IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN WEDNESDAY, THE 11TH MARCH 2009 / 20TH PHALGUNA 1930 OP.No.7728 of 2001(T) ------------------------- PETITIONER: -------------- K.A. IBRAHIMKUTTY, SON OF ABDULLA, VALLUR VILLAGE, PERUMBA, P.O. KANDOTH, PAYYANNUR, KANNUR DISTRICT. BY MR.B.KUMAR, SENIOR ADVOCATE. MR.R.RAJESH KORMATH, ADVOCATE. MR.ANISH S.AMBADY, ADVOCATE. MS.BIJIMOL JOSE, ADVOCATE. MS.PREETHY KARUNAKARAN, ADVOCATE. RESPONDENTS: ------------------ 1. THE APPELLATE TRIBUNAL FOR FORFEITED PROPERTY, 4TH FLOOR, LOK NAYAK BHAVAN, KHAN MARKET, NEW DELHI - 110 003. 2. THE COMPETENT AUTHORITY, SMUGGLERS AND FOREIGN EXCHANGE MANIPULATORS (FORFEITURE OF PROPERTY) ACT, 1976, “UTSAV”, No.64/1, G.N. CHETTY ROAD, T. NAGAR, CHENNAI - 600 017. BY MR.P.K.RAMKUMAR, ADDL.CGSC. MRI.M.L.SURESH KUMAR, ADDL.CGSC. THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 11/03/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OP.No.7728/2001 Order on C.M.P.No.12628/2001 in OP.No.7728/2001 Closed. 11.03.2009 Sd/- S. SIRI JAGAN, JUDGE. A P P E N D I X PETITIONER'S EXHIBITS: EXT. P1 : COPY OF the ORDER DTD. 12.3.1999 PASSED BY THE 2ND RESPONDENT. EXT. P2 : COPY OF THE MEMORANDUM OF APPEAL DTD. 27.3.1999 SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. EXT. P3 : COPY OF THE AFFIDAVIT AND PETITION DTD. 27.3.1999 SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. EXT. P4 : COPY OF THE RECEIPT DTD. 3.4.1999 ISSUED BY PROFESSIONAL COURIERS TO THE COUNSEL FOR the PETITIONER. EXT. P5 : COPY OF THE RECEIPT DTD. 3.4.1999 ISSUED BY PROFESSIONAL COURIERS TO THE COUNSEL FOR the PETITIONER WITH THE ENDORSEMENT “PUT IN BOX”. EXT. P6 : COPY OF THE LETTER DTD. 29.6.1999 SENT BY THE COUNSEL FOR THE PETITIONER TO the 2ND RESPONDENT. EXT. P7 : COPY OF THE LETTER DTD. 29.6.1999 SENT BY THE COUNSEL FOR the PETITIONER TO THE REGISTRAR OF THE 1ST RESPONDENT. EXT. P8 : COPY OF the NOTICE DTD. 9.7.1999 ISSUED BY THE FIRST RESPONDENT TO THE COUNSEL FOR the PETITIONER. EXT. P9 : COPY OF THE LETTER DTD. 15.7.1999 SENT BY THE COUNSEL FOR the PETITIONER TO THE REGISTRAR OF the FIRST RESPONDENT. EXT. P10 : COPY OF THE LETTER DTD. 30.8.1999 SENT BY THE COUNSEL FOR THE PETITIONER TO THE REGISTRAR OF THE 1ST RESPONDENT. OP.No.7728/2001 EXT. P11 : COPY OF THE NOTICE DTD. 7.9.1999 SENT BY THE 1ST RESPONDENT TO THE PETITIONER. EXT. P12 : COPY OF the AFFIDAVIT AND PETITION DTD. 22.9.1999 SUBMITTED BY THE PETITIONER TO THE 1ST RESPONDENT. EXT. P13 : COPY OF the NOTICE DTD. 4.10.1999 SENT BY THE 1ST RESPONDENT TO THE PETITIONER. EXT. P14 : COPY OF THE AFFIDAVIT DTD. 18.10.1999 SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. EXT. P15 : COPY OF THE PETITION DTD. 18.10.1999 SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. EXT. P16 : COPY OF THE ORDER DTD. 16.11.1999 PASSED BY THE FIRST RESPONDENT. EXT. P17 : COPY OF THE GUIDELINES DTD. 23.6.1994 ISSUED BY THE DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA. EXT. P18 : COPY OF THE JUDGMENT DTD. 14.3.2000 IN O.P.No.31748 OF 1999 PASSED BY THIS HONOURABLE COURT. EXT. P19 : COPY OF THE ORDER DTD. 16.1.2001 PASSED BY THE 2ND RESPONDENT-COMPETENT AUTHORITY. EXT. P20 : COPY OF THE ORDER DTD. 26.2.2001 PASSED BY THE 2ND RESPONDENT-COMPETENT AUTHORITY. RESPONDENT'S EXHIBITS: NIL. // True Copy // P.A. to Judge. smp S. SIRI JAGAN, J. ------------------------------------ O.P.No. 7728 OF 2001 ---------------------------------------- Dated this the 11th day of March, 2009 JUDGMENT This original petition arises under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA for short). The petitioner was detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act in 1975. That detention was not revoked. In 1980, proceedings were initiated under the SAFEMA for forfeiture of certain properties acquired by the petitioner during the year 1967-1968. The properties comprised of 36.50 cents with a residential building, of dry land in R.S.No.141 and 140/12 in Vellur Village Kandoth Desom, wherein the petitioner was residing, one acre of wet land in R.S.No.142/2 in Valloor Village and 25.25 cents in R.S.No.143/2 in Vellur Village. As per the documents of acquisition, the total consideration for these properties amounted to only Rs.4,950/-. After completing the proceedings under the SAFEMA, the 2nd respondent competent authority passed Ext.P1 order forfeiting the said property to the O.P.No.7728/2001 2 Central Government absolutely. Although the petitioner filed an appeal, the same reached the 1st respondent – Appellate Authority beyond the time prescribed under law even for condonation of delay in filing the same. Therefore, the appeal filed by the petitioner was dismissed as barred by limitation. The petitioner challenged that order by filing O.P.No.31748/99. By Ext.P18 judgment, passed in that original petition, this Court while upholding the order of the appellate authority dismissing the appeal as time barred, directed the competent authority to consider the case of the petitioner as to whether the petitioner is entitled to the benefits of Ext.P17 circular dated 23.6.1994 issued by the Government of India, whereby the Government of India issued guidelines to all competent authorities in the country as to the manner of proceeding with cases under the SAFEMA in respect of properties valued less than Rs.1 lakh. Pursuant to that direction, the 2nd respondent competent authority considered the matter and passed Ext.P19 order, whereby the competent authority rejected the claim of the petitioner for the alleged benefit under Ext.P17 Circular of the Government of India. The petitioner is challenging Ext.P19 order of the 2nd respondent in this original petition. O.P.No.7728/2001 3 2. The Senior Counsel engaged by the petitioner from out of State, raises four contentions. First is that the 2nd respondent is bound by Ext.P17 circular and therefore, once the Government of India directs dropping of all proceedings involving properties worth less than Rs.1 lakh, the competent authority has no discretion in the matter except to dispose of the matter in accordance Ext.P17 circular. The learned counsel for the petitioner relies on the decisions of Unit Trust of India V. P.K. Unny and Ors. [249 ITR 612], Commissioner of Income Tax V. Sriram Agrawal [161 ITR 302] and Indian Petrochemical Corporation V. Commissioner of C.Ex., Vadodara[(2005) 186 ELT 81] in support of the proposition that circulars issued by the Government of India are binding on the Competent Authority. The second contention raised by the petitioner is that when this Court directed the competent authority to consider the claim of the petitioner for benefit of Ext.P17 circular, the only question open to be considered by the competent authority was as to whether the value of the property involved was less than Rs.1 lakh and once it was found that the property was worth less than Rs.1 lakh the competent authority had no O.P.No.7728/2001 4 other discretion except to drop all further proceedings against the properties in question. The third contention raised is that under Section 4 of the SAFEMA, the forfeited properties belong absolutely to the Government of India and as the owner of the property it is for the Government of India to decide as to whether the property in question should be forfeited to the Government or not. In so far as the Government has directed all competent authorities to drop further proceedings in respect of the properties worth less than Rs.1 lakh, the competent authority has no discretion in the matter except to drop the proceedings against the properties belonging to the petitioner. The fourth contention is that pursuant to Ext.P17 circular, the competent authorities all over India have been granted benefits of the Circular to various persons proceeded against under SAFEMA and if the petitioner alone is denied the benefit of Ext.P17, that would amount to discrimination and violation of the fundamental right of the petitioner under the Constitution of India. 3. I have considered the contentions of the learned counsel for the petitioner in detail. 4. I am of opinion that the entire arguments of the O.P.No.7728/2001 5 petitioner are based on the premise that Ext.P17 circular confers a right or benefit on the persons against whom proceedings under the SAFEMA has been initiated. I am unable to subscribe to that view. Ext.P17, which are guidelines issued by the Government of India to all competent authorities, reads thus: “I am directed to say that in the Conference of Competent Authorities held on 19th October, 1993 in Delhi, it was inter alia decided that the CAS need not pursue the cases where the value of property is less than Rs.1,00,000/-. 2. The matter was examined in the Ministry. Initiation and finalisation of proceedings under the Act consumes considerable time even in cases involving persons of meagre means owning small properties. In the recent years it has been observed that a large number of detention orders of poor persons are received who are mostly Drivers, Cleaners, Crew of ships and other couriers. Even if such small properties are successfully forfeited the efforts and time required for their maintenance and /or disposal will not at all be commensurate with their utility to the Government. SAFEM (FOP) Act, 1976 can act as a meaningful and an effective detterent only if CAs and the officers working with them concentrate more on bringing to book big economic offenders with substantial properties instead of spending their time and energy in handling small cases. 3. In view of this position, CAs are requested to deal with the small cases of forfeiture of property where the value is less than Rs.1 lakh in the following manner:- (a) Cases where proceedings are yet to be initiated and cases where the proceedings are already initiated: O.P.No.7728/2001 6 The Proceedings under Section 6(1) of the SAFEM (FOP) Act, 1976 need not be initiated and if already initiated, may be dropped in the cases of (i) a person referred to in clause (a) or clauses (b) of sub-section (2) of Sec.2 of the Act (hereinafter referred to as the principal person); (ii) each of the relatives and associates of the principal person, as have been referred to in clauses (C) and (d) respectively of sub-section (2) of Section 2(2), if the aggregate value of the properties held by the aforesaid persons (that is, the sum total of the values of the properties held by all the persons referred to above) in respect of which proceedings under the Act have been or can be initiated, does not exceed Rs.1,00,000/-. Before such non- initiation/dropping, whether the value of property is less than Rs.1,00,000/- should have been identified by through investigations. (b) Cases where the final orders are issued by CAs: In the cases where the value of property involved exceeds Rs.1,00,000/- and the show Cause Notices are issued; the evidences furnished by the aforesaid person (s) to prove the sources of income, are accepted by CAs and the ultimate value of property to be forfeited comes to less than Rs.one lakh as per the order of CAs issued under the Act, in such cases further action under Section (19) for taking possession of the property may be dropped. 4. These instructions are in the nature of guidelines only and are being issued with a view to enable the CAs and all the officers working with them to concentrate more on bringing to book economic offenders with substantial proportion instead of spending their time and energy in handling small cases”. From the very reading of Ext.P17, it is abundantly clear that it is a purely internal communication between the Government of O.P.No.7728/2001 7 India and the competent authorities, which does not confer any right or benefit on any person proceeded against under the SAFEMA. The Government found that the time and money expended for the purpose of proceeding against small items of property did not justify the ultimate benefit obtained by the Government and therefore, a discretion was given to the competent authorities to decide whether in cases where the value of the property is less than Rs.1 lakh, it is in the interest of the Government to proceed against those properties further under the SAFEMA. Further, it is also intended to enable the competent authorities to concentrate upon bringing the big economic offenders with substantial properties, instead of spending time and energy in bringing to book small fish like Drivers, Cleaners, Crew of ships and other couriers. Further in paragraph 4 of Ext.P17, the Government has taken the precaution to make it abundantly clear that the instructions contained in Ext.P17 are merely in the nature of the guidelines only and are being issued with a view to enable the competent authorities and the officers working with them to concentrate more on bringing to book economic offenders with substantial properties instead of spending their time and energy in O.P.No.7728/2001 8 handling small cases. That being so, the competent authorities, apart from deciding the fact that the property is worth less than Rs.1 lakh, should also further consider whether in the facts and circumstances of a particular case it is necessary to drop further proceedings for taking possession of the property. As such, Ext.P17 does not confer any manner of right or benefit whatsoever on any person whose proeprties are proceeded against under the SAFEMA at all. 5. Further, the SAFEMA does not exempt persons or properties from proceeding under the Act, if the value of the properties involved is less than Rs.1 lakh. Therefore, the Government of India cannot under law direct the authority vested with powers under the Act not to proceed against properties which are liable to be forfeited under the Act. In fact Ext.P17, if understood the way the petitioner wants this Court to understand, would amount to a Secretary to the Government directing a competent authority not to enforce the Act in respect of certain properties, without any powers vested in the Government, to do so, which would be against the Rule of Law, which is a basic concept of our Constitution by which our democracy is governed. O.P.No.7728/2001 9 6. The reliance by the petitioner's counsel on the three decisions cited before me are misplaced. Those are decisions, which relate to assessment of income tax, central excise etc., of bonafide assessees. Circulars and Board Orders issued under the Income Tax and Central Excise and Customs Act cannot be equated with a circular like Ext.P17. Further in those legislations powers are conferred on the Central Board of Excise and Customs and Government of India to grant exemptions and benefits to assessees in appropriate cases. Here, SAFEMA Act does not confer any such power on the Government. The contention of the counsel for the petitioner that the Central Government being the absolute owner of the forfeited property, the Central Government can do whatever it pleases regarding forfeiture of that property does not appeal to me. I am of opinion that the Central Government cannot by issue of a circular override the provisions of the SAFEMA. The Government cannot also deal with properties so forfeited to it except in accordance with law. As such, I am not satisfied that, under Ext.P17, what the competent authorities are required to do, is an arithmetic calculation as to the value of the property and to drop proceedings if such calculation results O.P.No.7728/2001 10 in a value of less than Rs.1 lakh. It is not even intended for reducing the rigours of the SAFEMA as contended by the counsel for the petitioner. On the other hand, Ext.P17 is intended for the purpose of avoiding expenditure of money and time in running after properties which are not worthy of the time and money. That being so, Ext.P17 does not confer any manner of right or benefit on persons who have been found to be liable for forfeiture of their properties under the SAFEMA, which can be enforced through a Court of law. 7. For the same reasons, I do not find merit in the contention of the petitioner's counsel that once this Court has directed the consideration of the case of the petitioner for the benefit of Ext.P17, all what the competent authority could do is to decide whether the property is worth less than Rs.1 lakh and if so to drop further proceedings under the Act. In Ext.P18 judgment what this Court has directed is as follows: “In the above circumstances, I direct the competent authority to consider the case of the petitioner whether petitioner will be entitled to get any benefit before Ext.P18 order. Further proceedings in pursuance of Ext.P16 shall be taken only after passing an order by the Competent Authority with regard to the effect of Ext.P18 order regarding confiscation int this matter. (underlining supplied) O.P.No.7728/2001 11 Except directing the competent authority to consider the case of the petitioner whether the petitioner would be entitled to get any benefit of Ext.P17 order, the same does not mandate any such thing as sought to be made out by the counsel for the petitioner. It is just like an open remand to consider the effect of Ext.P17 circular on the petitioner's case. I am of opinion that as per that direction the 2nd respondent competent authority has all the discretion available to them for deciding cases as per Ext.P17 circular. As I have stated, Ext.P17 does not issue any absolute direction to competent authorities to drop proceedings for taking possession of property under Section 19 in all cases where the value of the property is less than Rs.1 lakh. That being so, I am not satisfied that the hands of the 2nd respondent competent authority are tied by Ext.P18 judgment to the effect that what he had to consider was only whether the property is worth less than Rs.1 lakh and if so, to drop further proceedings under Section 19. 8. Even if it is found that the Government has power to direct the competent authorities to drop further proceedings in cases where the value of the properties is less than Rs. 1 lakh, the question of absolute compliance would arise only O.P.No.7728/2001 12 when the Government had directed all competent authorities to drop all proceedings where the value of the property involved is less than Rs.1 lakh. As I have already held, there is no such absolute direction in Ext.P1. But the competent authorities have only been directed to consider cases involving properties worth less than Rs.1 lakh to decide in their discretion as to whether it would be worthwhile to continue proceedings under the Act in respect of those properties. 9. Further by Ext.P17, the stress is on the comparison between the time and effort required to take the proceedings to its logical conclusion and the returns derived by the Government under the Act. The Competent Authorities are to weigh the two and decide in their discretion the further course of action to their best judgment of the situation. Therefore, the object of Ext.P17 is not to give any benefit to persons whose properties were found to be liable to be forfeited to the State, but to arrange the business of the Government to its best advantage, which depends on the circumstances of each case. In this case, the entire proceedings had culminated in the order forfeiting the properties, appeal against which has also been dismissed which has become final on account of O.P.No.7728/2001 13 Ext.P18 judgment. What remains is only actual taking over of the physical possession of the property. The Government had already spent the time and money for taking the proceedings thus far. By dropping the proceedings for taking possession, the Government does not gain anything by doing so, but would completely lose the entire effort and money thus far spent, if the property whatever it is worth is not taken possession of merely on the basis of Ext.P17. 10. I am also not convinced that the property is worth less than Rs.1 lakh. The value of the property has to be considered as at present and not as obtaining on the date of acquisition or as on the date of issue of Section 6(1) notice or as on the date of order of forfeiture and certainly not on the basis of the consideration fixed in the title deed. According to me the valuation should be as on the date of taking a decision on the basis of Ext.P17 circular. The competent authority has not entered a definite finding regarding the valuation. What is stated in Ext.P19 in this regard is as follows: “................ Though the value of the properties under consideration might be well within one lakh, the stage at which the value of property should be reckoned for the purpose of applying the guidelines is the value as on the date of finalisation of O.P.No.7728/2001 14 proceedings i.e., the date on which the passing of the forfeiture order. In the instant case for the reasons already mentioned in the forfeiture order dated 12.03.1999 as the properties have been acquired by the appellant/detenu, there is justification to order forfeiture under the Act irrespective of the value of the acquisition. Once the Competent Authority is satisfied that the properties have been acquired through illegal sources, the same ought to be ordered for forfeiture. As such the plea of the Ld. Counsel that even if the Government is against entertaining petitions from the parties, the Competent Authorities can give the advantage to the parties on their own is incorrect and liable to be rejected. The next contention raised is that the value of the proeprty should be treated as value on the date of finalisation of proceedings is incorrect is unacceptable, since there were ample evidence to prove that the properties were acquired by the appellant through illicit sources, the Competent Authority forfeited the properties, without considering the value and the forfeiture order dated 12.03.1999 under Section 7 of the Act by the Competent Authority is valid and maintainable in law”. The same does not find that the property is worth less than Rs.1 lakh. The total extent of the property is 1 acre and 61.750 cents, out of which 61.75 cents is dry land and in 36.50 cents there is a house also constructed by the petitioner after demolition of the old one, in which the petitioner is now residing. By any conservative method of valuation the value of the property even in 2000, even if it is in a remote village, O.P.No.7728/2001 15 would be much more than Rs.1 lakh, is my impression. 11. I also note that the intention behind Ext.P17 is to go after actual smugglers without wasting money on mere couriers like drivers, cleaners, crew of ships etc. The petitioner has not claimed that he was a mere courier. In his reply dated 27.9.80, which is quoted in the original petition, he has stated that he had a stationery business which he had sold and thereafter he was conducting a chitty business. He also admits that he was an income tax payee. From the same it is clear that he is not a mere courier and a small fish, who only was directed to be avoided as per Ext.P17. Apart from quoting his reply, he has not stated in the original petition his status in life to prima facie show that he was a courier to whom Ext.P17 guidelines would apply. The discretion of the competent authority as per Ext.P17 has to be exercised taking into account that fact also. The petitioner has no pleading in respect of the same. For that reason also I am of opinion that the exercise of discretion by the competent authority cannot be faulted. 12. Of course, the learned counsel for the petitioner brings to my attention a subsequent order passed by the O.P.No.7728/2001 16 Government of India dated 26.2.2002 whereby Ext.P17 Circular had been withdrawn. The learned counsel for the petitioner would raise a contention that the fact that the circular had been withdrawn would go to show that the Government had intended that during the period when the circular was in force, it should be implemented effectively. I am of opinion that from the withdrawal of Ext.P17 another conclusion is also possible to the effect that the Government realised that issue of