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2017 (8) TMI 671 - SC - FEMAIllegally acquired property within the meaning of Section 3(1)(c) of SAFEMA - whether tenancy of a property, ownership of which is acquired by a person to whom the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) applies, will be treated as illegally acquired property within the meaning of Section 3(1)(c) of SAFEMA and can be subjected to forfeiture under the provisions thereof? - Held that - In the present case, it is undisputed that only adjudication which has taken place by the competent authority is that the property was owned by the person to whom the Act applied i.e. against whom the order of detention had been confirmed. The rights of the appellants, who claim to be bona fide tenants even prior to purchase of the property by the person to whom the Act applied, have not been adjudicated upon on the assumption that their rights will stand automatically terminated. In view of above, we are of the view that rights of a bona fide tenant will not stand automatically terminated by forfeiture of property and vesting thereof in the Central Government. Such forfeiture will extinguish the rights of the person to whom the Act applies in the present case Krishna Budha Gawde, who was the owner of the property in question or his relative or associate having nexus with him in relation to the said property. However, we do not express any opinion whether the appellants are the bona fide tenants and had no nexus with the acquisition of the property by the person to whom the Act applied as claimed by them. This question needs to be determined independently by the competent authority as defined in Section 3(b) of the Act. Accordingly, we allow this appeal, set aside the order of the High Court and remit the matter to the competent authority for passing an appropriate order in accordance with law. The parties are directed to appear before the competent authority for further proceedings on 9th October, 2017.
Issues Involved:
1. Whether tenancy of a property, ownership of which is acquired by a person to whom SAFEMA applies, will be treated as "illegally acquired property" under Section 3(1)(c) of SAFEMA and can be subjected to forfeiture. 2. Whether the rights of bona fide tenants are extinguished by forfeiture of property under SAFEMA. Issue-wise Detailed Analysis: 1. Illegally Acquired Property under Section 3(1)(c) of SAFEMA: The primary question was whether the tenancy of a property, owned by a person to whom SAFEMA applies, could be considered "illegally acquired property" under Section 3(1)(c) and thus subject to forfeiture. The property in question was owned by Krishna Budha Gawde, who was detained under COFEPOSA, making him subject to SAFEMA. The competent authority issued a forfeiture notice under Section 6 of SAFEMA, and the property was ordered to be forfeited under Section 7. The appellants, claiming to be bona fide tenants, challenged this forfeiture. 2. Rights of Bona Fide Tenants: The appellants argued that they were bona fide tenants under the Bombay Rent Act and were unaware of the SAFEMA and COFEPOSA proceedings against their landlord. They filed a writ petition seeking protection from the forfeiture order. The High Court dismissed the writ petition, stating that the tenancy did not survive due to Section 7(3) of SAFEMA, which extinguishes all rights, titles, and interests in the forfeited property. Legal Precedents and Judgments: The appellants cited several judgments to support their case: - C.B. Gautam vs. Union of India (1993): This case upheld the provision for compulsory purchase of immovable property by the Department if there was under-valuation for tax evasion. The Supreme Court held that bona fide rights of encumbrance holders, such as a subsisting lease, could not be adversely affected if they were not involved in tax evasion. - Attorney General for India vs. Amratlal Prajivandas (1994): This case upheld the validity of SAFEMA and COFEPOSA, stating that the Act aimed to ensure that properties acquired through illegal activities did not escape forfeiture, even if held in the names of relatives or associates. However, independent properties of such relatives or associates, not traceable to the convict/detenu, were not subject to forfeiture. - Fatima Mohd. Amin vs. Union of India (2003): The Court held that in the absence of an averment that the property was benami, an individual could not be proceeded against without any link or nexus of the property with illegally acquired money. - Vishal N. Kalsaria vs. Bank of India (2016): The Court ruled that protected tenants under state rent control laws could not be deprived of their rights under central statutes, emphasizing the importance of federalism. - Narayan Vittappa Kudva vs. Union of India (2002): The Bombay High Court held that bona fide tenants, having no connection to the person convicted or detained, did not fall under the purview of SAFEMA. Supreme Court's Conclusion: The Supreme Court found merit in the appellants' contention. It ruled that the rights of bona fide tenants do not automatically terminate upon the forfeiture of property under SAFEMA. The forfeiture extinguishes the rights of the person to whom the Act applies (Krishna Budha Gawde in this case) or his relatives or associates with a nexus to the property. However, the bona fide tenants' rights need to be independently adjudicated by the competent authority. The Court allowed the appeal, set aside the High Court's order, and remitted the matter to the competent authority for a fresh decision. The parties were directed to appear before the competent authority for further proceedings. This judgment underscores the importance of protecting the rights of bona fide tenants and ensuring that forfeiture under SAFEMA does not unjustly affect individuals with no connection to the illegal activities of the property owner.
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