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TMI Blog2014 (2) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... rfeiture of “illegally acquired property” - The submission of the appellant is that since the Act provides for a forfeiture of the property of the appellant on the ground that the appellant was detained under the COFEPOSA, the proposed forfeiture is nothing but a penalty within the meaning of the expression under Article 20 of the Constitution - Held that:- the properties of persons belonging to any one of the said five categories only could be forfeited under the Act. Even with reference to the properties held by any one falling under any of the abovementioned five categories, their entire property cannot be forfeited except the property which is determined to be illegally acquired property as defined under section 3(c) of the Act. Of all the five categories of persons to whom the Act is made applicable, only one category specified under section 2(2)(a) happens to be of persons who are found guilty of an offence under one of the enactments mentioned therein and convicted. The other four categories of persons to whom the Act is applicable are persons unconnected with any crime or conviction under any law while the category of persons falling under section 2(2)(b) are persons who ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swar, J. 1. Leave granted. 2. These two appeals are preferred against the final judgment dated 9th August 2007 passed by the Calcutta High Court in FMA No.206 of 2003 and order dated 30th August 2007 in Review Application bearing RVW No.2372 of 2007 dismissing the said review application filed by the appellant herein. 3. The facts leading to the instant litigation are as follows: 4. The appellant was initially detained by order dated 19.12.1974 under the provisions of the Maintenance of Internal Security Act, 1971 (since repealed) and later under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (hereinafter referred to as the COFEPOSA ) on the ground that he in collaboration with his brother, who was living in London at that point of time, was indulging in activities which are prejudicial to the conservation of foreign exchange. The appellant unsuccessfully challenged the detention order. He was eventually released in 1977. 5. While he was in custody, the second respondent issued a notice dated 4th March 1977 under section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forefeiture of Property) Act, 1976 (he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the COFEPOSA and the orders passed by the competent authority so merged in the appellate authority under section 6(1) of the SAFEMA as well as prayed for release of the properties confiscated by the appellate authority in terms of the order. 12. Before us, the appellant made three submissions (1) that the notice issued under Section 6 of the Act is defective and therefore illegal as the notice did not contain the reasons which made the competent authority believe that the notice scheduled properties are illegally acquired properties. In other words, the reasons were not communicated to the appellant; (2) that the forfeiture, such as the one provided under the Act, is violative of Article 20 of the Constitution of India; and (3) in the alternative, it is argued that the High Court failed to consider the question whether the decision of the competent authority as confirmed by the appellate authority is sustainable and therefore, the matter is required to be remitted to the High Court for an appropriate consideration of the legality of order of forfeiture. 13. Regarding the non communication of the reasons, the judgment under appeal recorded as follows: The matter may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission, learned counsel for the appellant very heavily relied upon a judgment of this Court in Ajantha Industries and others v. Central Board of Direct Taxes and others, (1976) 1 SCC 1001. It was a case where this court had to consider the legality of the order under Section 127 transferring the case of the Ajantha Industries. 15. Section 127 of the Income Tax Act, 1961 empowers the authorities (mentioned therein) to transfer any case (explained in the said section) from one Income Tax Officer to another. Further, the section stipulates that before such an order of transfer is made, two conditions are required to be complied with (1) that the assessee must be given a reasonable opportunity to explain why his case should not be transferred; and (2) the authority transferring the case is required to record the reasons which led him to initiate the proceedings. It appears from the judgment that though first of the abovementioned two requirements was complied with, it was found that no reasons were recorded much less communicated. Dealing with the legality of such an order, this Court held that there is a requirement of not only recording the reasons for the decision to transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of transfer is made has no such remedy under the Act to question the order of transfer. Besides, the aggrieved assessee on receipt of the notice under Section 34 may even satisfy the Income-tax Offier that there were no reasons for reopening the assessment. Such an opportunity is not available to an assessee under Section 127(1) of the Act. The above decision is, therefore, clearly distinguishable. 19. We reject the submission of the appellant for the following reasons. Firstly, there is no express statutory requirement to communicate the reasons which led to the issuance of notice under Section 6 of the Act. Secondly, the reasons, though not initially supplied alongwith the notice dated 4.3.1977, were subsequently supplied thereby enabling the appellant to effectively meet the case of the respondents. Thirdly, we are of the opinion that the case on hand is squarely covered by the ratio of Narayanappa case. The appellant could have effectively convinced the respondents by producing the appropriate material that further steps in furtherance to the notice under Section 6 need not be taken. Apart from that, an order of forfeiture is an appealable order where the correctness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 8, read with subsection (2) of section 9 of the said Act; or (iii) such order of detention, being an order to which the provisions of section 12A of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the first review under sub-section (3) of that section, or on the basis of the report of the Advisory Board under section 8, read with sub-section (6) of section 12A, of that Act; or (iv) such order of detention has not been set aside by a court of competent jurisdiction; (c) every person who is a relative of a person referred to in clause (a) or clause (b); (d) every associate of person referred to in clause (a) or clause (b); (e) any holder of any property which was at any time previously held by a person referred to in clause (a) or clause (b) unless the present holder or, as the case may be, any one who held such property after such person and before the present holder, is or was a transferee in good faith for adequate consideration. Explanation 1. For the purposes of sub-clause (i) of clause (a), the value of any goods in relation to which a person has been convicted of an offence shall be the wholesale price of the goods in the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or events including any conviction or detention which occurred or took place before the commencement of this Act. covered thereunder. Clause (a) persons who have been convicted under various enactments referred to therein; clause (b) - persons in respect of whom an order of detention has been made under the COFEPOSA (subject to certain conditions/exceptions the details of which are not necessary for our purpose); clause (c) persons who are relatives of persons referred to in clause (a) or clause (b). Expression relative is itself explained in explanation 2. Clause (d) every associate of persons referred to in clause (a) or clause (b). Once again the expression associate is explained under explanation 3 to subsection (2). Clause (e) subsequent holders of property which at some point of time belonged to persons referred to either in clause (a) or clause (b). 21. Section 4 makes it unlawful (for any person to whom the Act applies) to hold any illegally acquired property and it further declares that such property shall be liable to be forfeited to the Central Government (following the procedure prescribed under the Act). The procedure is contained under sections 6 and 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of any matter in relation to which Parliament has no power to make laws; or (iv) any property acquired by such person, whether before or after commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property referred to in sub-clauses (i) to (ii) or the income or earnings from such property; and includes t (A) any property held by such person which would have been, in relation to any previous holder thereof, illegally acquired property under this clause if such previous holder had not ceased to hold it, unless such person or any other person who held the property at any time after such previous holder or, where there are two or more such previous holders, the last of such previous holders is or was a transferee in good faith for adequate consideration; (B) any property acquired by such person, whether before or after the commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property falling under item (A), or the income or earnings therefrom.. Broadly speaking the definition covers two types of properties: 1) acquired by the income or earnings; and 2) assets derived or obtained from or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fence. (2) No person shall be prosecuted and punished for the same offence more than once. (3) No person accused of any offence shall be compelled to be a witness against himself. to section 2 which reads as follows: Explanation 4. For the avoidance of doubt, it is hereby provided that the question whether any person is a person to whom the provisions of this Act apply may be determined with reference to any facts, circumstances or events (including any conviction or detention which occurred or took place before the commencement of this Act). The answer to the question depends upon whether such deprivation is a penalty within the meaning of the said expression occurring in Article 20. 26. Article 20 contains one of the most basic guarantees to the subjects of the Republic of India. The Article in so far as is relevant for our purpose stipulates two things:- That no person shall be convicted of any offence except for violation of the law in force at the time of the commission of the act charged as an offence; and That no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant placing reliance on R.S. Joshi, Sales Tax Officer, Gujarat and Others v. Ajit Mills Ltd. and Another, (1977) 4 SCC 98 submitted that a Constitution Bench of this Court also opined the expression forfeiture to mean a penalty for breach of a prohibitory direction . 18. Coming to forfeiture , what is the true character of a forfeiture ? Is it punitive in infliction, or merely another form of exaction of money by one from another? If it is penal, it falls within implied powers. If it is an act of mere transference of money from the dealer to the State, then it falls outside the legislative entry. Such is the essence of the decisions which we will presently consider. There was a contention that the expression forfeiture did not denote a penalty. This, perhaps, may have to be decided in the specific setting of a statute. But, speaking generally, and having in mind the object of Section 37 read with Section 46, we are inclined to the view that forfeiture has a punitive impact. Black s Legal Dictionary states that to forfeit is to lose, or lose the right to, by, some error, fault, offence or crime , to incur a penalty . Forfeiture , as judicially annotated, is a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that there is arithmetical identity, assuming it to be so, between the figures of the illegal collections made by the dealers and the amounts forfeited to the State cannot create a conceptual confusion that what is provided is not punishment but a transference of funds. If this view be correct, and we hold so, the legislature, by inflicting the forfeiture, does not go outside the crease when it hits out against the dealer and deprives him, by the penalty of the law, of the amount illegally gathered from the customers. The Criminal Procedure Code, Customs Excise Laws and several other penal statutes in India have used diction which accepts forfeiture as a kind of penalty. When discussing the rulings of this Court we will explore whether this true nature of forfeiture is contradicted by anything we can find in Sections 37(1), 46 or 63. Even here we may reject the notion that a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability but must be preceded by mens rea. The classical view that no mens rea, no crime has long ago been eroded and several laws in India and abroad, especially regarding economic crimes and departmental penalties, have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and one American decision stating in substance that the meaning of a word occurring in a statute cannot be ascertained without examining the context and also the scheme of the Act in which the expression occurs. 56. In construing the expression amendment of this Constitution I must look at the whole scheme of the Constitution. It is not right to construe words in vacuum and then insert the meaning into an article. Lord Green observed in Bidie v. General Accident, Fire and Life Assurance Corporation (1948) 2 All ER 995, 998. The first thing one has to do, I venture to think, in construing words in a Section of an Act of Parliament is not to take those words in vacuo, so to speak, and attribute to them what is sometimes called their natural or ordinary meaning. Few words in the English language have a natural or ordinary meaning in the sense that they must be so read that their meaning is entirely independent of their context. The method of construing statutes that I prefer is not to take particular words and attribute to them a sort of prima facie meaning which you may have to displace or modify. It is to read the statute as a whole and ask oneself the question : In this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by means of the offence. Under section 13(3), it is provided that so much of the attached property referred to earlier equivalent to the value ascertained by the Criminal Court under section 12 is required to be forfeited to the State. 35. Dealing with the question whether such forfeiture (in the factual setting of the case) violated Article 20 of the Constitution of India?, a Constitution Bench of this Court held that the forfeiture contemplated in the Ordinance was not a penalty within the meaning of Article 20 but it is only a speedier mode of recovery of the money embezzled by the accused. The State of West Bengal v. S.K. Ghosh, AIR 1963 SC 255 Para 15. .. We are therefore of opinion that forfeiture provided in S. 13(3) in case of offences which involve the embezzlement etc. of Government money or property is really a speedier method of realizing government money or property as compared to a suit which it is not disputed the Government could bring for realizing the money or property and is not punishment or penalty within the meaning of Article 20(1). Such a suit could ordinarily be brought without in any way affecting the right to realize the fine that may have been impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open to a State legislature to make provision for the recovery of an amount which is not a tax under Entry 54 of List II in a law made for that purpose, it would still be open to the legislature to provide for paying over all the amounts collected by way of tax by persons, even though they really are not exigible as tax, as part of the incidental and ancillary power to make provision for the levy and collection of such tax. Now there is no dispute that the heads of legislation in the various Lists in the Seventh Schedule should be interpreted widely so as to take in all matters which are of a character incidental to the topics mentioned therein. Even so, there is a limit to such incidental or ancillary power flowing from the legislative entries in the various Lists in the Seventh Schedule. These incidental and ancillary powers have to be exercised in aid of the main topic of legislation, which, in the present case, is a tax on sale or purchase of goods. All powers necessary for the levy and collection of the tax concerned and for seeing that the tax is not evaded are comprised within the ambit of the legislative entry as ancillary or incidental. But where the legislation under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be illegally acquired property as defined under section 3(c) of the Act. Of all the five categories of persons to whom the Act is made applicable, only one category specified under section 2(2)(a) happens to be of persons who are found guilty of an offence under one of the enactments mentioned therein and convicted. The other four categories of persons to whom the Act is applicable are persons unconnected with any crime or conviction under any law while the category of persons falling under section 2(2)(b) are persons who are believed by the State to be violators of law. The other three categories are simply persons who are associated with either of the two categories mentioned in section 2(2)(a) and (b). At least with reference to the four categories other than the one covered by section 2(2)(a), the forfeiture/deprivation of the property is not a consequence of any conviction for an offence. 40. Therefore, with reference to these four categories, the question of violation of Article 20 does not arise. Insofar as first category mentioned above, in our opinion, Article 20 would have no application for the reason, conviction is only a factor by which the Parliament chose to ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which prevent the State from arbitrarily depriving a subject of his property. 42. Whether there is a right to hold property which is the product of crime is a question examined in many jurisdictions. To understand the substance of such examination, we can profitably extract from an article published in the Journal of Financial Crime, 2004 by Anthony Kennedy. Head of Legal Casework, Northern Ireland for the Assets Recovery Agency in his Article Justifying the civil recovery of criminal proceeds published in the Journal of Financial Crime, 2004 Vol.12, Iss.1. ..It has been suggested that a logical interpretation of Art. 1 of the First Protocol of the European Convention on Human Rights is: Everyone is entitled to own whatever property they have (lawfully) acquired .. hence implying that they do not have a right under Art. 1 to own property which has been unlawfully acquired. This point was argued in the Irish High Court in Gilligan v The Criminal Assets Bureau, namely that where a defendant is in possession or control over assets which directly or indirectly constitute the proceeds of crime, he has no property rights in those assets and no valid title to them, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive of Article 20 of the Constitution. Even otherwise as was rightly pointed out by the learned Addl. Solicitor General, in view of its inclusion in the IXth Schedule, the Act is immune from attack on the ground that it violates any of the rights guaranteed under Part III of the Constitution by virtue of the declaration under Article 31-B. 46. Now we are required to consider the alternative and last submission i.e., in view of the failure of the High Court to examine the tenability of the order of the forfeiture as confirmed by the appellate tribunal the matter is required to be remitted to the High Court for appropriate consideration. This submission is required to be rejected. We have carefully gone through the copy of the writ petition (a copy of which is available on record) from which the instant appeal arises. 47. Except challenging the order of forfeiture on the two legal grounds discussed earlier in this judgement, there is no other ground on which correctness of the order of forfeiture is assailed in the writ petition. For the first time in this appeal, an attempt is made to argue that the conclusions drawn by the competent authority that the properties forfeited are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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