By TIOL News Service

NEW DELHI, JAN 23, 2014: IT all started forty years ago in 1974 when the appellant was detained under the provisions of the Maintenance of Internal Security Act, 1971 (since repealed) and later under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 ("COFEPOSA") on the ground that he in collaboration with his brother, who was living in London at that point of time, was indulging in activities which are prejudicial to the conservation of foreign exchange. The appellant unsuccessfully challenged the detention order. He was eventually released in 1977.

While he was in custody, the second respondent issued a notice dated 4th March 1977 under section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 calling upon the appellant to explain the sources of his income out of which he had acquired the assets described in the schedule to the notice.

Eventually on 27th November 1989, the second respondent passed an order under section 7(1) of the Act forfeiting the properties mentioned in the schedule to the said order.

Aggrieved by the said order, an appeal was carried to the Appellate Tribunal and later to the High Court which culminated in the Final order of the High Court in 2007 confirming the order. The present appeal is against the High Court order.

Before the Supreme Court, the appellant made three submissions -

(1) that the notice issued under Section 6 of the Act is defective and therefore illegal as the notice did not contain the reasons which made the competent authority believe that the notice scheduled properties are illegally acquired properties. In other words, the reasons were not communicated to the appellant;

(2) that the forfeiture, such as the one provided under the Act, is violative of Article 20 of the Constitution of India; and

(3) in the alternative, it is argued  that the High Court failed to consider the question whether the decision of the competent authority as confirmed by the appellate authority is sustainable and therefore, the matter is required to be remitted to the High Court for an appropriate consideration of the legality of order of forfeiture.

The Supreme Court rejected the submission of the appellant for the following reasons.

Firstly, there is no express statutory requirement to communicate the reasons which led to the issuance of notice under Section 6 of the Act.

Secondly, the reasons, though not initially supplied alongwith the notice dated 4.3.1977, were subsequently supplied thereby enabling the appellant to effectively meet the case of the respondents.

Thirdly, the appellant could have effectively convinced the respondents by producing the appropriate material that further steps in furtherance to the notice under Section 6 need not be taken. Apart from that, an order of forfeiture is an appealable order where the correctness of the decision under Section 7 to forfeit the properties could be examined.

The second submission. The Act enables the Government of India to forfeit "illegally acquired property" of any person to whom the Act is made applicable. The Act is made applicable to the persons specified in section 2(2). Five categories of persons are covered thereunder.

(1) Clause (a) - persons who have been convicted under various enactments referred to therein;

(2) clause (b) - persons in respect of whom an order of detention has been made under the COFEPOSA ;

(3) clause (c) - persons who are relatives of persons referred to in clause (a) or clause (b). Expression  relative is itself explained in explanation 2.

(4) Clause (d) - every associate of persons referred to in clause (a) or clause (b). Once again the expression  associate is explained under explanation 3 to sub-section (2).

(5) Clause (e) - subsequent holders of property which at some point of time belonged to persons referred to either in clause (a) or clause (b).

Section 4 makes it unlawful (for any person to whom the Act applies) to hold any illegally acquired property and it further declares that such property shall be liable to be forfeited to the Central Government. The procedure is contained under sections 6 and 7 of the Act. Section 8 prescribes the special rule of evidence which shifts the burden of proving that any property specified in the notice under section 6 is not illegally acquired property of the noticee . Section 6 inter alia postulates that having regard to the value of the property held by any person (to whom the Act applies) and his known sources of income, if the "competent authority" (notified under section 5) has reason to believe that such properties are "illegally acquired properties" , the competent authority is authorized to call upon the holder of the property to "indicate" the source of his income etc. which enabled the acquisition of such property along with necessary evidence. It also authorizes the competent authority to call upon the noticee to show cause as to why all or any of such properties mentioned in the notice should not be declared illegally acquired properties and be forfeited to the Central Government. Section 7 provides for a reasonable opportunity of being heard after the receipt of response to the notice under section 6 to the noticee and requires the competent authority to record a finding whether all or any of the properties in question are illegally acquired properties.

Expression "illegally acquired property" is defined in elaborate terms under the Act. Broadly speaking the definition covers two types of properties:

1) acquired by the income or earnings; and

2) assets derived or obtained from or attributable to any activity which is prohibited by or under a law in force. Such law must be a law with respect to which parliament has the power to make law.

From the language and the scheme of the Act it does not appear that the application of the Act is limited to persons who either suffered a conviction under one of the acts specified in section 2(2)(a) the Act or detained under the COFEPOSA subsequent to the commencement of the Act in question. On the other hand, explanation 4 to section 2 expressly declares as follows:

"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)."

The appellant happens to be a person to whom the Act applies. He was detained under the provisions of the COFEPOSA . However, such a detention was anterior to the commencement of the Act, which came into force on 25th January 1976, while the detention order was passed on 19th December 1974. It appears from the judgment under appeal that the appellant was eventually set at liberty in 1977.

It is a well-settled principle of constitutional law that sovereign legislative bodies can make laws with retrospective operation; and can make laws whose operation is dependent upon facts or events anterior to the making of the law. However, criminal law is excepted from such general Rule, under another equally well settled principle of constitutional law, i.e. no ex post facto legislation is permissible with respect to criminal law. Article 20 contains such exception to the general authority of the sovereign legislature functioning under the Constitution to make retrospective or retroactive laws.

The submission of the appellant is that since the Act provides for a forfeiture of the property of the appellant on the ground that the appellant was detained under the COFEPOSA , the proposed forfeiture is nothing but a penalty within the meaning of the expression under Article 20 of the Constitution. Such an inference is inevitable in the light of the definition of "illegally acquired property" which by definition (under the Act) is property acquired either 'out of' or by means of any income, earnings & "obtained from or attributable to any activity prohibited by or under any law & .

If a subject acquires property by means which are not legally approved, sovereign would be perfectly justified to deprive such persons of the enjoyment of such ill-gotten wealth. There is a public interest in ensuring that persons who cannot establish that they have legitimate sources to acquire the assets held by them do not enjoy such wealth. Such a deprivation, would certainly be consistent with the requirement of Article 300A and 14 of the Constitution which prevent the State from arbitrarily depriving a subject of his property.

The Supreme Court of the opinion that the Act is not violative of Article 20 of the Constitution. Even otherwise as was rightly pointed out by the Addl . Solicitor General, in view of its inclusion in the IXth Schedule, the Act is immune from attack on the ground that it violates any of the rights guaranteed under Part III of the Constitution by virtue of the declaration under Article 31-B.

The alternative and last submission i.e., in view of the failure of the High Court to examine the tenability of the order of the forfeiture as confirmed by the appellate tribunal the matter is required to be remitted to the High Court for appropriate consideration. This submission is required to be rejected. The Supreme Court noted that except challenging the order of forfeiture on the two legal grounds, there is no other ground on which correctness of the order of forfeiture is assailed in the writ petition. For the first time in this appeal, an attempt is made to argue that the conclusions drawn by the competent authority that the properties forfeited are illegally acquired - is not justified on an appropriate appreciation of defence of the appellant. In other words, the appellant seeks re-appreciation of the evidence without even an appropriate pleading in the writ petition. It is a different matter that the High Court in exercise of its writ jurisdiction does not normally re-appreciate evidence. Looked at any angle, the Supreme Court saw no reason to remit the matter to the High Court.

In the result, the appeals, being devoid of merit, are dismissed.

(See 2014-TIOL-04-SC-FEMA)