REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 4711­4712 OF 2011

Gunwantlal Godawat  … Appellant

Versus

Union of India & Another … Respondents

J U D G M E N T  

Chelameswar, J.  

1. On 3rd  and  4th  June,  1965, the residential  premises  of the

appellant’s father were searched by the officers of the Government

of India  in  exercise  of the authority  conferred upon them under

Rule 126L(2) of the Defence of India Rules, 19621  (hereinafter

referred to as “the RULES”).  They found 240 kilograms of gold (bars

1 Rule 126L. Power of entry, search, seizure, to obtain information and to take samples.— (2) Any person  authorised by the Central Government by writing in this behalf may—

(a) enter and search any premises, not being a refinery or establishment referred to in sub-rule (1), vaults, lockers or any other place whether above or below ground;

(b) seize any gold in respect of which he suspects that any provision of this Part has been, or is being, or is about to be contravened, along with the package, covering or receptacle, if any, in which such gold is found and thereafter take all measures necessary for their safe custody.

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etc.) buried in the house and seized it.  Proceedings for confiscation

were initiated.   Eventually on 24.9.1966, the Collector of Central

Excise and Customs passed an order2  confiscating the seized gold

in exercise of the power under Rule 126M of the RULES on the

ground that the seized gold was held by the appellant in

contravention of Rule 126­I.   A penalty of Rs.25 lakhs under Rule

126L(16) of the RULES was also imposed.

2. Aggrieved by the same, an appeal was carried by the

appellant’s father before the Gold Control Administrator which was

dismissed on 6.3.1972.  The matter was carried further in a revision

before the Government of India which was also dismissed on

4.6.1979.  The decision of the Government of India was challenged

in a writ petition (No.1215/79) before the Rajasthan High Court.

By a judgment and order dated 9.8.1994, the Rajasthan High Court

allowed the writ petition.

3. It appears from the said judgment that two submissions were

made before the High Court, (i) no personal hearing was given by

the Collector to the appellant’s father before the order of

2 ““Gold was required to be declared under Rule 126-I of Defence of India Rules, 1962.  It was not declared.  I accordingly order absolute confiscation of 240.040 kgs. of gold, under Rule 126M of said Rules.  The iron safe in which gold was secreted is also confiscated under Rule 126M.

I hold that Shri Chhagan Lal Godavat is guilty of contravention of the provisions of the Rule 126-I of the Defence of India Rules, 1962.  He is liable to a penalty under Rule 126-L (16) of the said Rules.  Taking into consideration the gravity of the offence committed by him and in view of the fact that he hoarded a very huge quantity of undeclared gold I impose upon him a personal penalty of Rs.25,00,000/- (Twenty five lacs).”  

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confiscation was passed though a show cause notice dated

3.2.1966 was issued proposing confiscation and penalty under

Section 126M and 126L(16) of the RULES respectively, and (ii) An

opportunity to redeem the seized gold was not given.

4. The High Court accepted the submissions and remitted the

matter to the Collector (Central Excise and Customs).

The operative portion of the judgment reads as follows:­

“16.    As a  sequence  the  orders  passed by the  Collector  dated 24.9.1966 (Annex.1), the order dated 6.3.1972 passed by the Gold Control Administrator as well as the order dated 3/4.6.1979 passed by the  Special Secretary Finance,  Government of India exercising the  power  of revision of the  Central  Government  are quashed and the matter is remitted back to the Collector, Central Excise and Customs, New Delhi to examine the matter afresh in the light of the observations made above after affording full opportunity to the petitioners.   The parties are directed to appear before the Collector, Central Excise and Customs, New Delhi on 1.9.1994 whereafter the Collector shall proceed with the case afresh and shall dispose of the matter within four months from the date of receipt of the copy of the order as indicated above.   The matter has already been considerably  delayed  for  over  30 years and any  further  delay would amount to denial  of justice  to the petitioners.   It is further ordered that in the event of the appeal being filed by the aggrieved party to the Central Excise and Gold Control Tribunal, the Tribunal shall dispose of the same as expeditiously  as possible  preferably  within six  months  from the date of filing of the appeal.”

5. Pursuant to the  remand,  by an order  dated 9.12.1994, the

Collector once again ordered confiscation of the entire quantity of

(240 kilograms) gold approximately valued at Rs. 11.04 crores with

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an option to the legal heirs of the appellant’s father to redeem the

gold by paying a fine of Rs. 2.5 crores.

“(i) I order confiscation of the 240.040 Kgs. of gold (1) Sovereigns of gold 80.776 Kgs. (2) Passas of gold 242 Nos. 75.298.300 Kgs. (3) Pieces of gold bars 5 Nos. 10.975.845 Kgs. (4) Gold bars of 19127 and 1992 9 nos. 72.990 Kgss.) valued at Rs. 12,50,070.41 at the time of seizure (present approximate value Rs. 11.04 crores at the rate of Rs. 4,600 per 10 gms. as on 07.12.1994) along with Iron Safe used to conceal the gold seized from the house of Late Shri Chhaganlal Godawat, under the Rule 126­M of the erstwhile Defence of India Rules, 1962.   The impugned gold along with the Iron Safe will, however, be released and handed over to the legal heirs of Late Shri Chhaganlal Godawat on payment of redemption fine of Rs. 2.50 crores (Rupees Two crores fifty lacs only) in lieu of confiscation under Rule 126­M (8) (a) of the erstwhile Defence of India Rules, 1962. The option to redeem the same should be exercised  within three  months from  the  date of receipt of this order.”

The Collector further held that in view of the fact that the person

from whom the gold was seized (Chhaganlal Godawat) expired, the

levy of penalty contemplated under Rule 126L(16) of the RULES is

not called for.

6. Aggrieved by the decision of the Collector, the appellant herein

carried the matter in appeal to the Tribunal.3  The appeal was heard

by a Bench of the Tribunal consisting of two members.  There was a

difference of opinion between both the  members regarding the

3 Appeal No.C/144/95-NRB on the file of the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi against the Order-in-Original No.7/94 dated 9.12.1994 passed by the Collector of Central Excise & Customs, Jaipur.

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quantum of the redemption fine.   In view of the difference of

opinion, the matter was referred to the third Member.  The outcome

of the entire process  is that the Tribunal by its order dated 30th

October  1995  finally opined that the redemption fine should  be

reduced to Rs.12.5 lacs which represented the value of the gold as

on the date of the seizure.   Accordingly, the appeal was allowed.

7. The Collector sought a reference under Section 82­B4  of the

Gold Control Act, 1968 on two questions of law;

“1. Whether in the matter of imposition of redemption fine, the provisions of Section 73 of erstwhile5 Gold (Control) Act, 1968 will apply when the gold was neither seized nor confiscated under the Gold (Control) Act, 1968?

2. Whether the quantum of Redemption fine should be related to market value of Gold on the date of seizure or the market value of gold on the date of adjudication by the Commissioner of Customs & Central Excise, Jaipur?”

8. By an order dated 20.5.1996, the Tribunal referred the matter

to the Rajasthan High Court.

4  Section 82-B of the Gold (Control) Act, 1968 “Section 82-B. Statement of a case to High Court.  (1) The Collector of Central Excise or of Customs or the

other party may, within sixty days of the date upon which he is served with notice of an order under sec.81A, by application in the prescribed form, accompanied, court the application is made by the other party, by a fee of two hundred rupees require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High Court:

Provided that the Appellate Tribunal may, if it  is satisfied that the applicant was prevented by sufficient  cause  from  presenting  the  application  within  the  period  hereinbefore  specified,  allow  it  to  be presented within a further period not exceeding thirty days.

5 By the date of the Reference Application, the Gold (Control) Act, 1968 stood repealed by Act No.10 of 1990 of  the Parliament w.e.f. 6th June 1990.

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9. In the meanwhile, the Department filed an appeal against that

part of the Order of the Collector dated 9.12.1994 which gave an

option to the appellant to redeem the gold by paying fine of Rs. 2.5

crores in lieu of confiscation.   The said appeal was dismissed on

23.5.1996.

10. It appears from the record that the Union of India filed a Writ

Petition being D.B. Civil  Writ  Petition No. 6295 of  1996 with an

interesting prayer as follows:­

“It is, therefore, most respectfully prayed that:­

(i) By an appropriate writ, order or direction the respondents may be directed not to take any action with respect to getting goods from the Petitioner Department in any manner till the disposal of the reference petition.

(ii) Any other order or direction which the Hon’ble Court may consider just and proper in the facts and circumstance of case may also kindly be passed in favour of the petitioner.”

In fact it is stated at para 9(D) of the writ petition as follows:­

“D. That the petitioner department has come before the Hon’ble Court with a limited prayer that the goods may not be released to the respondents till the final disposal of the reference petition which has been referred by the learned CEGAT.”

11. It appears that initially there was an interim stay6 in the said

writ petition on 20th December 1996.  By an order dated 28.5.1997,

6  The order copy is not available on record

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the interim stay was vacated.   The operative portion of the Order

reads as follows:­

“8.   We, therefore, vacate the stay Order passed on December 20, 1996 staying that operation of the Order dated October 30, 1995 passed by the CEGAT and instead direct that the petitioner shall retain only that much quantity of the seized gold which will fetch a sum of Rs. 2,50,00,000/­ (Rupees Two Crores Fifty Lakhs ) @ Rs. 4600/­ (Rupees Four thousand six hundred) per 10 (ten) gms of gold and release and hand over possession of the rest of the quantity of gold to the respondent No. 1 within one month from today.   In case the petitioner succeeds and there is any shortfall in the recovery because of fall in price of gold, the respondent No. 1 shall make that good and if the petition is dismissed and the order of the CEGAT is maintained the respondent No. 1 shall be entitled to return of the gold permitted to be retained under this Order as per the directions of this Court while finally disposing of the matter or thereafter.”

12. The Reference came to be answered by  the Rajasthan High

Court by the order dated 29.6.2009, which is the subject matter of

the instant appeal.  The relevant portion reads as follows:

“19. Undeniably and undisputedly, it is the date of giving option which is relevant for adjudging the fine and not the date of seizure.

 xx xxx xxx xxx

The language of sub­rule 8 of Rule 126­M of ‘Rules, 1962’ categorically envisages that the officer adjudging may give to the owner of the Gold an option to pay in lieu of confiscation such fine as the said officer thinks fit.  According to Wiktionary, a wiki based open content dictionary, the meaning of term in lieu of is ‘Instead, in place  of ,  as  a substitute for’.  This  meaning suggests that the redemption fine is the substitute for the market value of the Gold.

 xxx xxx xxx xxx

………., the market value of the seized Gold has to be taken on that date when the option is given by the officer adjudging it.

20. It is revealed from the material on record that the Collector aptly applied the market price of Gold at the rate of Rs.4,600 per

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10 gms as on December 7, 1994, the date of adjudicating when the option was given by him to the respondent and on this basis, the price of total seized and confiscated Gold 240.040 kgs came to be 11.04 crores and the redemption fine cannot be in any way less than this.

21. Thus, in the ultimate analysis, it is candidly recorded that the quantity of redemption fine should be related to the market value of gold on 7.12.1994 i.e. the date of adjudication when the officer adjudging gave the owner of the Gold an option to pay fine in lieu of confiscation.  The amount of fine as adjudged to the tune of Rs.2.5 crores was totally arbitrary and irrational as it was not based on any sound and lawful reasoning.  

xxx xxx xxx xxx

23. ……………….. the respondents are entitled to redeem the confiscated Gold only after paying the redemption fine of Rs.11.040 crores.

24. In view of above, we deem it just and proper to direct the authorized officer to give an option afresh following above clinching observations to the owner of the  Gold asking him to pay the redemption fine in lieu of confiscation.”

13. For the sake of completion of the narration of facts, it must be

stated that  as  a consequence, the tribunal (CESTAT)  passed  an

order on 30.4.2010 remitting the matter to the adjudicating

Commissioner to determine the appropriate redemption fine and the

Commissioner passed an order on 16.7.2010.  The relevant portion

reads:

“4. Under the circumstances, we dispose of the appeal by way of remand to the Adjudicating Commissioner  (authorized officer) to determine appropriate redemption fine and allow the order of the gold to redeem the gold on payment of such redemption fine.   It goes without saying that while determining the redemption fine, he shall follow the cited order of the Hon’ble High Court dated 29.6.2009.”

xxx xxx xxx xxx

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(i) An option is given to Shri Gunwant Lal Godawat and legal heir of late  Shri  Chhagan  Lal  Godawat to  pay  Rs.11.04 crores (Rupees Eleven crores and four lakhs only) in lieu of confiscation of the gold weighing 240.040.145 kgs under the erstwhile Defence of India Rules, 1962 within three months of receipt of this order.

(ii) In case Shri Gunwant Lal Godawat and the legal heir of late Shri Chhagan Lal Godawat does not exercise the option of depositing the amount of Rs.11.04 crores in the stipulated time limit, as given above, Shri Gunwant Lal Godawat and legal heir of late  Shri  Chhagan Lal  Godawat  shall  be  liable to return  to the Department immediately the gold weighing 185.145 kgs which was returned to them  on  2.7.94 in compliance of directions of the Hon’ble Rajasthan High Court given in the order dated 28.05.97.”

THE HISTORY OF THE GOLD CONTROL REGIME:

14. On 26th  October 1962, the President of India made a

proclamation of emergency under Article 352 of the Constitution of

India.   On 28th  October 1962, the President of India promulgated

the Defence of  India Ordinance (4 of 1962).   It was amended by

another ordinance (6 of 1962).   In exercise of the power conferred

under Section 3 of the Ordinance (4 of 1962), RULES came to be

made in GSR 1465 dated 5th November 1962.  By an amendment to

the RULES, Part XIIA came to be introduced by GSR 1525 dated

23rd September, 1963 with the heading ‘Gold Control’.   

15. Part XIIA of the RULES contained various provisions regarding

acquisition, possession, sale etc. of gold ornaments and articles by

two defined classes under RULES 126­A(c)  and  (h), i.e. “dealers”

and “refiners” and persons other than dealers and refiners.   

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16. Both the Ordinances (4 & 6 of 1962) came to be repealed by

Section 48(2)  of the Defence of India Act  (51 of  1962)7.  Section

48(2) of the Act (51 of 1962) contained a declaration that

notwithstanding the repeal,  any  Rules  made  under the repealed

ordinance shall be deemed to have been made under the Act 51 of

1962.   It contained a further declaration creating a further fiction

that Act 51 of 1962 had commenced on 26th October, 1962.

“Section 48. Repeal and saving. –

(1)   The Defence of India Ordinance,  1962(4 of  1962) ,  and the Defence of  India  (Amendment) Ordinance, 1962 (6 of 1962), are hereby repealed.

 (2)  Notwithstanding such repeal, any rules made, anything done or any action taken under the Defence of India Ordinance, 1962(4 of 1962) , as amended by the Defence of India (Amendment) Ordinance, 1962 (6 of 1962) shall be deemed to have been made, done or taken under this Act as if this Act had commenced on the 26the October, 1962.”

  17. We  need not examine the purpose for creating the fiction

under sub­section (2) because no submission in this regard is made

before us by either of the parties.  We only take note of the fact that

the RULES must be deemed to have been made under Act 51 of

1962 w.e.f. 26th October 1962 though they were in fact made later

under Ordinance 4 of 1962.

7  Came into force on 15th December 1962

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18. The Defence of India Act  itself  was a temporary enactment.

Section 1(3) of the Act declared as follows:­

“(3).   It shall remain in force during the period of operation of the Proclamation of Emergency issued on the 26th October, 1962, and for a period of six months thereafter.”

The proclamation of emergency ceased to operate on 10th January

1968.  Therefore, it follows that the Defence of India Act (5 of 1962)

ceased to be in force by 9th July 1968.

19.  In the year 1968, an ordinance titled The Gold (Control)

Ordinance, 1968 (6 of 68) (hereinafter referred to as ‘the

ORDINANCE’) was promulgated on 29th June, 1968.8  Section 117 of

the  ORDINANCE  repealed the  RULES.   The  RULES would  have

lapsed on 9th  July 1968 because the authority of law for the

sustenance of the RULES ceased on that day with the cessation of

the operation of the Defence of India Act (5 of 1962), but for their

repeal by Section 117 of the ORDINANCE.  Since the repeal of any

rules by another statute and the consequences flowing therefrom

are not provided for either in the General Clauses Act 1897 or any

other law, it was declared in Section 117 of the ORDINANCE.

“(1) As from the commencement of this Ordinance, the provisions of Part XII­A of the  Defence of India Rules, 1962 shall stand

8 Parliament enacted the Gold (Control) Act, 1965 (18 of 65), which was never brought into force (for reasons not known nor necessary to be known for the purpose of this case).

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repealed and  upon such repeal, Section 6 of the General Clauses Act, 1897, shall apply as if the said Part were a Central Act;

(2)   Notwithstanding the repeal made by sub­section (1) but without prejudice to the application of  Section 6 of the General Clauses Act, 1897, any notification, order, direction, appointment or declaration made or any notice, licence or certificate issued or permission, authorization or exemption granted or any confiscation adjudged or penalty or fine imposed or any forfeiture ordered or any other thing done or any other action taken under or in pursuance of the provisions of Part XII­A of the Defence of India Rules, 1962, so far as it is not inconsistent with the provisions of this  Ordinance be deemed  to have been made, issued,  granted, adjudged, imposed, ordered, done or taken under the corresponding provisions of this Ordinance.”

20. Thereafter Parliament made the Gold Control Act (45 of 1968)9

(hereinafter referred to  as the  GOLD ACT).   The scheme  of the

ORDINANCE and  the  GOLD ACT  is  more  or less the  same  (the

details of which are not necessary for our purpose) and is

substantially similar to the scheme of the Part XIIA of the RULES.

Section 116(1) of GOLD ACT inter alia repealed the ORDINANCE.

Section 116(2) of the GOLD ACT:

“116. Repeal and savings. – (1) The Gold (Control) Act, 1965 (18 of 1965),  and the  Gold (Control)  Ordinance,  1968 (6 of  1968),  are hereby repealed.

(2) Notwithstanding such repeal, anything  done or any action taken, including any notification, order or appointment made, direction given, notice, licence or certificate issued, permission, authorization or exemption granted, confiscation adjudged, penalty or fine imposed, or forfeiture ordered whether under the Gold (Control) Ordinance, 1968 (6 of 1968), or Part XII­A of the Defence of India Rules, 1962, shall,  in so far as it is not

9 Act 45 of 68 came into force on the 1st September 1968.

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inconsistent with the provisions of this  Act,  be deemed to have been done, taken, made, given, issued, granted, adjudged, imposed or ordered, as the case may be, under the corresponding provision of this Act as if this Act had commenced on the 29th day of June, 1968.”

It can  be seen from  the sub­section (2) extracted  above that it

creates 2 fictions.  The 1st fiction provides that various things done

or actions taken under the ORDINANCE or the RULES are deemed

to be things done or actions taken under the corresponding

provisions of the GOLD ACT.  The 2nd fiction is that the GOLD ACT

“had commenced as on 29th  June 1968”.   But the GOLD ACT does not

contain a provision corresponding to that part of Section 117(1) of

the  ORDINANCE dealing  with the repeal of the  RULES and the

consequences of such repeal.

EFFECT OF THE REPEAL OF THE RULES BY THE ORDINANCE:

21. One of the questions that is required to be examined to decide

the controversy on hand is whether the RULES stood irrevocably

repealed in the absence of a provision in the GOLD ACT similar to

Section 117(1) of the ORDINANCE?  

22. The judgment of this Court in T. Venkata Reddy & Others v.

State of Andhra Pradesh10,  would be relevant and helpful to

10 (1985) 3 SCC 198

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answer the above question.   Certain posts of part­time Village

Officers were abolished by Section 3 of an Ordinance of the then

State of Andhra Pradesh.   The Legislature never replaced the

ordinance by an enactment.  In the litigation that ensued therefrom,

one of the questions before this Court was whether those abolished

part­time  Village  Officer posts  would revive on the lapse of the

ordinance.  A Constitution bench of this Court held that “the effect of

Section 3 of the Ordinance was irreversible except by express legislation”.  

23. The resultant legal position is that the efficacy of the

provisions of an ordinance would not in any way be diminuted or

abrogated unless there is a subsequent countervailing legislation.

The rights and obligations created, the liabilities incurred or

acquired or suffered under an ordinance would be as enduring as

those resulting from a Statute.  

24. But Venkata Reddy is declared not to be good law in view of

the law laid down in Krishna Kumar Singh & Another v.  State

of Bihar & Others, (2017) 3 SCC 1.11  It was held:

11 105.10. The  theory  of  enduring  rights  which  has  been  laid  down  in  the  judgment  in Bhupendra  Kumar Bose [State of Orissa v. Bhupendra Kumar Bose, 1962 Supp (2) SCR 380 : AIR 1962 SC 945] and followed in T. Venkata Reddy [T. Venkata Reddy v. State of A.P., (1985) 3 SCC 198 : 1985 SCC (L&S) 632] by the Constitution Bench is based on the analogy of a temporary enactment. There is a basic difference between an Ordinance and a temporary enactment. These decisions of the Constitution Bench which have accepted the notion of enduring rights which will survive an Ordinance which has ceased to operate do not lay down the correct position. The judgments are also no longer good law in view of the decision in S.R. Bommai [S.R. Bommai v. Union of India, (1994) 3 SCC 1] .

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“105.12.  The question as to whether rights, privileges, obligations and liabilities would survive an Ordinance which has ceased to operate must be determined as a matter of construction. The appropriate test to be applied is the test of public interest and constitutional necessity. This would include the issue as to whether the consequences which have taken place under the Ordinance have assumed an irreversible character. In a suitable case, it would be open to the court to mould the relief.”

25. Krishna Kumar Singh  dealt  with a case where a series of

Ordinances were issued by the Governor of Bihar.

“13. The Ordinances promulgated by the Governor followed a consistent  pattern.  None of the  Ordinances  was  laid  before the legislature. Each one of the Ordinances lapsed by efflux of time, six weeks after the convening of the session of the Legislative Assembly. When the previous Ordinance ceased to operate, a fresh Ordinance was issued when the Legislative Assembly was not in session. The Legislative  Assembly had  no occasion to consider whether any of the Ordinances should be approved or disapproved. No legislation to enact a law along the lines of the Ordinances was moved by the Government in the Legislative Assembly. The last of the Ordinances, like its predecessors, cease to operate as a result of the constitutional limitation contained in Article 213(2)(a). The subject was entirely governed by successive Ordinances; yet another illustration of  what  was described by this  Court  as  an Ordinance­Raj barely three years prior to the promulgation of the first in this chain of Ordinances.”

This Court was examining the issue:  

“69. The issue before the Court is of the consequence of an Ordinance terminating on the expiry of a period of six weeks or, within that period, on a disapproval by the legislature. … Would the legal effects created by the Ordinance stand obliterated as a matter of  law upon the lapsing of an Ordinance or passing of a resolution of disapproval?”  

This Court took note of the fact that  Venkata Reddy’s  case

and two earlier cases12 which laid down the law based on the theory

12 Para 76. The “enduring rights” theory which had been applied in English decisions to temporary statutes, was thus brought in while construing the effect of an Ordinance which has ceased to operate. In the view of the Constitution Bench: (Bhupendra Kumar case [State of Orissa v. Bhupendra Kumar Bose, 1962 Supp (2) SCR 380 :

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of “enduring rights” propounded by English decisions in the cases

of temporary statutes13  

26. This Court in Krishna Kumar Singh opined that “the basis and

foundation  of the two Constitution  Bench decisions  cannot  be  accepted  as

reflecting the true constitutional  position”  and went on to consider the

issue afresh and finally concluded:

“92. … The enduring rights theory attributes a degree of permanence to the power to promulgate Ordinances in derogation of parliamentary control and supremacy. Any such assumption in regard to the conferment of power  would run contrary to the principles which have been laid down in S.R. Bommai [S.R. Bommai v. Union of India, (1994) 3 SCC 1]  .  The  judgment in T. Venkata Reddy [T.  Venkata Reddy v. State of  A.P., (1985)  3 SCC 198 : 1985 SCC (L&S) 632] essentially follows the same logic but goes on to hold that if Parliament intends to reverse matters which have been completed under an Ordinance, it would have to enact a specific law with retrospective effect. This, in our view, reverses the constitutional ordering in regard to the exercise of legislative power.”

It must be remembered that the abovementioned discussion of law

was in the context of an Ordinance which was never tabled before

the Legislature and lapsed by virtue of the efflux of time.   

27. In our opinion, the declaration in Krishna Kumar Singh that

Venkata Reddy  is no longer good law in view of the judgment in

AIR 1962 SC 945] , AIR p. 954, para 21) “21. … Therefore, in considering the effect of the expiration of a temporary statute, it would be

unsafe to lay down any inflexible rule.  If the right created by the statute is of an enduring character and has vested in the person, that right cannot be taken away because the statute by which it was created has expired. If a penalty had been incurred under the statute and had been imposed upon a person, the imposition of the penalty would survive the expiration of the statute. That appears to be the true legal position in the matter.”

13 Wicks v. Director  of  Public  Prosecutions,  1947  AC  362  (HL);  Warren v. Windle,  102  ER  576  (KB); and Steavenson v. Oliver, 151 ER 1024 pp. 1026-27

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S.R. Bommai may not make any difference to the present case. In

the case on  hand, the  ORDINANCES came to be repealed and

replaced by the GOLD ACT with retrospective effect from 29th June

1968, that is, from the date of promulgation of the ORDINANCE.     

THE EFFECT OF THE REPEAL OF THE ORDINANCE BY THE GOLD ACT:

28. The General Clauses Act is silent in this regard.  On the other

hand, Section 3014 of the General Clauses Act deals with a situation

of  a Central  Act  being repealed by an Ordinance. It  declares  (in

substance) that the same consequences that would follow the repeal

of an earlier enactment by a later enactment would also follow in

the case of repeal of an earlier enactment by a subsequent

Ordinance.  The implications of Section 30 were considered by this

Court in State of Punjab v. Mohar Singh, AIR 1955 SC 84.   But

the counter position is not provided under the General Clauses Act.

In the circumstances, we are only required to look into the

provisions of the Act which repeals an Ordinance.   In the case on

hand, the provisions of the GOLD ACT.

14 Section 30. Application of Act to Ordinances.—In this Act  the expression Central  Act,  wherever it  occurs, except in section 5 and the word “Act” in clauses (9), (13), (25), (40), (43), (52) and (54)] of section 3 and in section 25 shall be deemed to include an Ordinance made and promulgated by the Governor General under section 23 of the Indian Councils Act, 1861 (24 and 25 Vict., c.67) or section 72 of the Government of India Act, 1915, (5 and 6 Geo. V. c, 61) or section 42 of the Government of India Act, 1935 (26 Geo. V. c. 2) and an Ordinance promulgated by the President under article 123 of the Constitution.

17

Though the GOLD ACT expressly repealed the ORDINANCE, it

did not make a declaration that the RULES are repealed.   But on

that account, the peremptory nature of the repeal of the RULES by

the ORDINANCE need not be doubted for the following two reasons:

(i) The GOLD ACT while making the declaration that

the ORDINANCE is repealed provided that various

actions taken both under PART XIIA of the RULES

or the ORDINANCE are deemed to be actions taken

under the corresponding  provisions of the  GOLD

ACT; and

(ii)  Unlike  Krishan  Kumar Singh,  the  ORDINANCE

was followed up by a legislative action which did not

disapprove the content of the ORDINANCE.   

SCHEME AND PURPOSE OF THE 1   ST    FICTION UNDER SECTION 116:

29. The purpose of creating the 1st  fiction  under Section 116,

according to us, is to declare that the rights and obligations flowing

from the adjudgment of confiscation would be those specified in the

GOLD ACT.   The  purpose of the fiction is  not to alter the law

applicable to the adjudgment proceedings.  One of the examples of

18

the rights flowing from the adjudgment of confiscation of gold is a

right of appeal against the adjudgment of confiscation.   Both the

RULES  [Rule 126M(3)  and the GOLD ACT  (Sections 80 and 81)]

provide for appeal.  While  under the  RULES, appeals lay to the

‘Administrator’ irrespective of the forum which adjudged the

confiscation.  Under the  GOLD ACT, the  appellate forum varies

depending on the forum which adjudged the confiscation.    

30. The fiction does not deal with the law applicable to pending

proceedings.   Such a conclusion is irresistible from the language of

Section 116(2) of the GOLD ACT which says;

“the confiscation adjudged .. under … Part XIIA of the Defence of India Rules 1962 … shall be deemed to have been adjudged … under the corresponding provisions of this Act.”

SCHEME OF PART XIIA OF THE RULES:

31. The RULES dealt with various matters.  We are only concerned

with Part XIIA titled “Gold  Control” (which  was inserted by an

Amendment dated 09.01.1963), because the seizure and

confiscation of  gold which is the subject matter of  these appeals

arose out of the operation of Part XIIA of the RULES.

32. Various Rules in  Part  XIIA dealt  with  the  regulation of the

activity of three classes of persons (i) dealers, (ii) refiners, and (iii)

19

others  who own or possess gold.   The expressions ‘dealer’ and

‘refiner’ are defined expressions under Rule 126­A(c) and (h)

respectively.   Chapter V of Part XIIA dealt with the regulation of

persons other than dealers and refiners who own gold (hereinafter

referred to as PERSONS for the sake of convenience).   

33. Under Rule 126­I, PERSONS were required to make a

declaration within a period stipulated therein.   The declaration is

required to contain, the quantity, description and other prescribed

particulars of  gold  (other than ornaments)  owned by a PERSON.

Sub­rule (3) stipulated that PERSONS shall  not acquire any gold

other than ornaments except either by succession or in accordance

with a permit granted under the RULES.   Sub­rule (4) mandated

that if a PERSON either acquires or parts with any quantity of gold

subsequent to a declaration made by him, such PERSON is

required to make a further declaration giving the particulars

thereof.

34. Rule 126­L(2) provided the authority of law (obviously for the

officers entrusted with responsibility of the enforcement of the

RULES) to enter and search any premises of PERSONS and seize

gold if found therein, if it is suspected that any provision of Part

20

XIIA  “has been or is being or is about to be contravened” with respect to

the gold found.

35. Rule 126­M provided for ‘confiscation’ of the gold seized under

Rule 126­L.  Rule provided that  a confiscation  is  required to be

‘adjudged’.  The expression  ‘adjudged’ is  not  defined but,  having

regard to the scheme of the Rules  mentioned above, the only

possible meaning that can be ascribed to that word is that

adjudgment is a proceeding by which the liability for confiscation

arising out of the provisions of Part XIIA of the gold seized is

required to be determined.  It appears from the scheme, the liability

for confiscation of the gold found in searched premises arises from

the fact that “there  has been or is being or is about to be” a

contravention of any provision of Part XIIA.   In other words,

adjudgment is nothing but a process of establishing the facts

relevant for arriving at a conclusion that “there has been or is being

or is about to be” a contravention of any one of the Rules contained

in  Part  XIIA.  Goes  without saying that adjudgment is a quasi

judicial proceeding.

36. The expression ‘confiscation’ is not defined in the RULES. It

had roots  in the latin word  Confiscare  – to consign to fiscus i.e.

21

transfer to treasury,  as a  punishment  or in  enforcement  of law.

Though, the expression is generally understood as having

implications associated with a crime. However, it is now well settled

at least by two15 earlier judgments of this Court that the liability for

confiscation of property could be purely civil in nature as a

consequence of the violation of some prescription of law commonly

described as ‘forfeiture’. The  words ‘forfeiture’ and ‘confiscation’

have come to be used interchangeably.    

  The  General  Clauses  Act, 1972  does  not employ the  word

‘confiscation’.  On the other hand, it employs the word ‘forfeiture’ in

Section 6(d)16.  Having regard to the long history of the usage of

those two expressions, we are of the opinion that ‘forfeiture’ is an

expression which takes within its sweep ‘confiscation’ also for the

purpose of law17.   

37. Rule 126­P provided for penalties.  The sub­rules insofar as it

is relevant for the facts of the present case are Rule 126P(1)(i) and

(2)(ii)18, the first of which stipulated that any PERSON either fails or

15 The State of West Bengal Vs. S.K. Ghosh AIR 1963 SC 255     Biswanath Bhattacharya Vs. Union of India (2014) 4 SCC 392  

16 Section 6(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or 17 Raja Saliqram Vs. Secretary of State of India in Council, 1874 12 Bengal LR 167, at page  182 18 Rule 126P. Penalties—(1) Whoever,—(i) fails or omits to make any return including a further return as required by rule 126F or any declaration including a further declaration as required by rule 126I without any reasonable cause, or makes any statement in such return or declaration which is false and which he either knows or believes to be false or does not believe to be true, shall be punishable with imprisonment for a term which may extend to one

22

omits to make any return required under Rule 126­I without any

reasonable  cause or  makes a  false  statement in the return  filed

either  with knowledge or belief that such statement is false is

punishable with imprisonment with a term of one year or fine or

both.  Sub­rule(2)(ii) stipulates  that  any person who “has  in  his

possession or under his control any quantity of gold in

contravention of any provision of this part” shall be punishable with

imprisonment for a term of not less than six months and not more

than two years and also with fine.

38. We have indicated the content of Rule 126­P(1) only for the

limited purpose of understanding the overall scheme of the RULES

and the consequences (other than confiscation of  the gold under

Rule 126M) that can visit  PERSONS either owning or possessing

gold in contravention of the provisions contained in Part XIIA.

39. It can be seen from the above that possession of undeclared

gold entails two consequences ­ (i) liability for confiscation of such

gold, and (ii) liability for prosecution and punishment.   Both the

consequences are independent though flowing from the same set of

facts.   

year or with fine or with both;”.    Rule 126(2) Whoever,— (ii) has in his possession or under his control any quantity of gold in  

contravention of any provision of this Part.   

23

40. Another relevant feature of the RULES (for the purpose of the

case on hand) is that under Rule 126­M(8)19, the officer adjudging

confiscation may give to the “owner of the gold” an option to pay in

lieu of confiscation such fine (popularly known as redemption fine)

as the officer thinks fit.

APPLICATION OF THE LAW TO THE FACTS OF THE CASE:

41. Confiscation of the gold of the appellant under the order (dated

24.09.1966) of adjudgment of confiscation was nothing but a

‘forfeiture’ of gold within the meaning of the expression occurring

under Section 6(d) of the General Clauses Act.   The order of

forfeiture necessarily extinguished the title of the appellant in the

confiscated gold and obliged the appellant to part with the gold.

Correspondingly the Union of India acquired title to that gold.   In

other words, the appellant incurred a liability to part with or forfeit

the gold.   If the original confiscation order (dated 24.09.1966)

remained unchallenged or otherwise and became final, the vesting

of title in the confiscated gold in the Union of India would have been

an accomplished fact under the RULES. But the appellant

questioned the legality of the order of confiscation before the

19  Rule 126M(8) (a) Whenever confiscation of any gold is authorised by this Part, the officer adjudging it may give to the owner of the gold an option to pay in lieu of confiscation such fine as the said officer thinks fit.

24

Such repeal gives rise to two questions – What is the effect of

(i)  the repeal of the Ordinance 6 of 1968, and  (ii)  the declaration

under Section 116(2) of the GOLD ACT?   

45. At the time of the making of the GOLD ACT, Parliament was

conscious of the existence of the RULES and their repeal by the

ORDINANCE and also the fact that various actions authorised

under the provisions of the Part XIIA of the RULES were taken or

pending.  The  Parliament is  also conscious  of the fact that the

ORDINANCE while repealing the RULES provided for the application

of Section 6 of the General Clauses Act.  Pursuant to the repeal of

the ORDINANCE, the Parliament did not choose by the GOLD ACT

to disapprove such a declaration  made  under the  ORDINANCE.

Therefore, in our opinion, it is  more than public interest and

constitutional necessity as opined in  Krishan  Kumar Singh’s

case  to hold that the RULES stood peremptorily repealed by the

ORDINANCE and on such repeal, Section 6 of the General Clauses

Act applied.  

Therefore, the RULES stood peremptorily repealed by the

ORDINANCE notwithstanding the fact that the ORDINANCE itself

27

came to be repealed subsequently by the GOLD ACT. The repeal of

the Ordinance does not revive the RULES.  

46. Now we shall deal with Question No.(ii) mentioned above i.e.,

the effect of Section 116(2), insofar as it is relevant for our purpose,

that the confiscation adjudged under Part XII­A of the RULES shall

be deemed to have been adjudged under the corresponding

provision22 of the GOLD ACT.   

47. The question is no more res integra.  This Court in Jayantilal

Amrathlal v. Union of India23 specifically dealt with the issue.

About 24.5 kgs. of gold was seized from the Jayantilal on 17th

December 1964.  On 5th  June 1965, a show­cause notice  was

issued, calling upon Jayantilal to explain why the seized gold

should not be confiscated under Rule 126­M of the RULES.   The

said  notice  was  challenged  under  Article  226  in  a  writ  petition.

During the  pendency of the said  writ petition, the  ORDINANCE

came to be issued followed by the GOLD ACT.   It was argued on

behalf of Jayantilal  that notice dated 5th  June 1965 could not be

22 “Section 78. Adjudication. Any confiscation may be adjudged or penalty may be imposed under this Act – (a) without limit, by a Gold Control Officer not below the rank of a Collector of Central Excise or of Customs;

(b) subject to such limits as may be specified in this behalf, by such other Gold Control Officer, not below the rank of a Superintendent of Central Excise, as the Central Government may, by notification, authorise in this behalf.” 23 (1972) 4 SCC 174

28

enforced because it was a notice issued under the RULES which

had been repealed.   The said argument was rejected.

“Para 7. In view of Section 115(2) of the Gold (Control) Act, 1968, it was urged on behalf  of the appellant that the notice issued on June 5, 1965 can no more be operative because under the Gold (Control) Act, 1968, there are no provisions for making a declaration relating to the possession of primary gold. At this stage it may be noticed that under the “Rules” every person who was in possession of primary gold, exceeding the prescribed weight was required to  convert the  same either into ornaments  or sell the same  to the licensed dealers  within  the  time prescribed by the “Rules”. Possession of primary gold thereafter exceeding the prescribed limit  was an offence. That period had expired long before the Gold (Control) Act, 1968 came into force. Hence the Gold (Control) Act naturally did not make any provision for a declaration of the possession of primary gold. In view of that circumstance it was urged on behalf  of the appellant that  the provisions in the “Rules” requiring a declaration to be made in respect of the possession of primary gold are inconsistent with the provisions of the Gold (Control) Act and therefore the notice issued under the “Rules” cannot be considered as being continued under the provisions of the Gold (Control) Act, 1968.

Para 8. The above contention is untenable. There are no provisions in the Gold (Control) Act, 1968 which are inconsistent with Rule 126(I)(10) of the “Rules”. That being so, action taken under that rule must be deemed to be continuing in view of Section 6 of the General Clauses Act, 1897. It is true that Gold (Control) Act, 1968 does  not  purport to incorporate into that  Act the  provisions  of Section 6 of the General Clauses Act. But the provisions therein are not inconsistent with the provisions in Section 6 of the General Clauses  Act.  Hence the  provisions of Section  6 of the  General Clauses Act are attracted in view of the repeal of the Gold (Control) Ordinance, 1968.  As the  Gold (Control) Act  does  not exhibit a different or contrary intention, proceedings initiated under the repealed law must be held to continue. We must also remember that by Gold (Control) Ordinance, the “Rules” were deemed as an act of Parliament. Hence on the repeal of the “Rules” and the Gold (Control) Ordinance, 1968 the consequences mentioned in Section 6 of the  General  Clauses  Act, follow.  For ascertaining  whether there is a contrary intention, one has to look to the provisions of the Gold (Control) Act, 1968. In order to see whether the rights and liabilities under the repealed law have been put an end to by the new enactment, the proper approach is not to enquire if the new enactment has by its new provisions kept alive the

29

rights and liabilities under the repealed law but whether it has taken away those rights and liabilities. The absence of a saving clause in a new enactment preserving the rights and liabilities under the repealed law is neither material nor decisive of the question — see State of Punjab v. Mohar Singh [AIR 1955 SC 84 : (1955) 1 SCR 893 : 1955 SCJ 25] and T.S. Baliah v. Income Tax Officer, Central Circle VI, Madras [AIR 1969 SC 701 : (1969) 3 SCR 65 : (1969) 1 SCJ 890 : 72 ITR 787] .”

Therefore, it  was held  that the  confiscation proceedings  initiated

under the RULES  must be concluded in accordance with the

RULES without any reference to the provisions of the GOLD ACT.

48. All the above analysis leads us to the following conclusions:

(1) the adjudgment of confiscation of the appellant’s

gold is required to be made only in accordance with

the RULES but not the GOLD ACT;

(2) the role of the 1st  fiction created under Section 116

of  GOLD ACT  is limited  as  explained in  para  29

(supra).

49. The submissions before us revolved around two questions:  

(i)  What is the law governing determination of the

amount of fine  that  could be  levied and collected

from the appellant in lieu of the confiscation of gold

seized from him?;  

30

(ii)  Whether the High Court applied the correct law in

recording the conclusion that the appellant is liable

to pay an amount of Rs.11.04 crores in lieu of the

confiscation of the Gold if he so chooses?

and issues ancillary thereto.

50. It must be remembered that by order dated 9.12.94, the officer

adjudging the confiscation of gold of the appellant gave an option to

the appellant to pay a fine of Rs.2.5 crores.   While deciding that

figure, the officer took note of the fact that the gold was valued at

Rs.12.5 lakhs at the time of its seizure and also took note of the fact

that as on 9.12.1994 (the date of adjudgment order), the gold was

valued at Rs.11.04 crores.  It must be remembered that Rule 126­

M(8)(a) did not oblige the officer to determine the amount of fine on

the basis of the value of the confiscated gold either with reference to

the date of its seizure or on the date of adjudgment of confiscation.

The rule (text of it at least) conferred an unfettered discretion on the

officer to determine the amount of fine.   But an unfettered

discretion and the Rule of Law are contradictions in terms.   The

High Court opined at para 18;

“… Now, what shall be the quantum of fine, decision thereof has been left to the adjudging authority and he may adjudge the fine as he thinks fit.   Of course, this decision is required to be exercised

31

judiciously in accordance with law or rule as the case may be but not arbitrarily.   The words “an option to pay    in lieu of      confiscation such fine” are very significant and the use of the words “in lieu of” connotes that the fine should be equivalent to the thing or Gold confiscated by the authority.”

We are in complete agreement with the view of the High Court.

51. While it is true that the discretion conferred upon the

Authority under Rule 128M – (8)(a) is textually unfettered, it does

not lead to the inference that the discretion is absolute and uniform

with reference to the various contraventions of  the RULES.   The

limitations on the discretion are to be found from the scheme of the

RULES. The various RULES in the Part XIIA of the RULES make

various stipulations and the contravention of any one of the

stipulations can lead to the confiscation of gold.  The factors which

influence the Authority’s exercise of discretion will necessarily vary

from the nature of the offence which is committed.  

For instance, Rule 126–I  mandates that certain PERSONS

make a declaration to the Administrator in the prescribed from. The

violation of this would entail a confiscation.  

52. But Rule 126–I(2) stipulates that the declaration is required to

be made by PERSONS  other  than owners of the gold  in certain

cases   because the owners are either legally incapacitated or

32

judicial persons  who are necessarily required to act through a

human agency. Rule 126–I(2)(a) stipulates that the declaration is to

be made by the guardian. Similarly with gold belonging to an idol24,

the declaration is to be made by the manager. In all these cases, the

declaration is to be made by a third person who is not necessarily

in possession or the owner of gold. In such circumstances, if the

declaration is not filed, the owner could not be held responsible for

the non­declaration.  Therefore, the relevant factor for the exercise

of the  discretion  is the  culpability  of the  owner  of the  gold  and

factors connected therewith.

53. In the same vein Rule 126–I(3)25  enjoins a person from

acquiring gold, subsequent to  making a declaration, except in

certain situations contemplated therein. Sub Rule 4 and 5 lay down

the manner in which a declaration is supposed to be made by those

who acquire gold through succession, intestate  or testamentary.

PERSONS not filing a declaration at all and PERSONS not filing a

24 Rule 126-I-(2)(b) in the case belonging to an idol or a deity, by the manager of such idol or deity, whether known as shebait or manager or by any other name

(c) in the case of gold belonging to a person whose properties under the management of a Court of wards,  by the manager of such Court

(d) in the case of gold belonging to a person whose properties are under the management of any  administrator or receiver , by such administrator or receiver. 25 Rule 126– I(3) No person who is either a required to make a declaration or a further declaration under this rule  or exempted from making such declaration or further declaration under sub-rule (7) thereof, shall, after the  commencement of this Part, acquire any gold other than ornament except –  

(A) By succession, intestate, or testamentary, or (B) In accordance with a permit granted by the Administrator in this behalf

33

further  declaration under  sub­Rule (3)  cannot  be treated on  the

same footing.    

54. All this just  goes  to  show that the  violations committed by

PERSONS falling under different category cannot be treated alike.

If the rule were to be applied to all these categories of PERSONS

uniformly it would result in the violation of Article 14.  

55. The appellant’s case does not in our view calls for any

discretion to be exercised in his favor in the light of the totality of

the circumstances.  The non­filing of the declaration is established

to be an absolutely calculated violation of law.26  

56. Aggrieved by the determination of the fine amount of Rs.2.5

crores, the appellant carried the matter in appeal under Section 81

26 The Collector’s order of 24/09/1966 deals with the pleas taken by the Appellant regarding his non-declaration: “In his Reply, Shri Chhagan Lal Godavat stated that his letters dated 26.09.1920  and 3.3.1921were written

by him when he was a minor. He contended that he did not know how to write account books. He was also not fully aware of his “good” and “bad”. He did not even recollect which connection these letters were got(sic) written from him. He could recollect only that  these letters were written to check up the balance sheet by his ‘Munim’ Shri Rikhab Dass.  

He further stated that the  documents were got written under the influence of ‘Bhang’. The late ‘Munim’ Shri RikhabDass was keeping the gold.  It  is  likely that his mother,  Smt. Birju Bai may have told about it.  He expressed his ignorance about this gold till  the date of seizure. He did not know where the gold was kept. He, therefore, submitted that he cannot be proceeded against on the basis of the letters written by him at a time when he was a minor.

Chhagan Lal Godavat also disclosed that he and his mother had strained relations. She did not disclose the fact of buried gold to him fearing that he might dispose it off… “

The Superintended after ascertaining the true position of the relationship of Chagganlal found that “The mother denied there was any quarrel with her son. The house stand in the name of the ancestral firm of which Chagganlal is the sole proprietor. The statement of the mother was recorded in the presence of Shri Chhagan Lal Godavat was also signed the same”

34

of the GOLD ACT.  Two members of the appellate tribunal were not

able to agree upon the quantum of the fine.   While the Member

(Technical – Brahma Deva) opined that the law applicable is only

Rule 126­M(8)(a) of the RULES and the RULES did not make any

reference to the value of the gold for the purpose of determining the

quantum of fine.  He, therefore, opined that the quantum is entirely

the discretion of the adjudicating officer.  He,  however,  chose to

substitute his discretion for that of the adjudicating officer by

reducing the fine to Rs.25 lakhs from Rs.2.5 crores. Whereas the

Member (Judicial – Sankararaman) opined27  that the quantum of

fine  must be “in line with Section 73 of the Gold Control Act” and,

therefore, opined that the fine amount should not exceed Rs.12.5

lakhs (the value of the gold at the time of seizure).   In view of the

disagreement, the matter was referred to the third member of the

tribunal who agreed with the Member (Technical)’s view.

27 While agreeing with the approach taken by my learned brother Shri Brahma Deva for reduction of the fine amount in lieu of confiscation, I am, however, of the view that the quantum thereof should be in line with Section 73 of Gold Control Act after it was amended whereby redemption fine was not to exceed the value of the gold.  The term ‘value’ has also been defined in the Act as the marked price on the date of seizure.  Applying the said yardstick the fine in lieu of confiscation should not exceed Rs.12.50 lakhs which was the value of the seized goods at the time of seizure.  In the circumstances, I feel that the proposed reduction of fine from Rs.2.50 crores as determined by the Collector in the adjudication order passed de novo to a sum of Rs.25 lakhs is apparently based upon the fact that the law has been changed from the Defence of India Rules to Gold Control Act.  In view of the matter, the subsequent development of the maximum amount of fine under Section 73 of the Gold Control Act being reduced to the value of goods from twice that amount should also be taken into account.  In that event the fine amount in the present case should not exceed Rs.12.5 lakhs.  I am of the view accordingly that the fine should be reduced to Rs.12.5 lakhs.  

35

57. Aggrieved  by the same, the respondent sought a reference

under  Section 82B of the  GOLD ACT to the  High Court  on two

precise questions, which are already noted at para 7 (supra) and, in

our opinion, the questions were rightly framed.     

58. The High Court rightly came to the conclusion that the case of

the appellant is governed only by the RULES and not by Section 73

of the GOLD ACT and recorded at paras 20 and 21 of the impugned

judgment as follows:

“20. It is revealed from the material on record that the Collector aptly applied the market price of Gold at the rate of Rs.4,600 per 10 gms as on December 7, 1994, the date of adjudicating when the option was given by him to the respondent and on this basis, the price of total seized and confiscated Gold 240.040 kgs came to be 11.04 crores and the redemption fine cannot be in any way less than this.

21. Thus, in the ultimate analysis, it is candidly recorded that the quantity of redemption fine should be related to the market value of gold on 7.12.1994 i.e. the date of adjudication when the officer adjudging gave the owner of the Gold an option to pay fine in lieu of confiscation.   The amount of fine as adjudged to the tune of Rs.2.5 crores was totally arbitrary and irrational as it was not based on any sound and lawful reasoning.”

The High Court finally directed –  

“24. In view of the above, we deem it just and proper to direct the authorized officer to give an option afresh following above clinching observations to the owner of the  Gold asking him to pay the redemption fine in lieu of confiscation.”

36

59. Pursuant  to  the order of the High Court dated 29.06.2009,

answering the reference, the tribunal made an order dated

30.04.2010 remitting the matter to the Commissioner:

“4. Under the circumstances, we dispose of the appeal by way of remand to the Adjudicating Commissioner  (authorized officer) to determine appropriate redemption fine and allow the order of the gold to redeem the gold on payment of such redemption fine.   It goes without saying that while determining the redemption fine, he shall follow the cited order of the Hon’ble High Court dated 29.6.2009.”

Thereby, the Commissioner passed an order as follows:

“(i) An option is given to Shri Gunwant Lal Godawat and legal heir of late  Shri  Chhagan  Lal  Godawat to  pay  Rs.11.04 crores (Rupees Eleven crores and four lakhs only) in lieu of confiscation of the gold weighing 240.040.145 kgs under the erstwhile Defence of India Rules, 1962 within three months of receipt of this order.

(ii) In case Shri Gunwant Lal Godawat and the legal heir of late Shri Chhagan Lal Godawat does not exercise the option of depositing the amount of Rs.11.04 crores in the stipulated time limit, as given above, Shri Gunwant Lal Godawat and legal heir of late  Shri  Chhagan Lal  Godawat  shall  be  liable to return  to the Department immediately the gold weighing 185.145 kgs which was returned to them  on  2.7.94 in compliance of directions of the Hon’ble Rajasthan High Court given in the order dated 28.05.97.”

It must be remembered that the amount of Rs.11.04 crores was the

value of the gold as on the date (7.12.94) when the appellant was

given the option to pay the fine in lieu of confiscation.

60. However, it is argued before us by the appellant that:  

“Once the order of confiscation had been set aside and the matter

remanded back, the issue whether the gold is to be confiscated

was required to be adjudicated afresh.   The determination of the

law under the proceedings would continue has to be considered

37

“on the  date  of remand by the  High Court”…  Thus  the  pending

proceedings  under  Part  XII­A  of the  DoI  Rules,  will  have to  be

deemed to be continue under the Gold (Control) Act.”28

In other words, the argument advanced is that the law applicable to

the adjudgment proceedings is GOLD ACT ­ a submission plainly

untenable in light of the reasons given  by  us in the preceding

paragraphs and the decision of this Court in Jayantilal.  

61. A proceeding initiated under the RULES and pending as on the

date of the GOLD ACT will still have to be concluded in accordance

with the RULES in view of Section 116 of the GOLD ACT for the

reasons already noted at para 29.    

62. On the basis  of the  above­mentioned submission,  a  further

submission was made:

“The said rule (Ed: Rule 126 M (8)) grants the further discretion to impose a fine that is less than or more than the market value as on the date of seizure or of order of confiscation, as the case may be (however, redemption at a higher value would not make commercial sense since the buyer  will prefer buying from the market).   Section 73 read with Section 2(v) of the Act mandates that the redemption fine will not exceed the market value of the gold seized as on the date of seizure.

The Act takes away the discretion available to the officer to determine the relevant date for valuation by mandating the relevant date to be the date of seizure, which in any case is one of the methods available to the officer for calculating the redemption fine  under rule 126M(8).   Therefore, the  Act only reduces the discretion available under Rule 126M(8) with respect to the relevant date for calculation of the redemption fine.     The officer

28 Written submissions of the appellant.  

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continues to have the discretion to impose a fine lesser than the market value  as  on  the  date  of  seizure.  There is therefore  no inconsistency between the DoI Rules and the Act.”

63. The substance of the submission is that both the RULES and

the GOLD ACT provide for giving an option to the “owner” of the

gold adjudged to be confiscated.  While the  RULES  provide an

unrestricted discretion to the “officer adjudging” to determine the

amount of fine, GOLD ACT restricts the discretion by imposing an

upper limit on the quantum of fine that could be imposed by

declaring that  “give to the owner thereof an option to pay in lieu of

confiscation such fine, not exceeding the value”.   According to the

petitioner, such value is to be determined with reference to the date

of the seizure of the gold because of Section 73 of the GOLD ACT

read with Section 2(v) thereof.

64. At the outset, we must make it clear that there is nothing in

the text of Section 73 of the GOLD ACT which requires the value of

the  gold  (for the  purpose of  determining  the fine)  should be  the

value of the gold as on the date of the seizure.  But the expression

‘value’ is a defined expression under Section 2(v) of the Act.

“Section 73 ­ Power to give option to pay fine in lieu of confiscation­ Whenever any  confiscation is authorized by this Act, the officer adjudging  it  may, subject to such conditions as may be specified in the order adjudging the confiscation,  give to the owner thereof an option to pay in lieu of confiscation such

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fine, not exceeding the value29  of the thing in respect of which confiscation is authorized, as the said officer thinks fit.”

Section 2(v).  ‘value’, in relation to primary gold, article or ornaments, means,­

(i)  when  the  gold is  seized  under this  Act, the  market price of such gold as on the date of the seizure thereof,

(ii) when the gold is not available for seizure, the market price of such gold as on the date on which the notice referred to in section 79 is issued.”

65. The language of Section 73 is clear that it applies only to those

cases wherein confiscation is one which is authorised “by this Act”.

In our opinion, Section 73 would have no application to those cases

of confiscation which are adjudged under the RULES.  It would be

applicable only for those cases where the confiscation is authorised

by the GOLD ACT.   Section 7130 authorises the confiscation of gold

in respect of which  “any provision of  this Act  or any rule or order made

thereunder has been,  or is being, or is  attempted to be,  contravened”.  In

other words, Section 71 authorises the confiscation of gold if there

has been or  is  or  is  attempt to contravene the provisions of the

GOLD ACT i.e. only such contravention occur after the

commencement of the  GOLD ACT  but  not contravention  of law

which existed anterior thereto (the RULES).  

29 This rule originally provided for imposition of a fine not exceeding twice the value of the goods.  However, the  word “twice” was omitted by the Gold Control (Amendment) Act, 1971 (21 of 1971), Sec.3.  30 “Section 71. Confiscation of gold. (1) Any gold in respect of which any provision of this Act or any rule or order made thereunder has been, or is being, or is attempted to be, contravened , together with any package, covering or receptacle in which such gold is found, shall be liable to confiscation:”

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66. There is a distinction between acts done pursuant to the

authorization of a statute and acts done pursuant to the

authorization under a different statute or a statutory  instrument

but deemed to have been done under the earlier of the

abovementioned two statutes.  When a statute creates a fiction

requiring certain events which took place prior to the

commencement of such a statute to be deemed to have been done

under the statute, such a fiction does not retrospectively authorise

doing of such acts.   It only takes note of the existence of certain

state of affairs and creates putative state of affairs by declaring that

such anterior events should be deemed to have taken place under

the statute which came into existence later.   Such fictions could

only have limited consequences.  

67. Prior to the GOLD ACT, seizure and confiscation of gold were

authorised by the RULES.  Though, by virtue of the fiction created

under Section 116, the confiscations adjudged under the RULES

are deemed to be confiscations adjudged under the GOLD ACT, the

Scheme and the limitations of such fiction are already explained

earlier in para 29.  Therefore, neither Section 73 nor the definition

under  Section  2(v), in our opinion,  would be applicable for the

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confiscations adjudged under the RULES – pursuant to a seizure

that took place before the commencement of the GOLD ACT.

68. No doubt that the option to pay fine in lieu of confiscation is

one of the consequences flowing from the adjudgment of

confiscation.   Therefore, in view of the fiction under Section 116,

Section 73 of the GOLD ACT would have been applicable if

consequence of applying such fiction to the confiscations adjudged

under the RULES is not inconsistent with the GOLD ACT.  In view

of the  language of Section 73 – “confiscation authorised by  this Act”

limits the operation of Section 73 only to the confiscations adjudged

under the GOLD ACT.  Hence, there is an inconsistency.  We are of

the opinion that the High Court rightly held that Section 73 would

not come into play at all in the case on hand.   Therefore, the fine

amount cannot be determined on the basis of the value of the gold.

69. On the other hand, as rightly opined by the High Court, the

market value of the gold as on the date of the exercise of the option

by the owner of the gold to pay fine in lieu of the confiscation would

be the legally appropriate amount of fine.   Because it is a fine in

lieu of confiscation.   Confiscation would result  in the loss of the

entire property in the confiscated gold resulting in a financial loss of

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the value of gold to the owner.  Hence, the value of the gold is to be

determined with reference to the date on which the owner exercises

the option to pay the fine in lieu of the confiscation.     

70. One of the ancillary submissions made on behalf of the

appellant is that in view of the fact that the order of the Collector

dated 9.12.94 gave an option to the appellant to redeem the gold by

paying  a fine  of  Rs.2.5  crores in lieu  of confiscation  which  had

become final in view of the dismissal of the appeal of the

department on 23.5.1996.   Therefore, it was not open to the High

Court to hold that the appellant is liable to pay a redemption fine of

Rs.11.04 crores  in  a  reference  under  Section 82­B of the  GOLD

ACT.  The High Court could not sit in appeal on the judgment of the

Tribunal and substitute its opinion regarding the amount of fine to

be collected from the appellant  in view of the confiscation of his

gold.  

71. The submission of the appellant is required to be rejected for

the simple reason that the  determination  of the  amount  of fine

made by the tribunal was without any basis.   The conclusion of the

Tribunal that the fine in lieu of confiscation must be equal to the

value of the gold as on the date of its seizure is not based on any

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principle of law.   The correctness of the said conclusion was the

subject matter of the reference before the High Court.   The High

Court was completely justified in examining the correctness of the

legal basis on which the figure of Rs.12.5 lakhs was arrived at.  For

the reasons already recorded by us earlier, the High Court rightly

came to the conclusion that the fine in lieu of confiscation must

represent the value of the gold so confiscated as on the date

(9.12.94) the appellant was given an option to pay the fine in lieu of

confiscation.   Even according to the said order of the Collector, the

value of the gold as on that date was Rs.11.04 crores.   Therefore,

the High Court was right in its direction.

72. We are only left with one submission made on behalf of the

Union of India, i.e., in view of the enormous delay which took place

in the confiscation proceedings (50+ years), the appellant must be

made to pay the interest on the amount of fine of Rs.11.04 crores.

Otherwise, it would have the effect of permitting the appellant to

profit by litigation as according to the Attorney  General if the

appellant is permitted to take back the entire quantity of 240.040

kgs. of gold the current  market value  would be Rs. 72 crores

(approx.).   We find the submission wholly justified.   We, therefore,

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deem  it  proper to  direct that the  appellant  would be  entitled to

redeem the gold by paying not only the fine of Rs.11.04 crores but

also the interest thereon calculated @ 10% p.a.

73. The appeals are disposed of as indicated above.

….....................................J.                        (J. CHELAMESWAR)

…….………….....................J.                   (S. ABDUL NAZEER)

New Delhi November 22, 2017

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