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TMI Blog2007 (7) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... lenge the action sought to be taken by the respondents under Section 19 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, hereinafter called as SAFEMA for brevity, mainly on the ground that the petitioners are lawful tenants in respect of flats in the building and that they cannot be evicted therefrom without following due process of law which is otherwise required to be followed in case of eviction of tenants of a building. 3. Few undisputed facts relevant for the decision are that : there existed a building called Gawde Building at Juhu Koliwada, Mumbai which belonged to one Mr.Francis Coelho and consisted of a chawl wherein the petitioners and their ancestors were residing as the tenants. One Shri.Krishna Budha Gawde purchased the said building sometime in 1965 and thereafter reconstructed the building in 1972. It was pursuant to the purchase of the premises by Shri.Krishna Budha Gawde that the building came to be known as the Gawde Building . Under the agreements with the said Shri.Krishna Budha Gawde, the petitioners occupied the reconstructed building and continued to pay the rent to said Krishna Budha Gawde. The petitioners were ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is the case of the respondents that consequent to the conclusion of the proceedings under the SAFEMA the properties of late Krishna Budha Gawde stand forfeited to the Central Government and the same include the properties in question and, therefore, it vests free from all encumbrances in favour of the Central Government. It is their further case that consequent to the forfeiture of the property, the alleged tenancy rights of the petitioners came to an end and they cannot independently claim any right to the said premises and further that Section 19 of SAFEMA clearly authorises the competent authority to take possession of such premises by evicting whoever found in possession of the forfeited property. 6. The learned Advocate appearing for the petitioners placed reliance in the decisions of the Apex Court in the matters of C.B.Gautam Vs. Union of India and others : (1993) 1 SCC 78; Attorney General for India Ors. Vs. Amratlal Prajivandas Ors : (1994) 5 SCC 54; Fatima Mohd. Amin (Smt) (Dead) through L.Rs. Vs. Union of India another : (2003) 7 SCC 436; and in the decision of Division Bench of this Court in the matter of Narayan Vittappa Kudva Vs. Union of India and another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omatically result in termination of tenancy rights of the occupants of such property. He has also submitted that the principle which is adopted in relation to the property acquired under the Income Tax Act will have to be applied to the case arising under SAFEMA, while considering the point as to whether the property vests in the Government free from encumbrances and if so at what extent. 7. The learned Advocate appearing for the respondents on the other hand has submitted that the petitioners are not the holders of the property nor there is any claim in that regard; and that their claim is that of tenants of the building in the said property. He has submitted that once the property is forfeited under SAFEMA, all the rights and interest in such property come to an end and the property vests in the Central Government free from all encumbrances. He has further submitted that under the Income Tax Act there is no forfeiture of the property but the property stands acquired on account of violation of certain statutory provisions, whereas in case of SAFEMA the property stands forfeited. The rent legislation in force in the State is not applicable to the properties belonging to the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or the leasehold rights. It is well known that a property may be heavily encumbered and its value can be considerably depressed if it were sold subject to encumbrances. It is equally well known that a property in respect of which there is a subsisting lease for a substantial period of time would fetch a comparatively low price because the purchase thereof would not carry with it the right to possession or occupation during the subsistence of the leasehold interests. In such cases, the amount of apparent consideration could be even less than the value of the encumbrances or the leasehold interests. An order for compulsory purchase in such cases would necessarily result in gross injustice to the encumbrance holders and lessees and to their being deprived of their rights without their being in any way involved in the attempt at a tax evasion. It, therefore, appears to us difficult to uphold the last part of sub-section (1) of Section 269-UE insofar as it provides that the property in respect of which an order under sub-section (1) of Section 269-UD is made shall vest in the Central Government free of all encumbrances. Having held as above, the Apex Court further ruled that : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasing their resources for operating in clandestine manner, as also that such persons have in many cases been holding the properties acquired by them through such ill gotten gains in the names of their relatives, associates and confidants, that the SAFEMA came to be enacted. 11. Section 4 of SAFEMA provides prohibition of holding illegally acquired property. Sub-section (1) of Section 4 thereafter provides that as from the commencement of the Act SAFEMA, it shall not be lawful for any person to whom SAFEMA applies to hold any illegally acquired property either by himself or through any other person on his behalf. Sub-section (2) of Section 4 provides that where any person holds any illegally acquired property in contravention of the provision of sub-section (1), such property shall be liable to be forfeited to the Central Government in accordance with the provisions of SAFEMA. Section 5 of SAFEMA deals with the functions of the competent authority under SAFEMA. Section 6 thereafter deals with subject of notice of forfeiture under SAFEMA. Sub-section (1) of Section 6 provides that if, having regard to the value of the properties held by any person to whom SAFEMA applies, either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such property shall, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances. (4) Where any shares in a company stand forfeited to the Central Government under this Act, then the company shall, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or the articles of association of the company, forthwith register the Central Government as the transferee of such shares. 13. Section 8 clarifies that in such proceedings, the burden of proving that any property specified in the notice served under Section 6 is not illegally acquired property shall be on the person affected and to whom the notice is issued. Section 9 speaks of fine in lieu of forfeiture which can be offered by an affected person. Section 10 relates to procedure in relation to certain trust properties. Section 11 declares certain transfers to be null and void. It provides that pursuant to issuance of a notice under Section 6 or under Section 10, any property, referred to in such notice, is transferred by any mode whatsoever such transfer shall, for the purpose of the proceedings under SAFEMA, to be ignored and if such property is subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted as well as any other person who may be in possession of the property to surrender or deliver possession thereof to the competent authority or to any person duly authorised by it in this behalf within thirty days of the service of the order. (2) If any person refuses or fails to comply with an order made under sub-section (1), the competent authority may take possession of the property and may for that purpose use such force as may be necessary. (3) Notwithstanding anything contained in sub-section (2), the competent authority may, for the purpose of taking possession of any property referred to in sub-section (1), requisition the service of any police officer to assist the competent authority and it shall be the duty of such officer to comply with such requisition. 15. Section 20 speaks of the powers to rectify the mistakes apparent from record. Section 21 provides that no finding of any officer or authority under any other law shall be conclusive for the purposes of any proceedings under SAFEMA. Section 22 speaks of mode of service of notices and orders under SAFEMA. Section 23 provides protection to the officers under SAFEMA for any action taken by them in good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earning income in a country to pay certain amount of tax, out of the income earned by them and for consequence in case of failure to comply with such obligation. However, the object of SAFEMA is essentially to deny the smugglers and foreign exchange manipulators any right to enjoy the benefits of ill-gotten money as well as forbid them from utilising such assets for generation of further income and for that therefore there is a provision for forfeiture of such assets. As against this, in case of compulsory purchase of property, it is essentially on account of failure to disclose the correct market value of the property purchased and specially for disclosure of lesser consideration for transfer made with the intention of evading the tax liability to the extent of non-disclosure of the real amount of consideration. However, such compulsory purchase requires the Government to pay the price for such purchase. In other words, though, it is a compulsory purchase, the Government is under obligation to pay the consideration for transferring the property in the name of the Government on account of the act on the part of the transferor or transferee in not disclosing the true consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuously argued that the law that the tenants or the lessees in the properties stated to be forfeited under SAFEMA are not bound by the said provisions of the Act which stands well established by that decision and that therefore it is not open to the respondents to act in contravention of the said decision. At the outset, it is to be noted that in Narayan Kadva s case (supra), there was no dispute that the occupants of the premises were the tenants and their tenancy continued even after forfeiture of the property. In paragraph-11 of the decision in the case of Narayan Kadva (supra), it has been observed thus :- 11. As far as forfeiture of the property in question in the present case is concerned, it appears that the property which stood in Gawde s name has been found to be property liable for forfeiture under the provisions of SAFEMA and therefore forfeited by the Central Government in accordance with the provisions of the SAFEMA, the petitioner is not really concerned with the forfeiture of the property of his landlord that is Gawde to the Central Government and its vesting in the Central Government. In fact, he claims that he has, after its vesting in the Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n lays down the law on the point that the competent authority acting under Section 19 of the SAFEMA is required to decide about the status of a person found in occupation of the property which has been forfeited under Section 7(3) of the SAFEMA, nor it can be said that the decision lays down law to the effect that moment a person found in occupation of the property forfeited under Section 7(3) of the SAFEMA claims to be a tenant of the property that the competent authority is required to adjudicate such claim before taking possession or evicting such person from such property. The observations made in Narayan Kudva s case were obviously in the matter where there was no dispute that the persons in occupation were tenants of the Central Government even after the forfeiture of the property. 24. The learned Advocate for the petitioners however drew our attention to various rent receipts stated to have been issued by the officers of the Central Government in relation to their occupation to the property and submitted that the same discloses undisputed fact about their leasehold right in the property in question. There is no substance in this contention. Mere acceptance of money having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that notice issued in that case under Section 6(1) of SAFEMA did not disclose that there existed any link or nexus between the property sought to be forfeited and the illegally acquired money of the detenu and therefore as the condition precedent for initiating proceedings under SAFEMA did not exist and therefore the order of forfeiture was not sustainable. Firstly the said matter relates to the challenge to the order of forfeiture of properties. In the case in hand there is no challenge to the forfeiture of the property. In the case in hand, the challenge is confined only to the alleged claim of tenancy of the petitioners in relation to the property which has already been forfeited under Section 7(3) of the SAFEMA. Being so, by no stretch of imagination the decision in Fatima Amin s case can be of any help to the petitioners. 27. Our attention was drawn to paragraph-44 of Amratlal s case (supra) while strenuously arguing about the need for an opportunity of being heard to be offered to the petitioners. Again the observations in paragraph-44 in Amratlal s case relate to the holders or possessors of the properties of the convicts and detenus on their behalf and therefore chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is true that the notice required the petitioners to deliver the possession within seven days. Section 19 merely provides period which the competent authority may grant for delivery of possession. In any case the petitioners have enjoyed the property for more than ten years from issuance of the said notice. Being so, this contention is not required to be considered at all. Besides, the period can even be granted while dispossessing the petitioners. 31. Drawing our attention to the copy of the letter dated 5th July, 1995 issued by the respondent, it was sought to be contended that the said notice is addressed to the petitioners as tenants and thereby the claim of tenancy of the petitioners has been admitted or atleast not disputed by the respondents. As already observed above, creation of tenancy can only be by the competent authority. It is nobody s case and it cannot be a case that the inspecting officer of the SAFEMA or NDPS, Mumbai is the competent authority to create tenancy in relation to any of the properties. Even otherwise the letter dated 5th July, 1995 reads thus :- .. The competent Authority and Administrator vide order under Sec. 7(1) and 19(1) of the SAFEM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der under Section 19(3) of the petitioners to be tenants in order to call upon them for compliance of requirements under Section 19(1) of SAFEMA that would not create any right of tenancy in favour of the petitioners. 33. The learned Advocate however further drawing our attention to the expression which has been used in the said letter dated 5th July, 1995 - all are required to have vacate their rooms within 7 days and hand over the property , submitted that the said expression disclose the cause of action to claim tenancy rights. As already stated above in order to claim a cause of action based on the said expression, it is primarily necessary for the petitioners to establish the lawful tenancy rights in the property. Merely because the petitioners were directed to vacate the premises that itself is not sufficient to create cause of action to claim tenancy rights. 34. It is then contended that even otherwise since the petitioners were not heard during the SAFEMA proceedings and undoubtedly they are in possession of the premises, in order to evict the petitioners therefrom, the respondents cannot take law in their hand and at the most they can proceed against the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X
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