2014 (1) TMI 1021 - HC - FEMA

Forfeiture of property - Whether in taking over the property of the contesting respondents, the procedure established by law has been followed by the writ petitioner - proceedings were initiated under SAFEMA, 1976 - activities of smuggling and illegal export of foreign exchange through carriers - Held that - the show cause notice issued by the writ petitioner suffers from manifest irregularity, non-application of mind and in total perversion of SAFEMA. Though this Court has held that in a given case, there is no impediment for the competent authority to file a writ petition, the said discretion must be properly exercised by the authority. It is only in cases where Tribunal s order is perverse, the question of entertaining a writ petition will arise. It is not a fit case where any interference is called for in the impugned order of the third respondent Tribunal. Section 6(1) of the SAFEMA will have to be strictly followed and the authority s satisfaction must be recorded in writing, failing which, the notice is liable to be quashed. - Writ petition dismissed.

Issues Involved:
1. Whether the procedure established by law was followed by the writ petitioner in taking over the property of the contesting respondents.
2. The maintainability of the writ petition by the Competent Authority.
3. The validity of the Appellate Tribunal's decision to set aside the Competent Authority's order of forfeiture.

Issue-wise Analysis:

1. Procedure Established by Law:
The primary issue in this case was whether the writ petitioner followed the procedure established by law under the SAFEMA, 1976, in taking over the property of the respondents. The first respondent was detained under COFEPOSA and subsequent proceedings under SAFEMA were initiated. The first respondent admitted to smuggling activities, and his properties were deemed tainted and forfeited. The second respondent, his wife, was also served notice under Section 6(1) of SAFEMA for property acquired allegedly through the first respondent's illegal income. Despite the first respondent's detention order being set aside by the Supreme Court, the proceedings under SAFEMA continued due to his conviction under the Customs Act. The Tribunal found that the investigation was tainted, and the Competent Authority violated principles of natural justice by relying on internet materials without notice to the respondents. The Tribunal concluded that the income earned by the first respondent in Singapore was legal and not subject to Indian laws, thus reversing the forfeiture order.

2. Maintainability of the Writ Petition:
The respondents raised a preliminary objection regarding the maintainability of the writ petition by the Competent Authority. The Competent Authority argued that it had the locus standi to file the writ petition, similar to the Provident Fund authorities, as established in previous judgments. The court referred to the judgment in Provident Fund Organisation v. EPF Appellate Tribunal, which allowed such authorities to challenge Tribunal orders. The court overruled the respondents' objection, stating that the Competent Authority had the right to challenge the Tribunal's order if it was perverse.

3. Validity of the Appellate Tribunal's Decision:
The Tribunal's decision to set aside the Competent Authority's order was based on several findings:
- The show cause notice issued was based on an invalid detention order.
- The Competent Authority failed to issue a fresh show cause notice after the first respondent's conviction.
- The reasons for considering the property as illegally acquired were not adequately recorded.
- The first respondent's income from Singapore was legally explained and shown in income tax returns.
- The Tribunal found that the proceedings were illegal and the respondents had discharged their burden of proving the legal source of their income.

The court upheld the Tribunal's decision, emphasizing that the Competent Authority's actions were irregular, lacked application of mind, and perverted the SAFEMA's intent. The court dismissed the writ petition, imposing costs on the petitioner.

Conclusion:
The High Court dismissed the writ petition, affirming the Tribunal's decision that the Competent Authority had not followed the proper legal procedure in forfeiting the respondents' properties. The court also upheld the maintainability of the writ petition but found no grounds to interfere with the Tribunal's order, which was deemed just and reasonable. The petitioner was ordered to pay costs to the respondents.

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