Allowed

FPA-ND-38/DLI/2016 of Sh.Rajesh Gulati v/s The Competent Authority, Delhi

ATFP13 Oct 2016FPA-ND-38/DLI/2016

Case brief

AI extract

What is this about?

The Appellate Tribunal for Forfeited Property set aside an order forfeiting immovable property held in the wife's name. The court held that the Competent Authority violated Section 6(2) of the Smugglers & Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 by failing to issue a notice to and hear the legal owner of the property before forfeiture.

What did the court decide?

Impugned order dated 17th March, 2016 for forfeiting the property is set aside, and the property is directed to be released from forfeiture forthwith.

FPA-ND-38/DLI/2016 of Sh.Rajesh Gulati v/s The Competent… — Property and Title | ATFP (2016)

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APPELLATE TRIBUNAL FOR FORFEITED PROPERTY NEW DELHI

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Date of Decision: 13^th October, 2016

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MP-104/DLI/2016 FPA-ND-38/DLI/2016

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Sh.Rajesh Gulati ……. Appellant

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Versus

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The Competent Authority, Delhi ..…. Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant	:	Sh. R.K. Tiwari, Advocate
For the Respondent	:	Sh.Manoj Dargar Maheshwari, Advocate
CORAM JUSTICE MANMOHAN SINGH	:	CHAIRMAN
SH.G.C. MISHRA	:	MEMBER
SH.B.K. BANSAL	:	MEMBER
JUDGMENT JUSTICE MANMOHAN SINGH	:	CHAIRMAN

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FPA-ND-38/DLI/2016

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By filing of the present appeal, Sh. Rajesh Gulati - the appellant has challenged the impugned order dated 17^th March, 2016 passed by the Competent Authority.

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The brief facts are available as per record that:-

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Prior to his detention under the Preventive order dated 28.09.2001, the appellant has been arrested on 5^th July, 2001 by the Customs officers at the Indira Gandhi International Airport, New Delhi on the allegation that he had smuggled 40 mobile telephones. The mobile phones were found hidden in a microwave oven. The microwave oven as well as the mobile telephones

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were seized and the collective value of the seized goods has been stated by the respondents to bee Rs. 5,16,000/-.

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At the time of his arrest, the appellant handed over his passport to the customs authorities. In the appellant‟s statement under Section 108 of the Customs Act, 1962, it was stated by the appellant that the appellant was an employee of M/s B.D. Denim. The appellant had also stated that he had made six trips to Dubai between 30^th May, 2000 to 3^rd July, 2001 at the instance of the proprietor of M/s B.D. Denim and that except for the first occasion, the appellant had on the instructions of and as arranged by the proprietor of M/s B.D. Denim, brought into India various household items including mobile phones.

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The proprietor of M/s B.D. Denim in his statement under Section 108 of the Customs Act, however, denied that he had any business relationship with the appellant and also denied that he had any knowledge of the appellant‟s trips to Dubai.

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After his arrest on 5^th July, 2001, the appellant was produced before the Court of Metropolitan Magistrate and was remanded to judicial custody till 19^th July, 2001. On the date of his arrest the appellant retracted his statement made under Section 108 before the Magistrate and alleged that the statement has been forcibly taken by Custom officers after beating him. The appellant thereafter made five applications for grant of bail which were rejected by the Court on 16^th July, 6^th August, 18^th August, 6^th September, and 17^th September, 2001. In the meantime on 3^rd September, 2001 a complaint was lodged by the Customs Department against the appellant for offences punishable under Section 132 and 135 (1)(a) of the Customs Act, 1962. The Metropolitan Magistrate took cognizance of the same and the proceedings are pending. The appellant was ultimately granted bail on 29^th

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October, 2001 by the Delhi High Court. However, prior to this date, on 28^th September, 2001 the impugned order was passed under the Act and served on the appellant in jail where the appellant still is.

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The appellant claims that he had sent a detailed retraction of his statement as recorded on 5^th July, 2001 to the Finance Minister and the Chief Commissioner (Customs). He also made a representation on 17^th October, 2001 to the detaining authority in which he has challenged the order of detention. The representation was rejected by the respondent No. 1 by an order dated 29^th October, 2001 and the detention order was confirmed for a period of one year from 29^th September, 2001.

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A Show Cause Notice C No. VIII (AP)10/P&I/27 A/2001 dated 13.12.2001 was issued by the Customs Department wherein the Appellant and Shri Deepak Dhembla were jointly asked to show casue why the seized goods should not be confiscated and penalty should not be imposed on them under section 112 of the Customs Act.

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The appellant submitted his reply to the show-cause notice issued by the Customs Department. Sh. Deepak Dhembla did not file any reply and the matter was adjudicated by Additional Commissioner of Customs who after appraisal of the evidences confiscated the seized goods and gave an option to the appellant to redeem the seized goods on payment of redemption fine of Rs.3 lakhs and imposed a penalty of Rs.2 Lakhs on the appellant on the ground that although Sh. Deepak Dhembla was involved in the alleged smuggling of mobile phones in India, but it was with the active involvement of the appellant.

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The appellant filed an appeal against the order dated 30^th January, 2004 before the Joint Secretary, Government of India. The Joint Secretary vide order dated 29^th September, 2006 reduced the penalty to Rs.50,000/- in

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view of the facts and circumstances of the case, stating that the appellant deserved a lenient view.

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Proceedings were also initiated against the appellant under Conservation of Foreign and Prevention of Smuggling Activities Act, 1974. An order of detention was passed against the appellant on 28^th September, 2001 and the said detention order was challenged by the appellant before the High Court in Writ Petition, which was dismissed by the High Court. Against the said dismissal order, the appellant filed an appeal before the Supreme Court who vide order dated 29^th August, 2002 set aside the order of the High Court and quashed the detention order while making the following observations:-

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Assuming that by some method of prescience the detaining Authority foresaw the order of bail which was granted to the appellant on his sixth application, the question still remained, would the appellant again resort to smuggling goods into the country? It was not the detaining authority‟s case that the appellant was a die-hard smuggler. In fact in the impugned detention order, the detaining authority noted that:

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“Though Shri Deepak Dhembla the proprietor of M/s B.D. Denim had denied any association in that case, yet from the statement of Shri Rajesh Gulati i.e. you it is clearly evident that Shri Dhembla was the brain behind the smuggling of mobile phones through your help and he was arranging for your ticket and toher expenses for executing the process of smuggling of mobile phones in clandestine manner”.

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In other words according to the detaining authority the prime mover for the smuggling activity was the proprietor of M/s B.D. Denim. The appellant at the worst was a pawn in the hands of another. The likelihood of the appellant indulging in smuggling activities by the appellant was a pawn in the hands of another. The likelihood of the appellant indulging in smuggling activities by the appellant was in any case effectively foreclosed by the retention of his passport by the customs department. The detaining authority noted that the appellant‟s passport was with the customs department and yet he said “but you are likely to travel clandestinely for the purpose of smuggling”. Now none of the instances of smuggling by the appellant as stated in the impugned detention order describe the appellant as having travelled without a passport for the purpose of smuggling. The conclusion that despite the absence of his passport the appellant could or would be able to continue his activities is based on no material but was a piece of pure speculation on the part of the detain authority. These findings

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are sufficient to invalidate the impugned detention order and it is not necessary to consider the other issue raised by the appellant.

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The appeal is accordingly allowed and the decision of the High Court is set aside. The impugned order of detention is quashed and the appellant is directed to be released forthwith.

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As per respondent the appellant had been involved, in a well organized manner, in activities prejudicial to law and was deriving illegal income there from, “reasons to believe” were recorded in writing within the meaning of section 6 of the Act, that the right, title and interest in the properties mentioned above are illegal within the meaning of Section 3(1)(c) of the Smugglers & Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 and were acquired by the appellant in his name or in the name of his family members/relatives out of illegal income.

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It is also the case of the respondent that Sh.Deepak Dhembla along with Sh.Rajesh Gulati was indulged in activities prejudicial to law, evasion of duty and derived illegal gains. Information regarding properties owned/possessed by Sh.Deepak Dhembla either in his name or in the names of his relatives/associates has been gathered from records as well as from the report on financial investigations received from Income Tax Authorities, Delhi.

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As per record, Sh.Deepak Dhembla is in possession of and has right, title and interest in the following properties:

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IMMOVABLE PROPERTIES

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(i) D-31, Vikas Marg, Laxmi Nagar Delhi-92 (ii) C-1107, Amarpali Greens, Indira Puram, Ghaziabad. (iii) B-110, Shakarpur Extension, Delhi-92.

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(iv) 238, Dhruv Apartment, Plot No. 4, I.P. Extension, Delhi-92

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MOVABLE PROPERTIES

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(A) HDFC Standard Life Insurance Policy No.10335879

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(B) Bajaj Alliance Policy NO. 0011551356

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(D) A/c No.CA 1126 in Dena Bank, F-17, Subhash Chowk, Laxmi Nagar, Delhi-92 in the name of Sh.Deepak Dhembla.

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In the impugned order dated 17^th March, 2016, it was held by the Competent Authority that the appellant has not filed any documentary evidence to explain the source of deposits in his bank accounts. In the facts and circumstances of the case, the appellant has failed to discharge the burden of proof as required under Section 8 of the SAFEM(FOP) Act, 1976 despite being provided sufficient opportunities for the same. Hence, the deposits and balance thereof in the subject property were forfeited to the Central Government, free from all encumbrances, in terms of the provisions of Section 7(1) and (3) of SAFEM(FOP) Act, 1976.

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The appellant has challenged the order dated 17^th March, 2016 passed by the Competent Authority in the present appeal filed under Section 26 of the Act. The appellant as well as the applicant are concerned only with the property at Serial No.(iv), namely, 238, Dhruv Apartments, Plot No.4, I.P. Extension, Delhi-110092 (hereinafter referred to as the “SAID PROPERTY”).

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In the grounds of appeal, it is stated that it was the admitted position that the said property is in the name of appellant‟s wife Mrs. Sumita Gulati, although the appellant has admitted that the said property was purchased in the name of his wife from the joint account of the appellant and his wife in the Syndicate Bank, being Saving Bank A/c No.1918, in March 1996 and the full and final payment was made at the time of purchase by cheque.

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The appellant has submitted the photocopies of General Power of Attorney dated 25^th March, 1996, Agreement to Sell dated 25^th March, 1996 and Will dated 25^th March, 1996 executed by Mrs.Nirmal Bindra in favour of Mrs.Sumita Gulati, wife of the appellant. Copies of the said documents would show that these are the registered documents.

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At the time of issuance of notice on 11^th July, 2016, the interim order was passed in favour of the appellant.

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After filing of the appeal, Mrs. Sumita Gulati has also filed a miscellaneous application with the prayer that the impugned order dated 17^th March, 2016 be set-aside and till the appeal is finally disposed of, the operation of the said order be stayed. She as well as the appellant have given an undertaking not to sell, part with or create third party interest in the said property till the disposal of the appeal.

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In the miscellaneous application filed by Mrs. Sumita Gulati, the specific statement has been made that the said property was purchased by her in 1996 on payment of Rs.3,15,000/-. The payment was made by way of five demand drafts, the details of which are given in para 2 of the application. The said demand drafts were drawn on Syndicate Bank where the applicant is holding joint account with her husband, the appellant, and Rs.45,000/- was paid in cash. The specific plea was taken by the applicant in the application that she is the sole owner of the said property, thus, the Competent Authority ought to have served her with the notice under Section 6(2) of SAFEM(FOP) Act, 1976, but the same was not served. She was not given an opportunity to plead her case before the Competent Authority. There is a gross violation of the said provision as she was deprived of her property without even being given an opportunity to plead her case. The order of the Competent Authority dated 17^th March, 2016 for forfeiting the

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said property is illegal. Therefore, the same is liable to be set-aside.

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We have heard the learned counsel for both the parties. Learned counsel for the respondent has mainly made two submissions on the issue of firstly about the non-issuance of notice required under Section 6(2) of the SAFEM(FOP) Act, 1976, on merits, he had submitted that the appellant has admitted before the Adjudicating Authority that he has purchased the property in the name of his wife. Secondly, the objection raised by his wife has no force as she was present at the time of hearing. However, it is not denied by him that at no point of time, any show-cause notice was issued to Mrs. Sumita Gulati which was required under Section 6(2) of SAFEM(FOP) Act, 1976. Counsel admits that the show-cause notice was issued to Mr. Deepak Dhembla with copy thereof to the appellant. It is also not denied by the counsel that the property in question is in the name of Mrs. Sumita Gulati and the respondent was aware about this fact when the impugned order was passed and these are registered documents.

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Section 7 of the Act makes it clear that before the order of forfeiture is passed, the person affected and in case any property appears to be held on his behalf by any other person then such other person, must also be given a reasonable opportunity of being heard. Admittedly, no such notice was given by the Competent Authority to the applicant Mrs. Sumita Gulati.

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The similar question came up before the Hon‟ble High Court of Delhi in the case of Kamla Bai v. Union of India, reported in 2004 (175) E.L.T. 98 Delhi, where the facts are almost identical. The husband of the appellant Smt. Kamla Bai was the accused in the matter. After having discussed the provisions of the Act as well as the judgment of the Supreme Court in paras 3 & 4 therein, the Hon‟ble High Court speaking through Hon‟ble Mr. Badar Durrez Ahmed, J. has observed that once the statute itself gives an

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opportunity of being heard, that opportunity cannot be whittled or taken

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away. Paras 3 & 4 of the said judgment read as under:-

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“3. The respondents and in particular the Competent Authority under SAFEMA issued a show cause notice dated 20.9.2001 under Section 6(1) of SAFEMA to the said Sh.Popat Lal. Thereafter, an order dated 22.7.2002 was passed by the Competent Authority under Section 7(1) and 7(3) of SAFEMA forfeiting the said property to the Central Government. In the said order dated 22.7.2002 which is impugned herein, it is clearly indicated as under:-

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“A perusal of the copy of the registered deeds filed by the advocates along with the letter dated 20.11.01 shows that a plot was purchased for Rs.25,000/- in Ramdevji Ki Gali, Takhatgarh, Distt Pali (Rajasthan) in the name of Kamlabai from Sh.Naina Rai son of Choghaji on 10/15.10.84.....” It was also recorded in the impugned order that it was not possible to verify the source of investment in the property in question. Paragraphs 23 and 25 of the impugned order read as under:-

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“23. Therefore, it is not possible to verify the source of investment in the property mentioned in the schedule. I have gone through the records and have taken into consideration all the facts on record. I have carefully considered all the facts on record at the monitoring stage and also after the issue of notice under section 6(1) and 7(1) of the Act. Under the circumstances and keeping in view the non-cooperative attitude of the AP and the fact that the proceedings cannot be kept pending indefinitely I have no alternative but to decide the case to the best of my judgment on the basis of material available on record.

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xxxx xxxx xxxx xxxx xxxx xxxx

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In the absence of any supporting evidence, I have no other alternative but to forfeit the property of the AP as mentioned in the schedule to the notice u/s 6 (1) of the Act. Hence, in view of the provisions of Section 3(1) to (iv), the same are forfeited u/s 7(1) and (3) of the SAFEM (FOP) Act, 1976, without any encumbrances to the Central Government.'' From the above, it is clear that it is an admitted position that the property in question stands in the name of the petitioner and not in the name of the said Sh.Popat Lal. It is also clear that it was not possible for the Competent Authority to verify the source of investment in the said property and that the decision of forfeiture taken by the Competent Authority was on the basis of his best judgment and in the absence of any supporting evidence. The learned counsel for the respondent has also pointed out, and, rightly so, that throughout the proceedings the said Sh.Popat Lal, husband of the petitioner, held himself out as the owner of the property. Be that as it may, the fact of the matter is that the property stands in the name of the petitioner who is the wife of the said Sh.Popat Lal. She claims to be the actual owner thereof and not just a namelender. It is clear that under SAFEMA only the properties of

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the convict/detenue are sought to be forfeited wherever they are. The idea is to each his properties in whosoevers‟ name they are kept or by whosoever they are held. The independent property of relatives and friends which are not traceable to the convict/detenue are not sought to be forfeited nor are they within the purview of SAFEMA. This has been clearly held by the Supreme Court in the case of Attorney General of India etc. etc. v. Amaratlal Prajivandas and others, etc. etc. It is for the purposes of ascertaining whether the property was actually one which belonged to the said Sh.Popat Lal and whether it was merely held by the petitioner on his behalf, that the provisions of Section 6 and 7 have been enacted. It is, therefore, necessary to examine these provisions. Section 6 and 7 of SAFEMA are set out herein below:-

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6. Notice of forfeiture -

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(1) If, having regard to the value of the properties held by any person to whom this act applies, either by himself or through any other person on his behalf, his known sources of income, earnings or assets, any other information of material available to it as a result of action taken under section 18 or otherwise, the competent authority has reason to believe (the reasons for such belief to be recorded in writing) that all or any of such properties are illegally acquired properties, it may serve a notice upon such person (hereinafter referred to as the person affected) calling upon him within such time as may be specified in the notice, which shall not be ordinarily less than thirty days, to indicate the sources of his income earnings or assets, out of which or by means of which he has acquired such property, the evidence on which he relies and other relevant informations and particulars, and to show cause why all or any of such properties as the case may be should not be declared to be illegally acquired properties and forfeited to the Central Government under this Act.

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(2) Whereas notice under sub-section (1) to any person specifies any property as being held on behalf of such person by any other person, a copy of the notice shall also be served upon such other person.

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7. Forfeiture of property in certain cases -

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(1) The competent authority may, after considering the explanation, if any, to the show cause notice issued under section 6, and the materials available before it and after giving to the person affected (and in a case where the person affected holds any property specified in the notice through any other person, to such other person also) a reasonable opportunity of being heard, by order, record a finding whether all or any of the properties in question are illegally acquired properties.

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(2) Where the competent authority is satisfied that some of the properties referred to in the show cause notice are illegally acquired properties but is not able to identify specifically such properties, then it shall be lawful for the competent authority to specify the properties which, to the

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best of its judgment, are illegally acquired properties and record a finding accordingly under sub-section (1).

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(3) Where the competent authority records a finding under this section to the effect that any property is illegally acquired property, it shall declare that such property shall, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances.

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(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.”

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From the aforesaid provisions, it becomes clear that under Section 6(1), a notice is required to be given to the person to whom the Act applies, in this case Sh.Popat Lal. Under Section 6(2), a notice is also required to be served upon such other person who holds the property in question on behalf of the person to whom the Act applies. This clearly means that notice under Section 6 ought to have been issued both to Sh.Popat Lal as well as to the petitioner in whose name the property stood. Learned counsel for the respondent argued that no notice was necessary in respect of the petitioner inasmuch as their stand was that the property in question belonged to Sh.Popat Lal and that throughout he had admitted the same. This, however, is not acceptable in view of the fact that it is quite possible that the property may be admitted by the detenue to belong to him when, in fact, it did not. There are many instances under which a person may claim that the property belongs to him when in point of fact it does not actually do so. It is for this reason that specific statutory provisions have been made and incorporated under Section 6(2) whereunder a copy of the notice is specifically to be served to the person who allegedly holds the property of the detenue on the latter‟s behalf. Admittedly, in this case, no notice under Section 6(2) of the SAFEMA had been issued to the petitioner i.e. the person in whose name the property stands. Section 7 also fortifies this line of reasoning inasmuch as it makes it abundantly clear that before an order of forfeiture can be made under the said Section the person affected and, in the case where the person affected holds any property specified in the notice through any other person, then, such other person must also be given a reasonable opportunity of being heard. Admittedly, no notice has been issued to the petitioner and obviously no opportunity of hearing has been given to the petitioner. In this view of the matter, the mandatory provisions of Section 6 and 7 of SAFEMA have not been complied with before the passing of the impugned order dated 22.7.2002 whereby, the property which stands in the name of the petitioner has been forfeited to the Central Government without notice and opportunity of hearing to the petitioner. It may be that the petitioner is Sh.Popat Lal‟s wife. Yet, mandatory provisions have to be complied with, particularly, when such provisions incorporate rules of natural justice. The Supreme Court in the

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case of West Bengal Electricity Regulatory Commission v. CESC Ltd. has categorically held as under:-

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“That apart, when a statute confers a right which is in conformity with the principles of natural justice, in our opinion, the same cannot be negatived by a court on an imaginary ground that there is a likelihood of an unmanageable hearing before the forum concerned. As noticed above, though, normally price fixation is in the nature of a legislative function and the principles of natural justice are not normally applicable, in cases where such right is conferred under a statute, it becomes a vested right, compliance of which becomes mandatory. While the requirement of the principles of natural justice can be taken away by a statute, such a right when given under the statute cannot be taken away by courts on the ground of practical inconvenience, even if such inconvenience does in fact exist. In our opinion, the statute having conferred a right on the consumer to be heard in the matter pertaining to determination of the tariff, the High Court was in error in denying that right to the consumers.”

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When such situation was pointed out to the learned counsel for the respondent, he made the suggestion that let the matter be remanded back to the Competent Authority for reconsideration. The same is not possible in the present case, as admittedly, the notice was not served upon the applicant which was mandated under Section 6(2) of SAFEM(FOP) Act, 1976.

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It is well-settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner. (See Nazir Ahmed v. King Emperor , AIR 1936 P.C. 253, Rao Shiv Bahadur Singh v. State of Vindhya Pradesh , AIR 1954 SC 322 and State of Uttar Pradesh v. Singhara Singh and others , AIR 1963 SC 358).

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As already mentioned, the appellant is concerned only with regard to the property at Serial No.(iv), namely, 238, Dhruv Apartments, Plot No.4, IP Extension, Delhi-110092 and the applicant is also concerned with the said property only.

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Under these circumstances, we are of the considered view that the impugned order dated 17^th March, 2016 is not sustainable as far as the said

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property of the applicant is concerned, as the same is passed contrary to the provisions of Section 6(2) of the SAFEM(FOP) Act, 1976 and the same is accordingly set-aside. The said property be released from the forfeiture forthwith.

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(Justice Manmohan Singh) Chairman

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(G.C. Mishra) Member

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(B.K. Bansal) Member

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New Delhi, 13^th October, 2016.

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„d‟

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