# GUNWANTLAL GODAWAT v. UNION OF INDIA & ANOTHER

- **Citation:** [2017] 14 S.C.R. 369
- **Court:** Supreme Court of India
- **Decided:** 2017
- **Bench:** J. Chelameswar, S. Abdul Nazeer
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gunwantlal-godawat-v-union-of-india-another-31981
- **Pages:** 40

## Headnote

Defence of India Rules. 1962 - Part XIIA - rr.126-I.126L(2).
A
B
l 26M -
Confiscation of gold -Law applicable to pending
adjudgment proceedings in respect of such confiscation- In 1965,
C
residential premises of appellant:~ father was searched wherein
240kgs gold was found and seized under 1962 Rules-1962 Rules
repealed by the 1968 Ordinance which in turn was repealed by
Gold Control Act of 1968- However. u/s.116(2) of the Act, by way
of fiction, anything done under the 1968 Ordinance or Part XII of
the 1962 Ru!es, was deemed to have been done under the said ActD
Collector of Central Excise and Customs ordered confiscation of
the entire gold with an option to legal heirs of appellants }ather
(dnce dead) to redeem the gold by paying redemption fine of
Rs.2.5crores- Appellate Tribunal reduced the redemption fine to
Rs.12.5Lacs which was the value of gold at the date of the seizpre E
in terms of the Gold Control Act of 1968- High Court, however.
held that the case of appellant is goyerned only by the 1962 Rules
and not by the Gold Control Act of 1968- Propriety of- Proceedings
pending under Part XIJA of the 1962 Rules, if would be deemed to
continue under the Gold Controi Act of 1968-:,He?d: A proceeding
initiated under the 1962 Rules and.pending as on the date of the
F
Gold Control Act of 1968 will have to be concluded in accordance
.
. ., .
with the 1962 Rule.~ in view of s.116 of the Gold Control Act of
1968- The fiction created u/s.116 does not deal with the law
applicable .to pending proceedings - The purpose' of fiction is not
to ·alter the law app/}cab!e._to. the acijudgment proceedings - Thus.
the aqjudgment of confiscation of the appellants gold is required
to be made only in accordance ,with the 1962 Rules and not the
Gold Control Act of 1968 ,.-,Constitution.of India - Art.352 - The
Gold (Control)•Ordinance, ;1968":-'S.'117~ Gold Cqntrol Act, 1968 -
Gold( Control) Act, ·1965 .-JJefence of India Act (51 .of1962) c369
a·
H
370
SUPREME COURT REPORTS
[2017] 14 S.C.R.
A ss.1(3) and 48(2)-Defence of India Ordinance (4of1962)-Defence
of b1dia Ordinance (6 of 1962).
Defence of India Rules, 19112- Rules repealed by 1968
Ordinance- s.117 of the Ordinance providing for the consequences
of such repeal declared that s.6, 1897 Act would apply- Effect of
B such declaration- Held: Rules remained unaffected in respect of
the various legal proceedings referred to in s.6(e) of the 1897 Act,
either pending or concluded and other appropriate consequences
specified in the Rules would follow - The Gold (Control) Ordinance,
1968 - General Clauses Act. 1897 - s.6.
C
Interpretation of Statutes - Effect of repeal of an Ordinance
by an enactment - 1962 Rules repealed by the 1968 Gold
Ordinance- Gold Act of 1968 repealed the 1968 Ordinance itself.
but did not make a declaration that the 1962 Rules were repealed -
Issue as to whether the 1962 Rules stood irrevocably repealedHeld: Efficacy of the provisions of an Ordinance would not in any
D way be diminuted or abrogated unless there is a subsequent
countervailing legislation - 1968 Ordinance was followed up by a
legislative action (Gold Act) which did not disapprove the content
of the Ordinance - Thus. the 1962 Rules stood repealed by
the Ordinance notwithstanding the fact that the Ordinance itself
E came to be repealed subsequently by the Gold Act - Repeal of the
1968 Ordinance does not revive the 1962 Rules - Defence ~f India
Rules, 1962 - The Gold (Control) Ordinance, 1968 - Gold Control
Act,1968 - General Clauses Act, 1897.
Words & Phrases - 'Adjudged', 'Confiscation' - Meaning
F of. in context of Defence of India Rules, 1962 - Discussed.
Defence of India Rules. 1962 - Part XIJA - Scheme of -
Discussed.
Defence of India Rules, 1962 - r.126M(8)(a) - Redemption
fine to he paid in lieu of confiscation of the gold seized under the
G
Z 962 Rules - Basis for determination of - Plea of appellant that
confiscation fine is to he determined with reference to the value of
gold on the date of the seizure,

## Text

_Characters 0–39,895 of 95,742. This is a partial read: ask again with offset=39895 for what follows._

[2017] 14 S.C.R. 369
GUNWANTLAL GODAWAT
v.
UNION OF INDIA & ANOTHER
(Civil Appeal Nos. 4711-4712 of201 l)
NOVEMBER22,2017
[J. CHELAMESWAR AND S. ABDUL NAZEER, JJ.]
Defence of India Rules. 1962 - Part XIIA - rr.126-I.126L(2).
A
B
l 26M -
Confiscation of gold -Law applicable to pending
adjudgment proceedings in respect of such confiscation- In 1965,
C
residential premises of appellant:~ father was searched wherein
240kgs gold was found and seized under 1962 Rules-1962 Rules
repealed by the 1968 Ordinance which in turn was repealed by
Gold Control Act of 1968- However. u/s.116(2) of the Act, by way
of fiction, anything done under the 1968 Ordinance or Part XII of
the 1962 Ru!es, was deemed to have been done under the said ActD
Collector of Central Excise and Customs ordered confiscation of
the entire gold with an option to legal heirs of appellants }ather
(dnce dead) to redeem the gold by paying redemption fine of
Rs.2.5crores- Appellate Tribunal reduced the redemption fine to
Rs.12.5Lacs which was the value of gold at the date of the seizpre E
in terms of the Gold Control Act of 1968- High Court, however.
held that the case of appellant is goyerned only by the 1962 Rules
and not by the Gold Control Act of 1968- Propriety of- Proceedings
pending under Part XIJA of the 1962 Rules, if would be deemed to
continue under the Gold Controi Act of 1968-:,He?d: A proceeding
initiated under the 1962 Rules and.pending as on the date of the
F
Gold Control Act of 1968 will have to be concluded in accordance
.
. ., .
with the 1962 Rule.~ in view of s.116 of the Gold Control Act of
1968- The fiction created u/s.116 does not deal with the law
applicable .to pending proceedings - The purpose' of fiction is not
to ·alter the law app/}cab!e._to. the acijudgment proceedings - Thus.
the aqjudgment of confiscation of the appellants gold is required
to be made only in accordance ,with the 1962 Rules and not the
Gold Control Act of 1968 ,.-,Constitution.of India - Art.352 - The
Gold (Control)•Ordinance, ;1968":-'S.'117~ Gold Cqntrol Act, 1968 -
Gold( Control) Act, ·1965 .-JJefence of India Act (51 .of1962) c369
a·
H
370
SUPREME COURT REPORTS
[2017] 14 S.C.R.
A ss.1(3) and 48(2)-Defence of India Ordinance (4of1962)-Defence
of b1dia Ordinance (6 of 1962).
Defence of India Rules, 19112- Rules repealed by 1968
Ordinance- s.117 of the Ordinance providing for the consequences
of such repeal declared that s.6, 1897 Act would apply- Effect of
B such declaration- Held: Rules remained unaffected in respect of
the various legal proceedings referred to in s.6(e) of the 1897 Act,
either pending or concluded and other appropriate consequences
specified in the Rules would follow - The Gold (Control) Ordinance,
1968 - General Clauses Act. 1897 - s.6.
C
Interpretation of Statutes - Effect of repeal of an Ordinance
by an enactment - 1962 Rules repealed by the 1968 Gold
Ordinance- Gold Act of 1968 repealed the 1968 Ordinance itself.
but did not make a declaration that the 1962 Rules were repealed -
Issue as to whether the 1962 Rules stood irrevocably repealedHeld: Efficacy of the provisions of an Ordinance would not in any
D way be diminuted or abrogated unless there is a subsequent
countervailing legislation - 1968 Ordinance was followed up by a
legislative action (Gold Act) which did not disapprove the content
of the Ordinance - Thus. the 1962 Rules stood repealed by
the Ordinance notwithstanding the fact that the Ordinance itself
E came to be repealed subsequently by the Gold Act - Repeal of the
1968 Ordinance does not revive the 1962 Rules - Defence ~f India
Rules, 1962 - The Gold (Control) Ordinance, 1968 - Gold Control
Act,1968 - General Clauses Act, 1897.
Words & Phrases - 'Adjudged', 'Confiscation' - Meaning
F of. in context of Defence of India Rules, 1962 - Discussed.
Defence of India Rules. 1962 - Part XIJA - Scheme of -
Discussed.
Defence of India Rules, 1962 - r.126M(8)(a) - Redemption
fine to he paid in lieu of confiscation of the gold seized under the
G
Z 962 Rules - Basis for determination of - Plea of appellant that
confiscation fine is to he determined with reference to the value of
gold on the date of the seizure, in terms of s. 73. Gold Control Act r/
w s.2(v) thereof- Held: Rule 126M(8)(a) does not oblige the officer
to determine the amount of fine on the basis of value of the
H
GUNWANTLAL GODAWAT v. UNION OF INDIA
371
confiscated gold either with reference to the date of its seizure or A
on the date of ac1judgment of confiscation- Further, there is nothing
in s. 73 of the Gold Control Act which requires that the value of the
goldfor determining the fine should be the value of gold as on the
date of the seizure- s. 7 3 applies only to those cases where
confiscation is under the Gold Act - High Court rightly held that
B
s. 7 3 would not apply to the instant case - Amount of fine to be paid
in lieu of confiscation of gold would he the 1iiarket .value ofgold on
the date on which the owner exercises the option to pay the fine in
lieu of c011fiscation, as rightly held by High Court to be Rs.11. 04
crores - Further. appellant to pay interest @ 10% p.a. on such fine
to redeem the gold - Gold Control Act ( 45 of 1968) - ss. 7 3 and C
2(v).
Defence of India Rules, 1962 - r.126M(8){a) - Redemption
fine to be paid in lieu of confiscation of the seized gold - Discretion
to the Ac{judging Officer - Nature of such discretion - Discussed.
Disposing of the appeals, the Court
HELD: THE HISTORY OF THE GOLD CONTROL
REGIME:
D
l.1 On 26th October 1962, the President of India made a
proclamation of emergency under Article 352 of the Constitution
E
of India. On 28th October 1962, the President of India
promulgated the Defence of India Ordinance (4 of 1962). It was
amended by another ordinance ( 6 of 1962). Jn exercise of- the
power conferred under Section 3 of the Ordinance (4 of 1962), .
Defence of India Rules, 1962 (RULES) came to be made. [Para
14)(385-C-D]
F
1.2 In the year 1968, an ordinance titled The Gold (Control)
Ordinance, 1968 (6 of 68) (hereinafter referred to as 'the
ORDINANCE') was promulgated on 29th June, 1968. Section
117 of the ORDINANCE repealed the RULES. The RULES
would have lapsed on 9th July 1968 because the authority of law
G
for the sustenance of the RULES ceased on that day with the
cessation of the operation of the Defence of India Act (5 of 1962),
but for their repeal by Section 117 ·of the ORDINANCE. Since
the repeal of any rules by another statute and the consequences
flowing therefrom are not provided for either in the General H
372 '···-
SUPREME COURT REPORTS
[2017] 14 S.C.R.
A Clauses Act 1897 or any other law, it was declared in Section 117
of the ORDINANCE. Thereafter Parliament made the Gold
Control Act (45 of 1968). The scheme of the ORDINANCE and
the GOLD ACT is more or less the same and is substantially
similar to the scheme of the Part XIIA of the RULES. Section
B 116(1) of GOLD ACT inter alia repealed the ORDINANCE. [Paras
19, 20)(386-E-G; 387-~]
EFFECT OF THE REPEAL OF THE RULES BY THE
ORDINANCE:
2. One of the questions that is required .to be examined to
c decide the controversy on hand is whether the RULES stood
irrevocably repealed in the absence of a provision in the GOLD
ACT similar to Section 117(1) of the ORDINANCE? The legal
position in view of the judgment of this Court in Venkata Reddy's
case is that the efficacy of the provisions of an ordinance would
not in any way be diminuted or abrogated unless there is a
D subsequent countervailing legislation. The rights and obligations
created, the liabilities incurred or acquired or suffered under an
ordinance would be as enduring as those resulting from a Statute.
But Venkata Reddy is declared not to be good law in view of the
law laid down in Krishna Kumar Singh case. However, the
E discussion of law in Krishna Kumar Singh case was in the context
of an Ordinance which was never tabled before the Legislature
and lapsed by virtue of the efflux of time. The declaration in
Krishna Kumar Singh that Venkata Reddy is no longer good law
in view of the judgment in S.R. Bommai may not make any
difference to the present case. In the case on hand, the
F ORDINANCES came to be repealed and replaced by the GOLD
ACT with retrospective effect from 29th June 1968, that is, from
the date of promulgation of the ORDINANCE. [Paras 21, 23, 24,
26· and 27)(388-C, E-.F; 390-E-.F]
G
H
Krishna Kumar Singh & Another v. State of Bihar &
Others (2017) 3 SCC 1 - distinguished.
T Venkata Reddy & Ors. v. State of Andhra Pradesh.
(1985) 3 SCC 198 : (1985] 3 SCR 509 - referred to.
SR Bommai v. VOi (1994) 3 SCC 1 - referred to.
GUNWANTLAL GODAWAT v. UNION OF INDIA
373
THE EFFECT OF THE REPEAL OF THE ORDINANCE BY A ·
THE GOLD ACT:
3. The General Clauses Act is silent in this regard. On the
other hand,' Section 30 of the General Clauses Act deals with a
situation of a Central Act being repealed l'.ty an Ordinance. It
declares (in substance) that the same consequences that would B
1
follow the repeal of an earlier enactment by a later enactment
would also follow in the case of repeal of an earlier enactment by
a subsequent Ordinance. But the coun·ter position is not provided
under the General Clauses Act. In the circumstances, the
provisions of the Act which repeals an Ordinance are only
required to be looked into. In the case on hand, though the GOLD
C
ACT expressly repealed the ORDINANCE, it did not make a
declaration that the RULES are repealed. But on that account,
the peremptory nature of the repeal of the RULES by the
ORDINANCE need not be doubted for the following two reasons:
(i) The GOLD ACT while making the declaration that the D
ORDINANCE is repealed provided that various actions taken
both under PART XIIA of the RULES oc the ORDINANCE are
deemed to be actions taken under the corresponding provisions
of the GOLD ACT; and (ii) Unlike Krishan Kumar Singh, the
ORDINANCE was followed up by a legislative action which did
not disapprove the content of the ORDINANCE. [Para 28)(391E
A-E]
State of Punjab v. Mohar Singh AIR 1955 SC 84 : (1955]
SCR 893 - referred to.
,
SCHEME AND PURPO'SE OF THE lST FICTION UNDER .
SECTION 116:
F
4. The purpose of creating the 1st fiction'"under Section
116 is to declare that the rights and obligations flowing from the
adjudgment of confiscation would be those specified in the GOLD
ACT. The purpose of the fiction is not to alter the law applicable
to. the adjudgment proceedings. One of the examples of the rights
G
· flowing from the adjudgment of confiscation of gold is a right of
appeal against the adjudgment of confiscation. Both the RUL.ES
[Rule 126M{3) and the GOLD ACT (Sections 80 and 81)) provide
for appeal. While under the RULES, appeals lay to th.e
'Administrator' irrespective of the forum which adjudged the H
374
SUPREME COURT REPORTS
[2017] 14 S.C.R.
A confiscation. Under the GOLD ACT, the appellate forum varies
depending on the forum which adjudged the confiscation. The
fiction does not deal with the law applicable to pending
proceedings. Such a conclusion is irresistible from the language
of Section 116(2) of the GOLD ACT. [Paras 29, 30)(391-F; 392B A-CJ
SCHEME OF PART XIIA OF THE RULES:
5.1 Various Rules in Part XIIA dealt with the regulation of
the activity of three classes of persons (i) dealers, (ii) refiners,
and {iii) others who own or possess gold.
[Para 32)(392-Ej
C
5.2 Ruic 126-M provided for 'confiscation' of the gold seized
under Rule 126-L. Rule provided that a confiscation is required
to be 'adjudged'. The expression 'adjudged' is not defined but,
having regard to the scheme of the Rules mentioned above, the
only possible meaning that can be ascribed to that word is that
adjudgment is a proceeding by which the liability for confiscation
D arising out of the provisions of Part XIIA of the gold seized is
required to be determined. It appears from the scheme, the
liability for confiscation of the gold found in searched premises
arises from the fact that "there has been or is being or is about to
be" a contravention of any provision of Part XIIA. In other words,
E adjudgmcnt is nothing but a process of establishing the facts
relevant for arriving at a conclusion that "there has been or is
bci.ng or is about to be" a contravention of any one of the Rules
contained in Part XIIA. Adjudgment is a quasi judicial
proceeding.[Para 35] [393-B-D]
5.3 The expression 'confiscation' is not defined in the
F RULES. The words 'forfeiture' and 'confiscation' have come to
be used interchangeably.
The General Clauses Act, does not
employ the word 'confiscation'. On the other hand, it employs
the word 'forfeiture' in Section 6(d). Having regard to the long
history of the usage of those two expressions, it is clear that
G 'forfeiture' is an expression which takes within its sweep
'confiscation' also for the purpose of law. Ruic
126-P provided
for penalties. Whereas under Ruic 126-M(S), the officer adjudging
confiscation may give to the "owner of the gold" an option to pay
in lieu of confiscation such fine (popularly known as redemption
fine) as the officer thinks fit. [Paras 36, 37 and 40)[393-E, F-G;
H 394-A, E]
GUNWANTLAL GODAWAT v. UNION OF INDIA
375.
APPLICATION OF THE LAW TO THE FACTS OF THE CASE:
A
6.1 The ORDINANCE itself came to be repealed by the
GOLD ACT by the date of the judgment of the Rajasthan High
Court. Such repeal gives rise to two questions- What is the effect
of (i) the repeal of the Ordinance 6of1968, and (ii) the declaration
under Section 116(2) of the GOLD ACT? At the time of the B
,making of the GOLD ACT, Parliament was conscious of the
existence of the RULES and their repeal by the ORDINANCE
and also the fact that various actions authorised under the
provisions of the Part XllA of the RULES were taken or pending.
The Parliament is also conscious of the fact that the ORDINANCE
while repealing the RULES provided for the application of Section
C
6 of the General Clauses Act. Pursuant to the repeal of the
ORDINANCE, the Parliament did not choose by the GOLD ACT
to disapprove such a declaration made under the ORDINANCE.
Therefore, it is more than public interest and constitutional
necessity as opined in Krishan Kumar Singh's case to hold that D
the RULES stood peremptorily repealed by the ORDINANCE
and on such repeal, Section 6 of the General Clauses Act applied.
Therefore, the RULES stood peremptorily repealed by the
ORDINANCE notwithstanding the fact that the ORDINANCE
itself came to be repealed subsequently by the GOLD ACT. The
repeal of the Ordinance docs not revive the RULES. [Paras 44,
E
45) [396-D-H]
6.2 The adjudgmcnt of confiscation of the appellant's gold
is. required to be made only in accordance with the RULES but
not the GOLD ACT. The role of the 1st fiction created under
Section 116 of GOLD ACT is limited as explained in para 29 of F
this judgment.[Para 48][399-B)
6.3 While it is true that the discretion conferred upon the
Authority under Rule 128M - (S)(a) is textually unfettered, it
docs not lead to the inference :that the discretion is absolute and
uniform with reference to the various contraventions of the G
RULES. The limitations on the discretion are to be found from
the scheme of the RULES. The various RULES in the Part XIIA
of the RULES make various stipulations and the contravention
of any one of the stipulations can lead to the confiscation of gold.
The factors which influence the Authority's exercise of discretion
H
376
SUPREME COURT REPORTS
[2017] 14 S.C.R.
A will necessarily vary from the nature of the offence which is
committed. [Paras 49-51](400-B-C]
6.4 The appellant's case does not call for any discretion to
be exercised in his favor in the light of the totality of the
circumstances. The non-fiJing of the declaration is established to
B be an absolutely calculated violation of law. [Para 55) [401-C]
6.5 The High Court rightly came to the conclusion that the
case of the appellant is governed only by the RULES and not by
Section 73 of the GOLD ACT. The amount of Rs.11.04 crorcs
was the value of the gold as on the date (7 .12.94) when the
C appellant was given the option to pay the fine in lieu of confiscation.
However, the argument advanced by appellant is that the law
applicable to the adjudgment proceedings is GOLD ACT- a
submission plainly untenable. A proceeding initiated under the
RULES and pending as on the date of the GOLD ACT will still
have to be concl;:.ded in accordance with the RULES in view of
D Section 116 of the GOLD ACT.[Paras 58-61](402-D; 404-A, C-D]
E
6.6 While the RULES provide an unrestricted discretion
to the "officer adjudging" to determine.the amount of fine, GOLD
ACT restricts the discretion by imposing an upper limit on the
quantum of fine that could be imposed by declaring that "give to
the owner thereof an option to pay in lieu of confiscation such
fine, not exceeding the value". There is nothing in the text of
Section 73 of the GOLD ACT which requires the value of the
gold (for the purpose of determining the fine) should be the value
of the gold as on the date of the seizure. But the expression·
'value' is a defined expression under Section 2(v) of the Act. The
F language of Section 73 is clear that it. applies only to those cases
wherein confiscation is one which is authorised "by this Act".
Section 73 would have no application to those cases of confiscation
which are adjudged under the RULES. It would be applicable
only for those cases where the confiscation is authorised by the
G GOLD ACT.
Section 71 authorises the confiscation of gold in
respect of which "any provision of this Act or any rule or order
made thereunder has been, or is being, or is attempted to be,
contravened". In other words, Section 71 authorises the
confiscation of gold if there has been or is or is attempt to
contravene the provisions of the GOLD ACT i.e. only such
H contravention occur after the commencement of the GOLD ACT
GUNWANTLAL GODAWAT v. UNION OF INDIA
377
but not contravention of law which existed anterior thereto (the A
RULES). There is a distinction between acts done pursuant to
the authorization of a statute and acts done pursuant to the
authorization under a different statute or a statutory instrument
but deemed to have been done under the earlier of the
abovcmcntioncd two st.atutes. When a statute creates a fiction
B
requiring certain events. which took place prior to the
commencement of such a statute to be deemed to have been
ilonc under the statute, such a fiction does not retrospectively
authorise doing of such acts. It qnly takes note of the existence
of certain state of affairs and cre:rtes putative state of affairs by
declaring that such anterior events should be deemed to have
C
taken place under the statute which came into existence later.
Such fictions could only have limited consequences. Prior to the
GOLD ACT, seizure and confiscation of gold were authorised by
the RULES. Though, by virtue of the fiction created under Section
116, the confiscations adjudged under the RULES are deemed D
to be confiscations adjudged under the GOLD ACT, but in view
of its Scheme there arc limitations of such fiction. Therefore,
neither Section 73 nor the definition under Section 2(v) would be
applicable for the confiscations adjudged under the RULESpursuant to a seizure that took place before the commencement
of the GOLD ACT. [Paras 63-67] [405-B-D; 406-A-G]
E
· 6. 7 The High Court rightly held that Section 73 would not
come into play at all in the case on hand. Therefore, the fine
amount cannot be determined on the basis of the value of the
gold. The High Court rightly opined that the market value of the
gold as on the date of the exercise of the option ~y the owner of F
the gold to pay fine in lieu of the confiscation would be the legally
appropriate amount of fine. Because it is a fine in lieu of
confiscation. Confiscation would result in the loss of the entire
propcrt,y in the confiscated gold resulting in a financial loss of the
· value of gold to the owner. Hence, the value of the gold is to be
determined with reference to the date on which the owner G
exercises the option to pay 'the fine in lieu of the confiscation.
[Paras 68, 69][407-A-D]
Raja Saliq'ram v. Secretary of State of India in Council
1874 12 Bengal LR 167 - approved.
H
378
A
B
c
D
E
SUPREME COURT REPORTS
[2017] 14 S.C.R.
The State of West Bengal v. SK. Ghosh AIR 1963 SC
255 : [1963] SCR 111; Biswanath Bhattachatya v.
Union of India (2014) 4 SCC 392 : [2014) 1 SCR 885;
l.T. Commissioner v. Shah Sadiq & Sons (1987) 3 SCC
516 : [1987) 2 SCR 942; Jayantilal Amrathlal v. Union
of India (1972) 4 SCC 174 - referred to.
Wicks v. Director of Public Prosecutions 1947 AC 362
(HL);
Warren v. Windle
102
ER
576
(KB); Steavenson v. Oliver 151 ER 1024 - referred to.
Case Law Reference
11985] 3 SCR 509
referred to
Para 22
c2011) 3 sec 1
distinguished Para 24
(1994) 3 sec 1
referred to
Para 27
[1955) SCR 893
referred to
Para 28
[1963) SCR 111
referred to
Para 36
[2014) 1 SCR 885
referred to
Para36
1874 12 Bengal LR 167
approved
Para 36
[1987) 2 SCR 942
referred to
Para 42
(1972) 4 sec 174
relied on
Para47
CIVILAPPELLATEJURISDICTION: Civil Appeal Nos. 47114712 of2011.
From the Judgment and Order dated 29.06.2009 of the High Court
F
of Judicature for Rajasthan, Jaipur Bench, Jaipur in D. B. Excise &
Gold (Control) Reference No. 24of1996 and D. B. Civil Writ Petition
No. 6295 of 1996.
C. A. Sundaram, Sr. Adv., Puneet Jain, Ms. Christi Jain, Abhishek
Gupta, Apoorv Tripathi, Zafar Inayat, Ms. Rohini Musa, Abhinav Gupta,
G
Ms. Priyal Jain. Harsh Jain, Ms. Yashika Sharma, Ms. Pratibha Jain,
Advs. for the Appellant.
H
K. K. Vcnugopal, AG, K. Radhakrishnan, Sr. Adv., Ms. Nisha
Bagehi, Ms. Pooja Sharma, B. Krishna Prasad, Advs. for the
Respondents.
. GUNWANTLAL GODAWAT v. UNION OF INDIA
379
The Judgment of the Court was delivered by
A
CHELAMESWAR, J. 1. On 3rd and 41h June, 1965, the
residential premises of the appellant's father were searched by the
officers of the Government oflndia in exercise of the authority conferred
upon them under Rule 126L(2) of the Defence of India Rules, 1962 1
(hereinafter referred to as "the RULES"). They found 240 kilograms
B
of gold (bars etc.) buried in the house and seized it. Proceedings for
confiscation were initiated. Eventually on 24.9.1966, the Collector of
Central Excise and Customs passed an order2 confiscating the seized
gold in exercise of the power under Rule 26M of the RULES on the
ground that the seized gold was held by the appellant in contravention of
Rule 126-I. A penalty ofRs.25 lakhs under Rule 126L(l 6) of the RULES
C
was also imposed.
·
2. Aggrieved by the same, an appeal was carried by the appellant's
father before the Gold Control Administrator which was dismissed on
6.3.1972. The matter was carried further in a revision before the
Government of India which was also dismissed on 4.6.1979. The decision D
of the Government oflndia was challenged in a writ petition (No.1215/
79) .before the Rajasthan High Court. By a judgment and order dated
·9.8. I 994, the Rajasthan High Court allowed the writ petition.
3. It appears from the said judgment that two submissions were
made before the High Court, (i) no personal hearing was given by the
Collector to the appellant's father before the order of confiscation was
I Rule 126L. Power of entry, search, seizure, to obtain information and to take samples.-
(2) Any person authorised by the Central Goveniment by writing in this behalf may-
( a) enter and search any premises, not being a refinery or establishment referred to
in sub-rule (I), vaults, lockers or any other place whether above or below
ground:
(b) seize any gold in respect of which he suspects that any provision of this Pait
has been, or is being, or is about to be contravened, along with the package,
covering or receptacle, ifany, in which such gold is found and thereafter take all
.
,measures necessary for their safe custody.
2 ""Gold was required to be declared under Rule 126-I ofDefence oflndia Rules, 1962.
It was not declared. l accordingly order absolute confiscation of240.040 kgs. of gold,
under Rule 126M of said Rules. The iron safe in which gold was secreted is also
confiscated under Rule I 26M.
I hold that Shri Chhagan Lal Godavat is guilty of contravention of the
provisions of the Rule 126-T of the Defence of India Rules, 1962. He is liable to a
penalty under Rule 126-L ( 16) of the said Rules. Taking into consideration the gravity
of the offence committed by him and in view of the fact that he hoarded a very huge
quantity of undeclared gold I impose upon him a personal penalty of Rs.25,00,000/-
(Twenty five lacs)."
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A passed though a show cause notice dated 3.2.1966 was issued proposing
confiscation and penalty under Section 126M and 126L( 16) of the RULES
respectively, and (ii) An opportunity to redeem the seized gala was not
given.
4. The High Court accepted the submissions and remitted the
B matter to the Collector (Central Excise and Customs).
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The operative portion of the judgment reads as follows:-
"16. As a sequence the orders passed sy the Collector dated
24. 9.1966 (Annex.I}, the order dated 6.3 .1972 passed by the Gold
Control Administrator as well as the order dated 3/4.6.1979 passed
by the Special Secretary Finance, Government oflndia exercising
the power of revision of the Central Government are quashed
and the matter is remitted back to the Collector, Central Excise
and Customs, New Delhi to examine the matter afresh in the light
of the observations made above after affording full opportunity to
the petitioners. The parties are directed to appear before the
Collector, Central Excise and Customs, New Delhi on 1.9.1994
whereafter the Collector shall proceed with the case afresh and
shall dispose of the matter within four months from the date of
receipt of the copy of the order as indicated above. The matter
has already been considerably delayed for over 30 years and any
further delay would amount to denial of justice to the petitioners.
It is further ordered that in the event of the appeal being filed by
the aggrieved party to the Central Excise and Gold Control Tribunal,
the Tribunal shall dispose of the same as expeditiously as possible
preferably within six months from the date of filing of the appeal."
5. Pursuant to the remand, by an order dated 9.12.1994, the
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Collector once again ordered confiscation of the entire quantity of (240
kilograms) gold approximately valued at Rs. 11. 04 crores with an option
to the legal heirs of the appellant's father to redeem the gold by paying a
fine of Rs. 2.5 crores.
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"(i) l ordarconfiscation of the 240.040 Kgs. of gold (1) Sovereigns
of gold 80.776 Kgs. (2) Passas of gold 242 Nos. 75.298.300 Kgs.
(3) Pieces of gold bars 5 Nos. 10.975.845 Kgs. (4) Gold bars of
19127 and 1992 9 nos. 72.990 Kgss.) valued at Rs. 12,50,070.41
at the time of seizure (present approximate value Rs. 11.04 crores
at the rate ofRs. 4,600per10 gms. as on 07.12.1994) along with
Iron Safe used to conceal the gold seized from the house of Late
GUNWANTLAL GODAWAT v. UNION OF INDIA
[CHELAMESWAR, J.]
Shri Chhaganlal Godawat, under the Rule 126-M of the erstwhile
Defence of India Rules, 1962. The impugned gold along with the
· Iron Safe will, however, be released and handed over to the legal
heirs of Late Shri Chhaganlal Godawat on payment ofredemption
fine of Rs. 2.50 crores (Rupees Two crores fifty lacs only) in lieu
of confiscation under Rule 126-M (8) (a) of the erstwhile Defence
of India Rules, 1962. The option to redeem the same should be
exercised within three~months from the date of receipt of this
order."
The Collector further held that in view of the fact that the person
from whom the gold was seized (Chhaganlal Godawat) expired, the levy
381
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of penalty contemplated under Rule I 26L( 16) of the RULES is not called
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for.
6. Aggrieved by the decision of the Collector, the appellant herein
carried the matter in appeal to the Tribunal.3 The appeal was heard by
a Bench of the Tribunal consisting of two members. There was a
difference of opinion between both the members regardingthc quantum D
of the redemption fine. In view of the difference of opinion, the matter
was referred to the third Member. The outcome of the entire process is
· that the Tribunal by its order dated 30th October 1995 finally opined that
the redemption fine should be reduced to Rs.12.5 lacs which represented ,
the value of the gold as on the date of the seizure. Accordingly, the
appeal was allowed.
7. The Collector sought a reference under Section 82-B4 of the
Gold Control Act, 1968 on two questions oflaw;
;'Appeal N·o.C/144/95-NRB on the file of the Customs, Excise and Gold (Control)
Appellate Tribunal, New Delhi against the Order-in-Original No. 7194 dated 9 .12.1994
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passed by the Collector of Central Excise & Customs, Jaipur.
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4 Section 82-B of the Gold (Control) Act, 1968
"Section 82-B. Statement of a case to High Court. (!) The Conector of
Central Excise or of Customs or the other party may, within sixty days of the
date upon which he is served with notice of an order under sec.SIA, by
application in the prescribed fom1, accompanied, court the application is made
by the other party, by a fee of two hundred rupees require the Appellate
Tribunal to refer to the High Court any question oflaw arising out of such order
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and, subject to the other provisions contained in this section, the Appellate
Tribunal shall, within one hundred and twenty days of the receipt of such
application, draw up a statement of the case and refer it to the High Court:
Provided that the Appellate Tribunal may, if it is satisfied that the applicant
was prevented by sufficient cause from presenting the application within the
period hereinbefore specified, allow it to be presented within a further period
not exceeding thirty days.
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"l. Whether in the matter of imposition of redemption fine, the
provisions of Section 73 of erstwhile5 Gold (Control) Act, 1968
will apply when the gold was neither seized nor confiscated under
the Gold (Control) Act, 1968?
2. Whether the quantum of Redemption fine should be related to
B
market value of Gold on the date of seizure or the market value of
gold on the date ofadjudieation by the Commissioner of Customs
& Central Excise, Jaipur?"
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8. By an order dated 20.5.1996, the Tribunal referred the matter
to the Rajasthan High Court.
9. In the meanwhile, the Department filed an appeal against that
part of the Order of the Collector dated 9.12.1994 which gave an option
to the appellant to redeem the gold by paying fine of R.~. 2.5 crores in
lieu of confiscation. The said appeal was dismissed on 23.5.1996.
10. lt appears from the record that the Union of India filed a Writ
D Petition being D.B. Civil Writ Petition No. 6295 of 1996 with an interesting
prayer as follows:-
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"It is, therefore, most respectfully prayed that:-
(i) By an appropriate writ, order or direction the respondents may
be directed not to take any action with respect to getting goods
from the Petitioner Department in any manner till the disposal
of the reference petition.
(ii) Any other order or direction which the Hon'ble Court may
consider just and proper in the facts and circumstance of case
may also kindly be passed in favour of the petitioner."
In fact it is stated at para 9(D) of the writ petition as follows:-
"D. That the petitioner department has come before the Hon'ble
Court with a limited prayer that the goods may not be released to
the respondents till the final disposal of the reference petition which
has been referred by the learned CEGAT."
11. It appears that initially there was an interim stay6 in the said
writ petition on 20th December 1996. By an order dated 28.5.1997, the
'By the date of the Reference Application, the Gold (Control) Act, 1968 stood repealed
by Act No. I 0 of 1990 of the Parliament w.c.f. 6" June 1990.
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'The order copy is not available on record
GUNWANTLAL GODAWAT v. UNION OF INDIA
383
[CHELAMESWAR, J.]
interim stay was vacated. The operative portion of the Order reads as
A
follows:-
"8. We, therefore, vacate the stay Order passed on December
20, 1996 staying that operation of the Order dated October 30,
1995 passed by the CEGAT and instead direct that the petitioner
shall retain only that much quantity of the seized gold which will
B
fetch a sum of Rs. 2,50,00,000/-(Rupees Two Crores Fifty Lakhs)
@Rs. 4600/- (Rupees Four thousand six hundred) per 10 (ten)
gms of gold and release and hand over possession of the rest of
the quantity of gold to the respondent No. 1 within one month
from today.
In case the petitioner succeeds and there is any
shortfall in the recovery because of fall in price of gold, the
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respondent No. 1 shall make that good and if the petition is
dismissed and the order of the CEGAT is maintained the respondent
No. 1 shall be entitled to return of the gold permitted to be retained
under this Order as per the directions of this Court while finally
disposing of the matter or thereafter."
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12. The Reference came to be answered by the Rajasthan High
Court by the order dated 29.6.2009, which is the subject matter of the
instant appeal. The relevant portion reads as follows:
"19. Undeniably and undisputedly, it is the date of giving option
which is relevant for adjudging the fine and not the date of seizure.
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xxx
xxx
xxx
The language of sub-rule 8 of Rule 126-M of 'Rules, 1962'
categorically envisages that the officer adjudging may give to the
owner of the Gold an option to pay in lieu of confiscation such
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fine as the said officer thinks fit. According to Wzktionary, a
wiki based open content dictionary, the meaning of term in
lieu of is 'Instead, in place of, as a substitute for'. This
meaning suggests that the redemption fine is the substitute for the
. market value of the Gold.
xxx
xxx
xxx
xxx
......... ., the market value of the seized Gold has to be taken on
that date when the option is given by the officer adjudging it.
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20. It is revealed from the material on record that the Collector
aptly applied the market price of Gold at the rate ofRs.4,600 per H
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SUPREME COURT REPORTS
[2017] 14 S.C.R.
10 gms as on December 7, 1994, the date of adjudicating when
the option was given by him to the respondent and on this basis,
the price of total seized and confiscated Gold 240.040 kgs came
to be 11.04 crores and the redemption fine cannot be in any way
less than this.
21. Thus, in the ultimate analysis, it is candidly recorded that the
quantity ofredemption fine should be related to the market value
of gold on 7.12.1994 i.e. the date ofadjudication when the officer
adjudging gave the owner of the Gold an option to pay fine in lieu
of confiscation. The amount of fine as adjudged to the tune of
Rs.2.5 crores was totally arbitrary and irrational as it was not
based on any sound and lawful reasoning.
xxx
xxx
xxx
xxx
23. .. .................. the respondents are entitled to redeem the
confiscated Gold only after paying the redemption fine ofRs.11.040
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crores.
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24. In view of above, we deem it just and proper to direct the
authorized officer to give an option afresh following above clinching
observations to the owner of the Gold asking him to pay the
redemption fine in lieu of confiscation."
13. For the sake ofcompletion of the narration of facts, it must be
stated that as a consequence, the tribunal (CESTAT) passed an order on
30:4.2010 remitting the matter to the adjudicating Commissioner to
determine the appropriate redemption fine and the Commissioner passed
an order on 16.7.2010. The relevant portion reads:
"4. Under the circumstances, we dispose of the appeal by way of
remand to the Adjudicating Commissioner (authorized officer) to
determine appropriate redemption fine and allow the order of the
gold to redeem the gold on payment of such redemption fine. It
goes without saying that while determining the redemption fine,
he shall follow the cited order of the Hon 'ble High Court dated
29.62009."
xxx
xxx
xxx
xxx
(i)An option is given to Shri Gunwant Lal Godawat and legal heir
oflate Shri Chhagan Lal Godawat to pay Rs.11.04 crores (Rupees
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Eleven erores and four lakhs only) in lieu of confiscation of the
Gill-TWANTLAL GODAWAT v. UNION OF INDIA
[CHELAMESWAR, J.]
385
gold weighing 240.040J45 kgs under the erstwhile Defence of. A
India Rules, 1962 within three months of receipt of this order.
(ii) In case Shri Gunwant Lal Godawat and the legal heir oflate
Shri Chhagan Lal Godawat does not exercise the option of
depositing the amount of Rs.11.04 crores in the stipulated time
limit, as given above, Shri Gunwant Lal Godawat and legal heir of B
late Shri Chhagan Lal Godawat shall be liable to return to the
Department immediately the gold weighing 185.145 kgs which
was returned to them on 2. 7 .94 in compliance of directions of the
Hon'ble Rajasthan High Court given in the order dated 28.05.97."
THE HISTORY OF THE GOLD CONTROL REGIME:
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14. On 26'h October 1962, the President of India made a ,.
proclamation of emergency und~r Article 352 of the Constitution of India. ·
On 28'h October 1962, the President oflndia promulgated the Defence
of India Ordinance ( 4 of 1962) .. It was amended by another ordinance
(6of1962). In exercise of the power conferred under Section 3 of the
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Ordinance ( 4 of 19()2), RULES came to be made in GSR 1465 dated 5th
November 1962. By an amendment to the RULES, Part XIIA came to
be introduced by GSR 1525 dated 23"' September, 1963 with the heading
'Gold Control'.
·
15. PartXIlA of the RULES contained various provisions regarding
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acquisition, possession, sale etc. of gold ornaments and articles by two
defined classes, under RULES 126-A(c) and (h), i.e. "dealers" and
"refiners" and persons other than dealers and refiners ..
. 16. Both the Ordinances (4 & 6of1962) C!!me to be repealed by
Section 48(2) of the Defence of India Act (51of1962)7• Section 48(2)
of the Act ( 51 of 1962) contained a declaration that notwithstanding the
repeal, any Rules made under the repealed ordinance shall be deemed
to have been made under the Act 51 of 1962. It contained a further
declaration creating a further fiction that Act 51 of 1962 had commenced
on 26th October, 1962.
·
"Section 48. Repeal and saving. -
· (1) The Defence oflndia Ordinance, 1962(4of1962), and the
Defence of India {Amendment) Ordinance, 1962 (6of1962), are
hereby repealed.
·
7 Came into force on 15" December.1962
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(2) Notwithstanding such repeal, any rules made, anything done
or any action taken under the Defence of India Ordinance, 1962( 4
of 1962) , as amended by the Defence of India (Amendment)
Ordinance, 1962 ( 6of1962) shall be deemed to have been made,
done or taken under this Act as if this Act had commenced on the
26the October, 1962."
17. We need not examine the purpose for creating the fiction
under sub-section (2) because no submission in this regard is made before
us by either of the parties. We only take note of the fact that the RULES
must be deemed to have been made under Act 51 of 1962 w.c.f. 26'h
C October I 962 though they were in fact made later under Ordinance 4 of
1962.
18. The Defence of India Act itself was a temporary enactment.
Section 1(3) of the Act declared as follows:-
"(3). It shall remain in force during the period of operation of the
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Proclamation of Emergency issued on the 26"' October, 1962,
and for a period of six months thereafter."
The proclamation of emergency ceased to operate on 10'" January
1968. Therefore, it follows that the Defence oflndia Act ( 5 of 1962)
ceased to be in force by 9'h July I 968.
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19. In the year I 968, an ordinance titled The Gold (Control)
Ordinance, 1968 ( 6 of 68) (hereinafter referred to as 'the ORDINANCE')
was promulgated on 29'h June, 1968.8 Section 117 of the ORDINANCE
repealed the l,{ULES.