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PETITIONER: TEKCHAND ETC.

       Vs.

RESPONDENT: COMPETENT AUTHORITY

DATE OF JUDGMENT31/03/1993

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) VENKATACHALA N. (J)

CITATION:  1993 SCR  (2) 864        1993 SCC  (3)  84  JT 1993 (4)   197        1993 SCALE  (2)325

ACT: Smugglers  and Foreign Exchange Manipulators (Forfeiture  of Property)  Act,  1976--Sections  2(2)(b), 3(e),  4,  6,  and 7--Forfeiture  of Property--Detention under Customs  Act  or FERA--Whether  applied only to persons detained  before  the commencement of the Act. Voluntary  Disclosure  of  Income  and  Wealth  Act,   1976: Sections  11  and 16--Immunity conferred--Not  absolute  but limited  in  character--Not to extend to  proceedings  under other enactments.

HEADNOTE: In 1975, the appellant, a dealer in watches and his sons the other  appellants,  made  voluntary  disclosure  of  certain income  under the provisions of the Voluntary Disclosure  of Income and Wealth Act.  On that basis proceedings were taken under the Act and concluded by the Department. In 1976, an order of detention was passed against the  first appellant  under the provisions of COFEPOSA.  He served  out the detention period. Thereafter, in 1978 notices under Section 6 of the Smugglers and  Foreign Exchange Manipulators (Forfeiture of  Property) Act,  1976 (SAFEMA) was served upon the  appellants  calling upon them to show cause why the properties mentioned in  the notices  be not forfeited to the Central  Government.   They were  also  called upon to explain the income,  earnings  or assets out of which they had acquired those properties.   In his explanation, the first appellant stated that he had made a  disclosure  of  a sum of Rs.25,000 in  Form-A  under  the Voluntary Disclosure Act which was accepted by the Competent Authority and a certificate was issued to the appellant.  He also riled a copy of the said certificate.  He also set  out the  manner  in which the said sum was  utilised  after  the disclosure.   He also submitted that he cannot be  asked  to explain  the source from which he obtained the said  sum  of Rs.25,000, and calling upon him to do so, would violate  the immunity granted to him under the Voluntary Disclosure Act. 865 Similar  pleas  were  taken  by  his  two  sons,  the  other appellants.    The   Competent  Authority   over-ruled   the objections  and  forfeited the properties specified  in  the orders.    The  appellants  preferred  appeals  before   the

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Appellate Tribunal which partly allowed the appeals.  To the extent  the Tribunal affirmed the orders of forfeiture,  the appellants preferred the present appeals. On  behalf of the appellants, it was contended that the  Act (SAFEMA)  applied only in case of persons who were  detained under the COFEPOSA prior to the commencement of SAFEMA, that it  did  not apply to persons who had  been  detained  under COFEPOSA  after the commencement of SAFEMA.  It was  further contended that the findings recorded by the authorities were perverse  and  not supported by any evidence  and  that  the procedure  prescribed  by  the Act  had  not  been  followed scrupulously which vitiated the order of forfeiture. Dismissing the appeal, this Court, HELD  : 1.1. There is nothing in the Smugglers  and  Foreign Exchange  Manipulators  (Forfeiture of Property)  Act  1976, (SAFEMA)  to  indicate  either  directly  or  by   necessary intendment  that the Act is confined only to  those  persons who  have  been  detained under COFEPOSA or  who  have  been convicted  under the Customs Act or FERA prior to  the  com- mencement of SAFEMA.  The use of the word "has been made" in Section 2(2)(b) does not and cannot lead to such conclusion. The use of the said words must be understood in the  contest of Section 2(2).  Section 2(2)(b) provides that every person in  respect of whom an order of detention has been made  and which detention order. has not been revoked or withdrawn  by the  competent  authority  nor  has  been  set  aside  by  a competent  court can be proceeded against under  SAFEMA.   A mere detention under COFEPOSA is not enough. [871 C-E] 1.2.  If  the  intention  of the  Parliament  was  that  the detention  should  have been prior to  the  commencement  of SAFEMA,  they  would have said that the question  should  be determined  only with reference to the  facts,  circumstance and  events including any conviction of detention which  oc- curred or took place before the commencement of the  SAFEMA. [872 A-B] 2.  The immunity conferred under Sections 11 and 16  of  the Voluntary Disclosure of Income and Wealth Act, 1976 is of  a limited character 866 and  that it is not an absolute or universal immunity.   The immunity cannot be extended beyond the confines specified by the  said  provisions.  There is also no reason  to  presume that  the  Parliament  intended to extend  any  immunity  to smugglers  and  manipulators  of foreign  exchange  who  are proceeded against under other enactments. [872-C] 3. That, in the instant case, the authorities acted with due care and caution is evident from the fact that with  respect to  one of the immovable properties the authorities were  of the  opinion  that the failure to explain pertains  only  to part of the income/assets and accordingly invoked Section  9 and imposed a fine instead of forfeiting the property. [872- F]

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeal No.13911393  of 1979. From  the Judgment and Order dated 27.9.1978 & 28.9.1978  of the  Appellate  Tribunal for Forfeited  Property  in  F.P.A. Nos.33/78-79, 31/78-79 and 32/78-79. Bhargava V. Desai and Ms. Sonia Mathur for the Appellants. S.C.  Manchanda, K.P. Bhatnagar and P. Parmeswaran (NP)  for the Respondent. The Judgment of the Court was delivered by

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B.P.  JEEVAN  REDDY,  J.  With a view  to  provide  for  the forfeiture of illegally acquired properties of smugglers and foreign  exchange manipulators, the Parliament  enacted,  in the   year   1976,  The  Smugglers  and   Foreign   Exchange Manipulators  (Forfeiture of Property) Act, 1976, being  Act No.13  of  1976.   The  Preamble to the  Act  sets  out  the objective which the Act seeks to achieve.  It says:               "WHEREAS  for  the  effective  prevention   of               smuggling  activities  and  foreign   exchange               manipulations  which are having a  deleterious               effect   on  the  national  economy  it   is,.               necessary  to deprive persons engaged in  such               activities  and  manipulations of  their  ill-               gotten gains:               AND WHEREAS such persons have been  augmenting               such gains by violations of wealth-tax income-               tax or other 867               laws  or by other means and have thereby  been               increasing their resources for operating in  a               clandestine manner;               AND  WHEREAS such persons have in  many  cases               been  holding the properties acquired by  them               through  such  gains  in  the  name  of  their               relatives, associates and confidants." It  would  equally be relevant to notice  the  Statement  of Objects  and  Reasons appended to the Bill.   The  Statement sets  out  the  mischief the Act was intended  to  meet  and counter-act.  It reads:               "Smuggling  activities  and  foreign  exchange               manipulations are having a deleterious  effect               on  the national economy.  Persons engaged  in               such  malpractices have been augmenting  their               ill-gotten gains by violation of laws relating               to  income-tax, wealth-tax or of  other  laws.               In many cases, such persons have been  holding               properties  acquired through ill-gotten  gains               in the names of their relatives associates and               confidants.   This accumulation of  ill-gotton               wealth  gives increasing power, influence  and               resources   to   those  who  carry   on   such               clandestine activities and even tend to confer               social  status  and prestige  which  is  quite               contrary to the healthy socio-cultural  norms.               These activities pose a serious threat to  the               economy  and the security of the  nation.   In               conjunction with various other steps taken  by               the Government in recent months for  cleansing               the   social  fabric  and  resuscitating   the               national  economy,  it  became  necessary   to               assume powers to deprive such persons of their               illegally   acquired  properties  so   as   to               effectively  prevent the smuggling  and  other               clandestine    operations.    The    President               promulgated  on  the 5th  November,  1975  the               Smugglers  and Foreign  Exchange  Manipulators               (Forfeiture of Property) Ordinance 1975." The Act was preceded by an Ordinance issued on 5th November, 1975.  For that reason, the Act, when made, was given effect to  from the said date.  The object with which the  Act  was made is, without a doubt, highly laudable. 868 The provisions of the Act apply to persons specified in sub- section (2)    of Section 2. Persons who have been convicted under  the Sea Customs Act, 1878/Customs Act, 1962,  persons

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convicted   under  the  Foreign  Exchange  Regulation   Act, 1947/Foreign  Exchange Regulation Act, 1973  constitute  the first  category.  The second category is of the persons  who have  been  detained  under  the  Conservation  of   Foreign Exchange  and Prevention of Smuggling Activities  Act,  1947 (COFEPOSA), provided the said order has not been revoked  or withdrawn  by the Competent Authority before the  completion of the period prescribed or set aside by a competent  Court. The  third  category is of the relatives and  associates  of persons  falling  under  categories  1  and  2.  The  fourth category  is of the transferees from the persons falling  in categorY  1  and  2. Clause (c) in  Section  3  defines  the expression  "illegally  acquired propertY".   It  means,  in short, any property acquired, by a person, whether before or after the commencement of the Act from out of any income  or assets  derived or attributable to the prohibited  activity. Section-4 declares that as from the commencement of the  Act it shall not lawful for any person, to whom the Act applies, to hold any illegally acquired property either by himself or through  any other person on his behalf It declares  further that  any  such  property  so held shall  be  liable  to  be forfeited.   Section-6  provides for issuance  of  a  notice calling  upon  the person to show-cause why  the  properties illegally  acquired  by him should not be forfeited  to  the Government.   Section-7 provides for the final orders to  be passed  on  such  show-cause notice  after  considering  the explanation,  if  any, furnished by such  person  and  after making   such   inquiry  as  may  be  appropriate   in   the circumstances.  Section-8 enacts a special rule of burden of proof  It  says,  "in any proceedings under  this  Act,  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." Section-9  provides  for imposing  fine  in lieu of forfeiture  where  the  authority finds that a property acquired by such person has only  been partly  acquired with illegally acquired income/assets.   It is  not  necessary to refer to the other  provisions  except Section-24,  which  gives  an  over-riding  effect  to   the provisions of the Act over any other law for the time  being in force.  Section-26 confers the rule-making power upon the Central Government. The appellant in Civil Appeal No.1391 of 1979, Tekchand  was a  dealer  in  watches.   The  appellants  in  Civil  Appeal Nos.1392 and 1393 of 1979 are his sons. 869 In  the  year  1976, Parliament had  enacted  the  Voluntary Disclosure  of  Income  and Wealth  Act,  1976,  hereinafter referred  to as the Voluntary Disclosure Act.  This Act  was also  preceded  by an Ordinance issued on October  8,  1975. The  Act  was given effect on and from the said  date.   The Ordinance  and the Act provided for declaration by a  person of his undeclared income in the prescribed manner and within the  prescribed  period.   If he  made  the  declaration  in accordance  with  the relevant provisions of  the  Act,  the income  so  disclosed was not liable to be included  in  his total  income  and  tax  was  levied  thereon  at  the  rate prescribed   in  the  schedule  to  the  Act,   which   was, comparatively  speaking,  much  lower than  the  rates  then prevailing.   Sections-11 and 16 conferred  certain  limited immunities  upon the person making a declaration  under  the Act.   Those are the only sections relevant for our  purpose and  must be noticed.  Section-11  states,  "notwithstanding anything  contained in any other law for the time  being  in force, nothing contained in any declaration made under  sub- section(l)  of  section 3 shall be  admissible  in  evidence

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against  the  declarant for the purpose  of  any  proceeding relating  to  imposition of penalty or for the  purposes  of prosecution  under any of the Acts mentioned in  sub-section (1) of section 8 of the Wealth-tax Act.’ The Acts  mentioned in  sub-section (1) of Section 8 are the  Indian  Income-tax Act,  1922, Excess Profits Tax Act, 1940,  Business  Profits Tax Act, 1947, Super Profits Tax Act, 1963 and the Companies (Profits)  Surtax  Act,  1964.  Section 11  thus  confers  a limited   immunity  from  imposition  of  any   penalty   or prosecution  under any of the said Acts and the  Wealth  Tax Act.  It does not confer an absolute or universal  immunity. Coming to Section 16 it too confers a limited immunity of  a different  kind.   It says that if the  voluntary  disclosed income,  wealth or assets is represented by gold,  then  the said  gold shall not be liable to confiscation either  under the Customs Act or Gold (Control) Act nor shall such  person be  liable to imposition of penalty or any other  punishment thereunder  provided he fulfils the conditions specified  in the said section. On October 31, 1975 Tekchand and his two sons made voluntary disclosure  of  certain income under the provisions  of  the Voluntary Disclosure Act.  On. that basis, proceedings  were taken under the Act and concluded. On August 21, 1976 an order of detention was passed  against Tekchand  under the provisions of COFEPOSA.  He  served  out the detention 870 period.  It was neither quashed or set aside by a  competent court  nor  was  it  withdrawn or  revoked  by  a  competent authority.  The validity of the said detention order is  not questioned in these proceedings. On  February  22, 1978 notices under section 6  of  the  Act (SAFEMA) were served upon Tekchand and his two sons  calling upon then to show cause why the properties mentioned in  the notices  be  not  forfeited  to  Central  Government.    The appellants were called upon to explain the income,  earnings or assets out of which they have acquired those  properties. Explanations  were  furnished  by all  the  three.   In  his explanation  Tekchand stated inter alia that he had  made  a disclosure  of  a  sum  of Rs.25,000  in  form-A  under  the Voluntary Disclosure Act which was accepted by the Competent Authority and a certificate issued to him in that behalf  He filed  a copy of the said certificate.  He also set out  the manner  in  which  the  said  sum  was  utilised  after  the disclosure.  He submitted that he cannot be asked to explain the source from which he obtained the said sum of Rs.25,000. Calling  upon him to do so, he submitted would  violate  the immunity granted to him under the Voluntary Disclosure  Act. Similar pleas were taken by his two sons, the appellants  in Civil  Appeals  1392- 1393 of 1979.  Their  objections  were over-ruled by the Competent Authority who by his Order dated October  21, 1976 forfeited the properties specified in  his orders.    The  appellants  preferred  appeals  before   the Appellate Tribunal which were partly allowed.  In so far  as the  Appellate Tribunal affirmed the orders  of  forfeiture, they  have  preferred these appeals with the leave  of  this Court under Article 136 of the Constitution. Mr.  B.V. Desai the learned counsel for the appellant  urged the following contentions: 1.The  Act  applies  only in case  of  persons  who  have detained under the COFEPOSA prior to the commencement of the ACT  (SAFEMA).  It does not apply to persons who  have  been detained  tinder COFEPOSA after the commencement of  SAFEMA. This  is evident from the use of the words "every person  in respect   of   whom   an  order  of   detention   has   been

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made.............  in  clause  (b)  of  sub-section  (2)  of Section-2. 2.In  these  cases it is not proved that  the  properties forfeited  are  illegally acquired  properties"  within  the meaning  of clause (c) of sub-section (1) of  Section-3   in particular   of  sub-clause  (iii)  thereof  The   competent authority  and the Appellate Authority erred in  not  giving effect to 871 the  immunity conferred by the Voluntary Disclosure Act  and in calling upon the appellants to explain the source of  the income declared under the Voluntary Disclosure Act. 3.The  explanations offered by the appellants  have  been rejected  by the authorities under the Act without a  proper discussion.  The findings recorded by them are perverse  and are not supported by any evidence.  The procedure prescribed by the Act has not also been followed scrupulously which too vitiates the orders of forfeiture. We  are unable to agree with any of the  above  submissions. There  is nothing in the Act to indicate either directly  or by  necessary  intendment that the Act is confined  only  to those  persons who have been detained under COFEPOSA or  who have  been convicted under the Customs Act or FERA prior  to the  commencement of the SAFEMA.  The use of the words  "has been  made" in Section 2(2)(b) does not and cannot  lead  to such  conclusion.   The  use  of  the  said  words  must  be understood in the context of Section 2(2).  Section  2(2)(b) provides  that every person in respect of whom an  order  of detention  has been made and which detention order  has  not been revoked or withdrawn by the competent authority nor has been  set  aside  by a competent  court,  can  be  proceeded against  under SAFEMA.  A mere detention under  COFEPOSA  is not  enough.   Not  only there must have been  an  order  of detention   under  the  said  Act,  the   other   conditions prescribed in the proviso to clause (b) should not also have taken place.  It is for the reason that the words "has  been made"  were  used in clause (b) of section  2(2).   In  this context  Explanation-4  appended  to  section  2(2)  becomes relevant.  The Parliament anticipated that a contention  may be  raised  by persons proceeded against under  SAFEMA  that proceedings  under the Act can be taken only in those  cases where  they have been detained under COFEPOSA  or  convicted under  Customs  Act or FERA after the coming into  force  of SAFEMA.    With  a  view  to  repel  any   such   contention explanation-4 states:               "Explanation  4.  For the avoidance of  doubt,               it  is  hereby  provided  that  the   question               whether  any  person is a person to  whom  the               provisions of this Act apply may be determined               with reference to any facts, circumstances  or               events (including any conviction or detention)               which  occurred  or  took  place  before   the               commencement of this Act." 872 If  the contention of the learned counsel is correct and  if that  was the intention of the Parliament, they  would  have said  that  such  question shall  be  determined  only  with reference  to the facts, circumstances and event&  including any  conviction  of detention which occurred or  took  place before the commencement of the SAFEMA.  The first contention of the learned counsel is accordingly rejected. So  far as the contention based upon sections 11 and  16  of Voluntary  Disclosure  Act  is  concerned  we  have  already pointed out, while setting out the said provisions that  the immunity conferred thereunder is of a limited character  and

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that  it  is  not an absolute  or  universal  immunity.  The immunity cannot be extended beyond the confines specified by the  said  provisions.  There is also no reason  to  presume that  the  Parliament  intended to extend  any  immunity  to smugglers  and  manipulators  of foreign  exchange  who  are proceeded   against  under  enactments  other   than   those mentioned in Sections 11 and 16 of the Voluntary  Disclosure Act.  So far as the argument that the authorities under  the Act have not properly considered the explanation offered  by the  appellants and the material produced by them,  we  must say  that  we are unable to agree with the same.   Both  the competent   authority  and  the  Appellate  Authority   have considered the same and held against the appellants.  We see no reason to interfere with the concurrent findings in  this appeal  under  Article  136 of  the  Constitution.   We  are equally  unable  to agree with the learned counsel  for  the appellants that the findings recorded by the authorities are either perverse or that they are based on no evidence.  That the  authorities acted with due care and caution is  evident from  the  fact that with respect to one  of  the  immovable properties  the  authorities were of the  opinion  that  the failure  to explain pertains only to part  of  income/assets and accordingly invoked Section 9 and imposed a fine instead of forfeiting the same. Mr.  Desai  argued finally that the  appellants  herein  are small shopkeepers and that the authorities acted arbitrarily in  proceedings  against them under SAFEMA leaving  out  far bigger and powerful violators.  His argument is evocative of what  the Poet, James Jeffrey Roche, exclaimed in  his  poem ’The net of law’: "The net of law is spread so wide, No sinner from its sweep may hide. Its meshes are so fine and strong. 873 They take in every child of wrong. O wondrous web of mystery! Big fish alone escape from thee!" May be there is some truth in what the learned counsel  says but  that cannot furnish or constitute a ground in  law  for allowing these appeals.  It is for the authorities in charge of implementation of the Act to take note of the said  wail. It  is  for them to ensure that the Act is utilised  in  all proper cases, more so where the ’big fish’ are involved. The appeals fail and are accordingly dismissed.  No order as to costs.  G.N. Appeals dismissed. G.N                                 Appeals dismissed. 874