2000 (10) TMI 986 - AT - FEMA

Appellate tribunal modifies SAFEMA decision, imposes fine to avoid property forfeiture; suggests legislative alignment with NDPS Act.

The appellate tribunal partially allowed the appeal under the SAFEMA Act, directing the appellant to pay a fine equal to one and one-fifth times the value ... - Issues:1. Whether properties should be forfeited under SAFEMA Act based on the connection between the detenu and the appellant.2. Validity of the acquisition of properties including a flat, credit balance in the bank, shares of public companies, and National Savings Certificates.3. Application of section 9 of the SAFEMA Act regarding fine in lieu of forfeiture.4. Comparison of section 9 of SAFEMA Act with section 68K of the NDPS Act.5. Determination of the value of the property for the purpose of imposing a fine in lieu of forfeiture under section 9.Analysis:1. The appellant, being the son of a detenu under COFEPOSA, received a notice under SAFEMA Act to show cause why certain properties should not be forfeited. The appellant contended that there was no nexus between him and the detenu, and the proceedings should be dropped. However, the Competent Authority directed the forfeiture of certain properties, leading to this appeal. The appellant argued that none of the properties were illegally acquired and sought the benefit of section 9 of SAFEMA Act.2. The appellant explained the acquisition of the flat through loans and sale of assets, but the Competent Authority found discrepancies in the timing of payments and loans, concluding that the flat was not purchased with the loan obtained from HDFC. However, the loan from the employer was accepted as a source for the flat's purchase. The appellant's claim of using proceeds from the sale of shares to buy the flat was supported by evidence not considered by the Competent Authority, which was acknowledged by the appellate tribunal.3. The tribunal analyzed the provisions of section 9 of the SAFEMA Act, which allows for a fine in lieu of forfeiture if the source of only a part of the property's acquisition is unexplained. The appellant was given the option to pay a fine equal to one and one-fifth times the value of the unexplained portion. The tribunal clarified the valuation criteria and provided the appellant with a deadline to pay the fine to avoid forfeiture of the properties.4. A comparison was drawn between section 9 of the SAFEMA Act and section 68K of the NDPS Act, highlighting the difference in valuation criteria for imposing fines in lieu of forfeiture. The tribunal noted that while the NDPS Act considers market value for fines, the SAFEMA Act bases it on the value of assets at the time of acquisition. The tribunal suggested that the Parliament may consider amending the SAFEMA Act to align with the NDPS Act regarding valuation for fines.5. The tribunal determined the value of the property for imposing the fine in lieu of forfeiture under section 9. It considered the unexplained portion of the property's acquisition and provided a specific amount for the appellant to pay as a fine within a stipulated timeframe. Additionally, the tribunal decided against the forfeiture of the balance in Dena Bank due to its negligible amount and upheld the Competent Authority's decision regarding the acquisition of shares with the appellant's salary.In conclusion, the appeal was partly allowed based on the directions provided under section 9 of the SAFEMA Act, with specific instructions for the appellant to pay a fine to avoid forfeiture of the properties.