M/s. Platinum Theatre and Others vs Competent Authority Smugglers & Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 and Another

HELD: 1. The Act, 1976 has been enacted by the Parliament with an object to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto. At the same time, to provide an 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. It also provides that such persons have been augmenting such gains by violations of wealth-tax, income-tax or other laws or by other means and have thereby been increasing their resources for operating in a clandestine manner and to nail such persons who are holding the properties acquired by them through such gains in the name of their relatives, associates and confidants. [Para 9][1090-E-G]

2. Section 2(1) of the Act, 1976 applies to the persons specified in sub-section (2). Section 2(2) gives a long list of different categories of persons to whom the Act applies and includes as defined in Section 2(2)(b) that every person in respect of whom an order of detention has been made under the COFEPOSA and also includes every associate of a person referred to in clause (a) or clause (b) as defined in sub-clause(d) read with Explanation 3, which refers to an associate and covers all individuals who had been or is a member, partner or director of an association of persons including association, body, partnership firm or private company, etc. [Para 10][1090-G-H; 1091-A]

3. Section 8 clearly postulates that burden of proof, in any proceedings under this Act, in reference to the notice served under Section 6 in regard to the illegally acquired properties shall lie on the person affected and while exercising power under Section 7, forfeiting the illegally acquired properties in a case where the source of only a part, being less than one-half of the income of which such property is acquired, the acquisition has been subject to proof to the satisfaction of the competent authority, can be offered an option to the person affected to pay in lieu of forfeiture, a fine of the value of such part, as indicated under Section 9 of the Act 1976. [Para 13][1095-H; 1096-A-B]

4. The Single Judge of the High Court revisited the factual matrix on record and returned a finding that no documentary evidence was placed by either of the appellants, during the proceedings initiated by the competent authority, who are under an obligation to prove in terms of Section 8 of the Act 1976. From the evidence which came on record, it could be gathered that out of the investment made by the partners (Appellant nos. 2 to 5) to the tune of Rs.10.20 lakhs, one Y (not a party to the present proceeding) contributed Rs.5 lakhs and Appellant no.2 and her children have contributed to the tune of Rs.5.2 lakhs each but neither Y has justified any source from where his capital contribution was made nor the explanation was tendered by Appellant nos. 2 to 5 regarding their source of income and it was disbelieved at all stages and a finding was returned that major part of the investment has been treated as income from undisclosed sources. That apart, no evidence was placed by Appellant no. 2 on record to justify that the land in question was purchased from the resources available at her command in the year 1969, through the sale deed dated 16th April, 1969. In the given circumstances, the appellants are not entitled to seek protection of Section 9 of the Act 1976. [Para 16][1097-C-F]

5. Even before this Court, there is no material that has been placed by Appellant no.2 in rebuttal which may even prima facie justify the sources of fund available at her command for acquisition of the land in question to the tune of Rs.33,000/- in the year 1969. In the absence of proper explanation as to the source of acquisition and as majority of investment remains unexplained, the authority disbelieved the version of Appellant no. 2 as no proof was placed on record of gifts from her marriage. That apart, if the value of the land is taken only of Rs.33,000/-, the total value of the land and building work out at Rs.25,20,000/-, and as such, the major part of the investment still remains unexplained. Even the accounts were not maintained in respect of the cost of construction of the building, in absence whereof, the authority has not committed any manifest error in forfeiting the property in exercise of power under Section 7 of Act 1976. [Para 19][1098-G-H; 1099-A-B]