1998 (4) TMI 502 - AT - FEMA

Summary

Issues:
1. Whether the appellants and the society were entitled to be issued with notice under section 6(1)?
2. Whether the appellants were bona fide purchasers for value without notice and do not fall within the definition of "person" under section 2(2)(e)?

Issue 1:
The appeal under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) was made against the order of the competent authority forfeiting a property. The detenu had sold the property to the appellants after a notice was issued but subsequently died. The competent authority ignored the sale transaction and directed forfeiture. The appellants argued that they should have been given notice and that the sale was not collusive. The Deputy Director contended that the sale was post-notice and thus ignored. The key question was whether the appellants and the society should have received notice.

Issue 1 Analysis:
The provision of section 11 of SAFEMA mandates that any property transfer post-notice issuance shall be ignored and deemed void upon forfeiture. The agreement between the detenu and the appellants was after the notice, making it correctly ignored by the competent authority. The nature of the title held by the detenu was not relevant as the forfeiture was limited to the detenu's rights. The argument that the society should have been heard was dismissed as unnecessary due to the limited scope of forfeiture.

Issue 2:
The appellants claimed to be bona fide purchasers and not covered by the Act's provisions. They argued that undue hardship should not be caused to bona fide purchasers. The contention was that the Act should be interpreted to protect bona fide purchasers not falling under section 11. The appellants' plea was based on being bona fide purchasers for value without notice.

Issue 2 Analysis:
The Act's provisions clearly differentiate between section 2(2)(e) and section 11, covering different scenarios. Section 2(2)(e) protects transactions before notice issuance, while section 11 deals with post-notice transfers. The argument that the appellants were bona fide purchasers did not hold as the transaction was after the notice. The plea of the bona fide purchaser was deemed applicable only if the transaction occurred before the notice was issued.

Conclusion:
The appeal was dismissed, confirming the competent authority's order of forfeiture. The judgment clarified the application of SAFEMA provisions regarding notice issuance, post-notice transactions, and the rights of bona fide purchasers. The decision emphasized the mandatory nature of section 11 and the limited scope of forfeiture concerning the detenu's rights in the property.