REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7207 OF 2012
(Arising out of SLP(C) No. 20420 of 2009)
Winston Tan & Anr. …… Appellants
Vs.
Union of India & Anr. …… Respondents
JUDGMENT
R.M. LODHA, J.
Leave granted.
2. The forfeiture of Flat No. 4, Kamala Mansion, Ground Floor,
Promenade Place, No. 45/2, Promenade Road, Bangalore – 560 042 under
Section 7 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of
Property) Act, 1976, to be referred as ‘SAFEMA’, is the subject matter in
this Appeal. Col. K. M. Somana (Retd.) was the original owner of that
flat. On 20.3.1997, he sold the flat to Mohd. Ismail Shabandari and his
wife Fathima Kauser Ismail by a sale deed which was registered in the
office of the Sub-Registrar, Bangalore.
3. Mohd. Ismail Shabandari was detained under Conservation of
Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (for
short, ‘COFEPOSA’) on 2.5.2003. The detention order came to be passed at
the instance of the Enforcement Directorate, Bangalore; his premises were
searched on 31.7.2002. In that search Indian Currency of Rs. 13,50,000/-
along with incriminating materials showing illegal transfer of money from
abroad was seized. The documents seized from the residence of Mohd. Ismail
Shabandari on 31.7.2002 by the Enforcement Directorate also indicated that
he had received Rs. 92,09,480/- from different persons as instructed by one
Hussain Sherrif of Dubai and he had made payments in India to various
persons to the tune of Rs. 78,59,480/- leaving a balance of Rs. 13,50,000/-
which was seized at the time of search. It was in this backdrop that the
order dated 2.5.2003 for detention of Mohd. Ismail Shabandari came to be
passed by the Competent Authority.
4. On 8.12.2003, a notice under Section 6(1) of SAFEMA in respect
of subject flat was issued to Mohd. Ismail Shabandari. SAFEMA was
applicable to him as he was a ‘person’ within the meaning of Section
2(2)(b) of SAFEMA. The Competent Authority having come to know that his
wife, Fathima Kauser Ismail, was having 50 per cent share in the subject
property, a notice under Section 6(1) was also issued to her as she
happened to be ‘relative’ within the meaning of Section 2(2)(c) of SAFEMA.
The above notices were served on them.
5. In response to the notice issued to him under Section 6(1),
Mohd. Ismail Shabandari sent a letter to the Competent Authority on
26.5.2004 stating therein that the subject flat was purchased through
legal earnings. By a subsequent letter, he stated that he had explained the
sources of acquisition before the income tax authorities. He filed copies
of the income tax returns and also stated that his wife Fathima Kauser
Ismail received remittances from her brother in 1994. Mohd. Ismail
Shabandari was asked by the Competent Authority to substantiate his claim
in respect of sources from which he and his wife purchased the property. He
and his wife were asked to appear personally but they did not appear and
it transpired that the subject property has been sold by them for Rs.
26,00,000/- on 10.2.2005 to the present appellants.
6. On 17.5.2005, a notice was again issued to Mohd. Ismail
Shabandari by the Competent Authority to explain the sources of his income
and earnings relating to Savings Bank A/c No. 15802, Vijaya Bank, Brigade
Road Branch, Bangalore. A copy of the said notice was also sent to the
Branch Manager, Vijaya Bank, Brigade Road Branch, Bangalore. The appellants
claim that they came to know of Section 6(1) notice issued to their vendors
from Vijaya Bank, Brigade Road Branch, Bangalore and consequently sent
their reply to the Competent Authority through their Advocate on
20.5.2005. In their reply, the appellants intimated to the Competent
Authority that they had purchased the subject flat by a registered sale
deed. As they were having insufficient funds to purchase the subject flat,
they availed of loan from Vijaya Bank, Brigade Road Branch, Bangalore. The
Bank sanctioned loan after proper examination and scrutiny of the documents
and after obtaining legal opinion. The appellants claimed that they were
in actual possession and enjoyment of the subject flat and they have also
applied to the authorities of Bangalore Mahanagar Palika for mutation of
their names in the records and for obtaining Khatha Certificate and
assessment of taxes.
7. The Competent Authority, on 23.6.2005 passed an order under
Sections 7(1) and (3) of SAFEMA forfeiting the subject flat and declaring
that forfeited property stands vested in the Central Government free from
all encumbrances. It was held in the order that the subject flat was not
acquired by Mohd. Ismail Shabandari and Fathima Kauser Ismail out of any
legal earnings. The said flat had been sold stealthily after the
commencement of the proceedings under SAFEMA and the said transfer in
favour of the appellants on 10.2.2005 was null and void by virtue of the
provisions of Section 11 of SAFEMA.
8. Subsequent to the passing of the above order, a further order
under Section 19(1) of SAFEMA was passed by the Competent Auhority on
23.12.2005 directing Mohd. Ismail Shabandari and Fathima Kauser Ismail to
surrender/deliver possession of the forfeited flat within 30 days of the
receipt of order. In that order, it was reiterated that transfer/sale
effected by them subsequent to the notice under Section 6(1) was null and
void in view of Section 11 of SAFEMA. A copy of this order was sent by the
Competent Auhority to the present appellants.
9. It was then that the appellants filed a writ petition before
the Karnataka High Court for quashing the order dated 23.6.2005 forfeiting
the subject flat and for writ of mandamus to the Competent Authority not to
interfere with their peaceful possession and enjoyment in respect of the
subject flat. The above reliefs were sought on diverse grounds, including
that they had purchased the subject flat after thorough verification and
after obtaining encumbrance certificates for the period from 1.4.1990 to
4.1.2005 and after satisfying with the title of the vendors and also that
there was no charge or encumbrance created over the subject flat. They
claimed that they were bona fide purchasers for adequate consideration.
10. A counter affidavit was filed by the Competent Authority in
opposition to the writ petition. The appellants filed rejoinder to the
counter affidavit.
11. The learned Single Judge of the High Court heard the parties
and considered the question that was raised before him as to whether the
appellants (petitioners therein) were entitled to a notice from the
Competent Authority before order of confiscation/forfeiture was passed
under SAFEMA. The Single Judge in his order dated 12.9.2007 held that the
sale in favour of the appellants had taken place on 10.2.2005, i.e., before
the order of forfeiture was passed by the Competent Authority. Although it
was a fact that the first notice was issued under SAFEMA to the transferors
much before the sale had taken place, but in the opinion of the Single
Judge, the order dated 23.6.2005 was violative of the principles of natural
justice and, consequently, he quashed the same and remitted the matter to
the Competent Authority for fresh consideration.
12. A writ appeal was preferred by the Union of India and the
Competent Authority against the order of the Single Judge. The Division
Bench of the High Court held that the sale transaction in favour of the
appellants was subsequent to the issuance of notice under Section 6 and,
accordingly, the transaction was null and void under Section 11 of SAFEMA.
In the opinion of the Division Bench, the appellants were not entitled to
any notice and non-issuance of notice to them had not vitiated the action
taken by the Competent Authority.
13. Mr. S.B. Sanyal, learned senior counsel for the appellants,
heavily relied upon the excepted clause of Section 2(2)(e) that protects a
transferee in good faith for adequate consideration and the observations
made by a 9-Judge Bench of this Court in Attorney General for India and
others v. Amratlal Prajivandas and Others[1] in para 44 (Pg. 92) of the
Report observing, ‘So far as the holders (not being relatives and
associates) mentioned in Section 2(2)(e) are concerned, they are dealt
with on a separate footing. If such person proves that he is a transferee
in good faith for consideration, his property – even though purchased from
a convict/detenu – is not liable to be forfeited’. He referred to diverse
documents to show that the appellants had purchased the property after due
diligence and after obtaining certificates from Sub-Registrar, Bangalore,
that the subject flat was not encumbranced in any manner whatsoever.
Learned senior counsel would submit that the appellants had obtained loan
from the Vijaya Bank, Brigade Road Branch, Bangalore and the title of the
property was fully scrutinized by the Bank and its Panel Advocate. The
adequate consideration of Rs. 26,00,000/- was paid by the Bank to the
transferors which prima facie establishes that the appellants are
transferees in good faith for adequate consideration. Learned senior
counsel contended that the appellants were seeking an opportunity to be
given to them to prove before the Competent Authority that they were
transferees in good faith for adequate consideration and that is what was
done by the Single Judge and there was no justification for the Division
Bench to upset such a just order.
14. On the other hand, Mr. A.S. Chandhiok, Additional Solicitor
General, would submit that the purchase of the subject flat by the
appellants was after the issuance of notice under Section 6(1) to the
vendors by the Competent Authority. SAFEMA is applicable to one of the
vendors by virtue of Section 2(2)(b) and to the other vendor by virtue of
Section 2(2)(c). He argued that transaction of sale was null and void
under Section 11 and the appellants are not covered by the excepted
category of the ‘holder’ under Section 2(2)(e). He placed reliance upon a
decision of this Court in Aamenabai Tayebaly and Others v. Competent
Authority under SAFEMA and others[2] and a decision of Madras High Court in
Competent Authority v. Parvathi Bai[3].
15. SAFEMA came into effect from 05.11.1975. It, inter alia,
provides for forfeiture of illegally acquired properties of smugglers and
foreign exchange manipulators. Its applicability is provided in Section 2.
Sub-section (1) of Section 2 provides that the provisions of SAFEMA shall
only apply to persons specified in sub-section (2). Clause (b), amongst
others, covers the persons in respect of whom an order of detention has
been made under COFEPOSA and such order has not been revoked or set aside
in any of the situations set out in the four sub-clauses of the proviso.
Clause (c) of sub-section (2) of Section 2 applies to the relatives of
persons referred to in clauses (a) or (b) while clause (d) applies to the
associates of persons referred to in clauses (a) or (b). Clause (e) of sub-
section (2) of Section 2 refers to a holder of property. It reads as under
:
“S. 2. Application.—(1) xxx xxx xxx
(2). The persons referred to in sub-section (1) are the
following, namely: -
(e) any holder (hereinafter in this clause referred to as the
present 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.”
16. Section 3 defines various expressions. Section 3 (1) © defines
‘illegally acquired property’ which reads as follows:
“S. 3(1). In this Act, unless the context otherwise requires,--
(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 (iii) or the income or
earnings from such property ; and includes-
(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;”
17. Section 4 prohibits holding of illegally acquired property
which reads as follows :
“S. 4. Prohibition of holding illegally acquired property.—(1)
As from the commencement of this Act, it shall not be lawful for
any person to whom this Act applies to hold any illegally
acquired property either by himself or through any other person
on his behalf.
(2) Where any person holds any illegally acquired property in
contravention of the provision of sub-section (1), such property
shall be liable to be forfeited to the Central Government in
accordance with the provisions of this Act.”
18. Section 6 provides for issuance of show cause notice before
forfeiture of illegally acquired property while Section 7 provides for
passing of final orders in that behalf. These provisions read as under:-
“S.6. - Notice of forfeiture.--(1) If, having regard to the
value of the properties held by any person to whom this Act
applies, either by himself or through any other person on his
behalf, his known sources of income, earnings or assets, any
other information or material available to it as a result of
action taken under section 18 or otherwise, the competent
authority has reason to believe (the reasons for such belief to
be recorded in writing ) that all or any of such properties are
illegally acquired properties, it may serve a notice upon such
person (hereinafter referred to as the person affected) calling
upon him within such time as may be specified in the notice,
which shall not be ordinarily less than thirty days, to indicate
the sources of his income, earnings or assets, out of which or
by means of which he has acquired such property, the evidence on
which he relies and other relevant information and particulars,
and to show cause why all or any of such properties, as the case
may be should not be declared to be illegally acquired
properties and forfeited to the Central Government under this
Act.
(2) Where a notice under sub-section (1) to any person specifies
any property as being held on behalf of such person by any other
person, a copy of the notice shall also be served upon such
other person.”
“S.7.- Forfeiture of property in certain cases.—(1) The
competent authority may, after considering the explanation, if
any, to the show-cause notice issued under section 6, and the
materials available before it and after giving to the person
affected (and in a case where the person affected holds any
property specified in the notice through any other person, to
such other person also) a reasonable opportunity of being heard,
by order, record a finding whether all or any of the properties
in question are illegally acquired properties.
(2) Where the competent authority is satisfied that some of the
properties referred to in the show-cause notice are illegally
acquired properties but is not able to identity specifically
such properties, then, it shall be lawful for the competent
authority to specify the properties which, to the best of its
judgment, are illegally acquired properties and record a finding
accordingly under sub-section(1).
(3) Where the competent authority records a finding under this
section to the effect that any property is illegally acquired
property, it shall declare that such property shall, subject to
the provisions of this Act, stand forfeited to the Central
Government free from all encumbrances.
(4) Where any shares in a company stand forfeited to the Central
Government under this Act, then the company shall,
notwithstanding anything contained in the Companies Act, 1956 (1
of 1956), or the articles of association of the company,
forthwith register the Central Government as the transferee of
such shares.”
19. Section 8 provides that burden of proving that property
specified in the notice served under Section 6 is not illegally acquired
property shall be on the person affected.
20. Section 11 declares transfers of properties specified in the
notice issued under Section 6 null and void when such transfers are
effected after the issuance of notice. Section 11 reads as follows :
“11. Certain transfers to be null and void.—Whereafter the
issue of a notice under section 6 or under section 10, any
property referred to in the said notice is transferred by any
mode whatsoever such transfer shall, for the purpose of the
proceedings under this Act, be ignored and if such property is
subsequently forfeited to the Central Government under Section
7, then, the transfer of such property shall be deemed to be
null and void.”
21. Section 19 makes a provision for taking possession of the
property which has been declared to be forfeited to the Central Government
and where the person affected as well as any other person who may be in
possession of the property fails to surrender or deliver possession.
Section 19 reads as under :
“S. 19. Power to take possession.—(1) Where any property has
been declared to be forfeited to the Central Government under
this Act, or where the person affected has failed to pay the
fine due under sub-section (1) of section 9 within the time
allowed therefor under sub-section (3) of that section, the
competent authority may order the person affected as well as any
other person who may be in possession of the property to
surrender or deliver possession thereof to the competent
authority or to any person duly authorised by it in this behalf
within thirty days of the service of the order.
(2) If any person refuses or fails to comply with an order
made under sub-section (1), the competent authority may take
possession of the property and may for that purpose use such
force as may be necessary.
(3) Notwithstanding anything contained in sub-section (2), the
competent authority may, for the purpose of taking possession of
any property referred to in sub-section (1), requisition the
service of any police officer to assist the competent authority
and it shall be the duty of such officer to comply with such
requisition.”
22. The provisions of SAFEMA are stringent and drastic in nature.
They are designed to discourage law breaking and directed towards
forfeiture of illegally acquired properties. One of the concepts that
centres around the provisions of SAFEMA is to reach properties acquired
illegally by the persons who are covered by Clauses (a) to (e) of Section
2(2). The provisions of SAFEMA are intended to apply to any property
acquired by persons covered by Clauses (a) to (e) of Section 2(2), whether
before or after the commencement, 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.
However, SAFEMA is not applicable to holder of any property under Section
2(2)(e) who proves that he is a transferee in good faith for adequate
consideration. The question that arises for consideration in this appeal
is, whether appellants who purchased the subject flat during pendency of
forfeiture proceedings are entitled to an opportunity to prove that they
are transferees in good faith for adequate consideration.
23. In Amratlal Prajivandas1, a 9-Judge Bench of this Court
extensively considered the scheme and the provisions of SAFEMA and the Act
has been held to be constitutional. The observations in para 44 of the
Report in Amratlal Prajivandas1, upon which heavy reliance has been placed
by the learned senior counsel for the appellants, were made by this Court
while dealing with the question, whether the application of SAFEMA to the
relatives and associates of detenus was violative of Articles 14,19 and 21?
It was submitted on behalf of the petitioners therein that the relatives
or associates of a person falling under Clause (a) or Clause (b) of Section
2(2) of SAFEMA might have acquired properties of their own, could be by
illegal means, but there was no reason why those properties be forfeited
under SAFEMA just because they were related to or were associates of the
detenu or convict. This Court held that the relatives or associates were
brought in only for the purpose of ensuring that the illegally acquired
properties of the convict or detenu, acquired or kept in their names, do
not escape the net of SAFEMA. It was further observed that it was not
unknown that persons indulging in illegal activities screen the properties
acquired from such illegal activities in the names of their relatives and
associates, sometimes they transfer such properties to them with an intent
to transfer the ownership and title and it was immaterial how such relative
or associate held the properties of convict/detenu, whether as a benami or
a mere name-lender or as a bona fide transferee for value or in any other
manner. Where a person is relative or associate as defined under SAFEMA,
he or she cannot put forward any defence on proof of the fact that the
property was acquired by the detenu, whether in his own name or in the name
of his relatives or associates. The Court allayed the apprehension that
the independently acquired properties of such relatives or associates could
be forfeited even if they were in no way connected with the convict/detenu.
This Court then made the observations, ‘So far as the holders (not being
relatives and associates) mentioned in Section 2(2)(e) are concerned, they
are dealt with on a separate footing. If such person proves that he is a
transferee in good faith for consideration, his property – even though
purchased from a convict/detenu – is not liable to be forfeited”. We are
afraid these observations have no application to a transferee who has
purchased illegally acquired property defined under Section 3 from a
detenu/convict and/or his relative or associate after issuance of notice
under Section 6 of SAFEMA. Section 2(2)(e) refers to any holder of any
property, which was at any time previously held by a person referred to in
clause (a) or clause (b) unless such holder proves that he is a transferee
in good faith for adequate consideration. The holder talked of in Section
2(2)(e) does not cover a holder who is a transferee of the property after
issuance of notice under Section 6. It is so because Section 11 makes it
manifest that if any property referred to in the notice under Section 6 or
under Section 10 is transferred by any mode whatsoever, such transfer shall
be ignored for the purposes of proceedings under SAFEMA and if such
property is subsequently forfeited under Section 7 then the transfer of
such property shall be deemed to be null and void. On issuance of notice
under Section 6, a moratorium is placed on transfer of property referred to
in the notice. Any transfer of such property (the property referred to in
Section 6 notice) is prohibited.
24. In Aamenabai Tayebaly2, this Court had expressly held that the
transaction of transfer effected after the issuance of notice under Section
6 is of no legal consequence and such transfer does not confer any title on
the transferee. Aamenabai Tayebaly2 was a case where one Talab Haji
Hussein Sumbhania was detained under Section 3(1) of COFEPOSA by an order
dated 2.4.1976. Before the detention order, in February, 1975, Tahira
Sultana, second wife of Talab Haji Hussein Sumbhania purchased a flat in
Mumbai. On 15.2.1977, a notice was issued by the Competent Authority under
Section 6(1) of SAFEMA to Tahira Sultana calling upon her to show cause why
the said flat should not be forfeited as the illegally acquired property of
the COFEPOSA detenu, her husband. On 12.10.1977, a forfeiture order
relating to that flat was passed under Section 7. The said order was
challenged by her in the Bombay High Court. She undertook before the High
Court not to alienate the said flat. However, on 30.7.1981, Tahira Sultana
sold the said flat to Tayab Ali in breach of the undertaking given to the
High Court. Tayab Ali received an information on 5.11.1982 that the flat
purchased by him was already forfeited by the Central Government and based
on that information he filed a writ petition before Bombay High Court on
13.12.1982. Tayab Ali raised the plea that he was a bona fide purchaser
for value without notice. The High Court dismissed the writ petition filed
by Tayab Ali and consequently the order of the Competent Authority
forfeiting the flat was confirmed. The matter reached this Court at the
instance of successor in interest of Tayab Ali. In the backdrop of these
facts, this Court referred to Section 11 of SAFEMA (Pgs. 713-714) and then
proceeded to hold as under:
“It is no doubt true that on the express language of the said
section transfer of any property pending the proceedings under
Section 6 or 10 of the said Act and prior to the order of
forfeiture shall be treated to be null and void. The purchaser's
transaction is after the order of forfeiture of the said
property. Still the consequence of the said transaction being
null and void could not be avoided by the purchaser on the plea
that this transaction was subsequent to the original order of
forfeiture. The original order of forfeiture was stayed at the
time of the purchase. It got confirmed by the Bombay High Court
ultimately when the Miscellaneous Petition No. 1680 of 1977
moved by Tahira Sultana was disposed of and the subsequent Writ
Petition No. 1527 of 1995 was dismissed by the High Court and
the SLP filed by her in this Court was also dismissed. We may
also note that as the Miscellaneous Petition No. 1680 of 1977
was withdrawn on 19-6-1995 and ultimately the forfeiture order
came to be confirmed in the subsequent Writ Petition No. 1527 of
1995 on 21-8-1995, the transaction of transfer in favour of
Tayab Ali would be said to have been effected after the notice
under Section 6, issued to Tahira Sultana, and before the order
of forfeiture ultimately got confirmed by the High Court and by
this Court and which had back effect of confirming the same from
1977. It must, therefore, be held that the transaction of
purchase by the appellants' predecessor Tayab Ali was also hit
by Section 11 of SAFEMA. Consequently in 1981 when the purchaser
purchased this property from Tahira Sultana she had no interest
in the said flat which she could convey to the appellants'
predecessor. In substance it amounted to selling of Central
Government's property by a total stranger in favour of the
purchaser. No title, therefore, in the said property passed to
the appellants' predecessor…..”
(Emphasis Supplied)
25. The above position wholly and squarely applies to the present
case. Admittedly, SAFEMA was applicable to both vendors here. One of the
vendors, a detenu, who was covered by Section 2(2)(b), was issued notice
way back on 8.12.2003 under Section 6(1) of SAFEMA. The other vendor, wife
of the detenu, was also issued notice under Section 6(1) in 2004 once it
transpired that she held 50% share in the said flat. Both vendors were
served with notices under Section 6(1) before transaction of sale in
favour of the appellants. After the issuance of notices under Section 6(1)
of SAFEMA to the vendors, the transaction of sale in favour of the
appellants has to be ignored by virtue of Section 11 and on passing of the
order of forfeiture under Section 7, the sale in favour of the appellants
had become null and void. The order of forfeiture dated 23.06.2005 under
Section 7 of SAFEMA relates back to the issuance of first notice under
Section 6(1) to one of the vendors.
26. Section 11 is unequivocal and its object is clear. It intends
to avoid transfer of property by the persons who are covered by clauses (a)
to (e) of sub-section (2) of Section 2 during the pendency of forfeiture
proceedings. The provision says that for the purposes of proceedings
under the Act, transfer of any property referred to in the notice under
Section 6 or under Section 10 shall be ignored. In respect of a transfer
after issuance of notice under Section 6, the property referred to
therein, the holder cannot set up plea that he is a transferee in good
faith or a bona fide purchaser for adequate consideration. Such plea is
not available to a transferee who has purchased the property during
pendency of forfeiture proceedings.
27. Learned Additional Solicitor General referred to a decision of
Madras High Court in the case of Parvathi Bai3. The Division Bench of
Madras High Court referred to the two decisions of this Court in Amratlal
Prajivandas1 and Aamenabai Tayebaly2 and after noticing the relevant
provisions of SAFEMA held that the protection given to a bona fide sale
under Section 2(2)(e) would not extend to a sale made subsequent to the
issuance of notice under Section 6 and in violation of Section 11 of
SAFEMA. We are in complete agreement with the view of the Madras High Court
in Parvathi Bai3.
28. It is true that the appellants had obtained encumbrances
certificates from the Sub-Registrar prior to purchase which show that there
were no encumbrances to the subject flat. It is also true that the
appellants had obtained loan from Vijaya Bank, Brigade Road Branch,
Bangalore for purchase of the said flat. It is a fact that sale
consideration to the tune of Rs. 26 lakhs was paid directly by the Bank to
the vendors after the Bank was satisfied about the title of the vendors.
The appellants had also mortgaged the flat with the Vijaya Bank as a
security towards loan. But unfortunately these facts are of no help to the
appellants as the sale in their favour was effected after notices under
Section 6(1) were issued to the vendors. Such sale has no legal sanction.
The sale is null and void on the face of Section 11; it is not protected so
as to enable the purchaser to prove that he is transferee in good faith for
adequate consideration. As a matter of law, no title came to be vested in
the appellants by virtue of sale-deed dated 10.02.2005 as the vendors could
not have transferred the property after service of the notice under Section
6(1) and during pendency of forfeiture proceedings under SAFEMA. The title
in the subject flat is deemed to have vested in the Central Government on
or about 08.12.2003 when the first notice under Section 6(1) was issued and
served on one of the vendors. The vendors ceased to have any title in the
subject flat on the date of transfer i.e. 10.02.2005. They had no
transferable right. The appellants cannot claim any right in the flat. In
the circumstances, question of according any opportunity to the appellants
to prove that they are transferees in good faith with adequate
consideration does not arise.
29. In view of the above, we find no merit in the appeal. The
impugned order does not call for any interference. Civil Appeal is
dismissed with no order as to costs.
…………………….J.
(R.M. Lodha)
…………………….J.
(Anil R. Dave)
NEW DELHI.
OCTOBER 4, 2012.
-----------------------
[1] (1994) 5 SCC 54
[2] (1998) 1 SCC 703
[3] (2011) 6 MLJ 537
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