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TMI Blog2023 (3) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... lled out from the record which led to passing of the order forfeiting the subject property are that one of the partners of the first appellant, namely, N.A. Yusuf, was ordered to be detained by Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974(hereinafter being referred to as "COFEPOSA") by order dated 21st January, 1985 by Government of Maharashtra and later by the Central Government by order dated 27th August, 1991. The two detention orders against N.A. Yusuf came to be challenged in the writ petition before Delhi High Court. Both the petitions were allowed by judgments dated 15th October, 1991 and 11th May, 1992 respectively. In consequence thereof, the forfeiture order passed by the competent authority on 23rd November, 1977 came to an end. 4. On 16th October, 1994, a show cause notice was issued to the first appellant firm and its partners calling upon them to provide an explanation as to why the subject theatre (M/s. Platinum Theatre) should not be forfeited. After affording opportunity of hearing, the competent authority, in the first instance, passed an order of forfeiture against the first appellant firm forfeiting M/s. Platinum Theatre and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of forfeiture on the premise that it could not have been possible because of long delay to trace the relevant documents which, indeed, has caused prejudice to the appellants. 7. Per contra, learned counsel for the respondents, while supporting the finding returned by the competent authority, in the first instance, forfeiting the subject property in question and later confirmed by the Tribunal in the impugned judgment, in counter, has made the following submissions: (i) Section 8 of the Act, 1976 provides that the burden to proof, in any proceedings under this Act, shall lie on the person affected. The appellants have failed to discharge the said burden, in consequence of which the finding recorded by the competent authority duly supported with the material on record justify and support the order of forfeiture passed by the competent authority dated 31st December, 1997. (ii) Both N.A. Yusuf and appellant no. 2(P.M.Saheeda) failed to disclose any source of their capital contribution in the first appellant firm and have failed to disclose any books of accounts for the expenditure in construction of the subject theatre and also failed to disclose any bank account from which mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clandestine manner and to nail such persons who are holding the properties acquired by them through such gains in the name of their relatives, associates and confidants. 10. Section 2(1) of the Act, 1976 applies to the persons specified in subsection (2). Section 2(2) gives a long list of different categories of persons to whom the Act applies and includes as defined in Section 2(2)(b) that every person in respect of whom an order of detention has been made under the COFEPOSA and also includes every associate of a person referred to in clause (a) or clause (b) as defined in subclause( d) read with Explanation 3, which refers to an associate and covers all individuals who had been or is a member, partner or director of an association of persons including association, body, partnership firm or private company, etc. 11. Sections 2, 6, 7, 8 and 9 of the Act, 1976 which are relevant for the purpose, are extracted hereinbelow: "2. Application. (1) The provisions of this Act shall apply only to the persons specified in subsection (2). (2) The persons referred to in subsection (1) are the following, namely: (a) every person (i) who has been convicted under the Sea Customs Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eviously held by a person referred to in clause (a) or clause (b) unless the present holder or, as the case may be, anyone 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. Explanation 2. 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 outhouses) of such person; (ii) any individual who had been or is managing the affairs or keeping the accounts of such person; (iii) any association of persons, body of individuals, partnership firm, or private company within the meaning of the Companies Act, 1956 ( 1 of 1956), of which such person had been or is a member, partner or director; (iv) any individual who had been or is a member, partner or director of an association of persons, body of individuals, partnership firm or private company referred to in clause (iii) at any time when such person had been or is a member, partner or director of such association, body, partnership firm or private company; (v) any person who had been or is managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and record a finding accordingly under subsection (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 Act, stand forfeited to the Central Government free from all encumbrances. (4) where any shares in a company stand forfeited to the Central Government under this Act, then, the company shall, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or the articles of association of the company, forthwith register the Central Government as the transferee of such shares. 8. Burden of proof. In any proceedings under this Act, the burden of proving that any property specified in the notice served under section 6 is not illegally acquired property shall be on the person affected. 9. Fine in lieu of forfeiture. (1) Where the competent authority makes a declaration that any property stands forfeited to the Central Government under section 7 and it is a case where the source of only a part, being less than onehalf of the income, earnings or assets with which such property was acquired has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the first appellant firm and its partners(Appellant nos. 2 to 5) dated 16th October, 1994. The competent authority, in the first instance, after taking into consideration the material on record returned a finding that the total contribution of the partners in M/s. Platinum Theatre by way of capital was Rs.10,20,000/as could be seen from the Partnership Deed as well as returns of M/s. Platinum Theatre that clearly indicates that N.A. Yusuf contributed Rs.5 lakhs. Appellant no.2 (P.M. Saheeda) and her minor son contributed Rs.5.20 lakhs. The partners are the joint owners of the property of a firm by virtue of their capital contribution in terms of Partnership Deed. 15. N.A. Yusuf has not disclosed any source from which he got capital contribution of Rs.5 lakhs. In respect of contribution made by Appellant no. 2(P.M. Saheeda) and her minor son to the tune of Rs. 5.20 lakhs in the partnership firm, no explanation was tendered about the source of funds infused in the partnership firm. The authorities of the incometax department on assessment were able to substantiate that neither the source of contribution made by N.A. Yusuf nor anyone else and the entire sum of Rs.4.57 lakhs was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at all stages and a finding was returned that major part of the investment has been treated as income from undisclosed sources. That apart, no evidence was placed by Appellant no. 2(P.M. Saheeda) on record to justify that the land in question was purchased from the resources available at her command in the year 1969, through the sale deed dated 16th April, 1969. In the given circumstances, the appellants are not entitled to seek protection of Section 9 of the Act 1976. 17. That apart, as regards the submissions made by the counsel for the appellants to impose fine in lieu of forfeiture, as contemplated under Section 9 of the Act 1976, after noticing the argument advanced by the appellants before the High Court, a categorical finding has been recorded as to why the appellants are not entitled to seek protection of Section 9 of the Act 1976, which is as follows: "The argument of petitioners' counsel is, major contribution is from the petitioners and that the land in question was acquired in the year 1969 prior to the entering into a partnership agreement out of the borrowings of 2nd petitioner Saheeda and that land in question ought not have been taken into consideration to for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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