1992 (1) TMI 316 - AT - FEMA

Issues Involved:
1. Legality of the forfeiture order based on the definition of "illegally acquired property" under Section 3(1)(c) of the Act.
2. Delay in passing the forfeiture order.
3. Application of mind by the Competent Authority.
4. Justification of the forfeiture of various properties.
5. Forfeiture of life insurance policies.

Issue-wise Detailed Analysis:

1. Legality of the forfeiture order based on the definition of "illegally acquired property" under Section 3(1)(c) of the Act:

The appellant argued that the properties should be linked to the earnings of his brother, detained under the COFEPOSA Act, to be considered "illegally acquired." The Tribunal clarified that the term "illegally acquired property" under Section 3(1)(c) does not necessitate a direct link to the relative indulging in smuggling. The illegal activity must be on the part of the property holder, and the source of money used for acquisition does not need to be linked to the relative's illegal activities.

2. Delay in passing the forfeiture order:

The appellant contended that the forfeiture order was vitiated by an inordinate delay of over 14 years from the detention order of his brother. The Tribunal noted that various reasons contributed to the delay, such as frequent adjournments, changes in officers, and the discovery of new properties under the Amnesty Scheme. The Tribunal found that there was no inordinate delay, and the delay was inherent in gathering relevant particulars about the appellant's properties. The cited case law supported that reasonable cause for delay does not invalidate the proceedings.

3. Application of mind by the Competent Authority:

The appellant argued that the Competent Authority did not properly apply his mind, as indicated by the reference to the "necessity" of issuing the notice under Section 6(1) of the Act. The Tribunal found this contention without substance, noting that the impugned order was detailed with proper marshalling of facts and submissions. It was not necessary for the Competent Authority to refer to all notices issued under Section 6(1) while passing the forfeiture order.

4. Justification of the forfeiture of various properties:

- Kosi Steel Industries: The appellant introduced initial capital of Rs. 1,50,000 and Rs. 98,000, claimed to be loans from nine persons and his resources. The Tribunal affirmed the Competent Authority's finding that these borrowings were unproved and unaccounted for, making the assets "illegally acquired."
- Baij Nath Aggarwalla: The appellant claimed to have borrowed Rs. 1,36,000 from his late father. The Tribunal upheld the Competent Authority's rejection of this claim due to lack of evidence and the improbability of the father's financial capability to lend such a sum.
- Gold Jewellery and Silver: The appellant failed to substantiate the source of acquisition, despite opportunities. The Tribunal upheld the forfeiture, noting discrepancies in the appellant's claims and the lack of previous disclosures.
- Life Insurance Policies: The Tribunal set aside the forfeiture of Life Insurance Policy No. 34815678 due to the absence of the Life Insurance Corporation as a party to the proceedings. The forfeiture of an unspecified policy was also set aside as infructuous.

5. Forfeiture of life insurance policies:

The Competent Authority ordered the forfeiture of Life Insurance Policy No. 34815678 and another unspecified policy. The Tribunal set aside the forfeiture of these policies, noting that the Life Insurance Corporation was not a party to the proceedings, and no adverse order could be passed against them without a hearing.

Conclusion:

The appeal was partly allowed. The forfeiture order concerning the life insurance policies was set aside, while the remaining forfeiture order of the Competent Authority was upheld. The Tribunal found no merit in the appellant's contentions regarding the legality of the forfeiture order, delay, and application of mind by the Competent Authority.

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