2001 (1) TMI 549 - HC - Customs

Summary

Issues Involved:
1. Legality of invoking SAFEMA against the petitioners.
2. Validity of property forfeiture under SAFEMA.
3. Evaluation of evidence regarding the source of funds for property acquisition.
4. Justification for rejecting the petitioners' claims.
5. Applicability of judicial review principles.

Issue-wise Detailed Analysis:

1. Legality of Invoking SAFEMA against the Petitioners:
The primary issue is whether the provisions of the Smugglers and Foreign Exchange (Manipulators Forfeiture of Property) Act, 1976 (SAFEMA) were correctly applied to the petitioners. According to Section 2 of SAFEMA, the Act applies to individuals convicted under specific customs and foreign exchange laws, those detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA), and their relatives and associates. The court noted that the Act's intent is to prevent smuggling and foreign exchange manipulations by forfeiting properties acquired through such illegal activities, even if held in the names of relatives or associates.

2. Validity of Property Forfeiture under SAFEMA:
The petitioners challenged the forfeiture of properties as per Ext. P5 order and Ext. P7 appellate order. The court examined whether the properties in question were illegally acquired by the detenu, Saidalavi, and whether they could be forfeited under SAFEMA. The court emphasized that the original acquisition of the properties by the detenu was through a family partition in 1955, long before any alleged illegal activities. The court found that there was no evidence to suggest that the initial acquisition of the properties was linked to illegal gains.

3. Evaluation of Evidence Regarding the Source of Funds for Property Acquisition:
The petitioners argued that the funds used to repurchase the properties from Abdul Aziz were derived from legitimate sources, including the sale proceeds received earlier from Abdul Aziz, agricultural income, and a loan from a relative. The competent authority and the Appellate Tribunal had rejected these claims due to lack of contemporaneous evidence and discrepancies in the timelines. However, the court found that the petitioners provided a reasonable explanation for the source of funds and that the competent authority failed to consider the evidence adequately.

4. Justification for Rejecting the Petitioners' Claims:
The court scrutinized the reasons given by the competent authority and the Appellate Tribunal for rejecting the petitioners' claims. The court noted that the rejection of the loan claim from Suharabi was based on the submission of a photocopy of a bank slip, which the authority did not verify further. The court held that the rejection of the petitioners' claims was unjustified, as the petitioners had produced available records to support their contentions.

5. Applicability of Judicial Review Principles:
The court addressed the respondents' argument that judicial intervention was unwarranted. The court clarified that judicial review is permissible to ensure that decisions are reasonable and based on evidence, and that irrelevant considerations are not taken into account. The court cited precedents, including State of U.P. v. Maharaja Dharmander Prasad Singh and Sitaram Sugar Co. Ltd. v. Union of India, to support its position that judicial review can be exercised when decisions are manifestly unreasonable or neglect relevant factors.

Conclusion:
The court concluded that the provisions of SAFEMA were wrongly applied against the petitioners. The original acquisition of the properties by the detenu was not linked to illegal gains, and the petitioners' claims regarding the source of funds were unjustly rejected. The court found that the Appellate Tribunal's decision was not consistent with the findings of the Apex Court in Attorney General for India v. Amratlal Prajivandas. Consequently, the court set aside Exts. P5 and P7 orders and allowed the original petitions.