ivil Appeal No 5807 of 1983
From the Judgment and Order dated 10121982 of the Delhi High Court in LPA No 28 of 1982
Soli J Sorabjee Harish N Salve PH Parekh and Dr DY Chandrachud for the Appellants
Govind Das Girish Chandra and CV Subba Rao for the Respondents
The Judgment of the Court was delivered by DUTT J
This appeal by special leave involves an inter pretation of the proviso to section 71 of the Gold Control Act
One Kesharimal Porwal who had two flourishing business es a bidi factory at Kamptee and a gold and silver shop at Mandsaur died on October 7 1952 leaving behind him surviv ing a widow Ratanbai a daughter Shantabai and a son Nem Kumar
Both Shantabai and Nem Kumar had each a son at the time of death of Kesharimal
After the death of Kesharimal Nem Kumar had four more sons
1120 The said Kesharimal also left a will dated February 10 1952 whereby he bequeathed certain gold and silver to his grandsons
It was provided in the will that each grandson would receive 500 tolas of gold at the time of marriage and the remaining gold would be equally divided among them
It may be stated here that at no stage the genuineness and validity of the will was questioned nor have they been challenged before us
On July 9 1968 the officers of the Central Excise Nagpur searched the residential premises of Nem Kumar and seized 10 slabs and 9 pieces of gold and 230 gold coins weighing about 42404 grams having at that time a market value of Rs763000 which were kept in a cupboard inside a big Godrej iron safe
It is not disputed that the seized gold was primary gold
On July 10 1968 the officials of the Central Excise separately recorded the statements of Ratanbai and Nem Kumar
It was stated by Ratanbai that the seized gold was the self earned property  of her late husband and that the same had been kept in the iron safe about 89 years ago
She admitted that the keys of the shelf had all along remained in her possession
Nem Kumar in his statement denied any knowledge about the gold
He said that he had come to know of the existence of the gold for the first time when it was found out during the search
A declaration in respect of seized gold was filed by Ratanbai to the Central Excise Nagpur on July 29 1968
The Collector of Central Excise Nagpur served two separate notices on Ratanbai and Nem Kumar calling upon them to show cause why the seized gold should not be confiscated and a penalty imposed for the violation of the provision of paragraph 91i of the Gold Control Ordinance 1968
Both Ratanbai and Nem Kumar showed cause against the proposed confiscation and penalty
The Collector came to the findings that Ratanbai had full knowledge of the gold and was in conscious possession of it for at least 8 9 years
So far as Nem Kumar was con cerned the Collector held that it was difficult to sustain the charge of possession custody and control of the gold against him in view of the vagueness of the evidence and lacunae in investigation
Accordingly by his order dated May 15 1970 the Collector came to the conclusion that it was only Ratanbai who had violated the provision of para graph 91i of the Gold Control Ordinance 1968 and di rected confiscation of the gold and imposition of penalty of Rs38000 on Ratanbai under paragraph 75 of the 1121 Gold Control Ordinance 1968
Nem Kumar was acquitted of the charges levelled against him
The Ordinance was replaced by the GoAd Control Act 1968
Being aggrieved by the said order of the Collector
Ratanbai preferred an appeal against the same to the Admin istrator under the Gold Control Act 1968
The Administra tor however dismissed the appeal by his order dated Febru ary 23 1972
Ratanbai filed an application for revision before the Central Government challenging the propriety of the order of the Administrator
The appellant No 1 Sushil Kumar son of Nem Kumar who had by now attained majority also filed a revisional application before the Central Government
Both the revisional applications were dismissed by the Central Government
Thereafter the appellants Nos 1 to 5 and Surendra Kumar since deceased son of Shantabai filed a writ peti tion in the Delhi High Court
The learned Single Judge of the Delhi High Court on an interpretation of section 711 of the Gold Control Act including the proviso thereto took the view that the seized gold could not be ordered to be confiscated and no penalty could be imposed on Ratanbai
In that view of the matter the learned Judge quashed the order of confiscation and penalty and directed the return of gold to the petitioners
The respondents could not accept the decision of the learned Judge and accordingly preferred an appeal to the Division Bench of the High Court
The Division Bench did not agree with the interpretation of the learned Judge on sec tion 711 of the Gold Control Act including the proviso thereto
We shall have occasion to refer to the interpreta tion put forward on section 711 by the Division Bench of the High Court and it is sufficient to state here that the Division Bench set aside the judgment of the learned Single Judge and allowed the appeal of the respondents
Hence this appeal by special leave by the sons of Nem Kumar Shantabai and Nem Kumar himself
Under rule 126 I of the Defence of India Rules 1962 every person other than a dealer was required to make a declaration as to the quantity description and other pre scribed particulars of gold other than ornaments owned by him within thirty days from January 9 1963 the date on which the Defence of India Amendment Rules 1963 came into force
Rule 126 H was amended by the Defence of 1122 India Fourth Amendment Rules 1966
Sub rules 1 A to I G were added to rule 126 H Sub rule 1 A provided as follows 1 A No person other than a dealer or refiner licensed under this Part shall after the expiry of a period of six months from the commencement of the Defence of India Fourth Amendment Rules 1966 either own or have in his possession custody or control any primary gold
 Clause i of sub rule 1 B which is also important for our purpose reads as follows 1 B Every person who owns or has in his possession custody or control at the com mencement of the Defence of India Fourth Amendment Rules 1966 any primary gold which has been included in a declaration or further declaration made under rule 126 1 as in force immediately before the commencement of the said Rules or in respect of which no such declaration is required to be made under that rule shall dispose of such primary gold in the following manner namely i If he being the owner is in pos session custody or control thereof at such commencement he shall within a period of six months from such commencement either sell such primary gold to a refiner or dealer licensed under this Part or deliver the same to a dealer or goldsmith licensed or certi fied as the case may be under this Part for conversion thereof into ornaments  The ground that weighed with the Central Excise Authori ties in confiscating the gold was that the acquisition possession custody or control of primary gold in question by Ratanbai became illegal and contraband and liable to confiscation as she did not file any declaration required under rule 126 I of the Defence of India Rules 1962 within thirty days from January 9 1963 nor did she dispose of the gold by sale nor convert the same into ornaments in contra vention of clause i of sub rule 1 B but possessed the same in violation of sub rule 1 A of rule 126 H of the Defence of India Fourth Amendment Rules 1966
But after the amendment of section 711 of the Gold Control Act 1968 by the addition of a proviso the appellants have placed reliance upon the proviso
1123 Initially section 711 was as follows 711 Any 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 shall be liable to confiscation This Court in Badri Prasad vs Collector of Central Excise 1971 Supp
SCR 254 held that section 71 placed an unreasonable restriction on the right of a person to ac quire hold and dispose of gold articles or gold ornaments
In that view of the matter this Court struck down section 71 as unconstitutional
Thereafter by Gold Control Amend ment Act 197 1 a new section 711 was enacted with retro spective effect from 1 9 1968
Sub section 1 of section 71 with which we are concerned is as follows Sec
711 Any 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 together with any package covering or receptacle in which such gold is found shall be liable to confis cation Provided that where it is estab lished to the satisfaction of the officer adjudging the confiscation that such gold or other thing belongs to a person other than the person who has by any act or omission ren dered it liable to confiscation and such act or omission was without the knowledge or connivance of the person to whom it belongs it shall not be ordered to be confiscated but such other action as is authorized by this Act may be taken against the person who has by such act or omission rendered it liable to confiscation
 It is contended on behalf of the appellants that Ratan bai by her omission to dispose of the gold by sale or to convert the same into ornaments in accordance with the provision of rule 126 H as amended by the Defence of India Fourth Amendment Rules 1966 rendered the gold liable to confiscation without the knowledge or connivance of the owners thereof namely the grandsons of Kesharimal Porwal the same cannot be confiscated in view of the proviso to section 711 of the Gold Control Act
The learned Single Judge of the High Court upheld the contention and directed the release of the gold in favour of the appellants
1124 On the other hand the Division Bench of the High Court took a contrary view
According to the learned Judges of the Division Bench the proviso will apply only to such gold the possession of which can be retained
As the gold in question was not converted or sold within the grace period of six months from March 1 1967 such gold became contraband and the possession thereof by Ratanbai was illegal
Moreover under section 81 of the Gold Control Act 1968 no person can own acquire or possess primary gold
In the view of the Division Bench confiscation of primary gold is mandatory under section 81 of the Gold Control Act and earlier under the Defence of India Rules
According to the Division Bench the proviso cannot be so construed as to permit primary gold to be retained by prohibiting an order of confiscation from being passed
The Division Bench held that possession of primary gold could never be legalised
The principal question that falls for our consideration is whether the proviso to section 711 also relates to primary gold
It is not disputed that the power of confisca tion of gold including primary gold is conferred by sub section 1 of section 71
The expression any gold refers to all kinds of gold including primary gold
Indeed section 2j defines gold as meaning gold including its alloy whether virgin melted or re melted wrought or unwrought in any shape or form of a purity of not less than nine carats and includes primary gold article and ornament
We may now consider the contention made on behalf of the respondents that the proviso does not relate to primary gold
The reason for this contention is that as in view of section 81 of the Gold Control Act nobody can retain possession of primary gold the proviso cannot relate to primary gold for if the conditions mentioned in the provi so are fulfilled the gold shall not be ordered to be con fiscated
In other words the gold would be allowed to be retained by the owner thereof
It is submitted that such interpretation would render section 81 nugatory
Section 81 is in the following terms Sec
Save as otherwise provided in this Act no person shall i own or have in his possession custody or control or ii acquire or agree to acquire the ownership possession custody or control of or 1125 iii buy accept or otherwise receive or agree to buy accept or otherwise receive any primary gold
 There can be no doubt that in view of section 81 no person can own acquire or retain possession custody or control or primary gold
It has already been noticed that under clause i of sub rule 1 B of rule 126 H of the Defence of India Fourth Amendment Rules 1966 it was enjoined that the owner in possession custody or control of primary gold was bound to either sell such primary gold to a licensed refiner or dealer or deliver the same to a licensed or certified dealer or goldsmith for conversion thereof into ornaments within a period of six months from September 1 1967 the date of commencement of the said Rules
Sub rule 1 A of rule 126 H prohibits possession custody or control of any primary gold after the expiry of the said period of six months
In the instant case it was Ratanbai who had failed to either sell or convert the primary gold in question within the grace period of six months without the knowledge and connivance of owners thereof that is the grandsons of Kesharimal Porwal
If the contention of the respondents is accepted it will mean that the owner of primary gold has to lose the same on account of default committed by somebody who is not the owner
It was perhaps one of the considerations that weighed with this Court in Badri Prasad s case supra namely that the pawnee who is the owner has to suffer confiscation or to pay a fine in lieu of confiscation not exceeding twice the value as provided in section 73 of the Gold Control Act before the same was amended not for any fault of his but for the omission of the pawn broker to file declarations or monthly statements and this Court struck down the unamended provision of section 71 as uncon stitutional
Therefore in interpreting the provision of section 711 including the proviso thereto we shall have to keep in view the above decision of this Court
It is with a view to removing the unconstitutionality of the unamended provision of section 71 that section 711 has been re enacted with a proviso added to sub section 1 of section 71
In that view of the matter it is difficult to hold that the proviso does not relate to primary gold but to other kinds of gold
It is also difficult to accept the contention that while the substantive provision of sub section 1 of section 71 relates to all kinds of gold 1126 including primary gold the proviso which is a part of the substantive provision will not include within its scope and ambit primary gold
It is true that under section 81 ofthe Gold Control Act retention of possession of primary gold is prohibited
But because of that it will not be reasonable and justified to ignore the plain meaning of the proviso and to interpret it in such a manner as to render it inconsistent with the substantive part of sub section 1 of section 71
The proviso lays down the circumstances under which any gold which is liable to confiscation will not be confiscat ed
Confiscation deprives the owner of his property to his loss and detriment
Where primary gold is not to be confis cated in view of the proviso to section 711 the owner thereof gets it back but it does not mean that he will be entitled to retain possession of such primary gold which is forbidden by section 81 of the Gold Control Act
In such a case the owner has to sell the primary gold to a licensed refiner or dealer or deliver the same to a dealer or gold smith licensed or certified as the case may be that is to say in the same manner and following the same procedure as was laid down in sub rule 1 B of rule 126 H of the Defence of India Fourth Amendment Rules 1966 and in our opinion so interpreted there will be no conflict between the proviso to section 711 and the provision of section 81 of the Gold Control Act
Indeed the Administrator under the Gold Control Act has issued an order No 1176 F 13 14175 GCII dated 30 7 1976 whereby it is directed inter alia that where gold is seized and confiscated and thereafter released and if such release relates to primary gold it is further directed a such primary gold shall be sold to a licensed dealer or got converted into ornaments b the person concerned shall within one month of taking back into his possession custody or control of such primary gold furnish to the concerned Gold Control Officer a certificate from the licensed dealer that such primary gold has been sold to him and where such primary gold has been converted into ornaments a certificate from the licensed dealer or the certified goldsmith as the case may be that such primary gold has been so converted
Thus there will be no difficulty in not confiscating the primary gold under the proviso for after such release the owner of primary gold will not be entitled to retain possession of the same but will have to dispose it of or convert the same into ornaments
We do not therefore agree with the view expressed by the Division Bench of the High Court that the proviso to section 711 of the Gold Control Act does not relate to primary gold
The Division Bench was greatly influenced by the fact that in view of section 81 of the Gold Control Act the possession of primary gold cannot be retained by any person
But as 1127 already discussed above such an interpretation is not possible to be made of the proviso to section 711
The interpretation that we have put on section 711 will not run counter to the provision of section 81 in view of the fact that although the primary gold is not confiscated it will not be allowed to be possessed by the owner but has to be disposed of by him or converted into ornaments in the manner as mentioned above or as directed by the Administra tor by his said order dated 30 7 1976
For the reasons aforesaid we set aside the order of the Division Bench and modify the order of the learned Single Judge of the High Court directing that the seized primary gold shall be released in favour of the appellants with a further direction that the appellants shall either sell the same to a licensed dealer or deliver possession of the same to a licensed dealer or a certified goldsmith as may be specified by the Administrator immediately on the release of such primary gold
The appeal is allowed but in view of the peculiar facts and circumstances of the case there will be no order as to costs
SL Appeal allowed


Summary:
One Kesharimal Porwal who had one of his businesses as gold and silver shop died on October 7 1952 leaving behind surviving a widow Ratanbai a daughter Shantabai and a son Nem Kumar
Kesharimal left a will whereby he bequeathed gold and silverto his grandsons sons of Shantabai and Nem Kumar providing that each grandson would receive 500 tolas of gold at the time of marriage and the remaining gold would be equally divided among them
The genuineness and validity of the will were not challenged at any stage
On July 9 1968 the officers of the Central Excise Nagpur searched the residential premises of Nem Kumar and seized 10 slabs and 9 pieces of gold and 230 gold coins having at that time a market value of Rs763000
The gold seized was primary gold
The officials of the Central Excise separately recorded the statements of Ratanbai and Nem Kumar
Ratanbai stated that the seized gold was the self earned property  of her late husband and had been kept in the iron safe about 89 years ago and that keys of the shelf had all along remained in her possession
Nem Kumar in his statement denied any knowledge of the gold and said that he had come to know of the existence of the gold for the first time during the search
A declaration in respect of the seized gold was filed by Ratanbai with the Central Excise
The Collector of Central Excise served separate notices on Ratanbai and Nem Kumar calling upon them to show cause why the seized gold should not be confiscated and a penalty imposed for violation of the provision of paragraph 91i of the Gold Control Ordinance 1968
The notices were re plied by both
The Collector came to the finding that Ratan bai had full knowledge of the gold and was in conscious possession of it for at least 89 years
As for Nem Kumar the Collector held that it was difficult to sustain the charge of possession and custody of the gold against him
Accordingly the Collector held that only Ratanbai had violated the provision of paragraph 91i of the 1117 Gold Control Ordinance 1968 and directed the confiscation of the gold and imposition of a penalty of Rs38000 on Ratanbai under paragraph 75 of the Gold Control Ordinance 1968 which was replaced by the Gold Control Act 1968
Nem Kumar was acquitted
An appeal preferred by Ratanbai against the order of the Collector was dismissed by the Administrator under the Gold Control Act Ratanbai then filed an application for revision before the Central Government challenging the order of the Administrator
The appellant No 1 Sushil Kumar son of Nem Kumar who had by then attained majority also filed a revisional application before the Central Government
Both the revisional applications were dismissed
Thereupon the appellants Nos 1 to 5 and Surendra Kumar since deceased son of Shantabai filed a writ petition in the High Court
The High Court Single Judge quashed the order of confisca tion and penalty and directed the return of the gold to the petitioners
The respondents preferred an appeal to the Division Bench of the High Court
The Division Bench did not agree with the interpretation of the learned Single Judge on section 711 of the Gold Control Act including the proviso thereto and set aside the judgment of the Single Judge
Aggrieved by the decision of the High Court the appellants moved this court for relief by special leave
Allowing the appeal the Court HELD The ground that weighed with the Central Excise Authorities in confiscating the gold was that the acquisi tion possession custody or control of primary gold in question by Ratanbai became illegal and liable to confisca tion as she had not filed any declaration required under rule 126 1 of the Defence of India Rules 1962 nor had she disposed of the gold by sale or converted the gold into ornaments in contravention of clause i of sub rule I B but had possessed the same in violation of sub rule I A of Rule 126 H of the Defence of India Fourth Amendment Rules 1966
But after the amendment of section 711 of the Gold Control Act 1968 by addition of a proviso the appellants placed reliance upon the proviso
It was contended on behalf of the appellants that Ratanbai by her omission to dispose of the gold by sale or to convert the same into ornaments in accordance with the provision of rule 126 H as amended by the Defence of India Fourth Amendment Rules 1966 rendered the gold liable to confiscation without the knowledge or connivance of the owners of the gold namely the grandsons of Kesharimal Porwal but the same could not be 1118 confiscated in view of the proviso to section 711 of the Gold Control Act
The Learned Single Judge of the High Court had upheld the contention and directed the release of the gold in favour of the appellants
1122F H 1123G H The principal question that fell for the consideration of this Court was whether the proviso to section 711 also related to primary gold
1124D Power of confiscation of gold including primary gold is conferred by sub section 1 of section 71
The expression any gold refers to all kinds of gold including primary gold
In view of section 81 of the Gold Control Act no person can acquire or retain possession custody or control of primary gold
Under clause i of sub rule I B of rule 126 H of the Defence of India Fourth Amendment Rules 1966 the owner in possession custody or control of primary gold is bound to either sell such primary gold to a licensed refiner or dealer or deliver the same to a licensed or certified dealer or goldsmith for conversion thereof into ornaments within a period of six months from September 1 1967 the date of the Commencement of the said Rules Sub rule 1 A of Rule 126 H prohibits the possession custody or control of any primary gold after the expiry of the said period of six months
1124D E 1125B C In this case it was Ratanbai who had failed to either sell or convert the primary gold within the grace period of six months without the knowledge and connivance of the owners thereof that is the grandsons of Kesharimal Porwal
If the contention of the respondents was accepted it would mean that the owner of the primary gold had to lose the same on account of default committed by somebody who was not the owner
It was also difficult to accept the contention that while the substantive provision of sub section 1 of sec tion 71 related to all kinds of gold including primary gold the proviso a part of the substantive provision would not include primary gold within its scope and ambit
The proviso lays down the circumstances under which any gold which is liable to confiscation will not be confiscated
Where primary gold is not to be confiscated in view of the proviso to section 711 the owner thereof gets it back but it does not mean that he will be entitled to retain possession of such primary gold which is forbidden by sec tion 81 of the Gold Control Act
Thus there would be no difficulty in not confiscating the primary gold under the proviso for after such release the owner of the primary gold will have to dispose it of or convert the same into ornaments
The Court did not agree with the view expressed by the Division Bench of the High Court that the proviso to section 711 of the 1119 Gold Control Act did not relate to primary Gold
The inter pretation put on section 71 1 by the Court would not run counter to the provision of section 81 as the primary gold not confiscated would not be allowed to be possessed by the owner but had to be disposed of by him or converted into ornaments in the manner mentioned above or as directed by order date 30776 of the Administrator under the Gold Control Act
1125D G 1127A B The Court set aside the order of the Division Bench and modified the order of the Single Judge of the High Court directing that the seized primary gold should be released in favour of the appellants and the appellants would either sell the same to a licensed dealer or deliver possession thereof to a licensed dealer or a certified goldsmith as might be specified by the Administrator immediately on the release of such primary gold
1127C Badri Prasad vs Collector of Central Excise 1971 Supp
SCR 254 referred to