2007 (9) TMI 688 - HC - Indian Laws

Forfeiture Order Quashed Due to Procedural Failures

SHRI GIAN CHAND GARG Versus UNION OF INDIA and OTHERS

The court quashed the forfeiture order under SAFEMA, citing non-disclosure of reasons to believe, lack of proper inquiry, and violation of natural justice ... - Issues Involved:1. Legitimacy of the forfeiture order under SAFEMA.2. Adequacy of the notice and reasons to believe under Section 6(1) of SAFEMA.3. Compliance with principles of natural justice.4. Validity of the competent authority's findings.5. Relevance of findings under other laws.Detailed Analysis:1. Legitimacy of the forfeiture order under SAFEMA:The petitioners challenged the forfeiture of properties and bank deposits under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA). The competent authority had directed the forfeiture of several properties and bank deposits, claiming they were illegally acquired. The appellate tribunal confirmed this order. The properties in question included house numbers in Bara Bazar, Shahdara, Delhi, and deposits in Shiv Trading Co. and the National Bank of Lahore (now State Bank of India).2. Adequacy of the notice and reasons to believe under Section 6(1) of SAFEMA:The petitioners argued that the notice under Section 6(1) of SAFEMA was vague and did not disclose the reasons to believe that the properties were illegally acquired. The competent authority's reasons were not disclosed to the petitioners until the appellate stage. The appellate tribunal held that the competent authority was not legally required to disclose the information received from various sources before issuing the notice. However, the court emphasized that the reasons to believe should be recorded in writing and should precede the issuance of the notice. The competent authority failed to conduct an inquiry or investigation under Section 18 before issuing the notice, which was a necessary safeguard.3. Compliance with principles of natural justice:The petitioners contended that they were denied a fair hearing as the reasons for the forfeiture were not disclosed to them. The appellate tribunal found that the competent authority had valid reasons recorded in writing before issuing the notice. However, the court noted that the stringent nature of SAFEMA required higher safeguards, including proper disclosure of reasons to the affected parties. The failure to disclose the reasons resulted in a violation of natural justice principles.4. Validity of the competent authority's findings:The competent authority concluded that the properties were illegally acquired based on the petitioners' inability to prove the legitimacy of the sources of income. The court found that the competent authority's rejection of the petitioners' explanations was based on assumptions and lacked proper inquiry. The properties were acquired nearly a decade before the notice, and the petitioners had provided explanations for their acquisition. The court held that the burden of proof should be based on the preponderance of probabilities rather than beyond reasonable doubt.5. Relevance of findings under other laws:The petitioners highlighted that the Income Tax Authorities and the Central Board of Excise and Customs had found no evidence of illegal activities. The court noted that while findings under other laws were not conclusive, they were relevant and should not be completely ignored. The competent authority and the tribunal erred in disregarding these findings, which showed no material evidence of smuggling or illegal activities.Conclusion:The court quashed the impugned order, holding that the competent authority and the tribunal failed to comply with the necessary safeguards and principles of natural justice. The reasons to believe were not properly recorded or disclosed, and the findings were based on assumptions without proper inquiry. The court emphasized the need for strict interpretation and higher safeguards in cases involving stringent laws like SAFEMA. The petition was allowed, and the forfeiture order was set aside.