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Wednesday, January 22, 2014

 Expression “illegally  acquired  property”  is  defined  in  elaborate
terms under the Act[4].  
Broadly speaking the definition  covers  two  types
of properties:
      1)    acquired by the income or earnings; and
      2)    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.  

The appellant was initially detained by order dated  19.12.1974  under
the provisions of the Maintenance of  Internal  Security  Act,  1971  (since
repealed) and later under the provisions  of  the  Conservation  of  Foreign
Exchange and Prevention  of  Smuggling  Activities  Act,  1974  (hereinafter
referred to as the “COFEPOSA”) on the ground that 
he in  collaboration  with
his brother, who was living in London at that point of time,  was  indulging
in  activities  which  are  prejudicial  to  the  conservation  of   foreign
exchange.
The appellant unsuccessfully challenged the detention order.   He
was eventually released in 1977.

5.    While he was in custody, the second respondent issued a  notice  dated
4th March 1977 under section 6(1) of  the  Smugglers  and  Foreign  Exchange
Manipulators (Forefeiture of Property) Act, 1976  (hereinafter  referred  to
as “the Act”) calling upon the appellant  to  explain  the  sources  of  his
income out of which he had acquired the assets described in the schedule  to
the notice.

Eventually on 27th November 1989,  the  second  respondent  passed  an
order under section 7(1) of the Act forfeiting the properties  mentioned  in
the schedule to the said order.  - the challenge finally reached to Apex court =

(1) that the  notice issued under Section 6 of the Act is defective and therefore illegal as  the
notice did not contain  the  reasons  which  made  the  competent  authority
believe  that  the  notice  scheduled  properties  are  illegally   acquired
properties. 
In other  words,  the  reasons  were  not  communicated  to  the
appellant; =

It appears from the  record  that  initially  notice  dated  4.3.1977  under
Section 6(1) was issued at a point of time  when  the  appellant  was  under
preventive detention.  Subsequently, by  a  communication  dated  1st  June,
1988, the recorded reasons for the belief  which  led  to  the  issuance  of
notice under Section 6(1) of the Act  was  served  on  the  appellant.   
The
appellant not only filed a rejoinder to the said  notice  but  he  was  also
given a hearing before an order of forfeiture under Section  7  was  passed.
in S. Narayanappa v. The Commissioner of Income-tax AIR 1967  SC  523  
where
this Court on an interpretation of Section 34 of the Income Tax  Act,  1922,
opined to the contra.  Section 34 provided for re-opening of the  assessment
with the prior sanction of the Commissioner, if the income tax  officer  has
‘reasons to believe’ that taxable income had been  under-assessed.   Dealing
with the question whether the reasons which led the Commissioner  to  accord
sanction for the initiation of proceedings under section 34 are required  to
be communicated to the assessee, this Court held –
           “There is no requirement in any of the provisions of the Act  or
        any section laying down as a condition for the  initiation  of  the
        proceedings that the reasons  which  induced  the  Commissioner  to
        accord sanction to proceed under S.34 must be communicated  to  the
        assessee.”

 In Ajantha Industries case, Narayanappa’s case  was  distinguished  on
the ground –
             ”When an order under Section 34 is made the aggrieved  assessee
        can agitate the matter in appeal against the assessment order,  but
        an assessee against whom an order of transfer is made has  no  such
        remedy under the Act to question the order of  transfer.   Besides,
        the aggrieved assessee on receipt of the notice  under  Section  34
        may even satisfy the Income-tax Offier that there were  no  reasons
        for reopening the assessment.  Such an opportunity is not available
        to an assessee under Section 127(1) of the Act.  The above decision
        is, therefore, clearly distinguishable.”
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.
(2) that the forfeiture, such as the one provided under the  Act,
is violative of Article 20 of the Constitution of  India;  and  =
 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.

The   Act  enables  the
Government of India to forfeit “illegally acquired property” of  any  person
to whom the Act is made applicable.  
The  Act  is  made  applicable  to  the
persons specified  in  section  2(2)[3]. 
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).  Expression “relative” is itself  explained  in
explanation 2.  
Clause (d) – every  associate  of  persons  referred  to  in
clause (a)  or  clause  (b).   
Once  again  the  expression  “associate”  is
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  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  the  “competent  authority”
(notified under section 5) has reason to believe that  such  properties  are
“illegally acquired properties”, the competent authority  is  authorized  to
call upon the holder of the property to ‘indicate’ the 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.  

2014 ( January - Vol -1) Judis.nic.in/S.C./file name =   41164                                    H.L. GOKHALE, J. CHELAMESWAR             

   Reportable


                        IN THE SUPREME COURT OF INDIA


                        CIVIL APPELLATE JURISDICTION


                     CIVIL APPEAL NOS.  772-773 OF 2014
            [Arising out of SLP (Civil) Nos.16872-16873 of 2007]

Biswanath Bhattacharya                       …Appellant
            Versus
Union of India & Others                            …Respondents



                               J U D G M E N T


Chelameswar, J.

1.    Leave granted.

2.    These two appeals are preferred against the final judgment  dated  9th
August 2007 passed by the Calcutta High Court in  FMA  No.206  of  2003  and
order dated 30th August 2007 in Review Application bearing  RVW  No.2372  of
2007 dismissing the said review application filed by the appellant herein.

3.    The facts leading to the instant litigation are as follows:

4.    The appellant was initially detained by order dated  19.12.1974  under
the provisions of the Maintenance of  Internal  Security  Act,  1971  (since
repealed) and later under the provisions  of  the  Conservation  of  Foreign
Exchange and Prevention  of  Smuggling  Activities  Act,  1974  (hereinafter
referred to as the “COFEPOSA”) on the ground that 
he in  collaboration  with
his brother, who was living in London at that point of time,  was  indulging
in  activities  which  are  prejudicial  to  the  conservation  of   foreign
exchange.
The appellant unsuccessfully challenged the detention order.   He
was eventually released in 1977.

5.    While he was in custody, the second respondent issued a  notice  dated
4th March 1977 under section 6(1) of  the  Smugglers  and  Foreign  Exchange
Manipulators (Forefeiture of Property) Act, 1976  (hereinafter  referred  to
as “the Act”) calling upon the appellant  to  explain  the  sources  of  his
income out of which he had acquired the assets described in the schedule  to
the notice.
Some correspondence ensued between  the  second  respondent  on
one hand and the wife of the appellant and the appellant on the other  hand,
the details of which may not be necessary for the time being.

6.    Eventually on 27th November 1989,  the  second  respondent  passed  an
order under section 7(1) of the Act forfeiting the properties  mentioned  in
the schedule to the said order.


7.    Aggrieved by the said order, an appeal was carried  to  the  Appellate
Tribunal constituted under section 12 of the Act.   The  appeal  was  partly
allowed setting aside the forfeiture of two items of the properties.


8.     Not  satisfied  with  the  Appellate  Authority’s   conclusion,   the
appellant challenged the same in writ petition  No.  C.O.  No.10543  (W)  of
1991 before the High Court of Calcutta.
In  the  said  writ  petition,  the
appellant also prayed for two declarations – 
(1) that  the  Act  is  illegal
and ultra  vires  the  Constitution  and  
(2)  that  the  detention  of  the
appellant under the COFEPOSA by the  order  dated  19th  December  1974  was
illegal and void – a collateral and second round of attack.


9.    Learned Single Judge of the Calcutta High  Court  by  an  order  dated
10th May 2002 partly allowed the writ petition holding that  the  forfeiture
of the property by the second  respondent  as  confirmed  by  the  Appellate
Tribunal was illegal on the ground that the notice  under  section  6(1)  of
the Act dated 4th March 1977 was not in  accordance  with  the  law  as  the
notice did not contain the reasons  which  constituted  the  basis  for  the
belief of the competent authority that the appellant illegally acquired  the
scheduled properties.


10.   Aggrieved by the order of the learned Single  Judge,  the  respondents
herein carried the matter in appeal to the Division Bench.  
By the  judgment
under appeal, the appeal was allowed.


11.   It appears from the judgment under appeal that  though  the  appellant
sought a declaration that the Act (SAFEMA) is unconstitutional, such a  plea
was not pressed before the learned Single Judge.[1]


12.   Before us, the appellant made three submissions –
(1) that the  notice
issued under Section 6 of the Act is defective and therefore illegal as  the
notice did not contain  the  reasons  which  made  the  competent  authority
believe  that  the  notice  scheduled  properties  are  illegally   acquired
properties. In other  words,  the  reasons  were  not  communicated  to  the
appellant; 
(2) that the forfeiture, such as the one provided under the  Act,
is violative of Article 20 of the Constitution of  India;  and  
(3)  in  the
alternative, it is argued – that the  High  Court  failed  to  consider  the
question whether the decision of the competent  authority  as  confirmed  by
the  appellate  authority  is  sustainable  and  therefore,  the  matter  is
required to be remitted to the High Court for an  appropriate  consideration
of the legality of order of forfeiture.


13.   Regarding the non communication of the  reasons,  the  judgment  under
appeal recorded as follows:
               “The matter may be looked into from another angle.  In  1976
          he was under detention.  His  wife  replied  to  the  said  notice
          without complaining of non-supply of reasoning.  After his release
          the respondent No.1 gave a further rejoinder by adopting what  had
          been said by his wife.  The authority did not proceed against  him
          until he was served with the reasoning in  1988.   The  respondent
          No.1 was also afforded opportunity to deal with the reasonings  in
          his  rejoinder.   The  competent  authority  after  affording  him
          opportunity of hearing  passed  a  detailed  reasoned  order.   He
          preferred an appeal.  The appeal was allowed in part that too by a
          detailed reasoned order. Hence, we do not find any reason to  hold
          that the fundamental right of the respondent No.1 was infringed.

It appears from the  record  that  initially  notice  dated  4.3.1977  under
Section 6(1) was issued at a point of time  when  the  appellant  was  under
preventive detention.  Subsequently, by  a  communication  dated  1st  June,
1988, the recorded reasons for the belief  which  led  to  the  issuance  of
notice under Section 6(1) of the Act  was  served  on  the  appellant.   
The
appellant not only filed a rejoinder to the said  notice  but  he  was  also
given a hearing before an order of forfeiture under Section  7  was  passed.
It is in the background of the  above mentioned  facts  we  are  required  to
consider the  submission  that  the  High  Court  erred  in  coming  to  the
conclusion that notice under Section 6(1) did not vitiate[2] the  subsequent
proceedings.

 14.  In support of the submission, learned counsel for the  appellant  very
heavily relied upon a judgment of  this  Court
in  Ajantha  Industries  and
others v. Central Board of Direct Taxes and others, (1976) 1 SCC  1001.   It
was a case where this court had to consider the legality of the order  under
Section 127 transferring the ‘case’ of the Ajantha Industries.

15.   Section 127 of the Income  Tax  Act,  1961  empowers  the  authorities
(mentioned therein) to transfer “any case” (explained in the  said  section)
from one Income Tax Officer to another.   
Further,  the  section  stipulates
that before such an order of transfer is made, two conditions  are  required
to be complied with – 
(1) that the  assessee  must  be  given  a  reasonable
opportunity to explain why his case should not be transferred; and  
(2)  the authority transferring the case is required to record the reasons which  led
him to initiate the proceedings.   
It appears from the judgment that  though
first of the above mentioned two  requirements  was  complied  with,  it  was
found that no reasons were recorded much less  communicated.   
Dealing  with
the legality of such an order, this Court held that there is  a  requirement
of not only recording the reasons for the decision to transfer the case  but
also such reasons are required to be communicated to the assessee.


16.   Though section 127 expressly provided for recording of reasons it  did
not expressly provide communicating the same to the assessee.   
Still,  this Court held that such a communication is mandatory.
   “10. The reason for recording of reasons in the order  and  making  these
   reasons known to the assessee is to enable an opportunity to the assessee
   to approach the High Court under its writ jurisdiction under Article  226
   of the  Constitution  or  even  this  Court  under  Article  136  of  the
   Constitution in an appropriate case  for  challenging  the  order,  inter
   alia, either on the ground that it is mala fide or arbitrary or  that  it
   is based on irrelevant and extraneous considerations. Whether such a writ
   or special leave application ultimately  fails  is  not  relevant  for  a
   decision of the question.


   11. We are clearly of opinion that the requirement of  recording  reasons
   under Section 127(1) is a mandatory direction under the law.”



17.   In our view, such a conclusion must be understood in the light of  the
observation of the Court that there was no provision of appeal  or  revision
under the Income Tax Act  against  an  order  of  transfer.
For  the  same
reason, this Court distinguished and declined to follow an earlier  judgment
in S. Narayanappa v. The Commissioner of Income-tax AIR 1967  SC  523
where
this Court on an interpretation of Section 34 of the Income Tax  Act,  1922,
opined to the contra.  Section 34 provided for re-opening of the  assessment
with the prior sanction of the Commissioner, if the income tax  officer  has
‘reasons to believe’ that taxable income had been  under-assessed.   
Dealing
with the question whether the reasons which led the Commissioner  to  accord
sanction for the initiation of proceedings under section 34 are required  to
be communicated to the assessee, this Court held –
           “There is no requirement in any of the provisions of the Act  or
        any section laying down as a condition for the  initiation  of  the
        proceedings that the reasons  which  induced  the  Commissioner  to
        accord sanction to proceed under S.34 must be communicated  to  the
        assessee.”


18.   In Ajantha Industries case, Narayanappa’s case  was  distinguished  on
the ground –
             ”When an order under Section 34 is made the aggrieved  assessee
        can agitate the matter in appeal against the assessment order,  but
        an assessee against whom an order of transfer is made has  no  such
        remedy under the Act to question the order of  transfer.   Besides,
        the aggrieved assessee on receipt of the notice  under  Section  34
        may even satisfy the Income-tax Offier that there were  no  reasons
        for reopening the assessment.  Such an opportunity is not available
        to an assessee under Section 127(1) of the Act.  The above decision
        is, therefore, clearly distinguishable.”

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 forfeit “illegally acquired property” of  any  person
to whom the Act is made applicable.  
The  Act  is  made  applicable  to  the
persons specified  in  section  2(2)[3]. 
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).  
Expression “relative” is itself  explained  in explanation 2.  
Clause (d) – every  associate  of  persons  referred  to  in
clause (a)  or  clause  (b).   
Once  again  the  expression  “associate”  is
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).


21.   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  the  “competent  authority”
(notified under section 5) has reason to believe that  such  properties  are
“illegally acquired properties”, the competent authority  is  authorized  to
call upon the holder of the property to ‘indicate’ the 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.   Expression “illegally  acquired  property”  is  defined  in  elaborate
terms under the Act[4].  
Broadly speaking the definition  covers  two  types
of properties:
      1)    acquired by the income or earnings; and
      2)    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.
23.   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
as follows:
      “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).”


      Apart from 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[5] of the Constitution of India in  the  specific
factual setting of the case coupled with the  explanation  4  to  section  2
which reads as follows:
      “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).”

The answer 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 of “illegally acquired property” which by definition  (under  the
Act) is property acquired either “out  of”  or  by  means  “of  any  income,
earnings …” “obtained from or attributable to any activity prohibited by  or
under any law …”.  On 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 a ‘penalty’ attracting the  prohibition  of  Article
20 of the Constitution of India.  It is submitted that under  Section  53[6]
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 expression “forfeiture” to  mean  “a  penalty  for  breach  of  a
prohibitory direction”.[7]
31.   On the other hand, the learned Addl. Solicitor General  appearing  for
the respondent submitted that the forfeiture contemplated under the  Act  is
not a ‘penalty’ within the meaning of that expression occurring  in  Article
20 but only a deprivation of property of a  legislatively  identified  class
of  persons  –  in  the  event  of  their  inability  to  explain  (to   the
satisfaction of the State) that they had legitimate  sources  of  funds  for
the acquisition of  such  property.  The  learned  Addl.  Solicitor  General
further submitted that while in the case of that class  of  persons  covered
under Section 2(2)(a) of  the  Act,  the  forfeiture  though  has  a  remote
connection with the commission of a crime and conviction; with reference  to
the other four classes of persons to whom the Act is made  applicable  under
Section 2(2) (b) to (e), the forfeiture has nothing to do with any crime  or
conviction.   Therefore, to say that the forfeiture under the Act is hit  by
the prohibition under Article 20 is without any basis in law.   The  learned
Addl. Solicitor General also relied upon The State of West  Bengal  v.  S.K.
Ghosh, [AIR  1963  SC  255]  and  R.S.  Joshi  (supra)  in  support  of  his
submission. Alternatively, the learned  Addl.  Solicitor  General  submitted
that in view of the fact that the Act is included  in  the  Ninth  Schedule,
the Act is immune from any attack on the ground that it violates any one  of
the fundamental rights contained in Part III of the Constitution  of  India,
as was held by a Constitution Bench of this Court in  Attorney  General  for
India & Others v. Amratlal Prajivandas and others (1994) 5 SCC 54.

32.   Lord Green in Bidie v.  General  Accident,  Fire  and  Life  Assurance
Corporation  [(1948)  2  All  ER  995  at  998]  said  in  the  context   of
ascertaining the meaning of an expression in any statute that “Few words  in
the English language have a natural or ordinary meaning in  the  sense  that
they must be so read that their meaning is  entirely  independent  of  their
context”.

33.    Chief   Justice   Sikri   in   His   Holiness   Kesavananda   Bharati
Sripadagalvaru v. State of Kerala and another (1973)  4  SCC  225  dwelt  on
this subject referring to two English decisions and  one  American  decision
stating in substance that the meaning of  a  word  occurring  in  a  statute
cannot be ascertained without examining the context and also the  scheme  of
the Act in which the expression occurs.[8]

34.   The regime of forfeiture of property contemplated  under  the  Act  is
not new.  At least from  1944  such  a  regime  (though  not  identical  but
similar to the impugned one) is prevalent in this country.   Two  ordinances
were made in 1943 and 1944, subsequently amended  by  another  ordinance  in
1945, all called Criminal Law Amendment Ordinances, which  continued  to  be
in force in this country by virtue of operation  of  Article  372  and  some
anterior laws - the details of which may not be necessary  for  the  present
purpose. Under the 1943 Ordinance, two special  Tribunals  were  constituted
to try cases allotted to them “in the first  Schedule  in  respect  of  such
charges  of  offence   prescribed   under   the   second   Schedule   etc.”.
Essentially, such cases were cases either of charge of  receipt  of  illegal
gratification by a public servant or embezzlement of public money etc.   The
1944 Ordinance provided for the attachment of the money  or  other  property
which is believed to have been  procured  by  means  of  one  of  the  above
mentioned scheduled offences by the offender.   Such  attached  property  is
required to be disposed  of  as  provided  under  section  13  of  the  said
Ordinance.  Under Section 12 of the Ordinance, the Criminal Court  trying  a
scheduled offence is obliged  to  ascertain  the  amount  or  value  of  the
property procured by the accused by means  of  the  offence.  Under  section
13(3), it is provided that so much of  the  attached  property  referred  to
earlier equivalent to the value ascertained  by  the  Criminal  Court  under
section 12 is required to be forfeited to the State.


35.   Dealing with the question – whether such forfeiture  (in  the  factual
setting of the case) violated Article 20 of the Constitution  of  India?,  a
Constitution Bench of this Court held that the  forfeiture  contemplated  in
the Ordinance was not a penalty within the meaning of Article 20 but  it  is
only a speedier mode of recovery of the money embezzled by the accused.[9]

36.   In R.S. Joshi case, the question was whether it  was  permissible  for
the State Legislature to enact that sums collected  by  dealers  by  way  of
sales tax but are not exigible under the State Law –  indeed  prohibited  by
it – shall be forfeited to the exchequer.


37.   The question - whether such  a  forfeiture  was  a  penalty  violating
Article 20 did not  arise  in  the  facts  of  that  case.   The  discussion
revolved around the question - whether such a forfeiture is  a  penalty  for
the violation of a prohibition contained under section 46  of  the  relevant
Sales Tax Act?   The contravention of section 46  is  made  punishable  with
imprisonment and fine under section 63 of the said Act.   Apart  from  that,
section 37 of the said Act provided for a  departmental  proceeding  against
the dealers who  violated  the  prohibition  under  section  46.   The  said
departmental proceeding could result in  the  forfeiture  of  “..  any  sums
collected by any person by way of tax in contravention of  section  46  ..”.
The legal issue before this Court was – whether the  State  Legislature  had
necessary competence to provide for such  forfeiture?   The  answer  to  the
query depended  upon  whether  such  a  forfeiture  is  a  penalty  for  the
violation of law made by the State for the  levy  and  collection  of  sales
tax.  If it is not a penalty  but  a  plain  transfer  of  money  (illegally
collected by the dealer) to the  State  it  would  be  incompetent  for  the
legislature  to  make  such  a  provision  in  the  light  of   an   earlier
Constitution Bench decision of this Court in R. Abdul Quader & Co.  v.  STO,
AIR 1964 SC 922.[10]


38.   As explained above, the issue and the ratio decidendi  of  R.S.  Joshi
case is entirely different and has nothing to do  with  the  application  of
Article 20 of the Constitution of India.


39.   To understand the exact nature of the  forfeiture  contemplated  under
the (SAFEMA) Act it is necessary to  examine  the  nature  of  the  property
which is sought to  be  forfeited  and  also  the  persons  from  whom  such
forfeiture is sought to be made.   As  already  noticed,  the  Act  is  made
applicable to five classes of persons specified under section 2.   In  other
words, the properties of persons belonging to  any  one  of  the  said  five
categories only could be forfeited under the Act.  Even  with  reference  to
the properties held by any one falling under any of the abovementioned  five
categories, their entire property cannot be forfeited  except  the  property
which is determined to be  illegally  acquired  property  as  defined  under
section 3(c) of the Act.  Of all the five categories of persons to whom  the
Act is made applicable, only one category specified  under  section  2(2)(a)
happens to be of persons who are found guilty of an  offence  under  one  of
the enactments mentioned therein and convicted.  The other  four  categories
of persons to whom the Act is applicable are persons  unconnected  with  any
crime or conviction under any law while  the  category  of  persons  falling
under section 2(2)(b) are persons who  are  believed  by  the  State  to  be
violators of law.  The other three categories are  simply  persons  who  are
associated with either of the two categories mentioned  in  section  2(2)(a)
and (b).  At least with reference to the four categories other than the  one
covered by section 2(2)(a), the forfeiture/deprivation of  the  property  is
not a consequence of any conviction for an offence.


40.   Therefore, with reference to these four categories,  the  question  of
violation of  Article  20  does  not  arise.    Insofar  as  first  category
mentioned above, in our opinion, Article 20 would have  no  application  for
the reason, conviction is only a factor by which  the  Parliament  chose  to
identify the persons to whom the Act be made applicable.   The Act does  not
provide for the confiscation of the properties of all the  convicts  falling
under Section 2(2)(a) or detenues falling under Section 2(2)(b).  Section  6
of the Act authorises the competent authority  to  initiate  proceedings  of
forfeiture only if it has reasons to believe (such reasons  for  belief  are
required to be recorded in writing) that all or some of  the  properties  of
the  persons  to  whom  the  Act  is  applicable  are   illegally   acquired
properties.  The conviction or the preventive detention  contemplated  under
Section 2 is not the basis or cause of  the  confiscation  but  the  factual
basis  for  a  rebuttable  presumption  to  enable  the  State  to  initiate
proceedings to examine whether the  properties  held  by  such  persons  are
illegally acquired properties.  It is  notorious  that  people  carrying  on
activities such as smuggling to make money are  very  clandestine  in  their
activity.   Direct proof is difficult if not impossible.  The nature of  the
activity and the harm it  does  to  the  community  provide  a  sufficiently
rational basis  for  the  legislature  to  make  such  an  assumption.  More
particularly, Section 6 specifically stipulates the parameters which  should
guide the competent authority in forming an opinion, they are; the value  of
the property and the known sources of  the  income,  earnings  etc.  of  the
person who is sought to be proceeded against.  Even  in  the  case  of  such
persons, the Act does not mandate such an enquiry against all the assets  of
such persons.  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.[11]
       “..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.

48.   In the result, the appeals, being devoid of merit, are dismissed.

                                                            ………………………………….J.
                                                    (H.L. GOKHALE)

                                                            ………………………………….J.
                                                  (J. CHELAMESWAR )
New Delhi;
January 21, 2014.

-----------------------
[1]    On perusal of the judgment and order of the Learned Single  Judge  it
appears that although the vires of the said  Act  was  under  challenge  the
respondent No.1 only asked  for  cancellation  of  the  order  of  detention
issued under Section 3  of  the  COFEPOSA  and  the  orders  passed  by  the
competent authority so merged in the appellate authority under section  6(1)
of the SAFEMA as well as prayed for release of  the  properties  confiscated
by the appellate authority in terms of the order impugned therein.
[2]      The respondent No.1  for  the  first  time  in  the  writ  petition
contended that the notice under Section 6(1) was bad due  to  non-supply  of
reasons whereas it would appear that the reasons were supplied as  and  when
asked for. Delayed supply of reasons, in  our  view,  did  not  vitiate  the
subsequent  orders  of  the  competent  authority  as  well   as   appellate
authority.  Show cause notice was served in  1976.   It  was  not  proceeded
with till 1988  when  reasons  were  supplied.   Order  was  passed  by  the
competent authority upon affording adequate  opportunity  of  hearing.   The
respondent No.1 availed the remedy of appeal where  his  appeal  was  partly
allowed.  With deepest regard we have for  the  learned  single  Judge,  His
Lordship was perhaps not right in interfering with the show cause notice  at
the stage when the respondent No.1  availed  of  the  remedies  in  law  and
became partly successful before the appellate authority.
[3]    Section 2. Application—(1) 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; or
             ii)       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; or
            iii)       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;
                 or
             iv)       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; or
             ii)       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; or
            iii)       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; or

             iv)       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  been
convicted of an offence shall be the wholesale price of  the  goods  in  the
ordinary course of trade in India as on the date of the  commission  of  the
offence.


            Explanation 2.—  For the purpose  of  clause  ©,  “relative”  in
relation to a person, means—


        i)       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  in  clause
           (ii) or clause (iii).


            Explanation 3.— For the purposes of clause (d), “associate”,  in
      relation to a person, means—


        i)       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, where,—
              a)       the trust has been created by such person; or
              b)       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.




[4]    Section 3(c)  “illegally  acquired  property”,  in  relation  to  any
person to whom this Act applies, means,—
     i)    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; or
    ii)    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; or
   iii)    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; or
    iv)    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—t
              A)       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.
 [5]    20. Protection in respect of conviction for offences.—(1) No person
shall be convicted of any offence except for violation of a law in force  at
the time of the commission  of  the  Act  charged  as  an  offence,  nor  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.
      (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  a
witness against himself.

[6]    Section 53.  Punishments.—The  punishments  to  which  offenders  are
liable under the provisions of this Code are—
      First—Death;
      Secondly.—Imprisonment for life;
      Thirdly.— Omitted
      Fourthly.—Imprisonment, which is of two descriptions, namely.—
            (1)  Rigorous, that is, with hard labour;
            (2)  Simple;
      Fifthly.—Forfeiture of property;
      Sixthly.—Fine.

[7]    18.  Coming  to  “forfeiture’,  what  is  the  true  character  of  a
“forfeiture’? Is 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 expression “forfeiture” did 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. Black’s Legal Dictionary states that “to forfeit” is  “to  lose,  or
lose the right to, by, some error, fault, offence or  crime’,  “to  incur  a
penalty’. “Forfeiture’, as judicially annotated, is  “a  punishment  annexed
by law to some illegal act or negligence . . .’.  “something  imposed  as  a
punishment for an offence or delinquency’.  The  word,  in  this  sense,  is
frequently associated with the word “penalty’. According  to  Black’s  Legal
Dictionary,
            The terms “fine”, “forfeiture”, and “penalty”,  are  often  used
   loosely, and even confusedly : but when a  discrimination  is  made,  the
   word “penalty” is found to be generic in its  character,  including  both
   fine and forfeiture. A “fine” is a pecuniary  penalty,  and  is  commonly
   (perhaps always) to be collected by suit in some form. A “forfeiture”  is
   a penalty by which one loses his rights and interest in his property.


      More explicitly, the U.S. Supreme Court has explained the  concept  of
“forfeiture” in the context of statutory construction. Chief Justice  Taney,
in the State of Maryland v. Baltimore & Ohio  RR  Co.,  11  L.Ed.  714,  722
observed :
            “And a 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.”


      19. The same connotation has been imparted by our Court too.  A  Bench
has held [Bankura Municipality v.Lalji Raja & Sons, 1953 Cri LJ 1101] :


      “According to the dictionary meaning of the word ‘forfeiture’ the 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 of forfeiture.”


      This word “forfeiture” must bear the same meaning  of  a  penalty  for
breach of a prohibitory direction.  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 of “forfeiture” is 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  that  “no
mens rea, no crime” has 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.

[8]    56.   In construing the expression “amendment of  this  Constitution”
I must look at the whole scheme of the Constitution.   It is  not  right  to
construe words in vacuum and  then  insert  the  meaning  into  an  article.
Lord Green observed in Bidie v. General Accident, Fire  and  Life  Assurance
Corporation (1948) 2 All ER 995, 998.

            “The first  thing  one  has  to  do,  I  venture  to  think,  in
      construing words in a Section of an Act of Parliament is not  to  take
      those words in vacuo, so to speak,  and  attribute  to  them  what  is
      sometimes called their natural or ordinary meaning.   Few words in the
      English language have a natural or ordinary meaning in the sense  that
      they must be so read that their meaning  is  entirely  independent  of
      their context.   The method of construing statutes that  I  prefer  is
      not to take particular words and attribute to them  a  sort  of  prima
      facie meaning which you may have to displace or  modify.    It  is  to
      read the statute as a whole and ask oneself the question  :  ‘In  this
      state, in this context, relating to this subject-matter, what  is  the
      true meaning of that words’.”

      57.   I respectfully adopt the reasoning of Lord Green  in  construing
the expression “the amendment of the Constitution.”

      58.   Lord Green is  not  alone  in  this  approach.    In  Bourne  v.
Norwich Crematorium, (1967) 2 ALL ER 576, 578  it is observed:

            “English words derive colour from  those  which  surround  them.
      Sentences are not mere collections of words to be  taken  out  of  the
      sentence defined separately by reference to the dictionary or  decided
      cases, and then put back again into  the  sentence  with  the  meaning
      which you have assigned to them as separate words, so as to  give  the
      sentence or phrase a meaning which as a sentence or phrase  it  cannot
      bear without distortion of the English language.”

      59.   Holmes, J., in Towne v. Eisner, 245 US 418, 425   had  the  same
thought.   He observed :

            “A word is not a crystal, transparent and unchanged; it  is  the
      skin of living thought and may vary  greatly  in  colour  and  content
      according to the circumstances and the time in which it is used.”

[9]    The State of West Bengal v. S.K. Ghosh, AIR 1963 SC 255
      Para 15. .. We are therefore of opinion that  forfeiture  provided  in
S. 13(3) in  case  of  offences  which  involve  the  embezzlement  etc.  of
Government money or property  is  really  a  speedier  method  of  realizing
government money or property as compared to a suit which it is not  disputed
the Government could bring for realizing the money or property  and  is  not
punishment or penalty within the meaning of  Article  20(1).   Such  a  suit
could ordinarily be brought without  in  any  way  affecting  the  right  to
realize the fine  that  may  have  been  imposed  by  a  criminal  Court  in
connection with the offence.
[10]   The first question therefore that falls for consideration is
whether
it was open to the State legislature under its  powers  under  Entry  54  of
List II to make a provision to the effect that money  collected  by  way  of
tax, even though it was not due as a tax under the Act, shall be  made  over
to Government.
Now it is clear that the sums so collected by way of tax  are
not in fact tax exigible under the Act. 
So it cannot be said that the  State
legislature  was  directly  legislating  for  the  imposition  of  sales  or
purchase tax under Entry 54 of List II when it made such  a  provision,  for
on the face of the provision, the amount, though collected by  way  of  tax,
was not exigible as tax under the law. 
The provision  however  is  attempted
to be justified on the ground that though it may not  be  open  to  a  State
legislature to make provision for the recovery of an amount which is  not  a
tax under Entry 54 of List II in a law  made  for  that  purpose,  it  would
still be open to the legislature to provide for paying over all the  amounts
collected by way of  tax  by  persons,  even  though  they  really  are  not
exigible as tax, as part of the  incidental  and  ancillary  power  to  make
provision for the levy and collection of such tax.
Now there is  no  dispute
that the heads of legislation in the various Lists in the  Seventh  Schedule
should be interpreted widely so as to take in all matters  which  are  of  a
character incidental to the topics mentioned therein. 
Even so,  there  is  a
limit to such incidental or ancillary power  flowing  from  the  legislative
entries in the various Lists in the Seventh Schedule. 
These  incidental  and
ancillary powers  have  to  be  exercised  in  aid  of  the  main  topic  of
legislation, which, in the present case, is a tax on  sale  or  purchase  of
goods. 
All  powers  necessary  for  the  levy  and  collection  of  the  tax
concerned and for seeing that the tax is not  evaded  are  comprised  within
the ambit of the legislative entry as ancillary  or  incidental.
But  where
the legislation under the relevant entry proceeds  on  the  basis  that  the
amount concerned is not a tax exigible under the law made under that  entry,
but even so lays down that though it is  not  exigible  under  the  law,  it
shall be paid over to Government, merely because some dealers by mistake  or
otherwise have collected it  as  tax,  it  is  difficult  to  see  how  such
provision  can  be  ancillary  or  incidental  to  the  collection  of   tax
legitimately due under a law made under the relevant  taxing  entry.
We  do
not think that the ambit of  ancillary  or  incidental  power  goes  to  the
extent of permitting the legislature  to  provide  that  though  the  amount
collected — may be wrongly — by way of tax is not exigible under the law  as
made under the relevant taxing  entry,  it  shall  still  be  paid  over  to
Government, as if it were tax.
The legislature  cannot  under  Entry  54  of
List II make a provision to the effect that even  though  a  certain  amount
collected is not a tax on the sale or purchase of goods as laid down by  the
law, it will still be collected as if it  was  such  a  tax.
This  is  what
Section 11(2) has provided. Such  a  provision  cannot  in  our  opinion  be
treated  as  coming  within  incidental  or  ancillary  powers   which   the
legislature has got under the relevant taxing entry to ensure that  the  tax
is levied and collected and that its  evasion  becomes  impossible.  
We  are
therefore of opinion that the provision contained in  Section  11(2)  cannot
be made under Entry 54 of List  II  and  cannot  be  justified  even  as  an
incidental or ancillary provision permitted under that entry.



[11]   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.

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