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2017 (1) TMI 1114 - MADRAS HIGH COURT

2017 (1) TMI 1114 - MADRAS HIGH COURT - TMI - Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 - forfeiture order - detention of the original petitioners - Held that:- In the present case, the original petitioner is not a person of no means. Her father owned properties and wrote a will. Later, it was cancelled and the family members had a registered deed of partition among themselves. Further, her father was a gold and silver merchant and has declared jewellery unde .....

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is on the person who is in possession of the property to explain their sources. But, once an explanation is forthcoming, then, naturally it is for the competent authority to prove the contrary. - This Court is not satisfied with the order of the Appellate Authority. As can be seen from Section 15, the Appellate Authority has ample power to call for any records from anyone and if they were not satisfied with the receipts produced by the petitioner, they could have summoned such of those docu .....

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etention of the original petitioners another son and that was released by the very same Tribunal. Again, the Tribunal, instead of relying upon the full order of that Tribunal chose to rely upon a portion of the order without any reason. The Tribunal also did not keep in mind the order of this Court made earlier remanding the matter. - This Court has no hesitation to set aside the order of the 2nd Respondent Tribunal made confirming the forfeiture order of the 1st Respondent. - Writ Petition .....

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vide W.P.M.P.11950 of 2002 sought to substitute themselves in the place of the petitioner and the same was ordered. 3 The original writ petition challenges the order dated 9.1.2001 passed by the Appellate Tribunal for Forfeited Property (Respondent 2) at New Delhi at his camp at Hyderabad. The Appeal was filed by the original petitioner against the order of the competent authority i.e. the 1st Respondent dated 28.7.1995, by which an house property at No.31A, Khanpalayam 3rd Street, Madurai and .....

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issed on 3.5.2000. Before the dismissal, notice was given to the 1st Respondent on the applications and comments were received from them. As against the order of dismissal passed by the first respondent Tribunal, the writ petition came to be filed. The writ petition was admitted on 29.3.2001. Pending the writ petition, in W.M.P.No. 84/50 of 2001, an order of interim stay for a period of 8 weeks was granted. Subsequently, on 12.6.2001 it was extended by two weeks. On 6.8.2001, the interim stay gr .....

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008, the matter was dismissed for want of prosecution. Again, the petitioners 2 to 7 filed an application to condone the delay for setting aside the dismissal in W.P.M.P.No.458 of 2011 which was ordered and thereafter, on 19.8.2011, the application in W.P.M.P. No. 511/2011 to set aside the dismissal of the writ petition was also allowed. 6 On notice from this Court, on behalf of the 1st respondent, a counter affidavit dated 19.7.2001 was filed. The case of the original petitioner was that the pr .....

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on under the Conservation of Foreign Exchange and Prevention of Smuggling Act, 1974 (for short COFEPOSA) vide orders of the Government of Tamil Nadu dated 11.10.1988. As such, she being the mother, she will be a person affected in terms of Section 2(2)( c) of the SAFEMA. 8 The original petitioner stated that she got married to one Thiagarajan Chettiar about 50 years ago and her father Pandian Chettiar was having both movable and immovable properties. He had bequeathed to her properties worth abo .....

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the share of the petitioner was 3 acres and 11 cents. At the time of her marriage, she was also given jewellery as marriage gift in the year 1957. Therefore, it cannot be said that the petitioner was having illegal properties acquired through illegal means obtained by her son. She had also stated that her son was a major and Section 2(2) (c ) of the SAFEMA will not attract her. She had already purchased the property in the year 1981. Her son was not even remotely connected to any illegal activi .....

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were recorded in writing that they were obtained by illegal sources. A forfeiture notice was issued under section 6(1) of the SAFEMA to the original petitioner proposing to forfeit the two properties. Initially, the notice sent came back undelivered and it was served through an Income Tax Inspector on 18.6.1992. As there was no response, a reminder was sent on 18.9.1992 asking her to submit her explanation. That notice also came back as not claimed. A hearing was fixed on 25.11.1994. The origin .....

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re, no proceeding can be initiated in respect of the said properties. It was also stated that the original petitioner had financial capacity to purchase the property in question and also took time to submit documentary proof. Therefore, the further hearing was held on 4.1.1995. An adjournment letter was sent and the hearing was posted on 16.2.1995. In view of the non-cooperation of the original petitioner, the authority rejected their stand and held that the original petitioner was a person cove .....

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possessing the said deposit. It was further stated that T.Gnaneswaran (3rd petitioner) and T.Murugadoss (5th petitioner), both sons of the original petitioner, were indulging in smuggling activities. Even though T.Gnaneswarans detention was set aside by this Court, both sons were indulging in smuggling activities and therefore, the property in possession of the original petitioner is liable for confiscation. 11 Aggrieved by the same, the original petitioner filed an Appeal under section 12(4) of .....

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equently dismissed. 12 As against the dismissal, the petitioner preferred a writ petition before this Court in W.P.No. 11540 of 2000. This Court, by order dated 11.7.2000, allowed the writ petition and directed the Tribunal to pass a fresh order after granting opportunity. In para 4 of the order, it was held as follows:- A perusal of the earlier order of the second respondent dated 16.2.2000 makes it clear that the 2nd respondent dismissed the appeal only on the ground that the petitioner did no .....

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tocopies. On the other hand, if the photocopies of the documents are objected to by the first respondent, still the respondent could pass appropriate orders in the light of such objection. Without doing so, the second respondent dismissed the appeal merely on the ground that the petitioner did not produce the original documents before the competent authority or at the appeal stage. 13 On remand from this Court, the Tribunal received comments from the 1st Respondent both on the appeal as well as .....

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he issuance of notice under section 6(1) of the SAFEMA dated 8.9.79. The alleged sale of jewellery was disbelieved and as she had not any independent source, she could not have had kept any deposit in the pawn shop. The declaration of stock of gold as on 20.6.1969 given to the Central Excise Department cannot have any effect as the property was acquired only in the year 1981. The sale receipt for gold and silver as well as account extract from the books of Selva Maligai was disbelieved. 14 As ag .....

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st the mother of the detenu. 15 In the present case, the 2nd Respondent Tribunal was specifically directed to go into the issue of the source explained by the original petitioner. It was clearly observed as follows:- I am of the considered opinion that photocopies have got secondary value of evidence if the photocopies of the documents are objected to by the first respondent, still the respondent could pass appropriate orders in the light of such objection. 16 In the present case, the original p .....

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procedures under sections 12(5), 12(7) and 15 may be usefully reproduced: Section 12 (5) : On receipt of an appeal under sub-section (4), the Appellate Tribunal may, after giving an opportunity to the appellant to be heard if he so desires, and after making such further enquiry as it deems fit, confirm, modify or set aside the order appealed against. Section 12(7): the Appellate Tribunal may regulate its own procedure. Section 15 : Competent authority and Appellate Tribunal to have powers of ci .....

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ublic record or copy thereof from any court or office; (e) issuing commissions for examination of witnesses or documents; (f) any other matter which may be prescribed. 18 In P.P.Abdulla and another v. Competent Authority and others [(2007) 2 SCC 510], the Supreme Court went into the issue relating to confiscation of the properties of smuggler under the SAFEMA. It was held that Section 6(1) of the SAFEMA will have to be strictly followed and the authority's satisfaction must be recorded in wr .....

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ific provisions found under Section 2(2) (c) of the SAFEMA. The only close relative excluded from the said presumption is the wife and not anyone else. The validity of the Act was upheld by a larger bench of nine Judges in Attorney General for India Vs. Amratlal Prajivandas [1994(5) SCC 54]. While explaining the scope of section 2(2) (c ) r/w section 6, the Supreme Court had observed in para 44 which is as follows:- The language of this section is indicative of the ambit of the Act. Clauses (c) .....

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latives or associates which they may have acquired illegally but only to reach the properties of the convict/detenu or properties traceable to him, wherever they are, ignoring all the transactions with respect to those properties. By way of illustration, take a case where a convict/detenu purchases a property in the name of his relative or associate it does not matter whether he intends such a person to be a mere name lender or whether he really intends that such person shall be the real owner a .....

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e matter, there is no basis for the apprehension that the independently acquired properties of such relatives and associates will also be forfeited even if they are in no way connected with the convict/detenu. So far as the holders (not being relatives and associates) mentioned in Section 2(2)(e) are concerned, they are dealt with on a separate footing. If such person proves that he is a transferee in good faith for consideration, his property even though purchased from a convict/detenu is not l .....

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not or do not belong to such detenu/convict. We do not think that Parliament ever intended to say that the properties of all the relatives and associates, may be illegally acquired, will be forfeited just because they happen to be the relatives or associates of the convict/detenu. There ought to be the connecting link between those properties and the convict/detenu, the burden of disproving which, as mentioned above, is upon the relative/associate. (emphasis added) 20 The same view was reiterat .....

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believe (which reasons have to be recorded in writing) that properties ostensibly standing in the name of a person to whom the Act applies are illegally acquired properties, he can issue a notice to such a person. Thereafter, the burden of proving that such property is not illegally acquired property will be upon the person to whom notice has been issued. The statutory provisions do not show that the competent authority, in addition to recording reasons for his belief, has to further mention an .....

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ted under section 6 and order passed under section 7 must fail. It was held in Union of India & Ors Vs Manoharlal Narang [(1987) 2 SCC 241] as follows:- It cannot be disputed that provisions of SAFEMA cannot be invoked in cases where there is no valid order of detention. We agree with the High Court that the order of detention is bad on the ground discussed above. Consequently we hold that the High Court was justified in quashing the notice issued under Section 6 and the proceeding initiated .....

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re on the ground of detention of T.Murugadoss (5th petitioner), the Tribunal, in its earlier order dated 28.7.1995, held that the said order will have no bearing on the present proceedings. In the present impugned order, the Tribunal also curiously held as follows:- The earlier order of the Competent Authority dated 31.1.92 was set aside by the Tribunal by order dtd. 6.5.92 in FPA No.12/MDS/92 on the ground that the earlier order of detention of the other son of the appellant, namely T.Gnaneswar .....

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g in para 7 which is as follows:- Although Sri. T.Gnaneswarans detention was set aside by the Court, nevertheless, there is nothing in doubt infer that the husband of the person affected as well as her two sons were indulging in smuggling activities and had been during different period, detained under COFEPOSA Act, 1974. In a capable conclusion therefore is that the investments in the property under consideration were made by the person affected though the illegal sources of the aforesaid person .....

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er through illegal means. 25 Though by virtue of the provisions of the Act, the burden of proof was on the person owning the property to establish the source, the original order passed for forfeiture by the 1st Respondent merely proceeded that despite opportunity, no materials are forthcoming. In para 5, it was held as under: It would be relevant to mention here that the person affecteds husband was a gold and silver merchant and the jewellery, claimed to have been sold, was declared under the g .....

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or the purchase of the house property was made out of the sale proceeds of the jewellery items. Accordingly, it is held that the house property under consideration had been purchased out of the illegal sources and hence liable for forfeiture under the Act. 26 When the matter went before the Tribunal for the first time, the Tribunal refused to allow production of documents as it was not produced before the 1st Respondent. This led to the intervention by this Court which also held that photocopies .....

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eived as stridhana by the appellant totaling 993.85 grams has also been produced. The above declaration is dated 30-6-1969 whereas the forfeited property was acquired only in the year 1981. Absolutely no evidence whatsoever has been tendered to substantiate the availability of the above said gold jewellery as far as back in the year 1981. Further, no documentary evidence in the form of sale receipts, etc have been furnished for perusal. No details of date of sale, to whom sold, consideration etc .....

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lling to reject the offer of explanation available to a person under section 8 of the Act. In para 12 of the impugned order, the Tribunal held as follows:- It is very strange that the appellant is said to have sold gold ornaments and silver items to nearly 20 different persons in small bits. No explanation is forthcoming as to why the appellant sold these items to so many shops within a period of one month. The notice under Section 6(1) was issued on 25.9.92 but the appellant did not choose to p .....

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d in her capacity as the wife of Thiagarajan Chettiar who was obtained, in view of Section 11 of the Act, and hence, the alleged sale of jewellery and silver was disbelieved. We are not prepared to place any reliance on the receipts for the sale of jewellery and silver for the reasons mentioned above, as well as the reason given by the Competent Authority. That apart, the appellant has not adduced any evidence to show that the amount realised by the alleged sale of jewellery and silver was inves .....

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st be understood that the Act is very draconian and it has to be interpreted strictly. When the burden of proof had shifted to the person owing to the property and that person has shown some acceptable evidence, it would not be open to the authorities to forfeit the properties on some ipse dixit. There is no rule that a person cannot sell her jewellery on small bits and that she cannot sell those jewellery to different shops within one month. Such a finding based on a suspicion cannot replace th .....

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