2023 (3) TMI 1074 - SC - FEMA

Forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators - order passed by the competent authority under Section 7 read with 19(1) of the Smugglers and Foreign Exchange Manipulators(Forfeiture of Property) Act - partners of the first appellant, namely, N.A. Yusuf, was ordered to be detained by Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974(hereinafter being referred to as COFEPOSA ) - HELD THAT - From the evidence which came on record, it could be gathered that out of the investment made by the partners(Appellant nos. 2 to 5) to the tune of Rs.10.20 lakhs, N.A. Yusuf contributed Rs.5 lakhs and Appellant no.2(P.M. Saheeda) and her children have contributed to the tune of Rs.5.2 lakhs each but neither N.A. Yusuf has justified any source from where his capital contribution was made nor the explanation was tendered by Appellant nos. 2 to 5 regarding their source of income and it was disbelieved at all stages and a finding was returned that major part of the investment has been treated as income from undisclosed sources. That apart, no evidence was placed by Appellant no. 2(P.M. Saheeda) on record to justify that the land in question was purchased from the resources available at her command in the year 1969, through the sale deed dated 16th April, 1969. In the given circumstances, the appellants are not entitled to seek protection of Section 9 of the Act 1976. That apart, as regards the submissions made by the counsel for the appellants to impose fine in lieu of forfeiture, as contemplated under Section 9 of the Act 1976, after noticing the argument advanced by the appellants before the High Court, a categorical finding has been recorded as to why the appellants are not entitled to seek protection of Section 9 of the Act 1976, as held that major investment remain unexplained and also disbelieved the version of the 2nd petitioner on the ground that the proof of gift from her marriage has not been produced. Thus, according to the Competent Authority as well as the Appellate Tribunal, even if the value of the land is taken only at Rs.33,000/, the total value of the land and building will work out at Rs.25,20,000/and as such, it was of the view that major part of the investment remained unexplained. No error being committed in the finding returned by the High Court which may call for our interference. Even before this Court, there is no material that has been placed by Appellant no.2 (P.M. Saheeda) in rebuttal which may even prima facie justify the sources of fund available at her command for acquisition of the land in question to the tune of Rs.33,000/in the year 1969. In the absence of proper explanation as to the source of acquisition and as majority of investment remains unexplained, the authority disbelieved the version of Appellant no. 2(P.M. Saheeda) as no proof was placed on record of gifts from her marriage. Even the accounts were not maintained in respect of the cost of construction of the building, in absence whereof, the authority has not committed any manifest error in forfeiting the property in exercise of power under Section 7 of Act 1976. Appeal is without substance and accordingly dismissed

Summary

Issues Involved:
1. Legality of the forfeiture of property.
2. Application of Section 9 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976.
3. Alleged delay in initiating forfeiture proceedings.

Summary:

1. Legality of the Forfeiture of Property:
The appeal challenges the judgment upholding the forfeiture of property under Section 7 read with 19(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976. The property in question, M/s. Platinum Theatre, was ordered for forfeiture due to the involvement of one of the partners, N.A. Yusuf, in smuggling activities. The competent authority found that the capital contributions towards the theatre were unexplained and likely derived from illegal activities. The High Court upheld this finding, noting the lack of evidence from the appellants to justify the sources of their investments.

2. Application of Section 9 of the Act, 1976:
The appellants contended that the competent authority should have applied Section 9, which allows for the payment of a fine in lieu of forfeiture if less than half of the property's value is unexplained. However, it was found that more than 50% of the theatre's value remained unexplained, thus disqualifying the appellants from seeking this option. The High Court and the Supreme Court both found no merit in this argument, as the appellants failed to provide adequate proof of legitimate sources for their investments.

3. Alleged Delay in Initiating Forfeiture Proceedings:
The appellants argued that the forfeiture proceedings were unduly delayed, causing prejudice. The court noted that the initial proceedings began with a show cause notice in 1977, and subsequent legal challenges and remands extended the process. The final forfeiture order was passed in 1997. The court found no fault with the timeline, stating that the delay was not attributable to the authorities and did not warrant interference with the forfeiture order.

Conclusion:
The Supreme Court dismissed the appeal, affirming the forfeiture of M/s. Platinum Theatre. The court held that the appellants failed to provide sufficient evidence to counter the findings of illegal acquisition of property and justified the competent authority's actions under the Act, 1976. The plea of delay was also rejected, and the forfeiture order was upheld as legally sound.