioners was liable under the GCA

the only logical step was to drop the entire proceedings against them. Yet,

inexplicably the central government persisted with enforcing the presumed

liability of the late Maharaja which it could not under the provisions of the

GCA. And in doing so it grievously erred. There was no justification for

either ordering the confiscation of any gold nor imposing any fine in lieu of

such confiscation. The impugned orders are declared illegal on this ground

as well.

38. Unfortunately for the Petitioners, it has taken thirty-five years for the

proceedings against them under the GCA to be brought to a close. What

compounds the misery is that, as pointed out in the written submissions of

the Petitioners, the gold seized which was released on payment by Petitioner

No. 1 of Rs. 1.5 crores (the amount of fine in lieu of confiscation as

originally determined) and the penalty of Rs. 5 lakhs, has been sold and

those proceeds have been used to pay the taxes and the loans borrowed to

pay the fine. So, the seized gold which was redeemed does not exist. The

moneys realized have been spent. It is stated that even the penalty and the

fine to the extent it stood reduced from Rs. 1.5 crores to Rs. 80 lakhs was

attached to meet other legal liabilities. It is unclear in relation to the sum of

Rs. 80 lakhs which is now liable to be returned to the estate of the late

Maharaja how much will be left after adjusting any other legal liability or

dues that may be outstanding. Meanwhile, thanks to the long drawn

litigation spanning over three decades, a whole generation has passed by.

There are other disputes between the legal heirs as regards their rightful

shares in the estate of the late Maharaja. Hopefully, with this the curtain will

be drawn on the forgettable episode of the searches that took place between

11th February and 13th June 1975 and the proceedings that followed which

have resulted in the members of the erstwhile royal family of Jaipur being

involved in avoidable litigation with the central government.

Conclusion and Directions

39. For all the aforesaid reasons, the impugned order dated 31st March 1981

of the central government to the extent that it sustains the order of the

Administrator dated 31st March 1980 ordering confiscation and imposing a

fine of Rs. 80 lakhs in lieu of confiscation of the seized gold is hereby set

aside. Consequently the amount of Rs. 80 lakhs will now be refunded to the

estate of the late Maharaja together with simple interest @ 6% per annum

from the date on which the fine in lieu of confiscation was paid by Petitioner

No.1 while getting the seized gold released till the date of its refund to the

estate by the central government. The said amount shall be deposited in this

Court by the central government, together with costs of this petition which

are quantified at Rs.50,000/- within a period of eight weeks. Any delay in

making the deposit will attract penal simple interest at 12% per annum for

the period of delay. The disbursement of the money so deposited to the

Petitioners and any other legal heirs entitled to succeed to the estate of the

late Maharaja will be subject to the final orders that may be passed in Suit

No. 870 of 1986 and/or Income Tax Reference No. 438 of 1983 and any

other consequential appellate or other proceedings. The question of the said

amount being used towards discharge of any legal liability of the estate of

the late Maharaja will also be decided in those proceedings.

40. The writ petition is allowed in the above terms. The applications are

disposed of.

S. MURALIDHAR, J.

APRIL 28, 2010 rk