Holding

SAFEMA applies to any person detained under COFEPOSA whose detention order remains in force, regardless of when the detention occurred, and the limited immunity under the Voluntary Disclosure Act does not shield such persons from forfeiture proceedings.

Summary

Tekchand, a watch dealer, and his two sons made a voluntary disclosure of income under the Voluntary Disclosure of Income and Wealth Act, 1976 and obtained a certificate. After serving a detention order under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA), they were served notices under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) to show cause why certain properties should not be forfeited. They contended that SAFEMA applied only to persons detained before the Act’s commencement and that the limited immunity under Sections 11 and 16 of the Voluntary Disclosure Act barred the forfeiture proceedings. The Competent Authority rejected these pleas and ordered forfeiture; the Appellate Tribunal partially upheld the order, and the appellants appealed to the Supreme Court. The Court held that SAFEMA applies to any person detained under COFEPOSA whose detention order remains in force, irrespective of when the detention occurred, and that the immunity under the Voluntary Disclosure Act is limited and does not protect against forfeiture under SAFEMA. The Court found the authorities had acted with due care, noting that a fine was imposed under Section 9 for a property only partially acquired illegally. Consequently, the appeals were dismissed.

Issues considered

Whether the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 applies only to persons detained under COFEPOSA before the Act’s commencement.
Whether the limited immunity under Sections 11 and 16 of the Voluntary Disclosure of Income and Wealth Act, 1976 bars forfeiture proceedings under SAFEMA.
Whether the procedural requirements of SAFEMA, including the burden of proof and notice provisions, were complied with.
Whether the properties in question qualify as "illegally acquired" within the meaning of SAFEMA.

Legislation cited

Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1947 (COFEPOSA)
Customs Act
Foreign Exchange Regulation Act (FERA)
Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976s. 2(2)(b), s. 24, s. 3(e), s. 4, s. 6, s. 7, s. 9
Voluntary Disclosure of Income and Wealth Act, 1976s. 11, s. 16

Subjects

smugglingforeign exchange manipulationforfeiture of propertyvoluntary disclosureimmunityCOFEPOSAillegal assetsburden of proof

Judgment

·--1

.-(

A TEKCHAND ETC.
v.
COMPETENT AUTHORITY

MARCH 31, 1993 .,.,,
B (B.P. JEEVAN REDDY AND N. VENKATACHALA, JJ.]

Smugglers and Foreign Exchange Manipulators (Foifeiture of Property)
-
Act, 197fr-Sections 2(2)(b), 3(e), 4, 6, and 7-Foifeiture of Property-Deten-
lion under Customs Act or FERA-Whether applied only to persons detained
c before the commencement of the Act.

•
Voluntary Disclosure of Income and Wealth Act, 1976: Sections 11 and
16-/mmunity conferred-Not absolute but limited in characte.-Not to ex-
>-·
tend lo proceedings under other enactments.

D In 1975, the appellant, a dealer in watches and his sons the other
appellants, made voluntary disclosure of certain income under the
provisions of the Voluntary Disclosure of Income and Wealth Act. On that
basis proceedings were taken under the Act and concluded by the Depart-
ment.

E In 1976, an order of detention was passed against the first appellant
under the provisions of COFEPOSA. He served out the detention period.

Thereafter, in 1978 notices under Section 6 of the Smugglers and
Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
(SAFEMA) wa• served upon the appellants calling upon them to show
--
F
cause why the properties mentioned in the notices be not forfeited to the ;J,
Central Government. They were also called upon to explain the income,
earnings or assets out of which they had acquired those properties. In his
explanation, the first appellant stated that he had made a disclosure of a
sum of Rs.25,000 in Form-A under the Voluntary Disclosure Act which was
G accepted by the Competent Authority and a certificate was issued to the
appellant. He also filed a copy of the said certificate. He also set out the "(.
manner in which the said sum was utilised after the disclosure. He also
submitted that he cannot be asked to explain the source from which he
obtained the said sum of Rs.25,000, and calling upon him to do so, would
H violate the immunity granted to him under the Voluntary Disclosure Act.
864
TEK CHAND ,._ COMPETENT AUTI10RITY 865

Similar pleas were taken by bis two sons, the other appellants. The A
Competent Authority over-ruled the objections and forfeited the proper-
ties specified in the orders. The appellants preferred appeals before the
Appellate Tribunal which partly allowed the appeals. To the extent the
~ Tribunal affirmed the orders of forfeiture, the appellants preferred the
present appeals.
B
On behalf ol' the appellants, it was contended that the Act
(SAFEMA) applied only in case of persons who were detained under the
COFEPOSA prior to the commencement of SAFEMA, that it did not apply
to persons who h&d been detained under COFEPOSA after the commen-
cement of SAFEMA. It was further contended that the findings recorded C
by the authorities were perverse and not supported by any evidence and
that the procedure prescribed by the Act had not been followed
scrupulously which vitiated the order of forfeiture.

Dismissing the appeal, this Court,
D
HELD : 1.1. There is nothing in the Smugglers and Foreign Ex-
change Manipulators (Forfeiture of Property) Act 1976, (SAFEMA) to
indicate either directly or by necessary intendment that the Act is confined
only to thpse persons who have been detained under COFEPOSA or who
have been convicted under the Customs Act or FERA prior to the com- E
nlencement of SAFEMA. The use of the word "has been made' in Section
2(2)(b) does not and cannot lead to such conclusion. The use of the said
words must be understood in the contest of Section 2(2). Section 2(2)(b)
"- provides that every person in respect of whom an order of detention has
been made and which detention order has not been revoked or withdrawn
by the competent authority nor has been set aside by a competent court F
can be proceeded against under SAFEMA. A mere detention under
COFEPOSA is not enough. [871 C-E]

1.2. If the intention of the Parliament was that the detention should
have been prior to the commencement of SAFEMA, they would have said G
that the question should be determined 011/y with reference to the facts,
circumstance and events including any conviction of detention which oc-
curred or took place before the commencement of the SAFEMA. [87Z A-BJ

2. The immunity conferred under Sections 11 and 16 of the Volun-
tary Disclosure of Income and Wealth Act, 1976 is of a limited character H
'·
866 SUPREME COURT REPORTS [1993] 2 S.C.R.

A and that it is not an absolute or universal immunity. The immunity cannot
be extended beyond the confines specified by the said provisions. There is
also no reason to presume that the Parliament intended to extend any
immunity to smugglers and manipulators of foreign exchange who are
proceeded against under other enactments. [872-C] '"'(

B 3. That, in the instant case, the authorities acted with due care and ~

caution is evident from the fact .that with respect to one of the immovable
properties the authorities were of the opinion that the failure to explaiPl
pertains only to part of the income/assets and accordingly invoked Section
9 and imposed a fine instead of forfeiting the property. [872-F]
-
c CIVIL APPELLATE JURISDICTION : Civil Appeal No~.1391-
1393 of 1979.

From the Judgment and Order dated 27.9.1978 & 28.9.1978 of the
Appellate Tribunal for Forfeited Property in F.P.A. Nos.33/78-79, 31/78-79
D and 32/78-79.

Bhargava V. Desai and Ms. Sonia Mathur for the Appellants.

S.C. Manchanda, K.P. Bhatnagar and P. Parmeswaran (NP) for the
Respondent.
E
The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. With a view to provide for the forfeiture
of illegally acquired properties of smugglers and foreign exchange
-
manipulators, the Parliament enacted, in the year 1976, The Smugglers and
F Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, being
Act No.13 of 1976. The Preamble to the Act sets out the objective which
the Act seeks to achieve. It says:

"WHEREAS for the effective prevention of smuggling
activities and foreign exchange manipulations which are
G
having a deleterious effect on the national economy it is.
necessary to deprive persons engaged in such activities 'f
'
and manipulations of their ill-gotten gains:

AND WHEREAS such persons have been augmenting
H such gains by violations of wealth-tax, income-tax or other
'" .

TEK CHAND v. COMPETENT AUTIIORITY [REDDY, J.] 867

laws or by other means and have thereby been increasing A
their resources for operating in a clandestine manner;

AND WHEREAS such persons have in many cases
been holding the properties acquired by them through
~· such gains in the name of their relatives, associates and
confidants." B

It would equally be relevant to notice the Statement of Objects and
- Reasons appended to the Bill. The Statement sets out the mischief the Act
was intended to meet and counter-act. It reads:
c
"Smuggling activities and foreign exchange manipula-
tions are having a deleterious effect on the national
economy. Persons engaged in such malpractices have been·
augmenting their ill-gotten gains by violation of laws relat-
ing to income-taic, wealth-tax or of other laws. In many D
cases, such persons have been holding properties acquired
through ill-gotten gains in the names of their relatives
associates and confidants. This accumulation of ill-gotton
weaJth gives increasing power, influence and resources to
those who carry on such clandestine activities and even
J tend to confer social status and prestige which is quite E
contrary to the healthy socio-cultural norms. These ac-
tivities pose a serious threat to the economy and the
-~ security of the nation. In conjunction with various other
steps taken by the Government in recent months for
cleansing the social fabric and resuscitating the nation!'! F
Jo(
economy, it became- necessary·10--assume powers to
deprive such persons of their illegally acquired properties
so as to effectively prevent the smuggling and other
clandestine operations. The President promulgated on the
5th November, 1975 the Smugglers and Foreign ~xchange
Manipulators (Forfeiture of Property) Ordinance 1975." G
.,...
The Act was preceded by an Ordinance issued on 5th November,
1975. For that reason, the Act, when made, was given effect to from the
said date. The object with which the Act was made is, without a doubt,
highly laudable. H
868 SUPREME COURT REPORTS [1993) 2 s.r R.

A The pr~visions of the Act apply to persons specified in sub-section
(2) of Section 2. Persons who have been convicted under the Sea Customs
Act, 1878/Customs Act, 1962, persons convicted under the Foreign Ex-
change Regulation Act, 1947/Foreign Exchange Regulation Act, 1973 con-

B
stitute the first category. The second category is of the persons who have
been detained under the Conservation of Foreign Exchange and Prevention .,,
of Smuggling Activities Act, 1947 (COFEPOSA), provided the said order
has no! been revoked or withdrawn by the Competent Authority before the
completion of the period prescribed or set aside by a competent Court.
The third category is of the relatives and associates of persons falling under _c
categories 1 and 2. The fourth category is of the transfe1 ees from the
c persons falling in category 1 and 2. Clause (c) in Section 3 defines the
expression "illegally acquired property". It means, in short, any property
a
acquired, by person, whether before or after the commencement of the
Act from out of any income or assets derived or attributable to the
prohibited activity. Scction-4 declares that as from the commencement of
the Act it shall not lawful for any person, to whom the Act applies, to hold
D
any illegally acquired property either by himself or through any other
person on his behalf. It declares further that any such property so held
shall be liable to be forfeited. Section-6 provides for issuance of a notice
calling upon the person to show-cause why the properties illegally acquired
by him should not be forfeited to the Government. Section-7 provides for
E the final orders to be passed on such show-cause notice after considering .~
the explanation, if any, furnished by such person and after making such
inquiry as may be appropriate in the circumstances. Section-8 enacts a
special rule of burden of proof. It says, "in any proceedings under this Act,
the burden of proving that any property specified in the notice served
under section 6 is no! illegally acquired property shall be on the person
-
F
affected." Seclion-9 provides for imposing fine in lieu of forfeiture where
the authority finds that a property acquired by such person has only been ,.J
partly acquired with illegally acquired income/assets. It is not necessary to
refer lo the ot.her provisions except Section-24, which gives an over-riding
effect to the provisions of the Act over any other law for the time being in
G force. Section-26 confers the rule-making power upon the Central Govern-
i
ment.
'<(
The appellant in Civil Appeal No.1391 of 1979, Tekchand was a
dealer in watches. The appellants in Civil Appeal Nos.1392 and 1393 of
t{ 1979 are his sons.
TEK CHAND v. COMPETENT AUTIIORITY [REDDY, J.] 869

In the year 1976, Parliament had enacted the Voluntary Disclosure A
of Income and Wealth Act, 1976, hereinafter referred to as the Voluntary
Disclosure Act. This Act was also preceded by an Ordinance issued on
October 8, 1975. The Act was given effect on and from the said date. The
Ordinance and the Act provided for declaration by a person of his un-
declared income in the prescribed manner and within the prescribed B
period. If he made the declaration in accordance with the relevant
provisions of the Act, the income so disclosed was not liable to be included
in his total income and tax was levied thereon at the rate prescribed in the
schedule to the Act, which was, comparatively speaking, much lower than
the rates then prevailing. Sections-11 and 16 conferred certain limited
immunities upon the person making a declaration under the Act. Those C
are the only sections relevant for our purpose and must be noticed.
Section-11 states, "nothwithstanding anything contained in any other law
for the time being in force, nothing contained in any declaration made
under sub-section(l) of section 3 shall be admissible in evidence against
the declarant for the purpose of any proceeding relating to impo.sition of D
penalty or for the purposes of prosecution under any of the Acts mentioned
in sub-section (1) of section 8 of the Wealth-tax Act." The Acts mentioned
in sub-section (1) of Section 8 are the Indian Income-tax Act, 1922, Excess
Profits Tax Act, 1940, Business Profits Tax Act, 1947, Super Profits Tax
Act, 1963 and the Companies (Profits) Sur-tax Act, 1964. Section 11 thus
confers a limited immunity from imposition of any penalty or prosecution E
under any of the said Acts and the Wealth Tax Act. It does not confer an
absolute or universal immunity. Coming to Section 16 it too confers a
limited immunity of a different kind. It says that if the voluntary disclosed
income, wealth or assets is represented by gold, then the said gold shi~ll
not be liable to confiscation either under the Customs Act or Gold (Con- F
trol) Act nor shall such person be liable to imposition of penalty or any
.. other punishment thereunder provided he fulfils the conditions specified
in the said section.

On October 31, 1975 Tekchand and his two sons made voluntary
disclosure of certain income under the provisions of the Voluntary Dis- G
closure Act. On that basis, proceedings were taken under the Act and
concluded.

On August 21, 1976 an order of detention was passed against Tek-
chand under the provisions of COFEPOSA. He served out the d~tention H
870 SUPREME COURT REPOR,TS (1993] 2 S.C.R.

A period. It was neither quashed or set aside by a competent court nor was
it withdrawo or revoked by a competent authority. The validity of the said
detention order is not questioned in these proceedings.

On February 22, 1978 noticesJI_nder section 6 of the Act (SAFEMA)
-.iir·
B
were served upon Tekchand and his two sons calling upon then to show- f
cause why the properties mentioned in the notices be not forfeited to
Central Government. The appellants were called upon to explain the
income, earnings or assets out of which they have acquired those proper-
l
ties. Explanations were furnished by all the three. In his explanation
Tekchand stated inter alia that he had made a disclosure of a sum of
c Rs.25,000 in form-A under the Voluntary Disclosure Act which was ac-
cepted by the Competent Authority and a certificate issued to him in that
behalf. He filed a copy of the said certificate. He also set out the manner
in which the said sum was utilised after the disclosure. He submitted that

D
he cannot be asked to explain the source from which he obtained the said
sum of Rs.25,000. Calling upon him to do so, he submitted would violate
the immunity granted to him under the Voluntary Disclosure Act. Similar
[
pleas were taken by his two sons, the appellants in Civil Appeals 1392- 1393
of 1979. Their objections were over-ruled by the Competent Authority who
by his Order dated October 21, 1976 forfeited the properties specified in
his orders. The appellants preferred appeals before the Appellate Tribunal
i
E which were partly allowed. In so far as the Appellate Tribunal affirmed the
orders of forfeiture, they have preferred these appeals with the leave of

-
this Court under Article 136 of the Constitution.

Mr. B.V. Desai the learned counsel for the appellant urged the
following contentions:
F
1. The Act applies only in case of persons who have detained under
the COFEPOSA prior to the commencement of the ACT (SAFEMA). It
does not apply to persons who have been detained under COFEPOSA
after the com111encement of SAFEMA. This is evident from the use of the
G words "every person in respect of whom an order of detention has been
made ..........." in clause (b) of sub-section (2) of Section-2.

2. In these cases it is not proved that the properties forfeited are
"illegally acquire.d properiies" within the meaning of clause (c) of sub-sec-
tion (1) of Section-3 - in particular of sub-clause (iii) thereof. The com-
H petent authoril\I and the Appellate Authority erred in not giving effect to
+,··
I

>- TEK CHAND v. COMPETENT AUlHORITY (REDDY, J.] 871

the immunity conferred by the Voluntary Disclosure Act and in calling A
1 upon the appellants to explain the source of the income declared under
the Voluntary Disclosure Act.

'r 3. The explanations offered by the appellants have been rejected by
the authorities under the Act without a proper discussion. The findings
recorded by them are perverse and are not supported by any evidence. The B
procedure prescribed by the Act has not also been followed scrupulously
......... which too vitiates the orders of forfeiture .

We are unable to agree with any of the above submissions. There is
nothing in the Act to indicate either directly or by necessary intendment c
~ that the Act is confined only to those persons who have been detained
under COFEPOSA or who have been convicted under the Customs Act or
FERA prior to the commencement of the SAFEMA. The use of the words
"has been made" in Section 2(2}(b) does not and cannot lead to such
conclusion. The use of the said words must be understood in the context
D
of Section 2(2). Section 2(2)(b) provides that every person in respect of
whom an order of detention has been made and which detelltion order has
not been revoked or withdrawn by the competent authority nor has been
set aside by a competent court, can be proceeded against under SAFEMA.
~ A mere detention under COFEPOSA is not enough. Not only there must
have been an order of detention under the said Act, the other conditions E
prescribed in the proviso to clause (b) should not also have taken place. It

- is for the reason that the words "has been made" were used in clause (b)
·of section 2(2). In this context Explanation-4 appended to section 2(2)
becomes relevant. The Parliament anticipated that a contention may be
raised by persons proceeded against under SAFEMA that proceedings F
under the Act can be taken only in those cases where they have been
""' detained under COFEPOSA or convicted under Customs Act or FERA
after the coming into force of SAFEMA. With a view to repel any such
contention explanation-4 states:

"Explanation 4. - For the avoidance of doubt, it is hereby G
provided that the question whether any person is a person
to whom the provisions of this Act apply may be deter-
mined with reference to any facts, circumstances or events
(including any conviction or delention) which occurred or
tOok place before the commencement of this Act." H
-i
'

872 SUPREME COURT REPORi:s [1993] 2 S.C.R,. ~
A If the contention of the learned counsel is correct and if that was the
intention of the Parliament, they would have said that such question shall
be determined only with reference to the facts, circumstances and events
including any conviction of detention which occurred or took place before
the commencement of the SAFEMA. The first contention of the learned ~
counsel is accordingly rejected.
B

-
So far as the contention based upon sections 11 and 16 of Voluntary
Disclosure Act is concerned we have already pointed out, while setting out
the said provisions that the immunity conferred thereunder is of a limited
character and that it is not an absolute or universal immunity . The
c immunity cannot be extended beyond the confines specified by the said
provisions. There is also no reason to presume that the Parliament in- ~
tended to extend any immunity to smugglers and manipulators of foreign
exchange who are proceeded against under enactments other than those
mentioned in Sections 11 and 16 of the Voluntary Disclosure Act. So far
as the argument that the authorities under the Act have not properly
D
considered the explanation offered by the appellants and the material
produced by them, we must say that we are unable to agree with the same.
Both the competent authority and the Appellate Authority have considered
the same and held against the appellants. We see no reason to interfere

E
with the concurrent findings in this appeal under Article 136 of the
Constitution. We are equally unable to agree with the learned counsel for
the appellants that the findings recorded by the authorities are either
*
perverse or that they are based on no evidence. That the authorities acted
with due care and caution is evident from the fact that with respect to one·
of the immovable properties the authorities were of the opinion that the
-
F failure to explain pertains only to part of income/assets and accordingly
invoked Section 9 and imposed a fine instead of forfeiting the same.
,...
Mr. Desai argued finally that the appellants herein are small shop-
keepers and that the authorities acted arbitrarily in proceedings against
I them under SAFEMA leaving out far bigger and powerful violators. His
G argument is evocative of what the Poet, James Jeffrey Roche, exclaimed in
his poem 'The net of law': ,,/

'The net of law is spread so wide,
No sinner from its sweep may hide.
H l\s meshes are so fine and strong.
TEK CHAND v. COMPETENT AUTIIORITY [REDDY, J.] sn
J'hey take in every child of wro0g. A
0 wondrous web of mystery!
Big fish alone escape from thee!'

May be there is some truth in what the learned counsel says but that
cannot furnish or constit11te a ground in law for allowing these appeals. It
is for the authorities in charge of implementation of the Act to take note B
of the said wail. It is for them to ensure that the Act is utilised in all proper

- cases, 1Dore so where the "big fish' are involved.

The appeals fail and are accordingly dismissed. No order as to costs.

G.N. Appeals dismissed.

-