IMPORTANT POINT
Forfeiture of illegally acquired property under SAFEMA.

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 app