Supreme Court Upholds Forfeiture Under SAFEMA Despite Revoked COFEPOSA Detention: Thanesar Singh Sodhi vs. Union of India (2023)

Date of the Judgment: 9 November 2023

Citation: 2023 INSC 997

Judges: Vikram Nath, J., Ahsanuddin Amanullah, J.

Can the revocation of a detention order under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA) nullify forfeiture proceedings initiated under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA)? The Supreme Court of India recently addressed this question, clarifying the relationship between these two acts. This judgment examines whether SAFEMA proceedings can continue even if the COFEPOSA detention order is revoked. The bench, comprising Justices Vikram Nath and Ahsanuddin Amanullah, delivered a unanimous decision.

Case Background

The case involves two appeals, both challenging orders of the High Court that upheld the forfeiture of properties under SAFEMA. The primary contention in both cases was that the revocation of detention orders under COFEPOSA should render the SAFEMA proceedings invalid.

In the case of Thanesar Singh Sodhi, an order for detention under Section 3(1) of COFEPOSA was issued on 02 January 1978. The representation against this order was rejected on 15 February 1978, and a subsequent writ petition before the Delhi High Court was dismissed on 25 September 1978. Later, the wife of the appellant filed a petition before the Supreme Court, which was withdrawn on 27 October 1978, following an undertaking by the Union of India to withdraw the detention order. Consequently, the detention order was revoked on 09 November 1978. Subsequently, on 10 February 1981, a show cause notice was issued under Section 6 of SAFEMA, and the properties were forfeited on 16 September 1983. The Appellate Tribunal upheld the forfeiture on 02 March 1995, which was later challenged in the Delhi High Court, resulting in the impugned order dated 26 March 2010.

Additionally, a criminal complaint was filed under the Customs Act, 1962, and the Gold (Control) Act, 1968, but the appellant was discharged on 30 October 1981, and the penalties were set aside on 03 August 1987.

Timeline:

Legal Framework

The core legal provision in this case is Section 2(2)(b) of SAFEMA, which states that the Act applies to:

“every person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974)”

The proviso to this section lists four exceptions under which SAFEMA would not apply:

• (i) If the detention order was revoked on the report of the Advisory Board under Section 8 of COFEPOSA, or before receiving the report, or before making a reference to the Board.
• (ii) If the detention order, to which Section 9 of COFEPOSA applies, was revoked before the expiry of the time for review, or based on the review, or on the report of the Advisory Board.
• (iii) If the detention order, to which Section 12A of COFEPOSA applies, was revoked before the expiry of the time for the first review, or based on the first review, or on the report of the Advisory Board.
• (iv) If the detention order has been set aside by a court of competent jurisdiction.

The Supreme Court interpreted these provisions to mean that unless one of these four conditions is met, the provisions of SAFEMA would apply to a person against whom a detention order under COFEPOSA was made.

Arguments

Appellant’s Arguments:

• The primary argument was that the revocation of the detention order under COFEPOSA renders the SAFEMA proceedings unsustainable.
• Relying on Section 2(2)(b) of SAFEMA, the appellant argued that the law applies only to those against whom a valid detention order exists. Once the detention order is revoked, SAFEMA cannot be applied.
• In Civil Appeal No. 5500 of 2011, the appellant further argued that their discharge in the criminal complaint under the Customs Act, 1962, and the Gold (Control) Act, 1968, and the subsequent revocation of penalties, also render the SAFEMA proceedings untenable.

Respondent’s Arguments:

• The respondent contended that SAFEMA applies to anyone against whom a detention order under COFEPOSA was made, subject to the exceptions in the proviso to Section 2(2)(b).
• The respondent argued that the revocation of the detention order in this case did not fall under any of the four exceptions listed in the proviso of Section 2(2)(b) of SAFEMA.
• The respondent submitted that the dismissal of the criminal complaint and the withdrawal of penalties under the Customs Act, 1962, and the Gold (Control) Act, 1968, were irrelevant to the SAFEMA proceedings.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether the proceedings under SAFEMA could be maintained and the impugned orders need to be quashed, given that the detention order under COFEPOSA was revoked.
2. Whether the dismissal of the criminal complaint and the withdrawal of the penalty under the Customs Act, 1962, and the Gold (Control) Act, 1968, would render the proceedings under SAFEMA untenable.

Treatment of the Issue by the Court

Authorities

The Court considered the following legal provisions:

• Section 2(2)(b) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA): This section specifies the persons to whom the Act applies, including those against whom a detention order has been made under COFEPOSA.
• Section 3 of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA): This section deals with the power to make detention orders.
• Section 6 of SAFEMA: This section deals with the issuance of show cause notices to disclose the sources of income, earnings, or assets.
• Section 7 of SAFEMA: This section deals with the forfeiture of properties.
• Section 8 of COFEPOSA: This section deals with the constitution and functions of the Advisory Board.
• Section 9 of COFEPOSA: This section deals with the review of detention orders.
• Section 12A of COFEPOSA: This section deals with the extension of detention orders.
• Section 135(1)(b) of the Customs Act, 1962: This section deals with offences and penalties related to customs.
• Section 85 of the Gold (Control) Act, 1968: This section deals with offences and penalties related to gold control.

The Court also considered the following case:

• Attorney General for India vs. Amratlal Prajivandas [(1994) 5 SCC 54]: This case upheld the vires of SAFEMA. (Supreme Court of India)

Judgment

How each authority was viewed by the Court:

• Section 2(2)(b) of SAFEMA: The Court interpreted this provision strictly, stating that unless the revocation of a detention order falls under one of the four exceptions, SAFEMA applies.
• Attorney General for India vs. Amratlal Prajivandas [(1994) 5 SCC 54]: The Court relied on this case to support the constitutional validity of SAFEMA.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by a strict interpretation of Section 2(2)(b) of SAFEMA and its proviso. The Court emphasized that the law clearly specifies the conditions under which SAFEMA would not apply, and since none of those conditions were met, the forfeiture proceedings were valid.

The court’s reasoning was heavily based on the following points:

• The detention order was validly passed under COFEPOSA.
• The revocation of the detention order did not occur under any of the circumstances mentioned in the proviso to Section 2(2)(b) of SAFEMA.
• The proceedings under the Customs Act, 1962, and the Gold (Control) Act, 1968, were separate and independent of the SAFEMA proceedings.

The court’s reasoning was primarily based on the legal provisions, with a lesser emphasis on the factual circumstances of the case.

Logical Reasoning:

The Court considered the argument that the revocation of the detention order should invalidate the SAFEMA proceedings but rejected it because the revocation did not fall under any of the four exceptions provided in the law. The court also clarified that proceedings under other statutes do not affect the validity of SAFEMA proceedings.

The court’s decision was based on a strict interpretation of the law, ensuring that the conditions for the application of SAFEMA were met. The court emphasized that the detention order was validly passed and was not revoked under any of the circumstances that would invalidate the SAFEMA proceedings. The court also noted that the proceedings under the Customs Act, 1962, and the Gold (Control) Act, 1968, were separate and independent of the SAFEMA proceedings.

“A perusal of the above quoted provision makes it clear that apart from the four contingencies given in clauses (i) to (iv) above, every person against whom an order of detention has been passed under COFEPOSA, the provisions of SAFEMA would apply.”

“In the present case, it is an admitted position that an order of detention under COFEPOSA was made against the appellants.”

“The revocation however had been made on a statement given on behalf of the Union of India before this Court in order to institute a complaint under the relevant statute. The said revocation is not contemplated under Section 2(2)(b) and its proviso, and, therefore, no benefit can be extended to the appellant (s) on the said count.”

Key Takeaways

• The revocation of a detention order under COFEPOSA does not automatically invalidate proceedings under SAFEMA.
• SAFEMA proceedings remain valid unless the revocation of the detention order falls under one of the four exceptions listed in the proviso to Section 2(2)(b) of SAFEMA.
• Proceedings under other statutes, such as the Customs Act, 1962, and the Gold (Control) Act, 1968, are independent of SAFEMA proceedings and do not affect their validity.
• This judgment reinforces the strict interpretation of SAFEMA and its application to those against whom a valid detention order under COFEPOSA has been made.

Directions

No specific directions were given by the Supreme Court in this case.

Specific Amendments Analysis

There is no specific amendment analysis in the judgment.

Development of Law

The ratio decidendi of this case is that forfeiture proceedings under SAFEMA are valid even if the detention order under COFEPOSA is revoked, provided the revocation does not fall under any of the four exceptions listed in the proviso to Section 2(2)(b) of SAFEMA. This judgment clarifies the relationship between COFEPOSA and SAFEMA and reinforces the strict interpretation of SAFEMA.

Conclusion

The Supreme Court dismissed the appeals, upholding the forfeiture of properties under SAFEMA. The Court clarified that the revocation of a detention order under COFEPOSA does not automatically invalidate SAFEMA proceedings unless the revocation falls under the specific exceptions outlined in the law. The judgment reinforces the stringent application of SAFEMA and its independence from other legal proceedings.