Allowed

FPA–21/MDS/2000 of Mrs. Kanta Bai v. The Competent Authority, Chennai

ATFP14 Nov 2024FPA–21/MDS/2000

Case brief

AI extract

What is this about?

The Appellate Tribunal fixed the current market value of 75% of a forfeited property for payment by appellants to avoid auction, citing High Court directions and statutory provisions, rejecting the claim for older valuation rates.

What did the court decide?

Appellants directed to pay 75% of the property value at current rate of Rs. 1944 per sq. ft. within three months to secure release from forfeiture.

FPA–21/MDS/2000 of Mrs. Kanta Bai Vs. The Competent Authority, Chennai — Corruption | ATFP (2024)

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APPELLATE TRIBUNAL UNDER SAFEMA AT NEW DELHI

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1. FPA- 19/ MDS /2000 Mrs. Vijaya Bai Versus The Competent Authority, Chennai

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2. FPA – 21 / MDS / 2000 Mrs. Kanta Bai Versus The Competent Authority, Chennai

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Advocates / Authorized Representatives who appeared

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For the Appellants : Mr. Naveen Malhotra, Advocate Mr. Ritvik Malhotra, Advocate For the Respondents : Mr. H.P. Rao, Advocate Mr. K.P. Singh, Advocate

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CORAM

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JUSTICE MUNISHWAR NATH BHANDARI : CHAIRMAN SHRI RAJESH MALHOTRA : MEMBER

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ORDER

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14.11.2024

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The appellant preferred an appeal to challenge the order dated 20.03.1998 passed by the Competent Authority under Section 7(1) of Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA). By the impugned order dated 20.03.1998 certain properties were forfeited which

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FPA – 19 & 21 / MDS / 2000

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includes a property at Corporation Door No. 38 (Old No. 2), Munuswamy Road of Tuskar Town, Bangalore-51 for 75% share. The appeal aforesaid was decided by the Appellate Tribunal for Forfeited Property by order dated 09.01.2001.

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The order of the Tribunal was challenged before the Madras High Court by maintaining a Writ Petition No. 22098 and 22099 of 2003. Those petitions were decided by the Order dated 06.07.2022. The Order dated 09.01.2001 was modified to limited extent and the matter was remanded back to the Tribunal. It was to exercise its jurisdiction under Rule 20 of Forfeited Property (Procedure) Rule of 1986 to determine the value of the property and direct the petitioner to pay the same to the Central Government within the stipulated period. If the petitioner makes payment of the amount determined by the Tribunal, the property would be released by the respondent from forfeiture. However, if the amount is not paid, order of forfeiture would stand confirmed for further action under the provisions of SAFEMA.

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On the remand of the case, the appeal was listed before the Single Bench of the Tribunal, however, without placing the appeal record before the Tribunal. It was found that record of the appeal has not been transmitted to the present Appellate Tribunal constituted with the merger of few Tribunals which

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FPA – 19 & 21 / MDS / 2000

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includes the Appellate Tribunal for Forfeited Property, which was independent earlier. In the absence of the records, the Tribunal made a request to the parties to help for reconstruction of the file so that the issue referred by the High Court may be decided at the earliest. It was also found that the respondents are not appearing. Thereby notices were also issued to them for their appearance. With the efforts of the Counsel for the appellant and later on even the respondent to reconstruct the record for which Ld. Senior Counsel, Shri Naveen Malhotra informed the Tribunal on 30.11.2023 for his efforts for reconstruction of the file and for that to collect papers relating to Appeal No. 19 / MDS / 2000 filed by Mrs. Vijaya Bai. The respondent also informed about their efforts for reconstruction of file. This Tribunal issued directions that reconstructed file may be exchanged between the parties and at the same time a direction was given to get valuation of the property in question so that an appropriate order may be passed in compliance of the order of the Madras High Court. It is with great persuasion of the Tribunal that the appellant submitted the Valuation Report as referred in the order dated 23.07.2024. This Tribunal found that the respondent has failed to comply the direction though it was informed by them that the file has been reconstructed pursuant to the direction of the Tribunal and the reconstructed file would be filed. This Tribunal passed an order to seek presence of the Competent

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FPA – 19 & 21 / MDS / 2000

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Authority for respondents for their default in getting the valuation of the property which was to be sought simultaneously along with the process for reconstruction of file. The direction of the Tribunal was yet not complied. Thus a detailed order was passed on 30.07.2024 to secure the presence of the Competent Authority of respondent from Chennai so that with completion of pleadings in regard to the valuation of the property in question and with reconstruction of file, the appeal can be disposed off at the earliest.

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With the efforts of the Tribunal, the process could be completed only on 20.08.2024. On reconstruction of the file and Valuation Reports even by the respondent, a direction was given by the Tribunal on 20.08.2024 to provide a copy of the Valuation Report to the Counsel for the appellant and who in turn prayed for time to consult his client. The prayer of the appellant was taken to be genuine and accordingly appeal was adjourned to 14.10.2024. On 14.10.2024, the appellant prayed for an opportunity to argue the appeal awaiting the outcome of the appeal filed before the Madras High Court. The prayer was granted by the Tribunal but with the condition that on the next date of hearing, the appellant would argue the appeal finally in reference to the order of the remand. The appeal was placed on 07.11.2024 for final arguments.

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FPA – 19 & 21 / MDS / 2000

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The Ld. Counsel for the appellant submitted that in compliance of the order of the High Court dated 06.07.2022, this Tribunal needs to determine the value of the property so that it may be paid by the appellant. The appellant has submitted the Valuation Report to determine the amount by the Tribunal which is of the Government Valuer. However, that Valuation Report was not accepted by the respondent rather they have also filed a Valuation Report which is at the rate of the property as on date of report. The Ld. Counsel for the appellant submits that valuation of the property should be determined as on the date when it was purchased by the appellant i.e. on 14.12.1994. It cannot be on current rate of the property.

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The Ld. Counsel for the respondent contested the issue aforesaid. The complete background of the case was given to show that original property was owned by one Mr. Abdul Razak who was detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA). A notice under Section 6(1) of SAFEMA was issued on 13.02.1980 to show cause as to why the immovable properties belonging to him should not be forfeited. The detenu, Mr. Abdul Razak sold the property on 03.03.1988 to Smt. Shalamma and Smt. Gokulamma though after the notice

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FPA – 19 & 21 / MDS / 2000

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under section 6(1) of SAFEMA sale of the property was null and void.

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It was further submitted that the property was further sold to the appellants on 14.12.1994 while the seller had no title because earlier sale was null and void and the property was ultimately forfeited by the Competent Authority on 20.03.1998. The fact is that the property was sold after the notice under Section 6(1) of SAFEMA Act. The transaction of the property was null and void as per Section 11 of SAFEMA after issuance of notice under Section 6(1) of SAFEMA Act. This Tribunal accordingly dismissed the appeal. On a Writ Petition preferred by the appellant, the matter has been remanded back by the High Court. However, in the light of the judgment of the Apex Court in the case of AamenabaiTayebaly v. Competent Authority reported in (1998) 1 SCC 703, the right of the appellant could not have been recognized. The sale and purchase of the property was hit by Section 11 of SAFEMA and as per the judgment of the Apex Court, the title of the property could not have been conveyed after the notice under Section 6(1) of SAFEMA. In any case, if the appellant has raised construction after demolition of old construction then also the value of the land having old construction cannot be taken on the old rate because with the forfeiture of the property by the Order dated 20.03.1998 it

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FPA – 19 & 21 / MDS / 2000

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vested with the Government and thus liable for auction. The order dated 20.03.1998 has not been annulled or set aside. In view of the above if the auction of the property is to be substituted to grant benefit to the appellant, it can be on the current rate of the property otherwise it would be amounting to nullifying the forfeiture without a specific order and accordingly, the current price excluding the value of the construction has been given. Thus appropriate order in compliance to the direction of the Madras High Court vide the judgment dated 06.07.2022 be passed.

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The Ld. Counsel for the appellant gave rejoinder to the arguments made by the respondent. It is submitted that appellant is a bona fide purchaser of the land. He demolished the old construction and raised the new construction. If a direction is given to make payment of the land on the current value, it would cause gross injustice to him. The value of the property should be assessed as on the date of purchase of the property by the appellant i.e. of 1994 and with the determination of the value of the property by the Tribunal, a reasonable time be given for the payment.

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We have considered the rival submissions of the parties and perused the record. It is a case where initially the appeal was decided by the Appellate Tribunal for Forfeited Property by

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FPA – 19 & 21 / MDS / 2000

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its order dated 09.01.2001. It is necessary to mention that at the relevant time jurisdiction for hearing of the appeal was with the Appellate Tribunal for Forfeited Property and has been assigned to the present Tribunal with merger of the jurisdiction only few years back.

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In any case with the great effort of the appellant and finally even of the respondent, the file was reconstructed but it took significant time and in the meanwhile when the matter was placed before the Division Bench of the Tribunal, the directions were given to the parties to submit the Valuation Report so that direction of the Madras High Court be complied. It was with the efforts that the file was reconstructed and Valuation Report was submitted and was recorded by the Tribunal in its order dated 20.08.2024. The appellant sought time to consult his client and the matter was then posted for final hearing. The Counsel for appellant prayed for adjournment but was declined by this Tribunal looking to the fact that the appeal is of the year 2000 and now with the reconstruction of file and submission of Valuation Report by both the parties, the appeals need to be decided immediately. Both the Counsel then made final arguments.

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We find that after detailed judgment of Madras High Court dated 06.07.2022 in Writ Petition No. 22098 and 22099

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FPA – 19 & 21 / MDS / 2000

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of 2003, the issue remains in narrow compass which is to find out the value of the property so that a direction may be given to the appellant to pay the value of the property within a reasonable period. If they fail to deposit the money then forfeiture of the property be taken for further action.

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The Ld. Counsel for the respondent made detailed arguments in reference to Section 11 of SAFEMA to press upon the Tribunal to treat sale of the property after issuance of the notice under Section 6(1) of SAFEMA Act to be null and void. A reference to the judgment of the Apex Court in the case of Aamenabai Tayebaly v. Competent Authority (supra) was given. We are unable to accept the arguments of the respondent because the judgment aforesaid was taken into consideration by the Madras High Court in its order dated 06.07.2022 and after that a detailed order was passed to direct the Appellate Tribunal to find out the value of 75% portion of the land and accordingly we will not allow the respondent to open the issue going beyond the order of the High Court rather this Tribunal would restrict this order within the four corner of the direction given by the Madras High Court in its order dated 06.07.2022.

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To determine the issue of value of the property, it would be gainful to refer para 17 to 19 of the judgment of the

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FPA – 19 & 21 / MDS / 2000

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Madras High Court dated 06.07.2022 and are reproduced

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hereunder:-

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“ 17. At this juncture, two factors weigh in the mind of the Court. The first factor is a delay of 18 years in passing the forfeiture order and the second factor is the petitioners being bona fide purchasers for value and that they had no occasion to become aware of the proceedings under SAFEMA. Keeping this in kind, this Court has to see if the interest of both the sides can be balanced. Ultimately, even if the forfeiture proceedings are upheld, the property will be put on auction sale and the amount will go to Central Government. What has been forfeited in the present case is 75% of the land that was purchased by the petitioners. The petitioners have spent money in demolishing the old structure and for putting up a new structure, after getting necessary sanction.

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18. The Appellate Tribunal itself has encountered cases where the vacant site along was forfeited as per the order of the competent authority and the construction made therein was not the subject matter of forfeiture. In those cases, the Tribunal had exercised the power conferred under Rule 20 of the Forfeited Property (Procedure) Rules, 1986 and directed the value of the forfeited site to be ascertained and on payment of the market value of the same, to release the property from the clutches of SAFEM.

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19. The above procedure could have been adopted by the 2^nd respondent on the facts of the present case so that the value of the property that was attached could have been ascertained and the petitioners could have been made to pay the same to the Central Government.

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The perusal of the paras quoted above, shows that to balance the equity between the parties, the High Court has given appropriate direction after recording a fact that if the forfeiture of properties is upheld, the property would be put to auction and amount will go to Central Government. The High

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FPA – 19 & 21 / MDS / 2000

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Court then referred to Rule 20 of the Forfeited Property (Procedure) Rules, 1986 to direct the Tribunal to ascertain the market value of the property which according to us has to be co-related to the auction of property by the Central Government, as indicated by the High Court. Thus we need to co-relate the value of the property in consonance with the observation of the High Court and not dehors where direction has been given to substitute the auction and therefore to take to the value as a substitute of the auction otherwise. If the value of the property is to be taken on the price, the appellant had purchased it, the Madras High Court would have passed an order after taking cognizance of the sale price disclosed in the sale deed but cautiously the matter was remanded back and in pursuant to the direction of the Tribunal, both the parties have produced the valuation report of the property.

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At the stage, it is necessary to indicate that even appellant has given the valuation of the property in different yearsupto the current year. It would be after noticing that to save the property from auction value has to be taken on the current price and accordingly we are unable to accept the prayer of appellant to determine the value of the property at the rate when it was purchased rather we are in agreement with the prayer of the respondent and accordingly accept the value of the property on the present rate which is Rs. 1944/per square feet, while according to the appellant it was Rs.

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FPA – 19 & 21 / MDS / 2000

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800/- per square feet for residential and Rs. 1120/- square feet for commercial in the year 2014-15 while in the year 2023-24 it was Rs.11000/- square meter. In any case even appellant have given the current rate of the property with the old rate. However, we would be taking present rate of the property for the reasons given above and direct the appellant to pay the amount for the land to the extent of 75% of area of the property in question with its multiplication with Rs. 1944/-. The amount arising out of the aforesaid calculation would be deposited by the appellant within three months from the date of this order, otherwise consequences to follow.

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With the aforesaid, the appeals are disposed of.

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(Justice MunishwarNath Bhandari) Chairman

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(Rajesh Malhotra)

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Member

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NEW DELHI

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14^TH NOVEMBER, 2024