Case: Biswanath Bhattacharya Vs. Union Of India

An enquiry is limited to such of the assets which the competent authority believes (to start with) are beyond the financial ability of the holder having regard to his known and legitimate sources of income, earnings etc. Connection with the conviction is too remote and, therefore, in our opinion, would not be hit by the prohibition contained under Article 20 of the Constitution of India.41. If a subject acquires property by means which are not legally approved, sovereign would be perfectly justified to deprive such persons of the enjoyment of such ill-gotten wealth. There is a public interest in ensuring that persons who cannot establish that they have legitimate sources to acquire the assets held by them do not enjoy such wealth. Such a deprivation, in our opinion, would certainly be consistent with the requirement of Article 300A and 14 of the Constitution which prevent the State from arbitrarily depriving a subject of his property.42. Whether there is a right to hold property which is the product of crime is a question examined in many jurisdictions. To understand the substance of such examination, we can profitably extract from an article published in the Journal of Financial Crime, 2004 by Anthony Kennedy. [Head of Legal Casework, Northern Ireland for the Assets Recovery Agency in his Article ‘Justifying the civil recovery of criminal proceeds’ published in the Journal of Financial Crime, 2004 Vol.12, Iss.1.] “..It has been suggested that a logical interpretation of Art. 1 of the First Protocol of the European Convention on Human Rights is:‘Everyone is entitled to own whatever property they have (lawfully) acquired …..’ hence implying that they do not have a right under Art. 1 to own property which has been unlawfully acquired. This point was argued in the Irish High Court in Gilligan v The Criminal Assets Bureau, namely that where a defendant is in possession or control over assets which directly or indirectly constitute the proceeds of crime, he has no property rights in those assets and no valid title to them, whether protected by the Irish Constitution or by any other law. A similar view seems to have been expressed earlier in a dissenting opinion in Welch v United Kingdom: ‘in my opinion, the confiscation of property acquired by crime, even without express prior legislation is not contrary to Article 7 of the Convention, nor to Article 1 of the First Protocol.’ This principle has also been explored in US jurisprudence. In United States v. Vanhorn a defendant convicted of fraud and money laundering was not entitled to the return of the seized proceeds since they amounted to contraband which he had no right to possess. In United States v Dusenbery the court held that, because the respondent conceded that he used drug proceeds to purchase a car and other personal property, he had no ownership interest in the property and thus could not seek a remedy against the government’s decision to destroy the property without recourse to formal forfeiture proceedings. The UK government has impliedly adopted this perspective, stating that:‘…. It is important to bear in mind the purpose of civil recovery, namely to establish as a matter of civil law that there is no right to enjoy property that derives from unlawful conduct.” 43. Non-conviction based asset forfeiture model also known as Civil Forfeiture Legislation gained currency in various countries: United States of America, Italy, Ireland, South Africa, UK, Australia and certain provinces of Canada.44. Anthony Kennedy conceptualised the civil forfeiture regime in the following words:- “Civil forfeiture represents a move from a crime and punishment model of justice to a preventive model of justice. It seeks to take illegally obtained property out of the possession of organised crime figures so as to prevent them, first, from using it as working capital for future crimes and, secondly, from flaunting it in such a way as they become role models for others to follow into a lifestyle of acquisitive crime. Civil recovery is therefore not aimed at punishing behaviour but at removing the ‘trophies’ of past criminal behaviour and the means to commit future criminal behaviour. While it would clearly be more desirable if successful criminal proceedings could be instituted, the operative theory is that ‘half a loaf is better than no bread’.” 45. For all the above-mentioned reasons, we are of the opinion that the Act is not violative of Article 20 of the Constitution. Even otherwise as was rightly pointed out by the learned Addl. Solicitor General, in view of its inclusion in the IXth Schedule, the Act is immune from attack on the ground that it violates any of the rights guaranteed under Part III of the Constitution by virtue of the declaration under Article 31-B.46. Now we are required to consider the alternative and last submission i.e., in view of the failure of the High Court to examine the tenability of the order of the forfeiture as confirmed by the appellate tribunal the matter is required to be remitted to the High Court for appropriate consideration. This submission is required to be rejected. We have carefully gone through the copy of the writ petition (a copy of which is available on record) from which the instant appeal arises.47. Except challenging the order of forfeiture on the two legal grounds discussed earlier in this judgement, there is no other ground on which correctness of the order of forfeiture is assailed in the writ petition. For the first time in this appeal, an attempt is made to argue that the conclusions drawn by the competent authority that the properties forfeited are illegally acquired - is not justified on an appropriate appreciation of defence of the appellant. In other words, the appellant seeks reappreciation of the evidence without even an appropriate pleading in the writ petition. It is a different matter that the High Court in exercise of its writ jurisdiction does not normally reappreciate evidence. Looked at any angle, we see no reason to remit the matter to the High Court.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]19. We reject the submission of the appellant for the following reasons. Firstly, there is no express statutory requirement to communicate the reasons which led to the issuance of notice under Section 6 of the Act. Secondly, the reasons, though not initially supplied alongwith the notice dated 4.3.1977, were subsequently supplied thereby enabling the appellant to effectively meet the case of the respondents. Thirdly, we are of the opinion that the case on hand is squarely covered by the ratio of Narayanappa case. The appellant could have effectively convinced the respondents by producing the appropriate material that further steps in furtherance to the notice under Section 6 need not be taken. Apart from that, an order of forfeiture is an appealable order where the correctness of the decision under Section 7 to forfeit the properties could be examined. We do not see anything in the ratio of Ajantha Industries case which lays down a universal principle that whenever a statute requires some reasons to be recorded before initiating action, the reasons must necessarily be communicated.20. Now, we deal with the second submission. The Act enables the Government of India to forfeitof any person to whom the Act is made applicable. The Act is made applicable to the persons specified in section 2(2) [Section 2.The provisions of this Act shall apply only to the persons specified in sub-section (2).(2) The persons referred to in sub-section(1) are the following, namely:—(a) every person—(i) who has been convicted under the Sea Customs Act, 1878 (8 of 1878), or the Customs Act, 1962 (52 of 1962), of an offence in relation to goods of a value exceeding one lakh of rupees; orii) who has been convicted under the Foreign Exchange Regulation Act, 1947 (7 of 1947), or the Foreign Exchange Regulation Act, 1973 (46 of 1973), of an offence, the amount of value involved in which exceeds one lakh of rupees; oriii) who have been convicted under the Sea Customs Act, 1878 (8 of 1878), or the Customs Act, 1962 (52 of 1962), has been convicted subsequently under either of those Acts; oriv) who having been convicted under the Foreign Exchange Regulation Act, 1947 (7 of 1947), or the Foreign Exchange Regulation Act, 1973 (46 of 1973), has been convicted subsequently under either of those Acts;(b) every person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and prevention of Smuggling Activities Act, 1974 (52 of 1974):Provided that—i) such order of detention being an order to which the provisions of section 9 or section 12A of the said Act do not apply, has not been revoked on the report of the Advisory Board under section 8 of the said Act or before the receipt of the report of the Advisory Board or before making a reference to the Advisory Board; orii) such order of detention being an order to which the provisions of section 9 of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the review under sub-section (3) of section 9 or on the report of the Advisory Board under section 8, read with sub- section (2) of section 9 of the said Act; oriii) such order of detention, being an order to which the provisions of section 12A of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the first review under sub-section (3) of that section, or on the basis of the report of the Advisory Board under section 8, read with sub-section (6) of section 12A, of that Act; oriv) such order of detention has not been set aside by a court of competent jurisdiction;c) every person who is a relative of a person referred to in clause (a) or clause (b);d) every associate of person referred to in clause (a) or clause (b);e) any holder of any property which was at any time previously held by a person referred to in clause (a) or clause (b) unless the present holder or, as the case may be, any one who held such property after such person and before the present holder, is or was a transferee in good faith for adequate consideration.Explanation 1.— For the purposes of sub-clause (i) of clause(a), the value of any goods in relation to which a person has beenconvicted of an offence shall be the wholesale price of the goods in theordinary course of trade in India as on the date of the commission of theoffence.Explanation 2.— For the purpose of clause ©,inrelation to a person,spouse of the person;ii) brother or sister of the person;iii) brother or sister of the spouse of person;iv) any lineal ascendant or descendant of the person;v) any lineal ascendant or descendant of the spouse of the person;vi) spouse of a person referred to in clause (ii), clause(iii), clause (iv) or clause (v);vii) any lineal descendant of a person referred to inor clause (iii).Explanation 3.— For the purposes of clause (d),in relation to a person,any individual who had been or is residing in the residential premises (including out houses) of such person;ii) any individual who had been or is managing the affairs or keeping the accounts of such person;iii) any association of persons, body of individuals, partnership firms, or private company within the meaning of the Companies Act, 1956 (1 of 1956), of which such person had been or is a member, partner or director;iv) any individual who had been or is a member, partner or director of an association of persons, body of individuals, partnership firm, or private company within the meaning of the Companies when such person had been or is a member, partner or director of such association, body, partnership firm of a private company;v) any person who had been or is managing the affairs, or keeping the accounts, of any association of persons, body of individuals, partnership firm or private company referred to in clause (iii);vi) the trustee of any trust,the trust has been created by such person; orb) the value of the assets contributed by such person (including the value of the assets, if any, contributed by him earlier) to the trust amounts, on the date on which the contribution is made, to not less than twenty per cent, of the value of the assets of the trust on that date;vii) where the competent authority, for reasons to be recorded in writing considers that any properties of such person are held on his behalf by any other person, such other person.Explanation 4.— For the avoidance of doubt, it is hereby provided that the question whether any person is a person to whom the provisions of this Act apply may be determined with reference to any facts, circumstances or events including any conviction or detention which occurred or took place before the commencement of this Act.]. Five categories of persons are covered thereunder. Clause (a) – persons who have been convicted under various enactments referred to therein; clause (b) - persons in respect of whom an order of detention has been made under the COFEPOSA (subject to certain conditions/exceptions the details of which are not necessary for our purpose); clause (c) – persons who are relatives of persons referred to in clause (a) or clause (b). Expressionis itself explained in explanation 2. Clause (d) – every associate of persons referred to in clause (a) or clause (b). Once again the expressionis explained under explanation 3 to sub-section (2). Clause (e) – subsequent holders of property which at some point of time belonged to persons referred to either in clause (a) or clause (b).Section 4 makes it unlawful (for any person to whom the Act applies) to hold any illegally acquired property and it further declares that such property shall be liable to be forfeited to the Central Government (following the procedure prescribed under the Act). The procedure is contained under sections 6 and 7 of the Act. Section 8 prescribes the special rule of evidence which shifts the burden of proving that any property specified in the notice under section 6 is not illegally acquired property of the noticee. Section 6 inter alia postulates that having regard to the value of the property held by any person (to whom the Act applies) and his known sources of income, if theed under section 5) has reason to believe that such properties arethe competent authority is authorized to call upon the holder of the property tothe source of his income etc. which enabled the acquisition of such property along with necessary evidence. It also authorizes the competent authority to call upon the noticee to show cause as to why all or any of such properties mentioned in the notice should not be declared illegally acquired properties and be forfeited to the Central Government. Section 7 provides for a reasonable opportunity of being heard after the receipt of response to the notice under section 6 to the noticee and requires the competent authority to record a finding whether all or any of the properties in question are illegally acquired properties. Section 7 also provides for certain incidental matters the details of which are not necessary for the present purpose.22. Expressionis defined in elaborate terms under the Act [Section 3(c)in relation to any person to whom this Act applies,any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets derived or obtained from or attributable to any activity prohibited by or under any law for the time being in force relating to any matter in respect of which Parliament has power to make laws; orii) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets in respect of which any such law has been contravened; oriii) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets the source of which cannot be proved and which cannot be shown to be attributable to any act or thing done in respect of any matter in relation to which Parliament has no power to make laws; oriv) any property acquired by such person, whether before or after commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property referred to in sub-clauses (i) to (ii) or the income or earnings from such property; and includes—tA) any property held by such person which would have been, in relation to any previous holder thereof, illegally acquired property under this clause if such previous holder had not ceased to hold it, unless such person or any other person who held the property at any time after such previous holder or, where there are two or more such previous holders, the last of such previous holders is or was a transferee in good faith for adequate consideration;B) any property acquired by such person, whether before or after the commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property falling under item (A), or the income or earnings therefrom.]. Broadly speaking the definition covers two types of properties:1) acquired by the income or earnings; and2) assets derived or obtained from or attributable to any activity which is prohibited by or under a law in force. Such law must be a law with respect to which parliament has the power to make law. A complete analysis of the definition in all its facets may not be necessary for our purpose.From the language and the scheme of the Act it does not appear that the application of the Act is limited to persons who either suffered a conviction under one of the acts specified in section 2(2)(a) the Act or detained under the COFEPOSA subsequent to the commencement of the Act in question. On the other hand, explanation 4 to section 2 expressly declares as4.—For the avoidance of doubt, it is hereby provided that the question whether any person is a person to whom the provisions of this Act apply may be determined with reference to any facts, circumstances or events (including any conviction or detention which occurred or took place before the commencement of thisfrom that we have already taken note of the fact that there are other categories of persons to whom the Act applies.24. The appellant happens to be a person to whom the Act applies. He was detained under the provisions of the COFEPOSA. However, such a detention was anterior to the commencement of the Act, which came into force on 25th January 1976, while the detention order was passed on 19th December 1974. It appears from the judgment under appeal that the appellant was eventually set at liberty in 1977.25. Section 7(3) of the Act provides for forfeiture of the illegally acquired property of the persons to whom the Act is made applicable after an appropriate enquiry contemplated under Sections 6 and 7 of the Act. In other words, the Act provides for the deprivation of the (illegally acquired) property of the persons to whom the Act applies. The question which we were called upon to deal with is whether such a deprivation is consistent with Article 20 [20. Protection in respect of conviction forNo personshall be convicted of any offence except for violation of a law in force atthe time of the commission of the Act charged as an offence, nor besubjected to a penalty greater than that which might have been inflictedunder the law in force at the time of the commission of the offence.(2) No person shall be prosecuted and punished for the same offence more than once.(3) No person accused of any offence shall be compelled to be awitness against himself.] of the Constitution of India in the specific factual setting of the case coupled with the explanation 4 to section 2 which reads asr the avoidance of doubt, it is hereby provided that the question whether any person is a person to whom the provisions of this Act apply may be determined with reference to any facts, circumstances or events (including any conviction or detention which occurred or took place before the commencement of thisanswer to the question depends upon whether such deprivation is a penalty within the meaning of the said expression occurring in Article 20.26. Article 20 contains one of the most basic guarantees to the subjects of the Republic of India. The Article in so far as is relevant for our purpose stipulates two things:-? That no person shall be convicted of any offence except for violation of the law in force at the time of the commission of the act charged as an offence; and? That no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.27. It is a well settled principle of constitutional law that sovereign legislative bodies can make laws with retrospective operation; and can make laws whose operation is dependent upon facts or events anterior to the making of the law. However, criminal law is excepted from such general Rule, under another equally well settled principle of constitutional law, i.e. no ex post facto legislation is permissible with respect to criminal law. Article 20 contains such exception to the general authority of the sovereign legislature functioning under the Constitution to make retrospective or retroactive laws.28. The submission of the appellant is that since the Act provides for a forfeiture of the property of the appellant on the ground that the appellant was detained under the COFEPOSA, the proposed forfeiture is nothing but a penalty within the meaning of the expression under Article 20 of the Constitution. Such an inference is inevitable in the light of the definition ofwhich by definition (under the Act) is property acquired eitheror by meansany income, earningsd from or attributable to any activity prohibited by or under any lawOn the other hand, if the forfeiture contemplated by the Act is not treated as a penalty for the alleged violation of law on the part of the appellant, it would be plain confiscation of the property of the appellant by the State without any factual justification or the constitutional authority.29. The learned counsel for the appellant further argued that the forfeiture contemplated under the Act whether based on proven guilt or suspicion of involvement in a certain specified activity prohibited by the Customs Act can only be aattracting the prohibition of Article 20 of the Constitution of India. It is submitted that under Section 53 [Section 53. Punishments.—The punishments to which offenders are liable under the provisions of this Code are—First—Death;Secondly.—Imprisonment for life;Thirdly.— OmittedFourthly.—Imprisonment, which is of two descriptions, namely.—(1) Rigorous, that is, with hard labour;(2) Simple;Fifthly.—Forfeiture of property;Sixthly.—Fine.] of the Indian Penal Code, forfeiture of property is one of the prescribed punishments for some of the offences covered under the Indian Penal Code.30. Learned counsel for the appellant placing reliance on R.S. Joshi, Sales Tax Officer, Gujarat and Others v. Ajit Mills Ltd. and Another, (1977) 4 SCC 98 submitted that a Constitution Bench of this Court also opined the expressiona penalty for breach of a prohibitory[18. Coming towhat is the true character of aIs it punitive in infliction, or merely another form of exaction of money by one from another? If it is penal, it falls within implied powers. If it is an act of mere transference of money from the dealer to the State, then it falls outside the legislative entry. Such is the essence of the decisions which we will presently consider. There was a contention that the expressiondid not denote a penalty. This, perhaps, may have to be decided in the specific setting of a statute. But, speaking generally, and having in mind the object of Section 37 read with Section 46, we are inclined to the view that forfeiture has a punitive impact.Legal Dictionary states thato lose, or lose the right to, by, some error, fault, offence oro incur a, as judicially annotated, ispunishment annexed by law to some illegal act or negligence . . .g imposed as a punishment for an offence orThe word, in this sense, is frequently associated with the wordLegal Dictionary,The termsare often used loosely, and even confusedly : but when a discrimination is made, the wordis found to be generic in its character, including both fine and forfeiture. Ais a pecuniary penalty, and is commonly (perhaps always) to be collected by suit in some form. Ais a penalty by which one loses his rights and interest in his property.More explicitly, the U.S. Supreme Court has explained the concept ofin the context of statutory construction. Chief Justice Taney, in the State of Maryland v. Baltimore & Ohio RR Co., 11 L.Ed. 714, 722 observeda provision, as in this case, that the party shall forfeit a particular sum, in case he does not perform an act required by law, has always, in the construction of statutes, been regarded not as a contract with the delinquent party, but as the punishment for an offence. Undoubtedly, in the case of individuals, the word forfeit is construed to be the language of contract, because contract is the only mode in which one person can become liable to pay a penalty to another for breach of duty, or the failure to perform an obligation. In legislative proceedings, however, the construction is otherwise, and a forfeiture is always to be regarded as a punishment inflicted for a violation of some duty enjoined upon the party by law ; and such, very clearly, is the meaning of the word in the act in question.The same connotation has been imparted by our Court too. A Benchhas held [Bankura Municipality v.Lalji Raja & Sons, 1953 Cri LJ 1101]to the dictionary meaning of the wordthe loss or the deprivation of goods has got to be in consequence of a crime, offence or breach of engagement or has to be by way of penalty of the transgression or a punishment for an offence. Unless the loss or deprivation of the goods is by way of a penalty or punishment for a crime, offence or breach of engagement it would not come within the definition ofmust bear the same meaning ofa penalty for breach of a prohibitorydirection. The fact that there is arithmetical identity, assuming it to be so, between the figures of the illegal collections made by the dealers and the amounts forfeited to the State cannot create a conceptual confusion that what is provided is not punishment but a transference of funds. If this view be correct, and we hold so, the legislature, by inflicting the forfeiture, does not go outside the crease when it hits out against the dealer and deprives him, by the penalty of the law, of the amount illegally gathered from the customers. The Criminal Procedure Code, Customs & Excise Laws and several other penal statutes in India have used diction which accepts forfeiture as a kind of penalty. When discussing the rulings of this Court we will explore whether this true nature ofis contradicted by anything we can find in Sections 37(1), 46 or 63. Even here we may reject the notion that a penalty or a punishment cannot be cast in the form of an absolute or no-fault liability but must be preceded by mens rea. The classical view thatmens rea, nohas long ago been eroded and several laws in India and abroad, especially regarding economic crimes and departmental penalties, have created severe punishments even where the offences have been defined to exclude mens rea. Therefore, the contention that Section 37(1) fastens a heavy liability regardless of fault has no force in depriving the forfeiture of the character of penalty.]