Supreme Court of India
M/S. PLATINUM THEATRE AND OTHERSversusCOMPETENT AUTHORITY SMUGGLERS & FOREIGN EXCHANGE MANIPULATORS (FORFEITURE OF PROPERTY) ACT, 1976 AND ANOTHER
- Citation
- 2023 INSC 273
- Decided
- 22 March 2023
- Disposal
- Dismissed
- Bench
- AJAY RASTOGI
Holding
The competent authority did not commit any manifest error; the forfeiture under Section 7 of the 1976 Act stands and the appellants are not entitled to relief under Section 9.
Summary
The Supreme Court examined the forfeiture of M/s. Platinum Theatre, a partnership firm, under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976. The competent authority had ordered forfeiture under Section 7 because more than 50% of the theatre's value (Rs.13.12 lakhs) remained unexplained, and the partners failed to disclose the source of their capital contributions. The appellants contended that the land was privately owned, that they were entitled to a fine in lieu of forfeiture under Section 9, and that the proceedings were unduly delayed. The Court held that the burden of proof under Section 8 lay on the appellants, who did not discharge it, and that the authority had not erred in refusing Section 9 relief or in the timing of the proceedings. Consequently, the forfeiture order was upheld and the appeal dismissed.
Issues considered
- The burden of proof under Section 8 of the 1976 Act and whether the appellants discharged it
- Whether the competent authority erred in forfeiting the property under Section 7 when more than half of its value was unexplained
- Whether the appellants were entitled to a fine in lieu of forfeiture under Section 9 of the 1976 Act
- Whether the alleged delay in initiating forfeiture proceedings invalidated the order
- Whether the land owned by appellant No.2 is exempt from forfeiture
Legislation cited
Subjects
ForfeitureSmugglers and Foreign Exchange Manipulators ActSection 7Section 8Section 9Burden of proofCOFEPOSAPartnership firmUnexplained wealthDelay in proceedings
Judgment
1084 [2023]
SUPREME COURT 3 S.C.R. 1084
REPORTS [2023] 3 S.C.R.
A M/S. PLATINUM THEATRE AND OTHERS
v.
COMPETENT AUTHORITY SMUGGLERS & FOREIGN
EXCHANGE MANIPULATORS (FORFEITURE OF PROPERTY)
ACT, 1976 AND ANOTHER
B
(Civil Appeal No(S). 4369 of 2009)
MARCH 22, 2023
[AJAY RASTOGI AND BELA M. TRIVEDI, JJ.]
Smugglers and Foreign Exchange Manipulators (Forfeiture
C
of Property) Act, 1976 – ss. 2, 6, 7, 8, 9 – Conservation of Foreign
Exchange and Prevention of Smuggling Activities Act, 1974
(COFEPOSA) – Appellant no.1-registered partnership firm
comprising of appellant nos. 2 to 5 were holding the subject theatre
– According to the finding recorded by the competent authority,
D more than 50% of the value assessed (i.e. Rs.13.12 lakhs) of the
theatre has remained unexplained and accordingly the theatre was
liable for forfeiture u/s. 7 of the Act, 1976 – Aggrieved by it, the
partners approached High Court – Single Judge of the High Court
dismissed their plea on the premise that the partners failed to disclose
the source of their income and had not tendered any explanation
E
with respect to the same – High Court upheld the order passed by
the competent authority u/s. 7 r/w. 19(1) of the 1976 Act – On appeal,
held: From the evidence on record, neither of the partners have
justified any source from where their capital contribution was made
nor the explanation was tendered by them regarding their source of
F income – What was tendered by the partners was disbelieved at all
stages and a finding was returned that major part of their investment
was income from undisclosed sources – Therefore, Authority has
not committed any manifest error in forfeiting the property in exercise
of power u/s. 7 of Act 1976.
G Smugglers and Foreign Exchange Manipulators(Forfeiture
of Property) Act, 1976 – Object & purpose of – The Act has been
enacted with an object to provide for the forfeiture of illegally
acquired properties of smugglers and foreign exchange
manipulators and for matters connected therewith or incidental
thereto – At the same time, to provide an effective prevention of
H
1084
PLATINUM THEATRE v. COMPETENT AUTHORITY SMUGGLERS & 1085
FOREIGN EXCHANGE MANIPULATORS ACT, 1976
smuggling activities and foreign exchange manipulations which are A
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.
Dismissing the appeal, the Court
HELD: 1. The Act, 1976 has been enacted by the B
Parliament with an object to provide for the forfeiture of illegally
acquired properties of smugglers and foreign exchange
manipulators and for matters connected therewith or incidental
thereto. At the same time, to provide an effective prevention of
smuggling activities and foreign exchange manipulations which C
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. It also provides that such
persons have been augmenting such gains by violations of
wealth-tax, income-tax or other laws or by other means and have
thereby been increasing their resources for operating in a D
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. [Para 9][1090-E-G]
2. Section 2(1) of the Act, 1976 applies to the persons
specified in sub-section (2). Section 2(2) gives a long list of E
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 sub-clause(d) F
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. [Para 10][1090-G-H;
1091-A]
G
3. Section 8 clearly postulates that burden of proof, in any
proceedings under this Act, in reference to the notice served
under Section 6 in regard to the illegally acquired properties shall
lie on the person affected and while exercising power under
Section 7, forfeiting the illegally acquired properties in a case
H
1086 SUPREME COURT REPORTS [2023] 3 S.C.R.
A where the source of only a part, being less than one-half of the
income of which such property is acquired, the acquisition has
been subject to proof to the satisfaction of the competent authority,
can be offered an option to the person affected to pay in lieu of
forfeiture, a fine of the value of such part, as indicated under
Section 9 of the Act 1976. [Para 13][1095-H; 1096-A-B]
B
4. The Single Judge of the High Court revisited the factual
matrix on record and returned a finding that no documentary
evidence was placed by either of the appellants, during the
proceedings initiated by the competent authority, who are under
an obligation to prove in terms of Section 8 of the Act 1976. From
C the evidence which came on record, it could be gathered that out
of the investment made by the partners (Appellant nos. 2 to 5) to
the tune of Rs.10.20 lakhs, one Y (not a party to the present
proceeding) contributed Rs.5 lakhs and Appellant no.2 and her
children have contributed to the tune of Rs.5.2 lakhs each but
D neither Y has justified any source from where his capital
contribution was made nor the explanation was tendered by
Appellant nos. 2 to 5 regarding their source of income and it was
disbelieved 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
E Appellant no. 2 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. [Para 16][1097-C-F]
F 5. Even before this Court, there is no material that has
been placed by Appellant no.2 in rebuttal which may even prima
facie justify the sources of fund available at her command for
acquisition of the land in question to the tune of Rs.33,000/- in
the year 1969. In the absence of proper explanation as to the
G source of acquisition and as majority of investment remains
unexplained, the authority disbelieved the version of Appellant
no. 2 as no proof was placed on record of gifts from her marriage.
That apart, if the value of the land is taken only of Rs.33,000/-,
the total value of the land and building work out at Rs.25,20,000/
-, and as such, the major part of the investment still remains
H
PLATINUM THEATRE v. COMPETENT AUTHORITY SMUGGLERS & 1087
FOREIGN EXCHANGE MANIPULATORS ACT, 1976
unexplained. Even the accounts were not maintained in respect A
of the cost of construction of the building, in absence whereof,
the authority has not committed any manifest error in forfeiting
the property in exercise of power under Section 7 of Act 1976.
[Para 19][1098-G-H; 1099-A-B]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4369 B
of 2009.
From the Judgment and Order dated 19.04.2007 of the High Court
of Karnataka at Bangalore in WP No.7263 of 2000.
Shyam Divan, Sr. Adv., Abdul Azeem Kalebudde, Ankolekar
Gurudatta, Adith Deshmukh, Advs. for the Appellants. C
Vikramjit Bannerjee, A.S.G., Arijit Prasad, Sr. Adv., T. A. Khan,
Shashank Bajpai, B K Satija, Nachiketa Joshi, Raj Bahadur Yadav, Arvind
Kumar Sharma, Advs. for the Respondents.
The Judgment of the Court was delivered by D
RASTOGI, J.
1. The instant appeal is directed against the judgment and order
dated 19th April, 2007 passed by learned Single Judge of the High Court
of Karnataka at Bangalore upholding the order passed by the competent
authority under Section 7 read with 19(1) of the Smugglers and Foreign E
Exchange Manipulators (Forfeiture of Property) Act, 1976(hereinafter
being referred to as the “Act, 1976”) dated 31st December, 1997.
2. Appellant no.1 is said to be a registered partnership firm
comprising of appellant nos. 2 to 5 and one N.A. Yusuf(not a party
herein) as its partners with the profit sharing ratio of the partners as F
follows:-
N.A. Yusuf - 50%
P.M. Saheeda(appellant no. 2) - 25%
Mohd. Ali(appellant no. 3) - 8.33% G
Shaukat Ali(appellant no. 4) - 8.33%
Mumtaz(appellant no. 5) - 8.33%
3. The background facts culled out from the record which led to
passing of the order forfeiting the subject property are that one of the
H
1088 SUPREME COURT REPORTS [2023] 3 S.C.R.
A 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 21stJanuary, 1985 by Government of
Maharashtra and later by the Central Government by order dated 27 th
August, 1991. The two detention orders against N.A. Yusuf came to be
B
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
C 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 its equipment
D by order dated 31st July, 1995. However, on appeal being preferred at
the instance of the appellants, the matter was remanded back to the
competent authority for fresh consideration by order dated 17th July,
1997.
5. The competent authority after revisiting the matter afresh and
E affording an opportunity of hearing to the parties, passed an order dated
31st December, 1997 of forfeiture of M/s.Platinum Theatre under Section
7 of the Act, 1976. Subsequently, the Appellate Tribunal for Forfeited
Property, New Delhi(hereinafter being referred to as the “Tribunal”)
dismissed the appeal and upheld the order of forfeiture passed by the
competent authority on 7th September, 1999 and, thereafter, the writ
F petition filed at the instance of the appellants also came to be dismissed
by judgment and order dated 19th April, 2007 which became a subject
matter of challenge in appeal before us.
6. Learned counsel for the appellant has challenged the order of
forfeiture particularly on the following submissions:-
G
(i) The land on which the subject theatre was constructed is not
the property of the first appellant firm. It is owned by appellant no.
2(P.M. Saheeda w/o Ibrahim Soofi) through a registered sale deed dated
16th April, 1969. Since the land was privately owned by appellant no. 2,
the order regarding forfeiture of land, in the facts and circumstance of
H the case, is not legally sustainable.
PLATINUM THEATRE v. COMPETENT AUTHORITY SMUGGLERS & 1089
FOREIGN EXCHANGE MANIPULATORS ACT, 1976 [AJAY RASTOGI, J.]
(ii) The competent authority ought to have applied Section 9 of A
the Act, 1976 in the present case and should have provided an option to
the appellants to pay fine in lieu of forfeiture, taking into consideration
the fact that the appellants had disclosed source of more than 50% cost
incurred in construction of the theatre. The loan of Rs.12 lakhs obtained
from Vijaya Bank by the appellants constituted more than 50% of cost
B
of the theatre’s construction. As such, the authority was under an
obligation to give an option to the appellants to pay a fine in lieu of
forfeiture in terms of Section 9 of the Act, 1976.
(iii) The forfeiture proceeding initiated in 1995 was grossly delayed.
The partnership firm is of the year 1974, the construction of the theatre
was carried out during the period 1971-1974 and the forfeiture order C
was passed in 1997, after more than two decades. The competent
authority ought to have considered the inordinate delay in passing of an
adverse order 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. D
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:- E
(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 F
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 G
account from which money was disbursed for building the said theatre.
In addition, appellant no. 2(P.M. Saheeda) failed to substantiate with
proof the claim that the land was bought from her wedding gifts in 1969.
In the facts and circumstances, the finding of forfeiture recorded by the
competent authority has been rightly confirmed at all later stages in the
course of proceedings. H
1090 SUPREME COURT REPORTS [2023] 3 S.C.R.
A (iii) The contribution of N.A. Yusuf was more than half of the
total contribution of Rs.10.20 lakhs of capital infused in the partnership
firm. Since more than 50% of the value remained unexplained, the
appellants were not entitled to seek an option to pay a fine in lieu of
forfeiture as contemplated under Section 9 of the Act.
B (iv) There was no delay which could be attributed to the authority
for the reason that proceedings were initiated in the first instance against
the appellant firm by issuance of show cause notice dated 13th January,
1977 and since then the proceedings were continued one after the other.
In reference to the instant proceedings, the show cause notice was served
to the appellant firm and its partners(appellant nos. 2 to 5) on 16th October,
C 1994 which finally culminated into forfeiture of the property under Section
7 by order dated 31st December, 1997. In the given circumstances, there
was no delay on the part of the respondent authorities in initiating the
proceedings in reference to the forfeiture of the property under the Act,
1976 which, in no manner, be said to be fatal in the given facts and
D circumstances to interfere in the instant proceedings.
8. We have heard learned counsel for the parties and with their
assistance perused the material available on record.
9. The Act, 1976 has been enacted by the Parliament with an
object to provide for the forfeiture of illegally acquired properties of
E smugglers and foreign exchange manipulators and for matters connected
therewith or incidental thereto. At the same time, to provide an 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
F of their ill-gotten gains. It also provides that such persons have been
augmenting such gains by violations of wealth-tax, income-tax or other
laws or by other means and have thereby been increasing their resources
for operating in a 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.
G
10. Section 2(1) of the Act, 1976 applies to the persons specified
in sub-section (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
H a person referred to in clause (a) or clause (b) as defined in sub-clause(d)
PLATINUM THEATRE v. COMPETENT AUTHORITY SMUGGLERS & 1091
FOREIGN EXCHANGE MANIPULATORS ACT, 1976 [AJAY RASTOGI, J.]
read with Explanation 3, which refers to an associate and covers all A
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: B
“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, C
namely: -
(a) every person-
(i) who has been convicted under the Sea Customs Act, 1878
(8 of 1878), or the Customs Act, 1962 (52 of 1962), of an
offence in relation to goods of a value exceeding one lakh of D
rupees ; or
(ii) who has been convicted under the Foreign Exchange
Regulation Act, 1947 (7 of 1947), or the Foreign Exchange
Regulation Act, 1104 1973 (46 of 1973), of an offence, the
amount or value involved in which exceeds one lakh of rupees; E
or
(iii) who having been convicted under the Sea Customs Act,
1878 (8 of 1878), or the Customs Act, 1962 (52 of 1962), has
been convicted subsequently under either of those Acts ; or
(iv) who having been convicted under the Foreign Exchange F
Regulation Act, 1947 (7 of 1947), or the Foreign Exchange
Regulation Act, 1973 (46 of 1973), has been convicted
subsequently under either of those Acts ;
(b) every person in respect of whom an order of detention has
been made under the Conservation of Foreign Exchange and G
Prevention of Smuggling Activities Act, 1974 (52 of 1974);
Provided that-
(i) such order of detention, being an order to which the provisions
of section 9 or section 12A of the said Act do not apply, has not
H
1092 SUPREME COURT REPORTS [2023] 3 S.C.R.
A been revoked on the report of the Advisory Board under section
8 of the said Act or before the receipt of the report of the
Advisory Board or before making a reference to the Advisory
Board; or
(ii) such order of detention, being an order to which the
B provisions of section 9 of the said Act apply, has not been
revoked before the expiry of the time for, or on the basis of,
the review under subsection (3)of section 9, or on the report of
the Advisory Board under section 8, read with sub- section (2)
of section 9, of the said Act ; or
C (iii) such order of detention, being an order to which, the
provisions of section 12A of the said Act apply, has not been
revoked before the expiry of the time for, or on the basis of,
the first review under sub-section (3) of that section, or on the
basis of the report of the Advisory Board under section 8, read
with sub-section (6) of section 12A, of that Act ; or
D
(iv) such order of detention has not been set aside by a court
of competent jurisdiction ;
(c) every person who is a relative of a person referred to in clause
(a) or clause (b) ;
E (d) every associate of a person referred to in clause (a) or clause
(b);
(e) any holder (hereafter in this clause referred to as the present
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
F holder or, as the case may be, anyone who heldsuch property
after such person and before the present holder, is or was a
transferee in good faith for adequate consideration.
Explanation 1.-
Explanation 2.—
G
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;
H
PLATINUM THEATRE v. COMPETENT AUTHORITY SMUGGLERS & 1093
FOREIGN EXCHANGE MANIPULATORS ACT, 1976 [AJAY RASTOGI, J.]
(ii) any individual who had been or is managing the affairs or A
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; B
(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 C
company;
(v) any person who had been or is managing the affairs, or
keeping the accounts, of any association of persons, body of
individuals, partnership firm or private company referred to in
clause (iii); D
(vi) ….”
….
6. Notice of forfeiture. E
(1) If, having regard to the value of the properties held by any
person to whom this Act applies, either by himself or through any
other person on his behalf, his known sources of income, earnings
or assets, and any other information or material available to it as a
result of action taken under section 18 or otherwise, the competent F
authority has reason to believe (the reasons for such belief to be
recorded in writting) that all or any of such properties are illegally
acquired properties. it may serve a notice upon such person
(hereinafter referred to as the person affected) calling upon him
within such time as may be specified in the notice, which shall not
be ordinarily less than thirty days, to indicate the sources of his G
income, earnings or assets, out of which or by means of which he
has acquired such property, the evidence on which he relies and
other relevant information and particulars, and to show cause why
all or any of such properties, as the case may be, should not be
H
1094 SUPREME COURT REPORTS [2023] 3 S.C.R.
A declared to be illegally acquired properties and forfeited to the
Central Government under this Act.
(2) Where a notice under sub-section (1) to any specifies any
property as being held on behalf of such person by any other
person. a copy of the notice shall also be served upon such other
B person.
7. Forfeiture of property in certain cases.
(1) The competent authority may, after considering the explanation,
if any, to the show- cause notice issued under section 6, and the
materials available before it and after giving to the person affected
C (and in a case where the person affected holds any property
specified in the notice through any other person, to such other
person also) a reasonable opportunity of being heard, by order,
record a finding whether all or any of the properties in question
are illegally acquired properties.
D (2) Where the competent authority is satisfied that some of the
properties referred to in the showcause notice are illegally acquired
properties but is not able to identify specifically such properties
then, it shall be lawful for the competent authority to specify the
properties which, to the best of its judgment, are illegally acquired
E properties and record a finding accordingly under sub-section (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
F 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.
G
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.
H
PLATINUM THEATRE v. COMPETENT AUTHORITY SMUGGLERS & 1095
FOREIGN EXCHANGE MANIPULATORS ACT, 1976 [AJAY RASTOGI, J.]
9. Fine in lieu of forfeiture. A
(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
one-half of the income, earnings or assets with which such property
was acquired has not been proved to the satisfaction of the B
competent authority, it shall make an order giving an option to the
person affected to pay, in lieu of forfeiture, a fine equal to one and
one-fifth times the value of such part.
Explanation.-For the purposes of this sub-section, the value of
any part of income, earnings or assets, with which any property C
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 D
assets.
(2) Before making an order imposing a fine under sub-section (1),
the person affected shall be given a reasonable opportunity of
being heard,
E
(3) Where the person affected pays the fine due under sub- section
(1), within such time as may be allowed in that behalf, the
competent authority may, by order, revoke the declaration of
forfeiture under section 7 and thereupon such property shall stand
released.”
F
12. Taking into consideration the scope and ambit of Act, 1976 of
which a detailed reference has been made, forfeiture proceedings could
be initiated under Section 6 in reference to such illegally acquired
properties by such persons who are covered under Section 2 read with
the explanation, appended thereto, by a show cause notice and after due
compliance of principles of natural justice, the power vests in the G
competent authority to pass an order of forfeiture of the property in
exercise of power under Section 7 of the Act 1976.
13. Section 8 clearly postulates that burden of proof, in any
proceedings under this Act, in reference to the notice served under
Section 6 in regard to the illegally acquired properties shall lie on the H
1096 SUPREME COURT REPORTS [2023] 3 S.C.R.
A person affected and while exercising power under Section 7, forfeiting
the illegally acquired properties in a case where the source of only a
part, being less than one-half of the income of which such property is
acquired, the acquisition has been subject to proof to the satisfaction of
the competent authority, can be offered an option to the person affected
to pay in lieu of forfeiture, a fine of the value of such part, as indicated
B
under Section 9 of the Act 1976.
14. The respondents have initiated the proceedings serving show
cause notice under Section 6 of forfeiture of the property which was
taken from ill-gotten gains to the first appellant firm and its
partners(Appellant nos. 2 to 5) dated 16th October, 1994. The competent
C 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.
D 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
E 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
income-tax 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 assessed as income of Appellant
F no. 2(P.M. Saheeda). From the other documentary evidence which has
come on record, it reveals that the construction and decoration of the
theatre was undertaken by N.A. Yusuf as a proprietor. A finding was
recorded that the entire capital in M/s. Platinum Theatre in the names of
N.A. Yusuf, P.M. Saheeda(Appellant no. 2)and her minor children was
G created through the illegally earned money by N.A. Yusuf through his
smuggling activities. It was supported by income-tax returns for the
assessment year 1975-76. Appellant no. 2(P.M. Saheeda) which claimed
that the land was purchased by her for Rs.33,000/-in the year 1969 from
her own funds generated through wedding gifts in support of which no
proofs was produced, and with land, the value of the theatre would work
H
PLATINUM THEATRE v. COMPETENT AUTHORITY SMUGGLERS & 1097
FOREIGN EXCHANGE MANIPULATORS ACT, 1976 [AJAY RASTOGI, J.]
out to be Rs.25.12 lakhs. The appellants failed to justify that the loan of A
Rs. 12 lakhs from Vijaya Bank was ever invested in the subject theatre.
There was no document placed on record which could justify that Rs.12
lakhs was invested in the construction of theatre. According to the finding
recorded by the competent authority, more than 50% of the value
assessed(i.e. Rs. 13.12 lakhs) of the theatre has remained unexplained
B
and accordingly the theatre was liable for forfeiture under Section 7 of
the Act, 1976, free from all encumbrances, under Order dated 31st
December, 1997.On appeal being preferred, the finding stood affirmed
by order dated 7th September, 1999.
16. Against the said order, a writ petition was filed before the
High Court under Article 226 of the Constitution. The learned Single C
Judge of the High Court revisited the factual matrix on record and
returned a finding that no documentary evidence was placed by either
of the appellants, during the proceedings initiated by the competent
authority, who are under an obligation to prove in terms of Section 8 of
the Act 1976. From the evidence which came on record, it could be D
gathered that out of the investment made by the partners(Appellant nos.
2 to 5) to the tune of Rs.10.20 lakhs, N.A. Yusuf contributed Rs.5 lakhs
and Appellant no.2(P.M. Saheeda) and her children have contributed to
the tune of Rs.5.2 lakhs each but neither N.A. Yusuf has justified any
source from where his capital contribution was made nor the explanation
was tendered by Appellant nos. 2 to 5 regarding their source of income E
and it was disbelieved 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 F
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 G
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:
H
1098 SUPREME COURT REPORTS [2023] 3 S.C.R.
A “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 forfeit
the same, and as such, the Competent Authority and the Appellate
B
Tribunal ought to have taken note of the same into consideration
only to impose fine and not to forfeit the property and also the
land in question should be available to the petitioners and it should
not be the subject matter of forfeiture.
In this regard, it appears the Competent Authority as well
C as the Appellate Tribunal having noted the transaction and also
having noted that there is no explanation offered by the 2nd
petitioner properly regarding acquisition of the land in question for
Rs.33,000/- in the year 1969, and also having doubted the unsigned
agreement between the 2nd petitioner and N.A. Yusuf, and in the
D absence of any such proper explanation as to source of acquisition,
held that major investment remain unexplained and also disbelieved
the version of the 2nd petitioner on the ground that the proof of gift
from her marriage has not been produced. Thus, according to the
Competent Authority as well as the Appellate Tribunal, even if
the value of the land is taken only at Rs.33,000/-, the total value of
E the land and building will work out at Rs.25,20,000/- and as such,
it was of the view that major part of the investment remained
unexplained. Even the accounts are not maintained in respect of
the cost of construction of the building and all other various
installations made.”
F 18. Taking into consideration the submissions made, we find no
error being committed in the finding returned by the High Court which
may call for our interference.
19. Even before this Court, there is no material that has been
placed by Appellant no.2 (P.M. Saheeda) in rebuttal which may even
G prima facie justify the sources of fund available at her command for
acquisition of the land in question to the tune of Rs.33,000/- in the year
1969. In the absence of proper explanation as to the source of acquisition
and as majority of investment remains unexplained, the authority
disbelieved the version of Appellant no. 2(P.M. Saheeda) as no proof
H was placed on record of gifts from her marriage. That apart, if the value
PLATINUM THEATRE v. COMPETENT AUTHORITY SMUGGLERS & 1099
FOREIGN EXCHANGE MANIPULATORS ACT, 1976 [AJAY RASTOGI, J.]
of the land is taken only of Rs.33,000/-, the total value of the land and A
building work out at Rs.25,20,000/-, and as such, the major part of the
investment still remains unexplained. Even the accounts were not
maintained in respect of the cost of construction of the building, in absence
whereof, the authority has not committed any manifest error in forfeiting
the property in exercise of power under Section 7 of Act 1976.
B
20. Suffice it to say that the proceedings were initiated in reference
to the appellants, in the first instance, pursuant to show cause notice
dated 13th January, 1977 and the competent authority passed an Order
of forfeiture on 23rd November, 1977. Later that came to be set aside in
the year 1991 and fresh forfeiture proceedings were initiated pursuant
to show cause notice under Section of the Act dated 16th October, 1994 C
which finally culminated into passing of order of the competent authority
on 31st December, 1997 and on dismissal of appeal, the writ petition was
preferred at the instance of the appellants and the matter reached to this
stage. Thus, in the given facts and circumstances, the very plea of so
called alleged gross delay in initiating the proceedings for forfeiture of D
the property is misconceived and deserves an outright rejection.
21. Consequently, the appeal is without substance and accordingly
dismissed. No costs.
22. Pending application(s), if any, shall stand disposed of.
E
Ankit Gyan Appeal dismissed.
(Assisted by : Mahendra Yadav, LCRA)
F
G
H
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