2013 (7) TMI 550 - HC - Indian Laws

Forfeiture of Property - detention under the provisions of COFEPOSA, 1974 - Unexplained investment - Tainted money - Petitioner s husband detained under Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 - More than 50% value of construction cost unexplained - Construction cost of property determined at current rate by valuation officer - Held that - It is seen that the petitioner s mother had gifted the property by way of registered gift deed. As such, the landed property which is nil encumbered property cannot be considered as bought through illegally acquired funds derived from her husband s income. Therefore, the landed property could not be forfeited, as the subsequent matter of the present dispute is only regarding the superstructure. Therefore, the forfeiture of land, which had been gifted to the petitioner by her mother through a gift deed cannot come under the purview of the Act . The property had not been purchased by her and the petitioner had only succeeded it through her mother. The Income Tax Returns particulars furnished showed taxes paid on legal source of income and no case has been made out by the respondents to show that the Income Tax Authorities collect income tax for illegally earned money also and hence, this point is not sustainable under law. The writ petitioner has failed to give detailed explanation regarding a portion of amount which had been utilized for the construction of the said building. It is imperative that the petitioner should give explanation regarding the source of income for the construction of the building, but she has failed to do so. The second respondent, being the competent authority is equally liable to give an explanation regarding the charge of illegal money received by the petitioner from her husband, by way of documentary evidence, but the second respondent has failed to establish their case that the writ petitioner had acquired illegal tainted money from her husband. Therefore, the impugned order of the competent authority has not been supported through documentary evidence. Therefore, the original impugned order passed by the second respondent /competent authority is not maintainable. As such, the subsequent order passed by the first respondent is also not sustainable under law. This Court is of the further view that the second respondent had initiated the show cause proceedings in the year 1976. After the final order of the second respondent, the writ petitioner filed an appeal before the first respondent. So, the matter is pending on the file of both the respondents for about 20 years, which is an inordinate delay for deciding the issue regarding forfeiture of property. This delay has caused injustice to the petitioner. The petitioner has been enjoying the interim order passed in W.M.P.No.819 of 1998, dated 21.02.1998. As such, she is enjoying the said property for a period of more than 14 years without any interference. Under the circumstances, the property cannot be forfeited after such a long period since the other expenses for maintenance of building has also been incurred by the petitioner including further investments. The interim order shows that there is a prima facie case on the side of the petitioner. - Decided in favour of petitioner.

Summary

Issues Involved:
1. Legitimacy of the source of funds used for property acquisition and construction.
2. Validity of the forfeiture notice and subsequent orders under the SAFEMA Act.
3. Procedural fairness and compliance with natural justice principles.
4. Burden of proof regarding the legality of funds.
5. Impact of delay in proceedings on the legitimacy of the forfeiture order.

Detailed Analysis:

1. Legitimacy of the Source of Funds:
The petitioner claimed that her husband, who was detained under COFEPOSA, had acquired the property and funds legally. The petitioner provided detailed explanations and evidence for the sources of funds used in acquiring and constructing the property, including loans from financial institutions and money lending business. The competent authority and the appellate tribunal found that substantial portions of the funds were unexplained or tainted, leading to the conclusion that the property was acquired through illegal means.

> "The petitioner submits that for the assessment years 1969-70 to 1974-75, she had declared an income of Rs.76,000/- and that she had taken a loan of Rs.3,62,000/- from the Kerala Financial Corporation in the year 1972."

2. Validity of the Forfeiture Notice and Orders:
The forfeiture notice issued under Section 6(1) of the SAFEMA Act was challenged on the grounds that it did not establish a clear link between the property and the alleged illegal activities of the petitioner's husband. The petitioner argued that the notice and subsequent orders were based on presumptions without substantial evidence.

> "The petitioner submits that the second respondent issued a notice to her husband on the 27th November 1976 stating that he has, on the basis of relevant information available to him, reason to believe that the properties...are illegally acquired properties."

3. Procedural Fairness and Compliance with Natural Justice:
The petitioner argued that the proceedings were delayed significantly, violating principles of natural justice. The final order was made almost 20 years after the initial notice, causing undue hardship and prejudice to the petitioner.

> "The final order is made in January 1995 after a lapse of about 20 years. There is no reason for the inordinate delay in passing the above said order."

4. Burden of Proof:
The petitioner contended that the burden of proof to establish that the funds were illegally acquired was not met by the respondents. The respondents, however, argued that the petitioner failed to provide satisfactory evidence for the sources of the funds used.

> "The petitioner submits that in so far as the reasons recorded had not stated that the source for the funds is illegal, but had only stated that the source is not explained, there is no justification for the issue of the aforesaid notice."

5. Impact of Delay:
The court considered the long delay in the proceedings and its impact on the petitioner's ability to defend herself. The delay was found to be prejudicial, and the court noted that the petitioner had been in possession and enjoyment of the property for an extended period.

> "Now about 37 years have already lapsed for conclusion of the said proceedings...During this period, painting, repair, renovation, changing the infrastructure...would have been carried out by the petitioner."

Conclusion:
The court found that the petitioner had provided sufficient explanations for the sources of funds for the property and construction. The delay in proceedings and lack of substantial evidence from the respondents led to the conclusion that the forfeiture orders were not justified. The court allowed the writ petition, setting aside the orders of the competent authority and the appellate tribunal.

> "In the result, the above writ petition is allowed. Consequently, the operation of the order of the second respondent in OCA/MDS/308/76, dated 6th January 1995, as confirmed by the first respondent in its order in F.P.A.No.9/MDS/95, dated 4th September 1997 is set-aside."