IMPORTANT POINT
Forfeiture of property where major part of investment remains unexplained, is justified.

JUDGMENT :

Rastogi, J.

1. The instant appeal is directed against the judgment and order dated 19th April, 2007 passed by learned 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 Exchange Manipulators(Forfeiture of Property) Act, 1976(hereinafter being referred to as the “Act, 1976”) dated 31st December, 1997.

2. Appellant no.1 is said to be a registered partnership firm comprising of appellant nos. 2 to 5 and one N.A. Yusuf(not a party herein) as its partners with the profit sharing ratio of the partners as follows:

3. The background facts culled out from the record which led to passing of the order forfeiting the subject property are that one of the partners of the first appellant, namely, N.A. Yusuf, was ordered to be detained by Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974(hereinafter being referred to as “COFEPOSA”) by order dated 21st January, 1985 by Government of Maharashtra and later by the Central Government by order dated 27th August, 1991. The two detention orders against N.A. Yusuf came to be challenged in the writ petition before Delhi High Court. Both the petitions were allowed by judgments dated 15th October, 1991 and 11th May, 1992 respectively. In consequence thereof, the forfeiture order passed by the competent authority on 23rd November, 1977 came to an end.

4. On 16th October, 1994, a show cause notice was issued to the first appellant firm and its partners calling upon them to provide an explanation as to why the subject theatre (M/s. Platinum Theatre) should not be forfeited. After affording opportunity of hearing, the competent authority, in the first instance, passed an order of forfeiture against the first appellant firm forfeiting M/s. Platinum Theatre and its equipment by order dated 31st July, 1995. However, on appeal being preferred at the instance of the appellants, the matter was remanded back to the competent authority for fresh consideration by order dated 17th July, 1997.

5. The competent authority after revisiting the matter afresh and affording an opportunity of hearing to the parties, passed an order dated 31st December, 1997 of forfeiture of M/s. Platinum Theatre under Section 7 of the Act, 1976. Subsequently, the Appellate Tribunal for Forfeited Property, New Delhi(hereinafter being referred to as the “Tribunal”) dismissed the appeal and upheld the order of forfeiture passed by the competent authority on 7th September, 1999 and, thereafter, the writ petition filed at the instance of the appellants also came to be dismissed by judgment and order dated 19th April, 2007 which became a subject matter of challenge in appeal before us.

6. Learned counsel for the appellant has challenged the order of forfeiture particularly on the following submissions:

(i) The land on which the subject theatre was constructed is not the property of the first appellant firm. It is owned by appellant no. 2(P.M. Saheeda w/o Ibrahim Soofi) through a registered sale deed dated 16th April, 1969. Since the land was privately owned by appellant no. 2, the order regarding forfeiture of land, in the facts and circumstance of the case, is not legally sustainable.

(ii) The competent authority ought to have applied Section 9 of the Act, 1976 in the present case and should have provided an option to the appellants to pay fine in lieu of forfeiture, taking into consideration the fact that the appellants had disclosed source of more than 50% cost incurred in construction of the theatre. The loan of Rs.12 lakhs obtained from Vijaya Bank by the appellants constituted more than 50% of