Dealing a blow to the practice of investing unaccounted and ill-gotten money in real estate, the Supreme Court has ruled that the government would be justified to deprive a person of his property if he cannot explain the legitimate source of funds to acquire it.
"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 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," a bench of Justices H L Gokhale and J Chelameswar said.
Before arriving at this conclusion that could send a chill down the spine of real estate mafia and those acquiring benami property, the bench studied the provisions to deal with this contentious issue in several countries.
The question before the bench was whether a person, who had been acquitted from the charge of acquiring illegal money, could be punished again by depriving him of the property that was bought using that unaccounted money under Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (Safema), 1976?
The bench differentiated between the civil nature of forfeiture prescribed under Safema from the criminal case for acquiring illegal wealth or money and said it could not be treated as double jeopardy, banned under Article 20 of the Constitution which bars prosecution of a person more than once for the same offence.
Writing the judgment for the bench, Justice Chelameswar said, "The conviction or 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 (about illegal funds being used to acquire property).
"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 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."
The bench said non-conviction based asset forfeiture model, also known as Civil Forfeiture Legislation, had gained currency in the US, Italy, Ireland, South Africa, the UK, Australia and certain provinces of Canada.
The judgment came in a case where one Bishwanath Bhattacharya was detained under Cofeposa for illegally dealing with foreign exchange in 1977 and during the period of detention was served notice under Safema to explain the source of money to acquire two properties in Salt Lake area of Kolkata and the investment in Bijaya Publishing House. The authorities had ordered forfeiture of these two properties and investment in the publishing house. SC upheld the action of forfeiture.
Article referred: http://timesofindia.indiatimes.com/india/SC-Govt-can-seize-land-if-source-of-funding-hidden/articleshow/29226393.cms
"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 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," a bench of Justices H L Gokhale and J Chelameswar said.
Before arriving at this conclusion that could send a chill down the spine of real estate mafia and those acquiring benami property, the bench studied the provisions to deal with this contentious issue in several countries.
The question before the bench was whether a person, who had been acquitted from the charge of acquiring illegal money, could be punished again by depriving him of the property that was bought using that unaccounted money under Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (Safema), 1976?
The bench differentiated between the civil nature of forfeiture prescribed under Safema from the criminal case for acquiring illegal wealth or money and said it could not be treated as double jeopardy, banned under Article 20 of the Constitution which bars prosecution of a person more than once for the same offence.
Writing the judgment for the bench, Justice Chelameswar said, "The conviction or 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 (about illegal funds being used to acquire property).
"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 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."
The bench said non-conviction based asset forfeiture model, also known as Civil Forfeiture Legislation, had gained currency in the US, Italy, Ireland, South Africa, the UK, Australia and certain provinces of Canada.
The judgment came in a case where one Bishwanath Bhattacharya was detained under Cofeposa for illegally dealing with foreign exchange in 1977 and during the period of detention was served notice under Safema to explain the source of money to acquire two properties in Salt Lake area of Kolkata and the investment in Bijaya Publishing House. The authorities had ordered forfeiture of these two properties and investment in the publishing house. SC upheld the action of forfeiture.
Article referred: http://timesofindia.indiatimes.com/india/SC-Govt-can-seize-land-if-source-of-funding-hidden/articleshow/29226393.cms
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