Allowed

Fpa No.104/BOM/2018 of Smt. Bhartiben Kapadia D/o Late Smt. Maniben H. Kapadia v. The Competent Authority, Safema, Mumbai

ATFP3 Feb 2025FPA No.104/BOM/2018

Case brief

AI extract

What is this about?

Appellants challenged forfeiture of six properties under SAFEMA. The Tribunal held that properties acquired decades before relevant license issuance lacked nexus with alleged violations. Relying on FERA appeal finality and lack of smuggling link, it allowed appeals and ordered release.

What did the court decide?

Direct release of the six disputed properties in favour of the appellants.

Fpa No.104/BOM/2018 of Smt. Bhartiben Kapadia D/o Late Smt… — Money Laundering | ATFP (2025)

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BEFORE RAJESH MALHOTRA, MEMBER, SINGLE BENCH; APPELLATE TRIBUNAL UNDER SAFEMA: AT NEW DELHI

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1. FPA No.11/BOM/2014

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Smt. Bhanumati Chimanbhai Kapadia W/o Late C. Kapadia,

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2. FPA No.104/BOM/2018

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Smt. Bhartiben Kapadia D/o Late Smt. Maniben H. Kapadia,

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3. FPA No.103/BOM/2018 Smt. Kusumben A. Kapadia W/o Sh. Arvindbhai Kapadia,

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4. FPA No.102/BOM/2018 Smt. Gitaben R. Kapadia W/o Rohitbhai Kapadia,

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5. FPA No.106/BOM/2018 Smt. Beenaben (Lata) R. Kapadia W/o Rashmikant Kapadia,

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6. FPA No.105/BOM/2018 Smt. Smitaben S. Kapadia W/o Sunil Kapadia,

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7. FPA No.101/BOM/2018

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Sh. Himanshu J. Kapadia S/o Sh. Jitubhai Kapadia … Appellants

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Versus

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The Competent Authority, SAFEMA, Mumbai … Respondent

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Advocates/Authorized Representatives who argued For the Appellant : Sh. Sumit R. Sharma, Adv. For the Respondent : Sh. Radha Singh Dhami, Adv.

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FINAL ORDER

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03.02.2025

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Present appeals are filed by the appellants under section 12 (4) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (herein after Act of 1976), against the impugned order dated 12.08.2014 passed by the Competent Authority, SAFEM (FOP) Act, Mumbai in F. No. CA/AHD/2 (b)/C-45/1999-2000/132, vide which following

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properties were forfeited to the Central Government:-

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i) Bungalow No. 9, Uttam Park Society, College Road, Nadiad in the name of AP-1, purchased on 18.03.1970 for sum of Rs. 11,001/- in the name of Sh. Chimanlal H. Kapadia (AP-1).

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ii) Bungalow No. 10, Uttam Park Society, College Road, Nadiad in the name of AP-2, purchased on 24.12.1966 for sum of Rs. 8,502/- in the name of Smt. Maniben H. Kapadia (Mother of Appellant No.2).

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iii) Bungalow No. 21, Uttam Park Society, College Road, Nadiad, purchased on 10.04.1968 for sum of Rs. 15,201/-in the name of AP-3 (through LR Appellant No.3).

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iv) Agricultural land at Chhaklasi Road, Nadiad bearing survey no. 1100/2 admeasuring 0.32.37 gunthas, purchased on

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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12.04.1988 for cost of Rs. 68,000/- in the name of AP-9 (through LRs-appellants No. 4-6), AP-10 and AP-11).

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v) Fixed deposit of Rs. 8,128/- dated 18.08.1990, valuing Rs. 16,084/- in the name of AP-18 in account no. 106960 and 106962 with Janta Co-operative Bank Ltd. P.B.7, Sindushi Pole, Chkla, Nadiad- 387001.

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vi) Fixed deposit of Rs. 8,128/- dated 18.08.1990, valuing Rs. 15,212/- in the name of AP-19 (herein Appellant no.7) in account no. 106961 and 106963 with Janta Co-operative Bank Ltd. P.B.7, Sindushi Pole, Chkla, Nadiad- 387001.

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Facts of the Case:

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2. On 01.07.1998, RBI issued Full Fledged Money Changer (FFMC) license to deal in foreign currency in favour of M/s Swami Nana Exchange Private Ltd. vide license no. 24/98 (Annexure A-2). The said company commenced its business from 16.07.1998 from its office situated at Bhavsarwad, Nadiad, Gujarat. On 09.10.1998, the said company requested RBI for permission to keep the foreign currency in residential premises for security reasons. The said permission was granted by RBI vide letter dated 07.1.1999 (Annexure- A-3). However, on 14.10.1998 at about 2 PM, the AntiTerrorist Squad, Gujarat Police, Ahmedabad raided the premises of appellants and seized US Dollars 30,000 from the possession of Chimanbhai Harjivan Kapadia. He was detained and produced before Enforcement Directorate, Ahmedabad.

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On 14.05.1999, a detention order was passed by Government of India, Ministry of Finance, Department of Revenue, New Delhi vide reference no. F.No. 673/29/99.Cus.VIII. Thereafter, representation dated 31.05.1999 was filed by Arvindbhai Kapadia, nephew of detenu to the Secretary to the Government of India seeking revocation of detention order, however, the said representation was rejected vide order dated 03.06.1999 being made at pre detention stage. Pending the said detention order, detenu fell sick and expired on 13.09.1999. After the death of detenu, Chimanbhai H. Kapadia, the Government of India vide its order reference no. F. No. 686/328/99.Cus.VIII dated 26.10.1999 revoke the detention order in terms

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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of Section 11 of COFEPOSA, Act, Annexure A-7. Sh. Sunil Arvindbhai, filed a petition before Hon’ble High Court of Gujarat being Special Civil Application No. 5015/1999 for issuance of Writ of mandamus to revoke the detention order dated 14.05.1999, however, the said Writ Petition was disposed of vide order dated 27.10.1999 as infructuous on account of death of said detenu.

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A Show Cause Notice bearing no. T-4/29/DD/SLH/A/99 dated 08.10.1999 was issued to seven noticees for contravention of provisions of Section 8 (1), Section 7 read with Section 73, Section 48 in terms of Section 68 (1) & (2) of Foreign Exchange Regulation Act, 1973. After granting opportunities of personal hearing to the said noticees, the Deputy Director of adjudication, ED, Ahmedabad vide order dated 19.07.2002 passed the order of confiscation of the seized Foreign Exchange and Indian Currencies. The said order was challenged by the noticees by filing appeal u/s 51 of FERA before Appellate Tribunal for foreign exchange at New Delhi vide appeal no. 52-58/2003. All the appeals were disposed of by the Appellate Tribunal vide common judgment dated 21.07.2003 whereby the appeals were allowed on the ground that material was very scantly to establish charges levelled against noticees; there was no cogent evidence to show that license granted by RBI was misused to purchase foreign exchange by illegal means; accounts of company were regularly audited and submitted to the RBI etc. Thereby, the impugned order was set aside and direction was passed for refund of all seized money and penalty.

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In the parallel proceedings, on the basis of detention order dated 14.05.1999, detenu Chimanbhai Harjivandas Kapadia was held to be covered u/s 2 (2) (b) of SAFEMA and accordingly, a Show Cause Notice No. CA/AHD/2(b)/C-45/1999-2000 dated 24.08.2001 was issued to the relatives of detenu including the present appellants for forfeiture of their properties. The said APs contested the SCN on the ground that all the properties were legally acquired properties of detenu Chimanbhai H. Kapadia

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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and the appellants, being not acquired through any illegal means. However, the Competent Authority SAFEMA, vide previous order dated 24.08.2001 forfeited the properties to the Central Government. The said order was challenged by the appellants before this Appellate Tribunal vide FPA. No. 84/BOM/2002. This Appellate Tribunal vide judgment dated 31.05.2011, set aside the impugned order dated 24.08.2001 and thereby remanded back the matter to the Competent Authority with directions for fresh adjudication.

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Pursuant to the order of remand, matter was re-heard by the Competent Authority after giving SCN dated 11.05.2012. Thereafter, fresh order dated 12.08.2014 was passed whereby 18 properties were released and the order of forfeiture of the six properties of the present appellants was passed. Aggrieved by the said impugned order dated 12.08.2016, the appellants have filed the present appeals.

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Arguments from the side of the Appellants:

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3. Ld. Counsel for the appellants pointed out that as per the case of respondent Competent Authority, the action was initiated on account of seizure of foreign currency of USD 30,000/- during the raid conducted on 14.10.1998 at the premises of detenu Chimanbhai H. Kapadia. It is an admitted fact that the said foreign currency belongs to M/s Swami Nana Exchange Private Ltd., holder of valid FFMC license dated 01.07.1998 guaranteed by RBI. It is also an admitted fact that the seized foreign currency was legally purchased by the said company and was duly reflected in its audited books of accounts. He contended that the respondent Competent Authority initiated the action just because the said foreign currency notes were found kept in the premises of Sh. Chimanbhai H. Kapadia (since deceased). He stressed that the detention order dated 14.05.1999 was already revoked, after the death of detenu, Chimanbhai H. Kapadia, by the Government of India vide its order reference no. F. No. 686/328/99.Cus.VIII dated 26.10.1999 in terms of Section 11 of

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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COFEPOSA, Act, Annexure A-7, though the said detention order was also challenged before Hon’ble High Court of Gujarat vide Special Civil Application No. 5015/1999 for issuance of Writ of Mandamus to revoke the detention order dated 14.05.1999, however, the said writ petition was disposed of vide order dated 27.10.1999 as infructuous, on account of death of said detenu. Ld. Counsel for the appellant argued that when the said detention order dated 14.05.1999 is already revoked by Government of India on 26.10.1999, all the proceedings subsequently initiated by the Competent Authority vide CA/AHD/2(b)/C-45/1999-2000 dated 24.08.2001 are null and void. Further, Ld. Counsel for appellants contended that the said APs contested the SCN on the ground that all the properties were legally acquired properties of detenu Chimanbhai H. Kapadia and the present appellants, being not acquired through any illegal means. However, their defence was not accepted by the Competent Authority SAFEMA, and thereby, vide previous order dated 24.08.2001 forfeited the properties to the Central Government. The said order was challenged by the appellants before this Appellate Tribunal vide FPA. No. 84/BOM/2002. This Appellate Tribunal vide judgment dated 31.05.2011, set aside the impugned order dated 24.08.2001 and thereby remanded back the matter to the Competent Authority with directions for fresh adjudication. He pointed out that pursuant to the order of remand, matter was re-heard by the Competent Authority after giving fresh SCN dated 11.05.2012. Thereafter, new order dated 12.08.2014 was passed, whereby 18 properties were released, but the order of forfeiture qua the present six properties of the appellants was passed.

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He pointed out that prior to the initiation of the proceedings for forfeiture of properties under SAFEMA, the Deputy Director of Adjudication, ED, Ahmedabad vide order dated 19.07.2002 passed the order of confiscation of the seized Foreign Exchange and Indian Currencies. The said

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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order was challenged by the noticees by filing appeal u/s 51 of FERA before Appellate Tribunal for foreign exchange at New Delhi vide appeal FPA-No. 52-58/2003. All the appeals were disposed of by the Appellate Tribunal vide common judgment dated 21.07.2003, whereby the appeals were allowed on the ground that material was very scanty to establish charges levelled against noticees; there was no cogent evidence to show that license granted by RBI was misused to purchase foreign exchange by illegal means; accounts of company were regularly audited and submitted to the RBI etc. Thereby, the order dated 19.07.2002 was set aside and direction was passed for refund of all seized money and penalty. He argued that this judgment dated 21.07.2003 has attained finality, and hence, there was no ground to initiate any action for initiation of fresh proceedings under SAFEMA, in absence of any violation under the provisions of FERA, in view of the judgment dated 21.07.2003 passed by this Appellate Tribunal. He stressed that even otherwise FFMC license was granted on 01.07.1998, whereas the properties were acquired much before the issuance of FFMC license as the immovable properties were acquired in the years 1966, 1968, 1970 & 1988, whereas the movable properties i.e, FDRs of Rs. 8128 were obtained on 18.08.1990. Accordingly, he stressed that by no stretch of imagination the aforesaid six properties mentioned in para no.1 above can be forfeited in favour of Central Government, in absence of any remote connection with the alleged violation under SAFEMA dated 14.10.1998 (though this fact is specifically denied in view of the judgment dated 21.07.2003 passed by this Appellate Tribunal pertaining to alleged violation under FERA). In support of his contention, he relied upon the judgment of Hon’ble High Court of Delhi in the case, Union of India v. Kamal Kumar, 2017 SCC Online Del 11361. Accordingly, he prayed to allow the present appeals qua the remaining six properties of the appellants as mentioned in para no.1 above, being the properties acquired from the legitimate sources of income.

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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Arguments on behalf of the Respondent:

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Ld. Counsel for the respondent Competent Authority submitted that

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most of the properties were already released by the Competent Authority but the aforesaid six properties were not released from forfeiture as the affected persons/appellants failed to discharge the onus of burden as required u/s 8 of the Act. She pointed out that detenu Chimanbhai H. Kapadia died on 13.09.1999 i.e., prior to the date of issuance of SCN and hence, after the death of detenu, Chimanbhai H. Kapadia, the Government of India vide its order reference no. F. No. 686/328/99.Cus.VIII dated 26.10.1999 revoked the detention order in terms of Section 11 of COFEPOSA, Act. The said revocation does not amount to quashing of the detention order, but revocation on account of abatement of proceedings. Hence, she stressed that appellants cannot take any benefit in absence of any quashing order of detention order by Hon’ble High Court. She further contended that even before the present incident dated 14.10.1998, the Enforcement Directorate initiated the actions against detenu Sh. Chimanbhai H. Kapadia and his associates and Chairman of M/s Swami Nana Exchange Pvt. Ltd. for violating the provisions of FERA and Custom Act and Show Cause Notices were issued against them. Accordingly, she argued that seeing the previous conduct of the appellants and detenu Chimanbhai H. Kapadia, the appellants are not entitled for any relief, seeing the fact that they failed to explain the legitimate sources of income for acquiring the said six properties as mentioned in para no. 1 above. Further, she also contended that as per point 1 of the Section II (Guidelines for grant of Authorisation for Additional Branches) of the RBI Master Circular on Memorandum of Instructions governing money changing activities (RBI/2011-2013) dated 01/07/2011, “ 1. No FFMC shall carry on money changing business at any additional place of business other than its permanent place of business except with the prior approval of the Reserve Bank. An FFMC which intends to commence money

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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changing business at any additional place of business shall apply in writing to the respective Regional Office of the Foreign Exchange Department under whose jurisdiction the registered office of the applicant falls and the Reserve Bank may approve the additional place of business subject to such conditions as deem fit .” She further contended that even if the properties in the present case were acquired prior to the commencement of the Act, they are liable to be forfeited and she cited the judgment Hon’ble Supreme Court of India in

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the case of Attorney General of India v. Amratlal Prajivandas dated 12 May, 1994 to support her contention, whereby in Para 41 the Court has held that “ The definition of “illegally acquired properties” in clause (c) of Section 3 (1) of SAFEMA is undoubtedly quite wide. It means and includes any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of nay income, earnings or assets derived or obtained from or attributable to any activity prohibited by pr under any law for the time being in force relating to any matter in respect of which Parliament has power to make laws [vide Sub Clause (i)]. Sub-clauses (ii), (iii) and (iv) of clause further widen and elaborate its ambit. The definition thus takes not only the property acquired after the Act but also property acquired before the Act, whatever, be the length of time. Secondly, it talks in property which may have been acquired partly from out of illegal activity in which case, of course, the provision in Section 9 would be attracted. Illegal activity is not confined to violation of the laws mentioned in Section 2 but all laws which Parliament has power to make.” Further, she also contended that the competent authority need not establish any nexus or link between the money of the convict or detenu and the property sought to be forfeited. In fact, if such a condition is imposed, the very purpose of enacting SAFEMA would be frustrated, as in many cases it would be almost impossible to show that the property was purchased or acquired from the money provided by the convict or detenu, as held by the Hon’ble Supreme Court in the case of Smt.

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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Kesar Devi v. Union of India & Ors . on 31 July 2003, AIR 2003 SC 4195, 2003. She further pointed out that the Special Civil Application No. 11556 of 2002 is already withdrawn by the petitioners from the Hon’ble High Cout of Gujarat on 13.03.2006. Prayer is accordingly made to dismiss the present appeals being devoid of any merit.

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Analysis and Findings:

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5. After hearing the rival submissions, I have given my thoughtful consideration of the same. As detenu Chimanbhai H. Kapadia was confined to bed on account of sickness, Sh. Sunil Arvindbhai, filed a petition before Hon’ble High Court of Gujarat being Special Civil Application No. 5015/1999 for issuance of Writ of mandamus to revoke the detention order dated 14.05.1999 issued against detenu. However, the said Writ petition was disposed of by Hon’ble High Court vide order dated 27.10.1999 as infructuous, on account of death of said detenu. Under such circumstances, the Competent Authority cannot take the benefit that revocation order was revoked, but not quashed by Hon’ble High Court. Even otherwise, all the six immovable properties were acquired by the detenu or his family members during the period from 1966 to 1988 and FDRs were prepared on 18.08.1990, whereas FFMC license in favour of M/s Swami Nana Exchange pvt. Ltd. was issued on 01.07.1998, i.e., much after the acquisition of said six properties. The said six properties cannot be presumed to be acquired on the basis of the contravention of the conditions of the said license dated 01.07.1998, or the contravention of the provisions of FERA, for possession of the foreign currency at residence, instead of the authorized office premises. In this regard, I fortify my view in the light of the judgment of Hon’ble Delhi High Court in the case, Union of India v. Kamal Kumar , 2017 SCC Online Del 11361, wherein it is held in para 11 that- Though Section 8 of SAFEMA casts a burden on the person receiving the notice, the basic premise is a valid notice. Thus, the notice should show some nexus or connection with smuggling

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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activities, leading to acquisition of ill-gotten wealth. If such nexus is missing, and the notice is upheld, SAFEMA would act in a draconian manner, casting a burden on proving that the wealth or assets acquired were through legitimate means, which maybe impossible if, like in this case, the authorities proceeded to reject the Income Tax Authority’s order . Further, in para 17 of the said judgment it is held that the importance of establishing a link howsoever rudimentary, but real nevertheless, between an individual and some smuggling activities, can be the only basis of a valid “reason to believe” under Section 6(1) of the Act. Otherwise, there is a danger of SAGMEA or any authority concluding that since the subject to unable to establish the legitimacy of his source of income, it must be on account of smuggling. In other words, suspicion is elevated into certainty or a finding . The facts of Smt. Kesar Devi case (supra) are not applicable to the facts of the present case, as in the said case 22 gold bars were recovered from 3 persons during the searches conducted in the year 1969 and 1972 and they failed to prove the acquisition of said gold bars. However, in the present case, the immovable properties were purchased by the appellants and Chamanbhai H. Kapadia about 30 years before the issuance of FFMC license and FDs were prepared 10 years before obtaining the license. All the properties were duly reflected in the ITRs.

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Moreover, the Deputy Director of Adjudication, ED, Ahmedabad vide order dated 19.07.2002 passed the order of confiscation of the seized Foreign Exchange and Indian Currencies. The said order was challenged by the noticees by filing appeal u/s 51 of FERA before Appellate Tribunal for foreign exchange at New Delhi vide appeal FPA-No. 52-58/2003. All the appeals were disposed of by the Appellate Tribunal vide common judgment dated 21.07.2003 whereby the appeals were allowed on the ground that material was very scantly to establish charges levelled against noticees; there was no cogent evidence to show that license granted by RBI was misused to

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FPA-11/BOM/2014 Smt. Bhanumati C. Kapadia & Ors. v. the Competent Authority, Mumbai

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purchase foreign exchange by illegal means; accounts of company were regularly audited and submitted to the RBI etc. Thereby, the impugned order was set aside and direction was passed for refund of all seized money and penalty. The said judgment dated 21.07.2003 has attained finality, and hence, I am satisfied with the contentions of the appellant that there was no ground to initiate any action for initiation of fresh proceedings under SAFEMA, in absence of any violation under the provisions of FERA, in view of the judgment dated 21.07.2003 passed by this Appellate Tribunal.

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The whole action was initiated by the Competent Authority for passing the detention order against Chimanbhai H. Kapadia, on the ground that USD 30000 were recovered from his possession on 14.10.1998, but it failed to appreciate the fact M/s Swami Nana Exchange Pvt. Ltd. applied to RBI on 09.10.1998 for keeping the foreign exchange at the house of the Directors for purpose of security and the said permission was granted by RBI on 07.01.1999 and accordingly there was no violation under FERA on account of ex-post facto approval. Moreover, the said foreign exchange was withdrawn on the date of raid itself.

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Therefore, being not convinced with the submissions made by Ld. Counsel for the respondent Competent Authority and being convinced with all the grounds taken by the Ld. counsel for the appellants, the present appeal needs to be allowed on merits.

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6. In sequel to my discussion in the preceding para, the present appeals are hereby allowed and thereby all the six properties are hereby directed to be released in favour of the appellants.

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Appeal Allowed.

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Pronounced on 03^rd Day of February, 2025.

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(Rajesh Malhotra) Member

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Fpa No.104/BOM/2018 of Smt. Bhartiben Kapadia D/o Late Smt. Maniben H. Kapadia v. The Competent Authority, Safema, Mumbai

Case brief

What is this about?

What did the court decide?

Fpa No.104/BOM/2018 of Smt. Bhartiben Kapadia D/o Late Smt. Maniben H. Kapadia v. The Competent Authority, Safema, Mumbai

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