Full Judgment Text
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PETITIONER:
TEKCHAND ETC.
Vs.
RESPONDENT:
COMPETENT AUTHORITY
DATE OF JUDGMENT31/03/1993
BENCH:
JEEVAN REDDY, B.P. (J)
BENCH:
JEEVAN REDDY, B.P. (J)
VENKATACHALA N. (J)
CITATION:
1993 SCR (2) 864 1993 SCC (3) 84
JT 1993 (4) 197 1993 SCALE (2)325
ACT:
Smugglers and Foreign Exchange Manipulators (Forfeiture of
Property) Act, 1976--Sections 2(2)(b), 3(e), 4, 6, and
7--Forfeiture of Property--Detention under Customs Act or
FERA--Whether applied only to persons detained before the
commencement of the Act.
Voluntary Disclosure of Income and Wealth Act, 1976:
Sections 11 and 16--Immunity conferred--Not absolute but
limited in character--Not to extend to proceedings under
other enactments.
HEADNOTE:
In 1975, the appellant, a dealer in watches and his sons the
other appellants, made voluntary disclosure of certain
income under the provisions of the Voluntary Disclosure of
Income and Wealth Act. On that basis proceedings were taken
under the Act and concluded by the Department.
In 1976, an order of detention was passed against the first
appellant under the provisions of COFEPOSA. He served out
the detention period.
Thereafter, in 1978 notices under Section 6 of the Smugglers
and Foreign Exchange Manipulators (Forfeiture of Property)
Act, 1976 (SAFEMA) was served upon the appellants calling
upon them to show cause why the properties mentioned in the
notices be not forfeited to the Central Government. They
were also called upon to explain the income, earnings or
assets out of which they had acquired those properties. In
his explanation, the first appellant stated that he had made
a disclosure of a sum of Rs.25,000 in Form-A under the
Voluntary Disclosure Act which was accepted by the Competent
Authority and a certificate was issued to the appellant. He
also riled a copy of the said certificate. He also set out
the manner in which the said sum was utilised after the
disclosure. He also submitted that he cannot be asked to
explain the source from which he obtained the said sum of
Rs.25,000, and calling upon him to do so, would violate the
immunity granted to him under the Voluntary Disclosure Act.
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Similar pleas were taken by his two sons, the other
appellants. The Competent Authority over-ruled the
objections and forfeited the properties specified in the
orders. The appellants preferred appeals before the
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Appellate Tribunal which partly allowed the appeals. To the
extent the Tribunal affirmed the orders of forfeiture, the
appellants preferred the present appeals.
On behalf of the appellants, it was contended that the Act
(SAFEMA) applied only in case of persons who were detained
under the COFEPOSA prior to the commencement of SAFEMA, that
it did not apply to persons who had been detained under
COFEPOSA after the commencement of SAFEMA. It was further
contended that the findings recorded by the authorities were
perverse and not supported by any evidence and that the
procedure prescribed by the Act had not been followed
scrupulously which vitiated the order of forfeiture.
Dismissing the appeal, this Court,
HELD : 1.1. There is nothing in the Smugglers and Foreign
Exchange Manipulators (Forfeiture of Property) Act 1976,
(SAFEMA) to indicate either directly or by necessary
intendment that the Act is confined only to those persons
who have been detained under COFEPOSA or who have been
convicted under the Customs Act or FERA prior to the com-
mencement of SAFEMA. The use of the word "has been made" in
Section 2(2)(b) does not and cannot lead to such conclusion.
The use of the said words must be understood in the contest
of Section 2(2). Section 2(2)(b) provides that every person
in respect of whom an order of detention has been made and
which detention order. has not been revoked or withdrawn by
the competent authority nor has been set aside by a
competent court can be proceeded against under SAFEMA. A
mere detention under COFEPOSA is not enough. [871 C-E]
1.2. If the intention of the Parliament was that the
detention should have been prior to the commencement of
SAFEMA, they would have said that the question should be
determined only with reference to the facts, circumstance
and events including any conviction of detention which oc-
curred or took place before the commencement of the SAFEMA.
[872 A-B]
2. The immunity conferred under Sections 11 and 16 of the
Voluntary Disclosure of Income and Wealth Act, 1976 is of a
limited character
866
and that it is not an absolute or universal immunity. The
immunity cannot be extended beyond the confines specified by
the said provisions. There is also no reason to presume
that the Parliament intended to extend any immunity to
smugglers and manipulators of foreign exchange who are
proceeded against under other enactments. [872-C]
3. That, in the instant case, the authorities acted with due
care and caution is evident from the fact that with respect
to one of the immovable properties the authorities were of
the opinion that the failure to explain pertains only to
part of the income/assets and accordingly invoked Section 9
and imposed a fine instead of forfeiting the property. [872-
F]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No.13911393 of
1979.
From the Judgment and Order dated 27.9.1978 & 28.9.1978 of
the Appellate Tribunal for Forfeited Property in F.P.A.
Nos.33/78-79, 31/78-79 and 32/78-79.
Bhargava V. Desai and Ms. Sonia Mathur for the Appellants.
S.C. Manchanda, K.P. Bhatnagar and P. Parmeswaran (NP) for
the Respondent.
The Judgment of the Court was delivered by
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B.P. JEEVAN REDDY, J. With a view to provide for the
forfeiture of illegally acquired properties of smugglers and
foreign exchange manipulators, the Parliament enacted, in
the year 1976, The Smugglers and Foreign Exchange
Manipulators (Forfeiture of Property) Act, 1976, being Act
No.13 of 1976. The Preamble to the Act sets out the
objective which the Act seeks to achieve. It says:
"WHEREAS for the effective prevention of
smuggling activities and foreign exchange
manipulations which are having a deleterious
effect on the national economy it is,.
necessary to deprive persons engaged in such
activities and manipulations of their ill-
gotten gains:
AND WHEREAS such persons have been augmenting
such gains by violations of wealth-tax income-
tax or other
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laws or by other means and have thereby been
increasing their resources for operating in a
clandestine manner;
AND WHEREAS such persons have in many cases
been holding the properties acquired by them
through such gains in the name of their
relatives, associates and confidants."
It would equally be relevant to notice the Statement of
Objects and Reasons appended to the Bill. The Statement
sets out the mischief the Act was intended to meet and
counter-act. It reads:
"Smuggling activities and foreign exchange
manipulations are having a deleterious effect
on the national economy. Persons engaged in
such malpractices have been augmenting their
ill-gotten gains by violation of laws relating
to income-tax, wealth-tax or of other laws.
In many cases, such persons have been holding
properties acquired through ill-gotten gains
in the names of their relatives associates and
confidants. This accumulation of ill-gotton
wealth gives increasing power, influence and
resources to those who carry on such
clandestine activities and even tend to confer
social status and prestige which is quite
contrary to the healthy socio-cultural norms.
These activities pose a serious threat to the
economy and the security of the nation. In
conjunction with various other steps taken by
the Government in recent months for cleansing
the social fabric and resuscitating the
national economy, it became necessary to
assume powers to deprive such persons of their
illegally acquired properties so as to
effectively prevent the smuggling and other
clandestine operations. The President
promulgated on the 5th November, 1975 the
Smugglers and Foreign Exchange Manipulators
(Forfeiture of Property) Ordinance 1975."
The Act was preceded by an Ordinance issued on 5th November,
1975. For that reason, the Act, when made, was given effect
to from the said date. The object with which the Act was
made is, without a doubt, highly laudable.
868
The provisions of the Act apply to persons specified in sub-
section (2) of Section 2. Persons who have been convicted
under the Sea Customs Act, 1878/Customs Act, 1962, persons
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convicted under the Foreign Exchange Regulation Act,
1947/Foreign Exchange Regulation Act, 1973 constitute the
first category. The second category is of the persons who
have been detained under the Conservation of Foreign
Exchange and Prevention of Smuggling Activities Act, 1947
(COFEPOSA), provided the said order has not been revoked or
withdrawn by the Competent Authority before the completion
of the period prescribed or set aside by a competent Court.
The third category is of the relatives and associates of
persons falling under categories 1 and 2. The fourth
category is of the transferees from the persons falling in
categorY 1 and 2. Clause (c) in Section 3 defines the
expression "illegally acquired propertY". It means, in
short, any property acquired, by a person, whether before or
after the commencement of the Act from out of any income or
assets derived or attributable to the prohibited activity.
Section-4 declares that as from the commencement of the Act
it shall not lawful for any person, to whom the Act applies,
to hold any illegally acquired property either by himself or
through any other person on his behalf It declares further
that any such property so held shall be liable to be
forfeited. Section-6 provides for issuance of a notice
calling upon the person to show-cause why the properties
illegally acquired by him should not be forfeited to the
Government. Section-7 provides for the final orders to be
passed on such show-cause notice after considering the
explanation, if any, furnished by such person and after
making such inquiry as may be appropriate in the
circumstances. Section-8 enacts a special rule of burden of
proof It says, "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." Section-9 provides for
imposing fine in lieu of forfeiture where the authority
finds that a property acquired by such person has only been
partly acquired with illegally acquired income/assets. It
is not necessary to refer to the other provisions except
Section-24, which gives an over-riding effect to the
provisions of the Act over any other law for the time being
in force. Section-26 confers the rule-making power upon the
Central Government.
The appellant in Civil Appeal No.1391 of 1979, Tekchand was
a dealer in watches. The appellants in Civil Appeal
Nos.1392 and 1393 of 1979 are his sons.
869
In the year 1976, Parliament had enacted the Voluntary
Disclosure of Income and Wealth Act, 1976, hereinafter
referred to as the Voluntary Disclosure Act. This Act was
also preceded by an Ordinance issued on October 8, 1975.
The Act was given effect on and from the said date. The
Ordinance and the Act provided for declaration by a person
of his undeclared income in the prescribed manner and within
the prescribed period. If he made the declaration in
accordance with the relevant provisions of the Act, the
income so disclosed was not liable to be included in his
total income and tax was levied thereon at the rate
prescribed in the schedule to the Act, which was,
comparatively speaking, much lower than the rates then
prevailing. Sections-11 and 16 conferred certain limited
immunities upon the person making a declaration under the
Act. Those are the only sections relevant for our purpose
and must be noticed. Section-11 states, "notwithstanding
anything contained in any other law for the time being in
force, nothing contained in any declaration made under sub-
section(l) of section 3 shall be admissible in evidence
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against the declarant for the purpose of any proceeding
relating to imposition of penalty or for the purposes of
prosecution under any of the Acts mentioned in sub-section
(1) of section 8 of the Wealth-tax Act.’ The Acts mentioned
in sub-section (1) of Section 8 are the Indian Income-tax
Act, 1922, Excess Profits Tax Act, 1940, Business Profits
Tax Act, 1947, Super Profits Tax Act, 1963 and the Companies
(Profits) Surtax Act, 1964. Section 11 thus confers a
limited immunity from imposition of any penalty or
prosecution under any of the said Acts and the Wealth Tax
Act. It does not confer an absolute or universal immunity.
Coming to Section 16 it too confers a limited immunity of a
different kind. It says that if the voluntary disclosed
income, wealth or assets is represented by gold, then the
said gold shall not be liable to confiscation either under
the Customs Act or Gold (Control) Act nor shall such person
be liable to imposition of penalty or any other punishment
thereunder provided he fulfils the conditions specified in
the said section.
On October 31, 1975 Tekchand and his two sons made voluntary
disclosure of certain income under the provisions of the
Voluntary Disclosure Act. On. that basis, proceedings were
taken under the Act and concluded.
On August 21, 1976 an order of detention was passed against
Tekchand under the provisions of COFEPOSA. He served out
the detention
870
period. It was neither quashed or set aside by a competent
court nor was it withdrawn or revoked by a competent
authority. The validity of the said detention order is not
questioned in these proceedings.
On February 22, 1978 notices under section 6 of the Act
(SAFEMA) were served upon Tekchand and his two sons calling
upon then to show cause why the properties mentioned in the
notices be not forfeited to Central Government. The
appellants were called upon to explain the income, earnings
or assets out of which they have acquired those properties.
Explanations were furnished by all the three. In his
explanation Tekchand stated inter alia that he had made a
disclosure of a sum of Rs.25,000 in form-A under the
Voluntary Disclosure Act which was accepted by the Competent
Authority and a certificate issued to him in that behalf He
filed a copy of the said certificate. He also set out the
manner in which the said sum was utilised after the
disclosure. He submitted that he cannot be asked to explain
the source from which he obtained the said sum of Rs.25,000.
Calling upon him to do so, he submitted would violate the
immunity granted to him under the Voluntary Disclosure Act.
Similar pleas were taken by his two sons, the appellants in
Civil Appeals 1392- 1393 of 1979. Their objections were
over-ruled by the Competent Authority who by his Order dated
October 21, 1976 forfeited the properties specified in his
orders. The appellants preferred appeals before the
Appellate Tribunal which were partly allowed. In so far as
the Appellate Tribunal affirmed the orders of forfeiture,
they have preferred these appeals with the leave of this
Court under Article 136 of the Constitution.
Mr. B.V. Desai the learned counsel for the appellant urged
the following contentions:
1.The Act applies only in case of persons who have
detained under the COFEPOSA prior to the commencement of the
ACT (SAFEMA). It does not apply to persons who have been
detained tinder COFEPOSA after the commencement of SAFEMA.
This is evident from the use of the words "every person in
respect of whom an order of detention has been
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made............. in clause (b) of sub-section (2) of
Section-2.
2.In these cases it is not proved that the properties
forfeited are illegally acquired properties" within the
meaning of clause (c) of sub-section (1) of Section-3 in
particular of sub-clause (iii) thereof The competent
authority and the Appellate Authority erred in not giving
effect to
871
the immunity conferred by the Voluntary Disclosure Act and
in calling upon the appellants to explain the source of the
income declared under the Voluntary Disclosure Act.
3.The explanations offered by the appellants have been
rejected by the authorities under the Act without a proper
discussion. The findings recorded by them are perverse and
are not supported by any evidence. The procedure prescribed
by the Act has not also been followed scrupulously which too
vitiates the orders of forfeiture.
We are unable to agree with any of the above submissions.
There is nothing in the Act to indicate either directly or
by necessary intendment that the Act is confined only to
those persons who have been detained under COFEPOSA or who
have been convicted under the Customs Act or FERA prior to
the commencement of the SAFEMA. The use of the words "has
been made" in Section 2(2)(b) does not and cannot lead to
such conclusion. The use of the said words must be
understood in the context of Section 2(2). Section 2(2)(b)
provides that every person in respect of whom an order of
detention has been made and which detention order has not
been revoked or withdrawn by the competent authority nor has
been set aside by a competent court, can be proceeded
against under SAFEMA. A mere detention under COFEPOSA is
not enough. Not only there must have been an order of
detention under the said Act, the other conditions
prescribed in the proviso to clause (b) should not also have
taken place. It is for the reason that the words "has been
made" were used in clause (b) of section 2(2). In this
context Explanation-4 appended to section 2(2) becomes
relevant. The Parliament anticipated that a contention may
be raised by persons proceeded against under SAFEMA that
proceedings under the Act can be taken only in those cases
where they have been detained under COFEPOSA or convicted
under Customs Act or FERA after the coming into force of
SAFEMA. With a view to repel any such contention
explanation-4 states:
"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 determined
with reference to any facts, circumstances or
events (including any conviction or detention)
which occurred or took place before the
commencement of this Act."
872
If the contention of the learned counsel is correct and if
that was the intention of the Parliament, they would have
said that such question shall be determined only with
reference to the facts, circumstances and event& including
any conviction of detention which occurred or took place
before the commencement of the SAFEMA. The first contention
of the learned counsel is accordingly rejected.
So far as the contention based upon sections 11 and 16 of
Voluntary Disclosure Act is concerned we have already
pointed out, while setting out the said provisions that the
immunity conferred thereunder is of a limited character and
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that it is not an absolute or universal immunity. The
immunity cannot be extended beyond the confines specified by
the said provisions. There is also no reason to presume
that the Parliament intended to extend any immunity to
smugglers and manipulators of foreign exchange who are
proceeded against under enactments other than those
mentioned in Sections 11 and 16 of the Voluntary Disclosure
Act. So far as the argument that the authorities under the
Act have not properly considered the explanation offered by
the appellants and the material produced by them, we must
say that we are unable to agree with the same. Both the
competent authority and the Appellate Authority have
considered the same and held against the appellants. We see
no reason to interfere with the concurrent findings in this
appeal under Article 136 of the Constitution. We are
equally unable to agree with the learned counsel for the
appellants that the findings recorded by the authorities are
either perverse or that they are based on no evidence. That
the authorities acted with due care and caution is evident
from the fact that with respect to one of the immovable
properties the authorities were of the opinion that the
failure to explain pertains only to part of income/assets
and accordingly invoked Section 9 and imposed a fine instead
of forfeiting the same.
Mr. Desai argued finally that the appellants herein are
small shopkeepers and that the authorities acted arbitrarily
in proceedings against them under SAFEMA leaving out far
bigger and powerful violators. His argument is evocative of
what the Poet, James Jeffrey Roche, exclaimed in his poem
’The net of law’:
"The net of law is spread so wide,
No sinner from its sweep may hide.
Its meshes are so fine and strong.
873
They take in every child of wrong.
O wondrous web of mystery!
Big fish alone escape from thee!"
May be there is some truth in what the learned counsel says
but that cannot furnish or constitute a ground in law for
allowing these appeals. It is for the authorities in charge
of implementation of the Act to take note of the said wail.
It is for them to ensure that the Act is utilised in all
proper cases, more so where the ’big fish’ are involved.
The appeals fail and are accordingly dismissed. No order as
to costs. G.N. Appeals dismissed.
G.N Appeals dismissed.
874