The Supreme Court (SC) upheldthe order passed under section 7 of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOS) in absence of valid evidence to explain investment.
M/s. Platinum Theatre and Others, the appellant against the judgment and order passed by Single Judge of the High Court of Karnataka at Bangalore upholding the order passed by the competent authority under Section 7 read with 19(1) of the Smugglers and Foreign ExchangeManipulators(Forfeiture of Property) Act, 1976(“Act, 1976”) dated 31st December 1997.
The Appellant is a registered partnership firm comprising of appellant nos. 2 to 5 and one N.A. Yusuf is its partnership with the profit-sharing ratio of the partners. One of the partners of the first appellant, namely, N.A. Yusuf was ordered to be detained by the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974(“COFEPOSA”) order dated 21st January 1985 by the Government of Maharashtra and later by the Central Government by order dated27th August 1991.
On 16th October 1994, a show cause notice was issued to the first appellant firm and its partners calling upon them to explain why the subject theatre (M/s. Platinum Theatre) should not be forfeited. The competent authoritypassed an order of forfeiture against the first appellant firm forfeiting M/s. PlatinumTheatre. On appeal, the matter was remanded back to the competentauthority for fresh consideration by order dated 17th July 1997.
Section 8 of the Act, 1976 provides that the burden to prove, in any proceedings under this Act, shall lie on the person affected. The appellants have failed to discharge the said burden, in consequence of which the finding recorded by the competent authority duly supported with the material on record justifies and supports the order of forfeiture passed by the competent authority dated 31st December 1997.
Both N.A. Yusuf and appellant no. 2(P.M.Saheeda) failed to disclose any source of their capital contribution in the first appellant firm and have failed to disclose any books of accounts for the expenditure in the construction of the subject theatre and also failed to disclose any bank account from which money wasdisbursed for building the said theatre.
A Coram comprising of Justice Ajay Rastogi and Justice Bela M Trivediviewed that no material has been placed by Appellant no.2 (P.M. Saheeda) in rebuttal which may even prima facie justify the sources of funds available at her command for the acquisition of the land in question to the tune of Rs.33,000/ in the year 1969.
Further viewed thatin the absence of proper explanation as to the source of acquisition and as the majority of investment remains unexplained, the authority disbelieved the version of Appellant no. 2(P.M. Saheeda) as no proof was placed on record of gifts from her marriage. If the value of the land is taken only at Rs.33,000/, the total value of the land and building works out to Rs.25,20,000/, and as such, the major part of the investment remains unexplained.
It was observed that the proceedings were initiated about the appellants, in the first instance, under show cause notice dated 13th January 1977 and the competent authority passed an Order of forfeiture on 23rd November 1977. Later that came to be set aside in the year 1991 and fresh forfeiture proceedings were initiated under show cause notice under Section 6 of the Act dated 16th October 1994 which finally culminated inthe passing of the order of the competent authority on 31st December 1997.
The Court alleged gross delay in initiating the proceedings for forfeiture of the property is misconceived and deserves an outright rejection.
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