# BISWANATH BHATIACHARYA v. UNION OF INDIA & OTHERS

- **Citation:** [2014] 1 S.C.R. 885
- **Court:** Supreme Court of India
- **Decided:** 2014-01-21
- **Case number:** Civil Appeal Nos. 772-773 of 2014
- **Bench:** H.L. Gokhale, J. Chelameswar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/biswanath-bhatiacharya-v-union-of-india-others-29783
- **Pages:** 39

## Headnote

SMUGGLERS
AND
FOREIGN
EXCHANGE
MANIPULATORS (FORFEITURE OF PROPERTY) ACT,
A
B
1976:
c
s. 6(1) - Notice under - Requirement of recording reasons
in the notice -Plea of appellant that notice issued u/s. 6 was
defective as it did not contain reasons which made competent
authority believe that notice scheduled properties were illegal D
acquired property - Held: Plea not sustainable - There is no
express statutory requirement to communicate the reasons
issuance of notice u/s. 6 of the Act - Secondly, the re_asons,
though not initially supplied alongwith the notice were
subsequently supplied thereby enabling the appellant to
E
effectively meet the case of the respondents - The appellant
not only filed a rejoinder to the said notice but he was a/so
given a hearing before an order of forfeiture uls. 7 was passed
- Further, an order of forfeiture is an appealable order where
the correctness of the decision u/s. 7 to forfeit the properties
F
could be examined.
ss. 7, 2(2) - Forfeiture of properties - If violative of Article
20 of Constitution - Held: The application of the Act is limited
to persons who have either suffered a conviction under one
of the acts specified in s.2(2)(a) of the Act or detained under G
the COFEPOSA subsequent to the commencement of the Act
in question - Apart from that there are other categories of
persons to whom the Act applies - Of all the five categories
of persons to whom the Act is made applicable, only one
885
H
886
SUPREME COURT REPORTS
[2014] 1 S.C.R.
A category specified u/s.2(2)(a) happens to be of persons who
are found guilty of an offence under one of the enactments
mentioned therein and convicted - The other four categories
of persons to whom the Act is applicable are persons
unconnected with any crime or conviction under any law while
B the category of persons falling u/s. 2(2)(b) are persons who are
believed by the State to be violators of law - The other three
categories are simply persons who are associated with either
of the two categories mentioned in s.2(2)(a) and (b) - At least
with reference to the four categories other than the one
c covered by s.2(2)(a}, the forfeiture/deprivation of the property
is not a consequence of any conviction for an offence -
Therefore, with reference to these four categories, the question
of violation of Article 20 does not arise - In case of first
category, Article 20 would have no application for the reason,
0
conviction is only a factor by which the Parliament chose to
identify the persons to whom the Act be made applicable -
The Act does not provide for the confiscation of the properties
of all the convicts falling uls.2(2)(a} or detenues falling u/
s.2(2)(b).
E
s.2(2) - Forfeiture of illegally acquired property - Legality
of - Held: There is a public interest in ensuring that persons
who cannot establish that they have legitimate sources to
acquire the assets held by them do not enjoy such wealth -
Such a deprivation would certainly be consistent with the
F requirement of Article 300A and 14 of the Constitution which
prevent the State from arbitrarily depriving a subject of his
property - Even otherwise, in view of its inclusion in the IXth
Schedule, the Act is immune from attack on the ground that
it violates any of the rights guaranteed under Part Ill of the
G Constitution by virtue of the declaration under Article 31-B -
Constitution of India, 1950 - Articles 14, 31-B, 300A.
LEGISLATION: Retrospective operation - Held: It is a
well settled principle of constitutional law that sovereign
H legislative bodies can make laws with retrospective operation;
BISWANATH BHATTACHARYA v. UNION OF ·INDIA
887
and can make laws whose operation is dependent upon facts A
or events anterior to the making of the law - However, criminal
law is excepted from such general Rule, under another equally
well settled principle of constitutional law, i.e. no ex post facto
legislation is permissible with respect to criminal law - Article
20 contains such exception to the general au

## Text

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[2014] 1 S.C.R. 885
BISWANATH BHATIACHARYA
v.
UNION OF INDIA & OTHERS
(Civil Appeal Nos. 772-773 of 2014)
JANUARY 21, 2014
[H.L. GOKHALE AND J. CHELAMESWAR, JJ.]
SMUGGLERS
AND
FOREIGN
EXCHANGE
MANIPULATORS (FORFEITURE OF PROPERTY) ACT,
A
B
1976:
c
s. 6(1) - Notice under - Requirement of recording reasons
in the notice -Plea of appellant that notice issued u/s. 6 was
defective as it did not contain reasons which made competent
authority believe that notice scheduled properties were illegal D
acquired property - Held: Plea not sustainable - There is no
express statutory requirement to communicate the reasons
issuance of notice u/s. 6 of the Act - Secondly, the re_asons,
though not initially supplied alongwith the notice were
subsequently supplied thereby enabling the appellant to
E
effectively meet the case of the respondents - The appellant
not only filed a rejoinder to the said notice but he was a/so
given a hearing before an order of forfeiture uls. 7 was passed
- Further, an order of forfeiture is an appealable order where
the correctness of the decision u/s. 7 to forfeit the properties
F
could be examined.
ss. 7, 2(2) - Forfeiture of properties - If violative of Article
20 of Constitution - Held: The application of the Act is limited
to persons who have either suffered a conviction under one
of the acts specified in s.2(2)(a) of the Act or detained under G
the COFEPOSA subsequent to the commencement of the Act
in question - Apart from that there are other categories of
persons to whom the Act applies - Of all the five categories
of persons to whom the Act is made applicable, only one
885
H
886
SUPREME COURT REPORTS
[2014] 1 S.C.R.
A category specified u/s.2(2)(a) happens to be of persons who
are found guilty of an offence under one of the enactments
mentioned therein and convicted - The other four categories
of persons to whom the Act is applicable are persons
unconnected with any crime or conviction under any law while
B the category of persons falling u/s. 2(2)(b) are persons who are
believed by the State to be violators of law - The other three
categories are simply persons who are associated with either
of the two categories mentioned in s.2(2)(a) and (b) - At least
with reference to the four categories other than the one
c covered by s.2(2)(a}, the forfeiture/deprivation of the property
is not a consequence of any conviction for an offence -
Therefore, with reference to these four categories, the question
of violation of Article 20 does not arise - In case of first
category, Article 20 would have no application for the reason,
0
conviction is only a factor by which the Parliament chose to
identify the persons to whom the Act be made applicable -
The Act does not provide for the confiscation of the properties
of all the convicts falling uls.2(2)(a} or detenues falling u/
s.2(2)(b).
E
s.2(2) - Forfeiture of illegally acquired property - Legality
of - Held: There is a public interest in ensuring that persons
who cannot establish that they have legitimate sources to
acquire the assets held by them do not enjoy such wealth -
Such a deprivation would certainly be consistent with the
F requirement of Article 300A and 14 of the Constitution which
prevent the State from arbitrarily depriving a subject of his
property - Even otherwise, in view of its inclusion in the IXth
Schedule, the Act is immune from attack on the ground that
it violates any of the rights guaranteed under Part Ill of the
G Constitution by virtue of the declaration under Article 31-B -
Constitution of India, 1950 - Articles 14, 31-B, 300A.
LEGISLATION: Retrospective operation - Held: It is a
well settled principle of constitutional law that sovereign
H legislative bodies can make laws with retrospective operation;
BISWANATH BHATTACHARYA v. UNION OF ·INDIA
887
and can make laws whose operation is dependent upon facts A
or events anterior to the making of the law - However, criminal
law is excepted from such general Rule, under another equally
well settled principle of constitutional law, i.e. no ex post facto
legislation is permissible with respect to criminal law - Article
20 contains such exception to the general authority of the
B
sovereign legislature functioning under the Constitution to
make retrospective or retroactive laws - Criminal law -
Constitution of India, 1950 - Article 20.
WRIT PETITION: Re-appreciation of evidence - Scope
of - Plea that in view of the failure of High Court to examine C
the tenability of the order of the forfeiture as confirmed by the
appellate tribunal the matter is required to be remitted to High
Court for appropriate consideration - Held: Plea is rejected -
In the writ petition, except challenging order of forfeiture on
the two legal grounds, there was no other ground on which
D
correctness of the order of forfeiture was assailed - For the first
time in the instant appeal, an attempt was made to argue that
conclusions drawn by competent authority that the properties
forfeited were illegally acquired - Appellant sought reappreciation of the evidence without even an appropriate
E
pleading in the writ petition - Therefore, no reason to remit the
matter to the High Court.
The appellant was once detained in 1974 under MISA,
1971 and then under COFEPOSA, 197 4 for the reason that
F
he with his brother in London was indulging in prejudicial
activities. He was eventually released in 1977. He was
given notice under Section 6(1) of SAFEMA on 4.3.1977
asking him to explain sources of income for acquiring
certain properties. Then on 27 .11.1989, respondent 2 G
ordered forfeiture of some of the properties of the
appellant. His appeal was partly allowed. He then filed
writ petition in High Court challenging the validity of the
SAFEMA and legality of his detention under COFEPOSA.
The Single judge of the High Court partly allowed it on
the ground of defective notice. Jhe appeal filed against H
888
SUPREME COURT REPORTS
[2014] 1 S.C.R.
A it was, however, allowed by the Division Bench of the
High Court.
In the instant appeals, the appellant contended that
the notice issued under Section 6 of the SAFEMA Act was
8 defective as it did not contain the reasons which made
the competent authority believe that the notice scheduled
properties were illegally acquired properties; that the
forfeiture, such as the one provided under the Act, is
violative of Article 20 of the Constitution of India; and in
C the alternative, he contended that matter should be
remitted to the High Court for an appropriate
consideration of the legality of order of forfeiture as it has
failed to consider the question whether the decision of
the competent authority as confirmed by the appellate
authority was sustainable.
D
Dismissing the appeals, the Court
HELD: 1.1. Initially notice under Section 6(1) of
SAFEMA was issued at a point of time when the appellant
E was under preventive detention. Subsequently, by a
communication dated 1st June, 1988, the recorded
reasons for the belief which led to the issuance of notice
under Section 6(1) of the Act was served on the appellant.
The appellant not only filed a rejoinder to the said notice
F but he was also given a hearing before an order of
forfeiture under Section 7 was passed. In support of the
submission that the Division Bench of the High Court has
erred in coming to the conclusion that notice under
Section 6(1) did not vitiate the subsequent proceedings,
the appellant relied upon a judgment of this Court in
G *Ajantha Industries. It was a case where this court had
to consider the legality of the order under Section 127 of
the Income Tax Act, 1961 transferring the 'case' of the
Ajantha Industries. Dealing with the legality of such an
order, it was held that there is a requirement of not only
H
BISWANATH BHATIACHARYA v. UNION OF !NOIA
889
recording the reasons ·tor the decision to transfer the case
A
but also such reasons are required to be communicated
to the assessee. Though section 127 expressly provided
for recording of reasons, it did not expressly provide
communicating the same to the assessee. Still, it was
held that such a communication is mandatory. Such a B
conclusion must be understood in the light of the
observation of the Court that there was no provision of
appeal or revision under the Income Tax Act against an
order of transfer. For the same reason, this Court
distinguished and declined to follow an earlier judgment c
in **S. Narayanappa where this Court on an interpretation
of Section 34 of the Income Tax Act, 1922, opined to the
contra. Section 34 provided for re-opening of the
assessment with the prior sanction of the Commissioner,
if the income tax officer has 'reasons to believe' that 0
taxable income had been under-assessed. Dealing with
the question whether the reasons which led the
Commissioner to accord sanction for the initiation of
proceedings under section 34 are required to be
communicated to the assessee, it was held that there is
no requirement in any of the provisions of the Act or any
E
section laying down as a condition for the initiation of the
proceedings that the reasons which induced the
Commissioner to accord sanction to proceed under S.34
must be communicated to the assessee. [Para 13-17]
[900-E-G; 901-A-B, E-F; 902-G-H]
F
1.2. The submission of the appellant is rejected on
the ground that firstly, there is no express statutory
requirement to communicate the reasons which led to the
issuance of notice under Section 6 of the Act. Secondly, G
the reasons, though not initially supplied alongwith the
notice dated 4.3.1977, were subsequently supplied
thereby enabling the appellant to effectively meet the
case of the respondents. Thirdly, the case on hand is
squarely covered by the ratio of **Narayanappa case. The
H
890
SUPREME COURT REPORTS
[2014] 1 S.C.R.
A appellant could have effectively convinced the
respondents by producing the appropriate material that
further steps in furtherance to the notice under Section
6 need not be taken. Apart from that, an order of forfeiture
is an appealable order where the correctness of the
B decision under Section 7 to forfeit the properties could
be examined. The ratio of *Ajantha Industries case does
not lay down a universal principle that whenever a statute
requires some reasons to be recorded before initiating
action, the reasons must necessarily be communicated.
c [Para 19] [903-D-G]
*Ajantha Industries and others v. Central Board of Direct
Taxes and others, (1976) 1 SCC 1001 : 1976 (2) SCR 884 -
held inapplicable.
D
**S. Narayanappa v. The Commissioner of Income-tax
AIR 1967 SC 523 : 1967 SCR 590 - relied on.
2.1. The SAFEMA Act enables the Government of
India to forfeit "illegally acquired property" of any person
E to whom the Act is made applicable. The Act is made
applicable to the persons specified in section 2(2). Five
categories of persons covered are: Clause (a) - persons
who have been convicted under various enactments
referred to therein; clause (b) - persons in respect of
whom an order of detention has been made under the
F COFEPOSA; clause (c) - persons who are relatives of
persons referred to in clause (a) or clause (b). Clause (d)
- every associate of persons referred to in clause (a) or
clause (b). Clause (e) - subsequent holders of property
which at some point of time belonged to persons referred
G to either in clause (a) or clause (b). Expression "illegally
acquired property" is defined in elaborate terms under the
Act. The definition covers two types of properties:
acquired by the income or earnings; and assets derived
or obtained from or attributable to any activity which is
H prohibited by or under a law in force. Such law must be
BISWANATH BHATIACHARYA v. UNION OF INDIA
891
a law with respect to which parliament has the power to A
make law. The language and the scheme of the Act show
that the application of the Act is limited to persons who
have either suffered a conviction under one of the acts
specified in section 2(2)(a) of the Act or detained under
the COFEPOSA subsequent to the commencement of the B
Act in question. Apart from that there are other categories
of persons to whom the Act applies. The appellant
happens to be a person to whom the Act applies. He was
detained under the provisions of the COFEPOSA.
However, such a detention was anterior to the c
commencement of the Act, which came into force on 25th
January 1976, while the detention order was passed on
19th December 1974. The appellant was eve11tually set at
liberty in 1977. [Paras 20, 22-24] [903-H; 904-A; 905-A;
906-A-B; 907-E; 908-A-B, C; 909-B-C]
D
2.2. Section 7(3) of the Act provides for forfeiture of
the illegally acquired property of the persons to whom the
Act is made applicable after an appropriate enquiry
contemplated under Sections 6 and 7 of the Act. In other
words, the Act provides for the deprivation of the (illegally E
acquired) property of the persons to whom the Act
applies. The question whether such a deprivation is
consistent with Article 20 of the Constitution of India in
the specific factual setting of the case coupled with the
explanation 4 to section 2 depends upon whether such
F
deprivation is a penalty within the meaning of the said
expression occurring in Article 20. Article 20 contains one
of the most basic guarantees to the subjects of the
Republic of India. The relevant portion of Article stipulates
two things:- that no person shall be convicted of any G
offence except for violation of the law in force at the time
of the commission of the act charged as an offence; and
that no person shall be subjected to a penalty greater than
that which might have been inflicted under the law in
force at the time of the commission of the offence. [Paras
H
892
SUPREME COURT REPORTS
[2014J 1 S.C.R.
. ·- A 25, 26] [909-D-E; 910-B-EJ
2.3. It is a well settled principle of constitutional law
that sovereign legislative bodies can make laws with
retrospective operation; and can make laws whose
8 operation is dependent upon facts or events anterior to
the making of the law. However, criminal law is excepted
from such general Rule, under another equally well
settled principle of constitutional law, i.e. no ex post facto
legislation is permissible with respect to criminal law.
Article 20 contains such exception tq the general
C authority of the sovereign legislature functioning under
the Constitution to make retrospective or retroactive laws.
[Para 27] [910-E-G]
2.4. The regime of forfeiture of property contemplated
D under the Act is not new. At least from 1944 such a regime
(though not identical but similar to the impugned one) is
prevalent in this country. Two ordinances were made in
1943 and 1944, subsequently amended by another
ordinance in 1945, all called Criminal Law Amendment
E Ordinances, which continued to be in force in this
country by virtue of operation of Article 372 and some
anterior laws. Under the 1943 Ordinance, two special
Tribunals were constituted to try cases allotted to them
"in the first Schedule in respect of such charges of
F offence prescribed under the second Schedule etc.".
Essentially, such cases were cases either of charge of
receipt of illegal gratification by a public servant or
embezzlement of public money etc. The 1944 Ordinance
provided for the attachment of the money or other
G property which is believed to have been procured by
means of one of the above stated scheduled offences by
the offender. Such attached property is required to be
disposed of as provided under section 13 of the said
Ordinance. Under Section 12 of the Ordinance, the
H Criminal Court trying a scheduled offence is obliged to
BISWANATH BHATIACHARYA v. UNION OF INDIA 893
ascertain the amount or value of the property procured A
by the accused by means of the offence. Under section
13(3), it is provided that so much of the attached property
referred to earlier equivalent to the value ascertained by
the Criminal Court under section 12 is required to be
forfeited to the State. [Para 34] [915-A-E; 916-A]
B
Attorney General for India & Others v. Amrat/al
Prajivandas and others (1994) 5 SCC 54 : 1994 (1) Suppl.
SCR 1; His Holiness Kesavananda Bharati Sripadagalvaru
v. State of Kera/a and another (1973) 4 sec 225 : 1973 (0) C
Suppl. SCR 1 - referred to.
Bidie v. General Accident, Fire and Life Assurance
Corporation (1948) 2 All ER 995 - referred to.
2.5. To understand the exact nature of the forfeiture o
contemplated under the (SAFEMA) Act it is necessary to
examine the nature of the property which is sought to be
forfeited and also the persons from whom such forfeiture
is sought to b~ made. The Act is made applicable to five
classes of persons specified under section 2. In other E
words, the properties of persons belonging to any one
of the said five categories only could be forfeited under
the Act. Even with reference to the properties held by any
one falling under any of the five categories, their entire
property cannot be forfeited except the property which ·
is determined to be illegally acqufred property as defined
F
under section 3(c) of the Act. Of all the five categories of
persons to whom the Act is made applicable, only one
category specified under section 2(2)(a) happens to be
of persons who are found guilty of an offence under one
of the enactments mentioned therein and convicted. The G
other four categories of persons to whom the Act is
applicable are persons unconnected with any crime or
conviction under any law while the category of persons
falling under section 2(2)(b) are persons who are believed
by the State to be violators of law. The other three H
894
SUPREME COURT REPORTS
[2014] 1 S.C.R.
A categories are simply persons who are associated with
either of the two categories mentioned in section 2(2)(a)
and (b). At least with reference to the four categories
other than the one covered by section 2(2)(a), the
forfeitureldeprivation of the property is not a
B consequence of any conviction for an offence. Therefore,
with reference to these four categories, the question of
violation of Article 20 does not arise. Insofar as first
category, Article 20 would have no application for the
reason, conviction is only a factor by which the
c Parliament chose to identify the persons to whom the Act
be made applicable. The Act does not provide for the
confiscation of the properties of all the convicts falling
under Section 2(2)(a) or detenues falling under Section
2(2)(b). Section 6 of the Act authorises the competent
0
authority to initiate proceedings of forfeiture only if it has
reasons to believe (such reasons for belief are required
to be recorded in writing) that all or some of the
properties of the persons to whom the Act is applicable
are illegally acquired properties. The conviction or the
preventive detention contemplated under Section 2 is not
E the basis or cause of the confiscation but the factual
basis for a rebuttable presumption to enable the State to
initiate proceedings to examine whether the properties
held by such persons are illegally acquired properties. It
is notorious that people carrying on activities such as
F smuggling to make money are very clandestine in their
activity. Direct proof is difficult if not impossible. The
nature of the activity and the harm it does to the
community provide a sufficiently rational basis for the
legislature to make such an assumption. More
G particularly, Section 6 specifically stipulates the
parameters which should guide the competent authority
in forming an opinion, they are; the value of the property
and the known sources of the income, earnings etc. of
the person who is sought to be proceeded against. Even
H in the case of such persons, the Act does not mandate
BISWANATH BHATIACHARYA v. UNION OF !NOIA
895
such an enquiry against all the assets of such persons. A
An enquiry is limited to such of the assets which the
competent authority believes (to start with) are beyond
the financial ability of the holder having regard to his
known and legitimate sources of income, earnings etc.
Connection with the conviction is too remote and, B
therefore, would not be hit by the prohibition contained
under Article 20 of the Constitution of India. [Paras 39-40]
[918-B-E; 919-A-H; 920-A-B]
R. S. Joshi, Sales Tax Officer, Gujarat and Others v. Ajit C
Mills Ltd. and Another, (1977) 4 SCC 98 : 1978 (1) SCR 338
- Distinguished.
R. Abdul Quader & Co: v. STO, AIR 1964 SC 922 : 1964
SCR 867 - referred to.
D
2.6. If a subject acquires property by means which
are not legally approved, sovereign would be perfectly
justified to deprive such persons of the enjoyment of
such ill-gotten wealth. There is a public interest in
ensuring that persons who cannot establish that they E
have legitimate sources to acquire the assets held by
them do not enjoy such wealth. Such a deprivation
would certainly be consistent with the requirement of
Article 300A and 14 of the Constitution which prevent the
State from arbitrarily depriving a subject of his property.
F
Whether there is a right to hold property which is the
product of crime is a question examined in many
jurisdictions. Non-conviction based asset forfeiture
model also known as Civil Forfeiture Legislation gaine~
currency in various countries: United States of America,
Italy, Ireland, South Africa, UK, Australia and certain G
provinces of Canada. The Act is not violative of Article 20
of the Constitution. Even otherwise, in view of its
inclusion in the IXth Schedule, the Act is immune from
attack on the ground that it violates any of the rights
H
896
SUPREME COURT REPORTS
~2014] 1 S.C.R.
A guaranteed under Part Ill of the Constitution by virtue of
the declaration under Article 31-B. [Paras 41-42, 43, 45]
[920-C-D; 921-G-H; 922-D-EJ
Article published in the Journal of Financial Crime, 2004
8
by Anthony Kennedy • referred to.
3. The last submission i.e., in view of the failure of the
High Court to examine the tenability of the order of the
forfeiture as confirmed by the appellate tribunal the matter
is required to be remitted to the High Court for appropriate
C consideration is rejected. In the writ petition, except
challenging the order of forfeiture on the two legal
grounds, there is no other ground on which correctness
of the order of forfeiture is assailed in the writ petition. For
the first time in this appeal, an attempt was made to argue
D that the conclusions drawn by the competent authority
that the properties forfeited were illegally acquired - is not
justified on an appropriate appreciation of defence of the
appellant. In other words, the appellant seeks
reappreciation of the evidence without even an
E appropriate pleading in the writ petition. It is a different
matter that the High Court in exercise of its writ jurisdiction
does not normally re-appreciate evidence. Looked at any
angle, there is no reason to remit the matter to the High
Court. [Paras 46-47] [922-F-H; 923-A-B]
F
G
H
State of West Bengal v. S.K. Ghosh, [AIR 1963 SC 255]
: 1963 SCR 111 - Referred to.
Case Law Reference:
1976 (2) SCR 884
held inapplicable
Para 14
1967 SCR 590
Relied on
Para 17
1978 (1) SCR 338
Distinguished
Para 30
1963 SCR 111
Referred to
Para 31
BISWANATH BHATTACHARYA v. UNION OF INDIA
897
1994 (1) Suppl. SCR 1
Referred to
Para 31
A
(1948) 2 All ER 995 at 998 Referred to
Para 32
1973 (0) Suppl. SCR 1
Referred to
Para 33
1964 SCR 867
Referred to
Para 37
B
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 772773 of 2014.
From the Judgment and Order dated 09.08.2007 and
order dated 30.08.2007 of the High Court at Calcutta in FMA c
No. 206 of 2003 and RVW No. 2372 of 2007.
C.A. Sundaram, Puneet Jain, Christie Jain (for Pratibha
Jain) for the Appellant.
AS. Chandhiok, ASG, Rashmi Malhotra, Ritesh Kumar,
D
Vidit Gupta, Harleen Singh, Vishnu Kant, Gurpreet S.
Parwanda, Hayank Baamniyal, Tanushree Sinha, Anil Katiyar
· (for B.V. Balaram Das) for the Respondents.
The Judgment of the Court was delivered by
E
CHELAMESWAR, J. 1. Leave granted.
2. These two appeals are preferred against the final
judgment dated 9th August 2007 passed by the Calcutta High
Court in FMA No.206 of 2003 and order dated 30th August
F
2007 in Review Application bearing RVW No.2372 of 2007
dismissing the said review application filed by the appellant
herein.
3. The facts leading to the instant litigation are as follows:
G
4. The appellant was initially detained by order dated
19.12.1974 under the provisions of the Maintenance of Internal
Security Act, 1971 (since repealed) and later under the
provisions of the Conservation of Foreign Exchange and
Prevention of Smuggling Activities Act, 1974 (hereinafter
H
898
SUPREME COURT REPORTS
[2014) 1 S.C.R.
A referred to as the "COFEPOSA") on the ground that he in
collaboration with his brother, who was living in London at that
point of time, was indulging in activities which are prejudicial
to the conservation of foreign exchange. The appellant
unsuccessfully challenged the detention order. He was
B eventually released in 1977.
5. While he was in custody, the second respondent issued
a notice dated 4th March 1977 under section 6(1) of the
Smugglers and Foreign Exchange Manipulators (Forefeiture of
C Property) Act, 1976 (hereinafter referred to as "the Act") calling
upon the appellant to explain the sources of his income out of
which he had acquired the assets described in the schedule
to the notice. Some correspondence ensued between the
second respondent on one hand and the wife of the appellant
and the appellant on the other hand, the details of which may
D not be necessary for the time being.
6. Eventually on 27th November 1989, the second
respondent passed an order under section 7(1) of the Act
forfeiting the properties mentioned in the schedule to the said
E order.
7. Aggrieved by the said order, an appeal was carried to
the Appellate Tribunal constituted under section 12 of the Act.
The appeal was partly allowed setting aside the forfeiture of two
F items of the properties.
8. Not satisfied with the Appellate Authority's conclusion,
the appellant challenged the same in writ petition No. C.O.
No.10543 (W) of 1991 before the High Court of Calcutta. In the
said writ petition, the appellant also prayed for two declarations
G - (1) that the Act is illegal and ultra vires the Constitution and
(2) that the detention of the appellant under the COFEPOSA
by the order dated 19th December 1974 was illegal and void
- a collateral and second round of attack.
H
9. Learned Single Judge of the Calcutta High Court by an
BISWANATH BHATTACHARYA v. UNION OF INDIA
899
[J. CHELAMESWAR, J.]
order dated 1oth May 2002 partly allowed the writ petition
A
holding that the forfeiture of the property by the second
respondent as confirmed by the Appellate Tribunal was illegal
on the ground that the notice under section 6(1) of the Act dated
4th March 1977 was not in accordance with the law as the
notice did not contain the reasons which constituted the basis
B
for the belief of the competent authority that the appellant
illegally acquired the scheduled properties.
10. Aggrieved by the order of the learned Single Judge,
the respondents herein carried the matter in appeal to the
Division Bench. By the judgment under appeal, the appeal was
C
allowed.
11. It appears from the judgment under appeal that though
the appellant sought a declaration that the Act (SAFEMA) is
unconstitutional, such a plea was not pressed before the D
learned Single Judge.1
12. Before us, the appellant made three submissions - (1)
that the notice issued under Section 6 of the Act is defective
and therefore illegal as the notice did not contain the reasons
E
which made the competent authority believe that the notice
scheduled properties are illegally acquired properties. In other
words, the reasons were not communicated to the appellant;
(2) that the forfeiture, such as the one provided under the Act,
is violative of Article 20 of the Constitution of India; and (3) in
the alternative, it is argued - that the High Court failed to
consider the question whether the decision of the competent
authority as confirmed by the appellate authority is sustainable
and therefore, the matter is required to be remitted to the High
F
1.
On perusal of the judgment and order of the Learned Single Judge it G
appears that although the vires of the said Act was under challenge the
respondent No. 1 only asked for cancellation of the order of detention issued
under Section 3 of the COFEPOSA and the orders passed by the competent
authority so merged in the appellate authority under section 6(1) of the
SAFEMA as well as prayed for release of the properties confiscated by the
appellate authority in terms of the order impugned therein.
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[2014] 1 S.C.R.
A Court for an appropriate consideration of the legality of order
of forfeiture.
13. Regarding the non communication of the reasons, the
judgment under appeal recorded as follows:
B
"The matter may be looked into from another angle.
In 1976 he was under detention. His wife replied to the
said notice without complaining of non-supply of reasoning.
After his release the respondent No.1 gave a further
rejoinder by adopting what had been said by his wife The
C
authority did not proceed against him until he was served
with the reasoning in 1988. The respondent No.1 was also
afforded opportunity to deal with the reasonings in his
rejoinder. The competent authority after affording him
opportunity of hearing passed a detailed reasoned order.
o
He preferred an appeal. The appeal was allowed in part
that too by a detailed reasoned order. Hence, we do not
find any reason to hold that the fundamental right of the
respondent No.1 was infringed."
E It appears from the record that initially notice dated 4.3.1977
under Section 6(1) was issued at a point of time when the
appellant was under preventive detention. Subsequently, by a
communication dated 1st June, 1988, the recorded reasons for
the belief which led to the issuance of notice under Section 6(1)
of the Act was served on the appellant. The appellant not only
F filed a rejoinder to the said notice but he was also given a
hearing before an order of forfeiture under Section 7 was
passed. It is in the background of the abovementioned facts
we are required to consider the submission that the High Court
erred in coming to the conclusion that notice under Section 6(1)
G did not vitiate2 the subsequent proceedings.
H
2.
The respondent No. 1 for the first time in the wirt petition contended that
the notice under Section 6(1) was bad due to non-supply of reasons
whereas it would appear that the reasons were supplied as and when
asked for. Delayed supply of reasons, in our view, did not vitiate the
subsequent orders of the competent authority as well as appellate authority.
BISWANATH BHATTACHARYA v. UNION OF INDIA
901
[J. CHELAMESWAR, J.]
14. In support of the submission, learned counsel for the A
appellant very heavily relied upon a judgment of this Court in
Ajantha Industries and others v. Central Board of Direct Taxes
and others, (1976) 1 sec 1001. It was a case where this court
had to consider the legality of the order under Section 127
transferring the 'case' of the Ajantha Industries.
B
15. Section 127 of the Income Tax Act, 1961 empowers
the authorities (mentioned therein) to transfer "any case"
(explained in the said section) from one Income Tax Officer to
another. Further, the section stipulates that before such an
C
order of transfer is made, two conditions are required to be
complied with - (1) that the assessee must be given a
reasonable opportunity to explain why his case should not be
transferred; and (2) the authority transferring the case is
required to record the reasons which led him to initiate the
proceedings. It appears from the judgment that though first of D
the abovementioned two requirements was complied with, it
was found that no reasons were recorded much less
communicated, Dealing with the legality of such an order, this
Court held that there is a requirement of not only recording the
reasons for the decision to transfer the case but also such
E
reasons are ,required to be communicated to the assessee.
16. Though section 127 expressly provided for recording
of reasons it did not expressly provide communicating the
same to the assessee. Still, this Court held that such a
F
communication is mandatory.
"10. The reason for recording of reasons in the order and
Show cause notice was served in 1976. It was not proceeded with till 1988
wnen reasons were supplied. Order was passed by the competent authority G
upon affording adequate opportunity of hearing. The respondent No.1 availed
the remedy of appeal where his appeal was partly allowed. With deepest
regard we have for the learned single Judge, His Lordship was perhaps not
right in interfering with the show cause notice at the stage when the
respondent No.1 availed of the remedies in law and became partly succesful
before the appellate authority.
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902
A
B
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SUPREME COURT REPORTS
[2014] 1 S.C.R.
making these reasons known to the assessee is to enable
an opportunity to the assessee to approach the High Court
under its writ jurisdiction under Article 226 of the
Constitution or even this Court under Article 136 of the
Constitution in an appropriate case for challenging the
order, inter alia, either on the ground that it is mala fide or
arbitrary or that it is based on irrelevant and extraneous
considerations. Whether such a writ or special leave
application ultimately fails is not relevant for a decision of
the question.
11. We are clearly of opinion that the requirement of
recording reasons under Section 127(1) is a mandatory
direction under the law."
17. In our view, such a conclusion must be understood in
D
the light of the observation of the Court that there was no
provision of appeal or revision under the Income Tax Act
against an order of transfer. For the same reason, this Court
distinguished and declined to follow an earlier judgment in S.
Narayanappa v. The Commissioner of Income-tax AIR 1967
E
SC 523 where this Court on an interpretation of Section 34 of
the Income Tax Act, 1922, opined to the contra. Section 34
provided for re-opening of the assessment with the prior
sanction of the Commissioner, if the income tax officer has
'reasons to believe' that taxable income had been underF
assessed. Dealing with the question whether the reasons which
led the Commissioner to accord sanction for th~ initiation of
proceedings under section 34 are required to be
communicated to the assessee, this Court held -
G
H
"There is no requirement in any of the provisions of the Act
or any section laying down as a condition for the initiation
of the proceedings that the reasons which induced the
Commissioner to accord sanction to proceed under S.34
must be communicated to the assessee."
BISWANATH BHATIACHARYA v. UNION OF INDIA
903
[J. CHELAMESWAR, J.]
18. In Ajantha Industries case, Narayanappa's case was
A
distinguished on the ground -
"When an order under Section 34 is made the aggrieved
assessee can agitate the matter in appeal against the
assessment order, but an assessee against whom an
order of transfer is made has no such remedy under the
Act to question the order of transfer. Besides, the
aggrieved assessee on receipt of the notice under Section
34 may even satisfy the Income-tax Offier that there were
no reasons for reopening the assessment. Such an
opportunity is not available to an assessee under Section
127(1) of the Act. The above decision is, therefore, clearly
distinguishable."
B
c .
19. We reject the submission of the appellant for the
following reasons. Firstly, there is no express statutory
D
requirement to communicate the reasons which led to the
issuance of notice under Section 6 of the Act. Secondly, the
reasons, though not initially supplied alongwith the notice dated
4.3.1977, were subsequently supplied thereby enabling the
appellant to effectively meet the case of the respondents.
E
Thirdly, we are of the opinion that the case on hand is squarely
covered by the ratio of Narayanappa case. The appellant could
have effectively convinced the respondents by producing the
appropriate material that further steps in furtherance to the
notice under Section 6 need not be taken. Apart from that, an
F
order of forfeiture is an appealable order where the correctness
of the decision under Section 7 to forfeit the properties could
be examined. We do not see anything in the ratio of Ajantha
Industries case which lays down a universal principle that
whenever a statute requires some reasons to be recorded
G
before initiating action, the reasons must necessarily be
communicated.
20. Now, we deal with the second submission. The Act
enables the Government of India to forfeit "illegally acquired
property" of any person to whom the Act is made applicable.
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[2014] 1 S.C.R.
A The Act is made applicable to the persons specified in section
2(2)3. Five categories of persons are covered thereunder.
Clause (a) - persons who have been convicted under various
enactments referred to therein; clause (b) - persons in respect
B
- c
3.
Section 2. Application-(1) The provisions of this Act shall apply only to the
persons specified in sub-section (2).
(2) The persons referred to in sub-section (1) are the following, namely:-
(a) every person-
(i) who has been convicted under the Sea Customs Act, 1878 (8 of 1878),
or the Customs Act, 1962 (52 of 1962), of an offence in relation to goods
of a value exceeding one lakh of ruppes; or
M who has been convicted under the Foreign Exchange Regulation Act,
1947(7of1947), or the Foreign Exchange Regulation Act, 1973 (46of1973),
of an offence, the amount of value involved in which exceeds one lakh of
rupees; or
D
(iii) who have been convicted under the Sea Customs Act, 1878 (8 of 1878),
or the Customs Act, 1962 (52 of 1962), has been convicted subsequently
under either of those, Acts; or
(iv) who having been convicted under the Foreign Exchange Regulation
Act, 1947 (7of1947), or the Foreign Exchange Regulation Act, 1973 (46 of
1973), has been convicted subeqeuntly under either of those Acts;
E (b) every person in respect of whom an order of detention has been made
under the Conservation of Foreign Exchange and prevention of Smuggling
Activities Act, 1974 (52of1974):
F
G
H
Provided that-
(i) such order of detention being an order to which the provisions of section
9 or section 12A of the said Act do not apply, has not been revoked on the
report of the Advisory Board under section 8 of the said Act or before the
receipt of the Advisory Board or before making a reference to the Advisory
Board: or
(ii) such order of detention being an order to which the provisions of section
9 of the said Act apply, has not been revoked before the expiry of the time
for, or on the basis of, the review under sub-section (3) of section 9 or on
the report of the Advisory Board under section 8, read with sub-section (2)
of section 9 of the said Act; or
(iii) such order of detention, being an order to which the provisions of
section 12A of the said Act apply, has not been revoked before the expiry of
the time for, or on the basis of, the first review under sub-section (3) of that
section, or on the basis of the report of the Advisory Board under section 8,
read with sub-section (6) of section 12A, of that Act; or
BISWANATH BHATTACHARYA v. UNION OF INDIA 905
[J.