By TIOL News Service

NEW DELHI, NOV 23, 2017: MORE than fifty years ago, on 3/4 June, 1965, the residential premises of the appellant's father were searched by the officers under Rule 126L(2) of the Defence of India Rules, 1962 [RULES]. They found 240 kilograms of gold (bars etc.) buried in the house and seized it. Proceedings for confiscation were initiated.

Eventually on 24.9.1966, the Collector of Central Excise and Customs passed an order confiscating the seized gold on the ground that the seized gold was held by the appellant in contravention of Rule 126-I. A penalty of Rs.25 lakhs under Rule 126L(16) of the RULES was also imposed.

Aggrieved, an appeal was carried by the appellant's father before the Gold Control Administrator which was dismissed on 6.3.1972. The matter was carried further in a revision before the Government of India which was also dismissed on 4.6.1979. The decision of the Government of India was challenged in a writ petition before the Rajasthan High Court.

The High Court accepted the submissions of the petitioner and remitted the matter to the Collector[order dated 9.8.1994] by observing thus -

Pursuant to the remand, by an order dated 9.12.1994 , the Collector once again ordered confiscation of the entire quantity of (240 kilograms) gold approximately valued at Rs. 11.04 crores with an option to the legal heirs of the appellant's father to redeem the gold by paying a fine of Rs. 2.5 crores. The option to redeem the gold was to be exercised within three months.

The Collector further held that in view of the fact that the person from whom the gold was seized had expired, the levy of penalty contemplated under Rule 126L(16) of the RULES was not called for .

Aggrieved, the appellant carried the matter in appeal to the Tribunal. By a Majority decision, the Tribunal by its order dated 30th October 1995 finally opined that the redemption fine should be reduced to Rs.12.5 lacs which represented the value of the gold as on the date of the seizure.

On a reference by the Collector, by an order dated 20.5.1996 , the Tribunal referred the matter to the Rajasthan High Court.

In the meanwhile, the appeal by the Department against that part of the Order of the Collector dated 9.12.1994 which gave an option to the appellant to redeem the gold by paying fine of Rs. 2.5 crores in lieu of confiscation was dismissed on 23.5.1996 .

The Reference came to be answered by the Rajasthan High Court by the order dated 29.6.2009 , which is the subject matter of the instant appeal .

The relevant portion reads as follows:

As a consequence, the Tribunal passed an order on 30.4.2010 remitting the matter to the adjudicating Commissioner to determine the appropriate redemption fine and the Commissioner passed an order on 16.7.2010 and which relevant portion(s) read -

The Supreme Court narrated the history of the Gold Control Regime and observed that one of the questions that is required to be examined to decide the controversy on hand is whether the RULES stood irrevocably repealed in the absence of a provision in the GOLD ACT similar to Section 117(1) of the ORDINANCE?

In this connection, the Supreme Court examined a plethora of case laws and observed -

++ In the year 1968, an ordinance titled The Gold (Control) Ordinance, 1968 (6 of 68) (hereinafter referred to as 'the ORDINANCE') was promulgated on 29th June, 1968. Section 117 of the ORDINANCE repealed the RULES. The RULES would have lapsed on 9th July 1968 because the authority of law for the sustenance of the RULES ceased on that day with the cessation of the operation of the Defence of India Act (5 of 1962), but for their repeal by Section 117 of the ORDINANCE. Since the repeal of any rules by another statute and the consequences flowing therefrom are not provided for either in the General Clauses Act 1897 or any other law, it was declared in Section 117 of the ORDINANCE.

++ Thereafter Parliament made the Gold Control Act (45 of 1968) (hereinafter referred to as the GOLD ACT). The scheme of the ORDINANCE and the GOLD ACT is more or less the same and is substantially similar to the scheme of the Part XIIA of the RULES. Section 116(1) of GOLD ACT inter alia repealed the ORDINANCE.

++ The resultant legal position is that the efficacy of the provisions of an ordinance would not in any way be diminuted or abrogated unless there is a subsequent countervailing legislation. The rights and obligations created, the liabilities incurred or acquired or suffered under an ordinance would be as enduring as those resulting from a Statute.

++ In the case on hand, the ORDINANCES came to be repealed and replaced by the GOLD ACT with retrospective effect from 29th June 1968, that is, from the date of promulgation of the ORDINANCE.

++ Though the GOLD ACT expressly repealed the ORDINANCE, it did not make a declaration that the RULES are repealed. But on that account, the peremptory nature of the repeal of the RULES by the ORDINANCE need not be doubted for the following two reasons:

(i) The GOLD ACT while making the declaration that the ORDINANCE is repealed provided that various actions taken both under PART XIIA of the RULES or the ORDINANCE are deemed to be actions taken under the corresponding provisions of the GOLD ACT; and

(ii) Unlike Krishan Kumar Singh, the ORDINANCE was followed up by a legislative action which did not disapprove the content of the ORDINANCE.

++ Section 116(2) of the GOLD ACT says -

"the confiscation adjudged .. under … Part XIIA of the Defence of India Rules 1962 … shall be deemed to have been adjudged … under the corresponding provisions of this Act."

++ The adjudgment of confiscation was found to be not in accordance with law by the Rajasthan High Court in Writ Petition No.1215/79 dated 9th August 1994 . The High Court had set aside the adjudgment order and remitted the matter to the original authority for fresh adjudgment. The High Court did not hold the seizure of appellant's gold was illegal. In other words, the seizure of the gold under the RULES remained undisturbed thereby requiring an examination of the question whether the gold is required to be confiscated. As a result, only the adjudgment of confiscation was required to be conducted afresh. It is a liability incurred by the appellant. Necessarily the question arises as to what is the law in accordance with which such adjudgment is to be made. By the date of the judgment of the High Court, the RULES stood repealed by the ORDINANCE which inter alia provided that Section 6 of the General Clauses Act applies.

++ The ORDINANCE itself came to be repealed by the GOLD ACT by the date of the judgment of the Rajasthan High Court.

The Apex Court further examined the effect of -

(i) the repeal of the Ordinance 6 of 1968, and

(ii) the declaration under Section 116(2) of the GOLD ACT?

And observed -

++ At the time of the making of the GOLD ACT, Parliament was conscious of the existence of the RULES and their repeal by the ORDINANCE and also the fact that various actions authorised under the provisions of the Part XIIA of the RULES were taken or pending. The Parliament is also conscious of the fact that the ORDINANCE while repealing the RULES provided for the application of Section 6 of the General Clauses Act. Pursuant to the repeal of the ORDINANCE, the Parliament did not choose by the GOLD ACT to disapprove such a declaration made under the ORDINANCE.

++ Therefore, the RULES stood peremptorily repealed by the ORDINANCE notwithstanding the fact that the ORDINANCE itself came to be repealed subsequently by the GOLD ACT. The repeal of the Ordinance does not revive the RULES.

++ The effect of Section 116(2) that the confiscation adjudged under Part XII-A of the RULES shall be deemed to have been adjudged under the corresponding provision of the GOLD ACT, the question is no more res integra . [Jayantilal Amrathlal v. Union of India - held that the confiscation proceedings initiated under the RULES must be concluded in accordance with the RULES without any reference to the provisions of the GOLD ACT.]

Therefore, the Supreme Court concluded -

(1) the adjudgment of confiscation of the appellant's gold is required to be made only in accordance with the RULES but not the GOLD ACT ;

(2) the role of the 1st fiction created under Section 116 of GOLD ACT is limited.

The Supreme Court further observed -

(i) What is the law governing determination of the amount of fine that could be levied and collected from the appellant in lieu of the confiscation of gold seized from him?;

(ii) Whether the High Court applied the correct law in recording the conclusion that the appellant is liable to pay an amount of Rs.11.04 crores in lieu of the confiscation of the Gold if he so chooses?

+++ There is a distinction between acts done pursuant to the authorization of a statute and acts done pursuant to the authorization under a different statute or a statutory instrument but deemed to have been done under the earlier of the abovementioned two statutes.

+++ When a statute creates a fiction requiring certain events which took place prior to the commencement of such a statute to be deemed to have been done under the statute, such a fiction does not retrospectively authorise doing of such acts. It only takes note of the existence of certain state of affairs and creates putative state of affairs by declaring that such anterior events should be deemed to have taken place under the statute which came into existence later.

+++ Prior to the GOLD ACT, seizure and confiscation of gold were authorised by the RULES. Though, by virtue of the fiction created under Section 116, the confiscations adjudged under the RULES are deemed to be confiscations adjudged under the GOLD ACT, the Scheme and the limitations of such fiction are already explained earlier in para 29. Therefore, neither Section 73 nor the definition under Section 2(v) would be applicable for the confiscations adjudged under the RULES - pursuant to a seizure that took place before the commencement of the GOLD ACT.

+++ No doubt that the option to pay fine in lieu of confiscation is one of the consequences flowing from the adjudgment of confiscation. Therefore, in view of the fiction under Section 116, Section 73 of the GOLD ACT would have been applicable if consequence of applying such fiction to the confiscations adjudged under the RULES is not inconsistent with the GOLD ACT. In view of the language of Section 73 - "confiscation authorised by this Act" limits the operation of Section 73 only to the confiscations adjudged under the GOLD ACT. Hence, there is an inconsistency. We are of the opinion that the High Court rightly held that Section 73 would not come into play at all in the case on hand. Therefore, the fine amount cannot be determined on the basis of the value of the gold.

+++ On the other hand, as rightly opined by the High Court, the market value of the gold as on the date of the exercise of the option by the owner of the gold to pay fine in lieu of the confiscation would be the legally appropriate amount of fine. Because it is a fine in lieu of confiscation. Confiscation would result in the loss of the entire property in the confiscated gold resulting in a financial loss of the value of gold to the owner. Hence, the value of the gold is to be determined with reference to the date on which the owner exercises the option to pay the fine in lieu of the confiscation.

++ The High Court rightly came to the conclusion that the fine in lieu of confiscation must represent the value of the gold so confiscated as on the date (9.12.94) the appellant was given an option to pay the fine in lieu of confiscation. Even according to the said order of the Collector, the value of the gold as on that date was Rs.11.04 crores. Therefore, the High Court was right in its direction.

Plea of UOI

The UOI submitted that in view of the enormous delay which took place in the confiscation proceedings (50+ years), the appellant must be made to pay the interest on the amount of fine of Rs.11.04 crores. Otherwise, it would have the effect of permitting the appellant to profit by litigation as, according to the Attorney General, if the appellant is permitted to take back the entire quantity of 240.040 kgs. of gold, the current market value would be Rs. 72 crores (approx.).

The Supreme Court found the submission wholly justified and, therefore, directed that the appellant would be entitled to redeem the gold by paying not only the fine of Rs.11.04 crores but also the interest thereon calculated @ 10% p.a.

The appeals were disposed of.