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TMI Blog2014 (2) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in London at that point of time, was indulging in activities which are prejudicial to the conservation of foreign exchange. The appellant unsuccessfully challenged the detention order. He was eventually released in 1977. 5. While he was in custody, the second respondent issued a notice dated 4th March 1977 under section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forefeiture of Property) Act, 1976 (hereinafter referred to as "the Act") calling upon the appellant to explain the sources of his income out of which he had acquired the assets described in the schedule to the notice. Some correspondence ensued between the second respondent on one hand and the wife of the appellant and the appellant on the other hand, the details of which may not be necessary for the time being. 6. Eventually on 27th November 1989, the second respondent passed an order under section 7(1) of the Act forfeiting the properties mentioned in the schedule to the said order. 7. Aggrieved by the said order, an appeal was carried to the Appellate Tribunal constituted under section 12 of the Act. The appeal was partly allowed setting aside the forfeiture of two items of the properties. 8. Not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court failed to consider the question whether the decision of the competent authority as confirmed by the appellate authority is sustainable and therefore, the matter is required to be remitted to the High Court for an appropriate consideration of the legality of order of forfeiture. 13. Regarding the non communication of the reasons, the judgment under appeal recorded as follows: "The matter may be looked into from another angle. In 1976 he was under detention. His wife replied to the said notice without complaining of non-supply of reasoning. After his release the respondent No.1 gave a further rejoinder by adopting what had been said by his wife. The authority did not proceed against him until he was served with the reasoning in 1988. The respondent No.1 was also afforded opportunity to deal with the reasonings in his rejoinder. The competent authority after affording him opportunity of hearing passed a detailed reasoned order. He preferred an appeal. The appeal was allowed in part that too by a detailed reasoned order. Hence, we do not find any reason to hold that the fundamental right of the respondent No.1 was infringed." It appears from the record that initially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the case is required to record the reasons which led him to initiate the proceedings. It appears from the judgment that though first of the abovementioned two requirements was complied with, it was found that no reasons were recorded much less communicated. Dealing with the legality of such an order, this Court held that there is a requirement of not only recording the reasons for the decision to transfer the case but also such reasons are required to be communicated to the assessee. 16. Though section 127 expressly provided for recording of reasons it did not expressly provide communicating the same to the assessee. Still, this Court held that such a communication is mandatory. "10. The reason for recording of reasons in the order and making these reasons known to the assessee is to enable an opportunity to the assessee to approach the High Court under its writ jurisdiction under Article 226 of the Constitution or even this Court under Article 136 of the Constitution in an appropriate case for challenging the order, inter alia, either on the ground that it is mala fide or arbitrary or that it is based on irrelevant and extraneous considerations. Whether such a writ or special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the respondents. Thirdly, we are of the opinion that the case on hand is squarely covered by the ratio of Narayanappa case. The appellant could have effectively convinced the respondents by producing the appropriate material that further steps in furtherance to the notice under Section 6 need not be taken. Apart from that, an order of forfeiture is an appealable order where the correctness of the decision under Section 7 to forfeit the properties could be examined. We do not see anything in the ratio of Ajantha Industries case which lays down a universal principle that whenever a statute requires some reasons to be recorded before initiating action, the reasons must necessarily be communicated. 20. Now, we deal with the second submission. The Act enables the Government of India to forfeit "illegally acquired property" of any person to whom the Act is made applicable. The Act is made applicable to the persons specified in section 2(2) Section 2. Application-(1) The provisions of this Act shall apply only to the persons specified in sub-section (2). (2) The persons referred to in sub-section(1) are the following, namely:- (a) every person- (i) who has been convicted under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) unless the present holder or, as the case may be, any one who held such property after such person and before the present holder, is or was a transferee in good faith for adequate consideration. Explanation 1.- For the purposes of sub-clause (i) of clause (a), the value of any goods in relation to which a person has been convicted of an offence shall be the wholesale price of the goods in the ordinary course of trade in India as on the date of the commission of the offence. Explanation 2.- For the purpose of clause (c), "relative" in relation to a person, means- (i) spouse of the person; (ii) brother or sister of the person; (iii) brother or sister of the spouse of person; (iv) any lineal ascendant or descendant of the person; (v) any lineal ascendant or descendant of the spouse of the person; (vi) spouse of a person referred to in clause (ii), clause (iii), clause (iv) or clause (v); (vii) any lineal descendant of a person referred to in clause (ii) or clause (iii). Explanation 3.- For the purposes of clause (d), "associate", in relation to a person, means- (i) any individual who had been or is residing in the residential premises (including out houses) of such person; (ii) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me point of time belonged to persons referred to either in clause (a) or clause (b). 21. Section 4 makes it unlawful (for any person to whom the Act applies) to hold any illegally acquired property and it further declares that such property shall be liable to be forfeited to the Central Government (following the procedure prescribed under the Act). The procedure is contained under sections 6 and 7 of the Act. Section 8 prescribes the special rule of evidence which shifts the burden of proving that any property specified in the notice under section 6 is not illegally acquired property of the noticee. Section 6 inter alia postulates that having regard to the value of the property held by any person (to whom the Act applies) and his known sources of income, if the "competent authority" (notified under section 5) has reason to believe that such properties are "illegally acquired properties", the competent authority is authorized to call upon the holder of the property to 'indicate' the source of his income etc. which enabled the acquisition of such property along with necessary evidence. It also authorizes the competent authority to call upon the noticee to show cause as to why all or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consideration; (B) any property acquired by such person, whether before or after the commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property falling under item (A), or the income or earnings therefrom.. Broadly speaking the definition covers two types of properties: 1) acquired by the income or earnings; and 2) assets derived or obtained from or attributable to any activity which is prohibited by or under a law in force. Such law must be a law with respect to which parliament has the power to make law. A complete analysis of the definition in all its facets may not be necessary for our purpose. 23. From the language and the scheme of the Act it does not appear that the application of the Act is limited to persons who either suffered a conviction under one of the acts specified in section 2(2)(a) the Act or detained under the COFEPOSA subsequent to the commencement of the Act in question. On the other hand, explanation 4 to section 2 expressly declares as follows: "Explanation 4.-For the avoidance of doubt, it is hereby provided that the question whether any person is a person to whom the provisions of this Act apply may be dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in so far as is relevant for our purpose stipulates two things:- That no person shall be convicted of any offence except for violation of the law in force at the time of the commission of the act charged as an offence; and That no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. 27. It is a well settled principle of constitutional law that sovereign legislative bodies can make laws with retrospective operation; and can make laws whose operation is dependent upon facts or events anterior to the making of the law. However, criminal law is excepted from such general Rule, under another equally well settled principle of constitutional law, i.e. no ex post facto legislation is permissible with respect to criminal law. Article 20 contains such exception to the general authority of the sovereign legislature functioning under the Constitution to make retrospective or retroactive laws. 28. The submission of the appellant is that since the Act provides for a forfeiture of the property of the appellant on the ground that the appellant was detained under the COFEPOSA, the propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting of a statute. But, speaking generally, and having in mind the object of Section 37 read with Section 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 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 Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contention that Section 37(1) fastens a heavy liability regardless of fault has no force in depriving the forfeiture of the character of penalty. 31. On the other hand, the learned Addl. Solicitor General appearing for the respondent submitted that the forfeiture contemplated under the Act is not a 'penalty' within the meaning of that expression occurring in Article 20 but only a deprivation of property of a legislatively identified class of persons - in the event of their inability to explain (to the satisfaction of the State) that they had legitimate sources of funds for the acquisition of such property. The learned Addl. Solicitor General further submitted that while in the case of that class of persons covered under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aning in the sense that they must be so read that their meaning is entirely independent of their context. The method of construing statutes that I prefer is not to take particular words and attribute to them a sort of prima facie meaning which you may have to displace or modify. It is to read the statute as a whole and ask oneself the question : 'In this state, in this context, relating to this subject-matter, what is the true meaning of that words'." 57. I respectfully adopt the reasoning of Lord Green in construing the expression "the amendment of the Constitution." 58. Lord Green is not alone in this approach. In Bourne v. Norwich Crematorium, (1967) 2 ALL ER 576, 578 it is observed: "English words derive colour from those which surround them. Sentences are not mere collections of words to be taken out of the sentence defined separately by reference to the dictionary or decided cases, and then put back again into the sentence with the meaning which you have assigned to them as separate words, so as to give the sentence or phrase a meaning which as a sentence or phrase it cannot bear without distortion of the English language." 59. Holmes, J., in Towne v. Eisner, 245 US 418, 425 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method of realizing government money or property as compared to a suit which it is not disputed the Government could bring for realizing the money or property and is not punishment or penalty within the meaning of Article 20(1). Such a suit could ordinarily be brought without in any way affecting the right to realize the fine that may have been imposed by a criminal Court in connection with the offence. 36. In R.S. Joshi case, the question was whether it was permissible for the State Legislature to enact that sums collected by dealers by way of sales tax but are not exigible under the State Law - indeed prohibited by it - shall be forfeited to the exchequer. 37. The question - whether such a forfeiture was a penalty violating Article 20 did not arise in the facts of that case. The discussion revolved around the question - whether such a forfeiture is a penalty for the violation of a prohibition contained under section 46 of the relevant Sales Tax Act? The contravention of section 46 is made punishable with imprisonment and fine under section 63 of the said Act. Apart from that, section 37 of the said Act provided for a departmental proceeding against the dealers who violated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised in aid of the main topic of legislation, which, in the present case, is a tax on sale or purchase of goods. All powers necessary for the levy and collection of the tax concerned and for seeing that the tax is not evaded are comprised within the ambit of the legislative entry as ancillary or incidental. But where the legislation under the relevant entry proceeds on the basis that the amount concerned is not a tax exigible under the law made under that entry, but even so lays down that though it is not exigible under the law, it shall be paid over to Government, merely because some dealers by mistake or otherwise have collected it as tax, it is difficult to see how such provision can be ancillary or incidental to the collection of tax legitimately due under a law made under the relevant taxing entry. We do not think that the ambit of ancillary or incidental power goes to the extent of permitting the legislature to provide that though the amount collected - may be wrongly - by way of tax is not exigible under the law as made under the relevant taxing entry, it shall still be paid over to Government, as if it were tax. The legislature cannot under Entry 54 of List II make a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is not a consequence of any conviction for an offence. 40. Therefore, with reference to these four categories, the question of violation of Article 20 does not arise. Insofar as first category mentioned above, in our opinion, Article 20 would have no application for the reason, conviction is only a factor by which the Parliament chose to identify the persons to whom the Act be made applicable. The Act does not provide for the confiscation of the properties of all the convicts falling under Section 2(2)(a) or detenues falling under Section 2(2)(b). Section 6 of the Act authorises the competent authority to initiate proceedings of forfeiture only if it has reasons to believe (such reasons for belief are required to be recorded in writing) that all or some of the properties of the persons to whom the Act is applicable are illegally acquired properties. The conviction or the preventive detention contemplated under Section 2 is not the basis or cause of the confiscation but the factual basis for a rebuttable presumption to enable the State to initiate proceedings to examine whether the properties held by such persons are illegally acquired properties. It is notorious that people car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn property which has been unlawfully acquired. This point was argued in the Irish High Court in Gilligan v The Criminal Assets Bureau, namely that where a defendant is in possession or control over assets which directly or indirectly constitute the proceeds of crime, he has no property rights in those assets and no valid title to them, whether protected by the Irish Constitution or by any other law. A similar view seems to have been expressed earlier in a dissenting opinion in Welch v United Kingdom : 'in my opinion, the confiscation of property acquired by crime, even without express prior legislation is not contrary to Article 7 of the Convention, nor to Article 1 of the First Protocol.' This principle has also been explored in US jurisprudence. In United States v. Vanhorn a defendant convicted of fraud and money laundering was not entitled to the return of the seized proceeds since they amounted to contraband which he had no right to possess. In United States v Dusenbery the court held that, because the respondent conceded that he used drug proceeds to purchase a car and other personal property, he had no ownership interest in the property and thus could not seek a remedy again ..... X X X X Extracts X X X X X X X X Extracts X X X X
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