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2012 (10) TMI 506 - SC - FEMASAFEMA - notice in respect of illegal flat to assessee and his wife holding 50 per cent share in the subject property - whether appellants who purchased the subject flat during pendency of forfeiture proceedings are entitled to an opportunity to prove that they are transferees in good faith for adequate consideration ? - Held that:- Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) came into effect from 05.11.1975 provides for forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators. Where the competent authority is satisfied that some of the properties referred to in the show-cause notice are illegally acquired it shall declare that such property shall, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances. Section 8 provides that burden of proving that property specified in the notice served under Section 6 is not illegally acquired property shall be on the person affected. Admittedly, SAFEMA was applicable to both vendors here. One of the vendors, a detenu, who was covered by Section 2(2)(b), was issued notice way back on 8.12.2003 under Section 6(1) of SAFEMA. The other vendor, wife of the detenu, was also issued notice under Section 6(1) in 2004 once it transpired that she held 50% share in the said flat. Both vendors were served with notices under Section 6(1) before transaction of sale in favour of the appellants. After the issuance of notices under Section 6(1) of SAFEMA to the vendors, the transaction of sale in favour of the appellants has to be ignored by virtue of Section 11 and on passing of the order of forfeiture under Section 7, the sale in favour of the appellants had become null and void. The order of forfeiture dated 23.06.2005 under Section 7 of SAFEMA relates back to the issuance of first notice under Section 6(1) to one of the vendors. In respect of a transfer after issuance of notice under Section 6, the property referred to therein, the holder cannot set up plea that he is a transferee in good faith or a bona fide purchaser for adequate consideration. Such plea is not available to a transferee who has purchased the property during pendency of forfeiture proceedings - the protection given to a bona fide sale under Section 2(2)(e) would not extend to a sale made subsequent to the issuance of notice under Section 6 and in violation of Section 11 of SAFEMA. The title in the subject flat is deemed to have vested in the Central Government on or about 08.12.2003 when the first notice under Section 6(1) was issued and served on one of the vendors. The vendors ceased to have any title in the subject flat on the date of transfer i.e. 10.02.2005. They had no transferable right. The appellants cannot claim any right in the flat.
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