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Aamenabai Tayebaly And Others Versus Competent Authority, Smugglers And Foreign Exchange Manipulators (Forfeiture Of Property) Act, 1976, And Others

1997 (11) TMI 100 - SUPREME Court

Whether the provisions of the SAFEMA apply to the sale transaction entered into between the widow of Talab Haji Hussein, COFEPOSA detenu and the purchaser, predecessor-in-interest of the appellants? - Whether the purchaser was a bona fide purchaser for value without notice? - Whether the forfeiture of purchaser's flat in Dharam Jyoti Building by the authorities can be treated as double forfeiture on the basis of the same tainted money of the COFEPOSA convict only because the subsequent p .....

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purchaser purchased this property from Tahira Sultana, she had no interest in the said flat which she could convey to the appellants' predecessor. In substance, it amounted to selling of the Central Government's property by a total stranger in favour of the purchaser. No title, therefore, in the said property passed to the appellants' predecessor. The appellants' predecessor, therefore, had no legal defence against the claim of the authorities in calling upon the appellants as heirs of the origi .....

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and inoperative in law and if such subsequent transaction qua the said property remains a still-born one no life can be infused in it on account of the subsequent forfeiture of some other property of the original vendor when a subsequent forfeiture has stood on its own and has become final. The third point for determination, therefore, also is held against the appellants and in favour of the respondents. - On pint 4 the transaction of purchase by Tayab Ali was an exercise in futility. Such .....

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s finally lost in her challenge to the said order. The fourth point for determination, therefore, has also to be rejected and stands decided against the appellants. Appeal dismissed. - Dated:- 19-11-1997 - Judge(s) : M. JAGANNADHA RAO., S. B. MAJMUDAR JUDGMENT The judgment of the court was delivered by S. B. MAJMUDAR J.-This appeal by special leave seeks to challenge the judgment and order rendered by a Division Bench of the Bombay High Court in Writ Petition No. 2841 of 1982. By the impugned ju .....

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ntion of Smuggling Activities Act, 1974 (hereinafter referred to as the COFEPOSA ), by the Government of Gujarat by order dated April 2, 1976. Before the said order of detention, the second wife of the said Talab Haji Hussein, Tahira Sultana, purchased a flat being Flat No. 25 in Dharam Jyoti Premises Co-operative Housing Society, Bandra, Bombay, in February, 1975, for a consideration of Rs. 88,562. On February 15, 1977, the competent authority issued a notice under section 6(1) of the SAFEMA to .....

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es as laid down under section 7(3) of the SAFEMA. The said Tahira Sultana challenged the aforesaid order of forfeiture by filing a Miscellaneous Petition No. 1680 of 1977, on the original side of the Bombay High Court. In the writ petition, she challenged both the order of detention of her husband as well as the order of forfeiture of the said property standing in her name. The said writ petition was moved in December, 1977. The High Court of Bombay admitted the said writ petition of Tahira Sult .....

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. By an amendment to her writ petition, she also challenged the latter order. In the meantime, the writ petition filed by her before the Bombay High Court remained pending. On November 20, 1980, the COFEPOSA detenu Talab Haji Hussein expired. Now, comes the crucial date when the present appellant s predecessor came into the picture. By a sale deed dated July 30, 1981, Tahira Sultana sold the said flat to Tayab Ali, predecessor-in-interest of the present appellants, for a consideration of Rs. 3,6 .....

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in good faith for valuable consideration since he was not aware of the order of the competent authority or his vendor, Tahira Sultana s undertaking to the High Court. The said Tahira Sultana out of the consideration money received by her from the purchaser in the aforesaid transaction amounting to Rs. 3,60,000 is said to have purchased a flat at Shivasthan Co-operative Society, Bandra, Bombay, for Rs. 1,86,000. The case of the appellants is that towards the said purchase consideration Rs. 1,60,0 .....

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Writ Petition No. 2841 of 1982 filed by the purchaser Tayab Ali on December 13, 1982, in the Bombay High Court. The said writ petition was admitted on December 16, 1982, by the High Court and interim relief was granted to the purchaser. When it was brought to the notice of the Bombay High Court that, the purchaser s vendor, Tahira Sultana, had committed breach of the undertaking given by her in her pending writ petition against the forfeiture order of the flat in Dharam Jyoti Building, the High .....

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lants predecessor-in-interest Tayab Ali, the purchaser of the flat in question, moved the High Court of Gujarat on August 12, 1985, challenging the detention order of the COFEPOSA detenu, Talab Haji Hussein, which gave rise to the proceedings under the SAFEMA as well as the consequential order under the SAFEMA since the order of detention was issued by the State of Gujarat. The Division Bench of the High Court of Gujarat by its judgment dated July 17, 1986, held that the order of forfeiture of p .....

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7, 1987, after hearing the purchaser s heirs, namely, the present appellants, re-confirmed the order of forfeiture of the flat purchased by their predecessor, under the SAFEMA. Independent of these proceedings, the competent authority also passed an order on June 18, 1987, under section 7(2) of the SAFEMA, after hearing Tahira Sultana, forfeiting the second flat purchased by her being Flat No. 1, Ground Floor, Shivasthan Co-operative Housing Society Ltd., Bandra, Bombay. It was held by the compe .....

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e SAFEMA that the said Flat No. 1, Shivasthan Society, was illegally acquired by Tahira Sultana and directed her to deliver possession thereof to the Central Government authorities. Tahira Sultana filed an appeal against the said order in connection with forfeiture of Flat No. 1, Shivasthan Society, which was dismissed by the Appellate Tribunal on November 2, 1987. Tahira Sultana unsuccessfully challenged the said order in proceedings for setting aside the ex parte order before the Appellate Tri .....

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leave petition before this court challenging the order of the Bombay High Court pertaining to Flat No. 1, Shivasthan Society, Bombay. It was dismissed by this court on November 24, 1995. Therefore, the forfeiture of Flat No. 1, Shivasthan Society, became final up to this court. The appellants, who were brought on record as heirs of the purchaser in the latter s Writ Petition No. 2841 of 1982, which challenged the forfeiture of the said Flat No. 25, Dharam Jyoti Building, and the direction to th .....

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s rejected by the Bombay High Court on August 21, 1995. The said decision was challenged before this court in S. L. P. (C) No. 25358 of 1995 which was dismissed by this court on November 24, 1995. It is in the background of the aforesaid facts that the main contentions canvassed in support of this appeal have to be examined. Learned senior counsel, Shri R. F. Nariman, for the appellants firstly contended that the SAFEMA itself did not apply to the purchase made by the purchaser as he was not one .....

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Court of Bombay for which she was adequately punished, the purchaser cannot be visited with any adverse consequences thereof. It was next contended that section 11 of the SAFEMA would not apply to the facts of the present case, as the appellants predecessor-in-interest had not purchased the flat in Dharam Jyoti Building between two terminal dates, namely, February 15, 1977, when notice under section 6(1) of the SAFEMA was issued to Tahira Sultana and October 12, 1977, when the order of the comp .....

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detenu, once she sold the said property to the purchaser by taking Rs. 3,60,000 from him and once out of the said consideration she spent Rs. 1,60,000 for purchasing Shivasthan Society flat, the tainted money which was converted into flat in Dharam Jyoti was again re-converted into cash and was utilised for purchasing another immovable property. Therefore, the tainted money could be traced to the said property in Shivasthan Society and could be said to have ultimately resulted in the purchase of .....

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wherein only the vendor, Tahira Sultana, was at fault and consequently on an analogy of section 9 of the SAFEMA this court may impose appropriate fine in lieu of forfeiture. Learned senior counsel for the respondents, Shri K. N. Shukla, on the one hand, supported the decision of the High Court. In view of the aforesaid contentions of learned senior counsel Shri Nariman, the following points arise for determination : 1. Whether the provisions of the SAFEMA apply to the sale transaction entered i .....

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also been forfeited to the Government under the SAFEMA. 4. Whether the transaction in favour of the purchaser could be cleared on principles analogous to section 9 of the SAFEMA by imposing fine in lieu of forfeiture on the peculiar facts of this case. We shall deal with these points for consideration seriatim. Points Nos. 1 and 2 : It is true that the SAFEMA has been enacted to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for ma .....

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erred to in clause (a) or clause (b), clause (d) refers to every associate of a person referred to in clause (a) or clause (b); while clause (e) refers to any holder of any property which was at any time previously held by a person referred to in clause (a) or clause (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. It is obvious that the purchaser .....

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y of the provisions of section 2, sub-section (2)(e), as we will presently show. The property in question at the relevant time stood in the name of the purchaser s vendor Tahira Sultana. As she was the relative of the COFEPOSA detenu, her husband, the competent authority issued a notice to her under section 6(1) of the SAFEMA in connection with Dharam Jyoti Building flat, the disputed property herein. After hearing her, the competent authority passed an order under section 7 of the SAFEMA forfei .....

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tainted transaction. It is, of course, true that pending the writ petition there was already a stay order of the High Court of Bombay by which the order of forfeiture of the said property had remained stayed. But it was not an absolute order. It was conditional on the purchaser s vendor Tahira Sultana, the writ petitioner, not transferring or alienating the said property pending the proceedings. The said injunction of the High Court reflected by the undertaking of Tahira Sultana made the said pr .....

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ion was dismissed the transfer effected by the writ petitioner in breach of the prohibition and the undertaking would not give any benefit to the purchaser. It would be too much for him to contend that he was a bona fide purchaser for value without notice. The High Court in the impugned judgment has noted that the said plea does not appear to be probable. It is true, as pointed out by learned senior counsel Shri Nariman for the appellants, that for coming to this finding the High Court had wrong .....

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ler. When the purchaser purchased the said flat standing in the name of the wife of the said smuggler, in the usual course of conduct the said purchaser must have been put on enquiry as to how the COFEPOSA detenu s wife Tahira Sultana became the owner of this property and what had happened to this property in the proceedings under the SAFEMA and whether title of the said flat was clear or not. No such enquiry seems to have been made and it is not the case of the purchaser that any such enquiry w .....

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ion filed by Tahira Sultana challenging the forfeiture order of October 12, 1977, got dismissed by the Bombay High Court and once that order became final the original order of forfeiture of this property dated October 12, 1977, operated in full swing and the result was that as per section 7, sub-section (3) of the SAFEMA the said property stood forfeited to the Central Government free from all encumbrances. Therefore, it must be held that by October 12, 1977, the property in dispute had ceased t .....

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re had been stayed by the High Court but, as seen earlier, it was a limited stay subject to the condition of inalienability of the property by Tahira Sultana and breach of such undertaking, which was a substitute for an injunction, would make that transaction voidable and its efficacy had to be seen in the light of the final result of the writ petition and once the final result was against Tahira Sultana, whatever she did in the meantime became an exercise in futility. In this connection, we may .....

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and void. It is no doubt true that on the express language of the said section transfer of any property pending the proceedings under section 6 or 10 of the said Act and prior to the order of forfeiture shall be treated to be null and void. The purchaser s transaction is after the order of forfeiture of the said property. Still the consequence of the said transaction being null and void could not be avoided by the purchaser on the plea that this transaction was subsequent to the original order o .....

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iture order came to be confirmed in the subsequent Writ Petition No. 1527 of 1995 on August 21, 1995, the transaction of transfer in favour of Tayab Ali would be said to have been effected after the notice under section 6, issued to Tahira Sultana, and before the order of forfeiture ultimately got confirmed by the High Court and by this court and which had back effect of confirming the same from 1977. It must, therefore, be held that the transaction of purchase by the appellants predecessor Taya .....

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claim of the authorities in calling upon the appellants as heirs of the original purchaser to vacate and hand over the possession of the property to the Central Government as full owner thereof. Both the points for determination, therefore, are answered against the appellants and in favour of the respondents. Point No. 3 : So far as this point is concerned, we fail to appreciate how it is a case of double forfeiture of the property purchased from the very same tainted money. It is easy to visual .....

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er for Rs. 3,60,000. Therefore, money earned out of the said consideration Rs. 88,562 remained tainted money. Utilising a part of this money, she purchased the Shivasthan Society flat for Rs. 1,86,000 out of which it is said that Rs. 1,60,000, were utilised from the sale proceeds of Dharam Jyoti Building flat. To this original tainted money of Rs. 88,562, therefore, she must have added some more money for purchasing Shivasthan Society flat. Even assuming that for the purchase of the said flat sh .....

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had already resulted in forfeiture of the disputed property. It is not as if that Dharam Jyoti Building flat is being forfeited twice. Consequently, the forfeiture of the Dharam Jyoti flat on October 12, 1977, by the competent authority must be treated to be quite an independent transaction as compared to the latter order of forfeiture of the Shivasthan flat on June 18, 1987. The latter order of forfeiture of entirely different immovable property cannot retrospectively invalidate the earlier or .....

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other property of the original vendor when a subsequent forfeiture has stood on its own and has become final. The third point for determination, therefore, also is held against the appellants and in favour of the respondents. Point No. 4 : So far as this contention is concerned section 9 of the SAFEMA on its express language cannot apply. It lays down as under : 9. Fine in lieu of forfeiture.-(1) Where the competent authority makes a declaration that any property stands forfeited to the Central .....

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ets, with which any property has been acquired, shall be,- (a) in the case of any part of income or earnings, the amount of such part of income or earnings; (b) in the case of any part of assets, the proportionate part of the full value of the consideration for the acquisition of such assets. This is not a case in which the purchase of Flat No. 25. Dharam Jyoti Building, Bandra, Bombay, by Tahira Sultana in February, 1975, could be said to be the result of only a part utilisation of the tainted .....

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5 lakhs as seen from the auction notice and that appropriate fine may be imposed on the appellants in lieu of forfeiture. It is difficult to agree. The appellants predecessor, purchaser Tayab Ali played with fire. He purchased the property despite there being an injunction and an undertaking by his vendor Tahira Sultana in the pending proceedings in the writ petition. His transaction, therefore, was liable to be voided in the light of the final result of the writ petition which confirmed the ord .....

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