Winston Tan Vs Union of India

04 October 2012
Supreme Court
Download

WINSTON TAN Vs UNION OF INDIA

Bench: R.M. LODHA,ANIL R. DAVE
Case number: C.A. No.-007207-007207 / 2012
Diary number: 21517 / 2009
Advocates: ANJANI AIYAGARI Vs SHREEKANT N. TERDAL

Page 1

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7207 OF 2012 (Arising out of SLP(C) No. 20420 of 2009)

Winston Tan & Anr. …… Appellants

Vs.

Union of India & Anr. …… Respondents

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

Page 2

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

Page 3

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)

Page 4

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 applied to the authorities

of Bangalore Mahanagar Palika for mutation of their names in the records

and for obtaining Khatha Certificate and assessment of taxes.

7. The Competent Authority, on 23.6.2005 passed an order

under Sections 7(1) and (3) of SAFEMA forfeiting the subject flat and

declaring that forfeited property stands vested in the Central Government

free from all encumbrances. It was held in the order that the subject flat

was not acquired by Mohd. Ismail Shabandari and Fathima Kauser Ismail

out of any legal earnings. The said flat had been sold stealthily after the

commencement of the proceedings under SAFEMA and the said transfer

in favour of the appellants on 10.2.2005 was null and void by virtue of the

provisions of Section 11 of SAFEMA.

Page 5

8. Subsequent to the passing of the above order, a further order

under Section 19(1) of SAFEMA was passed by the Competent Auhority

on 23.12.2005 directing Mohd. Ismail Shabandari and Fathima Kauser

Ismail to surrender/deliver possession of the forfeited flat within 30 days of

the receipt of order. In that order, it was reiterated that transfer/sale

effected by them subsequent to the notice under Section 6(1) was null and

void in view of Section 11 of SAFEMA. A copy of this order was sent by the

Competent Auhority to the present appellants.

9. It was then that the appellants filed a writ petition before the

Karnataka High Court for quashing the order dated 23.6.2005 forfeiting the

subject flat and for writ of mandamus to the Competent Authority not to

interfere with their peaceful possession and enjoyment in respect of the

subject flat. The above reliefs were sought on diverse grounds, including

that they had purchased the subject flat after thorough verification and

after obtaining encumbrance certificates for the period from 1.4.1990 to

4.1.2005 and after satisfying with the title of the vendors and also that

there was no charge or encumbrance created over the subject flat. They

claimed that they were bona fide purchasers for adequate consideration.

10. A counter affidavit was filed by the Competent Authority in

opposition to the writ petition. The appellants filed rejoinder to the counter

affidavit.

Page 6

11. The learned Single Judge of the High Court heard the parties

and considered the question that was raised before him as to whether the

appellants (petitioners therein) were entitled to a notice from the

Competent Authority before order of confiscation/forfeiture was passed

under SAFEMA. The Single Judge in his order dated 12.9.2007 held that

the sale in favour of the appellants had taken place on 10.2.2005, i.e.,

before the order of forfeiture was passed by the Competent Authority.

Although it was a fact that the first notice was issued under SAFEMA to the

transferors much before the sale had taken place, but in the opinion of the

Single Judge, the order dated 23.6.2005 was violative of the principles of

natural justice and, consequently, he quashed the same and remitted the

matter to the Competent Authority for fresh consideration.

12. A writ appeal was preferred by the Union of India and the

Competent Authority against the order of the Single Judge. The Division

Bench of the High Court held that the sale transaction in favour of the

appellants was subsequent to the issuance of notice under Section 6 and,

accordingly, the transaction was null and void under Section 11 of

SAFEMA. In the opinion of the Division Bench, the appellants were not

entitled to any notice and non-issuance of notice to them had not vitiated

the action taken by the Competent Authority.

Page 7

13. Mr. S.B. Sanyal, learned senior counsel for the appellants,

heavily relied upon the excepted clause of Section 2(2)(e) that protects a

transferee in good faith for adequate consideration and the observations

made by a 9-Judge Bench of this Court in Attorney General for India and

others v. Amratlal Prajivandas and Others1 in para 44 (Pg. 92) of the

Report observing, ‘So far as the holders (not being relatives and

associates) mentioned in Section 2(2)(e) are concerned, they are dealt

with on a separate footing. If such person proves that he is a transferee in

good faith for consideration, his property – even though purchased from a

convict/detenu – is not liable to be forfeited’. He referred to diverse

documents to show that the appellants had purchased the property after

due diligence and after obtaining certificates from Sub-Registrar,

Bangalore, that the subject flat was not encumbranced in any manner

whatsoever. Learned senior counsel would submit that the appellants had

obtained loan from the Vijaya Bank, Brigade Road Branch, Bangalore and

the title of the property was fully scrutinized by the Bank and its Panel

Advocate. The adequate consideration of Rs. 26,00,000/- was paid by the

Bank to the transferors which prima facie establishes that the appellants

are transferees in good faith for adequate consideration. Learned senior

counsel contended that the appellants were seeking an opportunity to be

1 (1994) 5 SCC 54

Page 8

given to them to prove before the Competent Authority that they were

transferees in good faith for adequate consideration and that is what was

done by the Single Judge and there was no justification for the Division

Bench to upset such a just order.

14. On the other hand, Mr. A.S. Chandhiok, Additional Solicitor

General, would submit that the purchase of the subject flat by the

appellants was after the issuance of notice under Section 6(1) to the

vendors by the Competent Authority. SAFEMA is applicable to one of the

vendors by virtue of Section 2(2)(b) and to the other vendor by virtue of

Section 2(2)(c). He argued that transaction of sale was null and void under

Section 11 and the appellants are not covered by the excepted category

of the ‘holder’ under Section 2(2)(e). He placed reliance upon a decision

of this Court in Aamenabai Tayebaly and Others v. Competent Authority

under SAFEMA and others2 and a decision of Madras High Court in

Competent Authority v. Parvathi Bai3.

15. SAFEMA came into effect from 05.11.1975. It, inter alia,

provides for forfeiture of illegally acquired properties of smugglers and

foreign exchange manipulators. Its applicability is provided in Section 2.

Sub-section (1) of Section 2 provides that the provisions of SAFEMA shall

only apply to persons specified in sub-section (2). Clause (b), amongst 2 (1998) 1 SCC 703 3 (2011) 6 MLJ 537

Page 9

others, covers the persons in respect of whom an order of detention has

been made under COFEPOSA and such order has not been revoked or

set aside in any of the situations set out in the four sub-clauses of the

proviso. Clause (c) of sub-section (2) of Section 2 applies to the relatives

of persons referred to in clauses (a) or (b) while clause (d) applies to the

associates of persons referred to in clauses (a) or (b). Clause (e) of sub-

section (2) of Section 2 refers to a holder of property. It reads as under :

“S. 2. Application.—(1) xxx xxx xxx

(2). The persons referred to in sub-section (1) are the following, namely: - (e) any holder (hereinafter in this clause referred to as the present holder) of any property which was at any time previously held by a person referred to in clause (a) or clause (b) unless the present holder or, as the case may be, any one who held such property after such person and before the present holder, is or was a transferee in good faith for adequate consideration.”

16. Section 3 defines various expressions. Section 3 (1) ©

defines ‘illegally acquired property’ which reads as follows:

“S. 3(1). In this Act, unless the context otherwise requires,--

(i) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets derived or obtained from or attributable to any activity prohibited by or under any law for the time being in force relating to

Page 10

any matter in respect of which Parliament has power to make laws; or

(ii) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets in respect of which any such law has been contravened; or

(iii) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets the source of which cannot be proved and which cannot be shown to be attributable to any act or thing done in respect of any matter in relation to which Parliament has no power to make laws; or

(iv) any property acquired by such person, whether before or after commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property referred to in sub- clauses (i) to (iii) or the income or earnings from such property ; and includes-

(A) any property held by such person which would have been, in relation to any previous holder thereof, illegally acquired property under this clause if such previous holder had not ceased to hold it, unless such person or any other person who held the property at any time after such previous holder or, where there are two or more such previous holders, the last of such previous holders is or was a transferee in good faith for adequate consideration;

(B) any property acquired by such person, whether before or after the commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property falling under item (A), or the income or earnings therefrom;”

Page 11

17. Section 4 prohibits holding of illegally acquired property which

reads as follows :

“S. 4. Prohibition of holding illegally acquired property.—(1) As from the commencement of this Act, it shall not be lawful for any person to whom this Act applies to hold any illegally acquired property either by himself or through any other person on his behalf.

(2) Where any person holds any illegally acquired property in contravention of the provision of sub-section (1), such property shall be liable to be forfeited to the Central Government in accordance with the provisions of this Act.”

18. Section 6 provides for issuance of show cause notice before

forfeiture of illegally acquired property while Section 7 provides for passing

of final orders in that behalf. These provisions read as under:-

“S.6. - Notice of forfeiture.--(1) If, having regard to the value of the properties held by any person to whom this Act applies, either by himself or through any other person on his behalf, his known sources of income, earnings or assets, any other information or material available to it as a result of action taken under section 18 or otherwise, the competent authority has reason to believe (the reasons for such belief to be recorded in writing ) that all or any of such properties are illegally acquired properties, it may serve a notice upon such person (hereinafter referred to as the person affected) calling upon him within such time as may be specified in the notice, which shall not be ordinarily less than thirty days, to indicate the sources of his income, earnings or assets, out of which or by means of which he has acquired such property, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties, as the case may be should not be declared to be illegally acquired properties and forfeited to the Central Government under this Act.

Page 12

(2) Where a notice under sub-section (1) to any person specifies any property as being held on behalf of such person by any other person, a copy of the notice shall also be served upon such other person.”

“S.7.- Forfeiture of property in certain cases.—(1) The competent authority may, after considering the explanation, if any, to the show-cause notice issued under section 6, and the materials available before it and after giving to the person affected (and in a case where the person affected holds any property specified in the notice through any other person, to such other person also) a reasonable opportunity of being heard, by order, record a finding whether all or any of the properties in question are illegally acquired properties.

(2) Where the competent authority is satisfied that some of the properties referred to in the show-cause notice are illegally acquired properties but is not able to identity specifically such properties, then, it shall be lawful for the competent authority to specify the properties which, to the best of its judgment, are illegally acquired properties and record a finding accordingly under sub-section(1). (3) Where the competent authority records a finding under this section to the effect that any property is illegally acquired property, it shall declare that such property shall, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances.

(4) Where any shares in a company stand forfeited to the Central Government under this Act, then the company shall, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or the articles of association of the company, forthwith register the Central Government as the transferee of such shares.”

19. Section 8 provides that burden of proving that property

specified in the notice served under Section 6 is not illegally acquired

property shall be on the person affected.

Page 13

20. Section 11 declares transfers of properties specified in the

notice issued under Section 6 null and void when such transfers are

effected after the issuance of notice. Section 11 reads as follows :

“11. Certain transfers to be null and void.—Whereafter the issue of a notice under section 6 or under section 10, any property referred to in the said notice is transferred by any mode whatsoever such transfer shall, for the purpose of the proceedings under this Act, be ignored and if such property is subsequently forfeited to the Central Government under Section 7, then, the transfer of such property shall be deemed to be null and void.”

21. Section 19 makes a provision for taking possession of the

property which has been declared to be forfeited to the Central

Government and where the person affected as well as any other person

who may be in possession of the property fails to surrender or deliver

possession. Section 19 reads as under :

“S. 19. Power to take possession.—(1) Where any property has been declared to be forfeited to the Central Government under this Act, or where the person affected has failed to pay the fine due under sub-section (1) of section 9 within the time allowed therefor under sub-section (3) of that section, the competent authority may order the person affected as well as any other person who may be in possession of the property to surrender or deliver possession thereof to the competent authority or to any person duly authorised by it in this behalf within thirty days of the service of the order.

(2) If any person refuses or fails to comply with an order made under sub-section (1), the competent authority may take possession of the property and may for that purpose use such force as may be necessary.

Page 14

(3) Notwithstanding anything contained in sub-section (2), the competent authority may, for the purpose of taking possession of any property referred to in sub-section (1), requisition the service of any police officer to assist the competent authority and it shall be the duty of such officer to comply with such requisition.”

22. The provisions of SAFEMA are stringent and drastic in nature.

They are designed to discourage law breaking and directed towards

forfeiture of illegally acquired properties. One of the concepts that centres

around the provisions of SAFEMA is to reach properties acquired illegally

by the persons who are covered by Clauses (a) to (e) of Section 2(2). The

provisions of SAFEMA are intended to apply to any property acquired by

persons covered by Clauses (a) to (e) of Section 2(2), whether before or

after the commencement, wholly or partly out of or by means of any

income, earnings or assets derived or obtained from or attributable to any

activity prohibited by or under any law for the time being in force.

However, SAFEMA is not applicable to holder of any property under

Section 2(2)(e) who proves that he is a transferee in good faith for

adequate consideration. The question that arises for consideration in this

appeal is, whether appellants who purchased the subject flat during

pendency of forfeiture proceedings are entitled to an opportunity to prove

that they are transferees in good faith for adequate consideration.

Page 15

23. In Amratlal Prajivandas1, a 9-Judge Bench of this Court

extensively considered the scheme and the provisions of SAFEMA and the

Act has been held to be constitutional. The observations in para 44 of

the Report in Amratlal Prajivandas1, upon which heavy reliance has been

placed by the learned senior counsel for the appellants, were made by this

Court while dealing with the question, whether the application of SAFEMA

to the relatives and associates of detenus was violative of Articles 14,19

and 21? It was submitted on behalf of the petitioners therein that the

relatives or associates of a person falling under Clause (a) or Clause (b) of

Section 2(2) of SAFEMA might have acquired properties of their own,

could be by illegal means, but there was no reason why those properties

be forfeited under SAFEMA just because they were related to or were

associates of the detenu or convict. This Court held that the relatives or

associates were brought in only for the purpose of ensuring that the

illegally acquired properties of the convict or detenu, acquired or kept in

their names, do not escape the net of SAFEMA. It was further observed

that it was not unknown that persons indulging in illegal activities screen

the properties acquired from such illegal activities in the names of their

relatives and associates, sometimes they transfer such properties to them

with an intent to transfer the ownership and title and it was immaterial how

such relative or associate held the properties of convict/detenu, whether as

Page 16

a benami or a mere name-lender or as a bona fide transferee for value or

in any other manner. Where a person is relative or associate as defined

under SAFEMA, he or she cannot put forward any defence on proof of the

fact that the property was acquired by the detenu, whether in his own

name or in the name of his relatives or associates. The Court allayed the

apprehension that the independently acquired properties of such relatives

or associates could be forfeited even if they were in no way connected with

the convict/detenu. This Court then made the observations, ‘So far as the

holders (not being relatives and associates) mentioned in Section 2(2)(e)

are concerned, they are dealt with on a separate footing. If such person

proves that he is a transferee in good faith for consideration, his property –

even though purchased from a convict/detenu – is not liable to be

forfeited”. We are afraid these observations have no application to a

transferee who has purchased illegally acquired property defined under

Section 3 from a detenu/convict and/or his relative or associate after

issuance of notice under Section 6 of SAFEMA. Section 2(2)(e) refers to

any holder of any property, which was at any time previously held by a

person referred to in clause (a) or clause (b) unless such holder proves

that he is a transferee in good faith for adequate consideration. The holder

talked of in Section 2(2)(e) does not cover a holder who is a transferee of

the property after issuance of notice under Section 6. It is so because

Page 17

Section 11 makes it manifest that if any property referred to in the notice

under Section 6 or under Section 10 is transferred by any mode

whatsoever, such transfer shall be ignored for the purposes of proceedings

under SAFEMA and if such property is subsequently forfeited under

Section 7 then the transfer of such property shall be deemed to be null

and void. On issuance of notice under Section 6, a moratorium is placed

on transfer of property referred to in the notice. Any transfer of such

property (the property referred to in Section 6 notice) is prohibited.

24. In Aamenabai Tayebaly2, this Court had expressly held that

the transaction of transfer effected after the issuance of notice under

Section 6 is of no legal consequence and such transfer does not confer

any title on the transferee. Aamenabai Tayebaly2 was a case where one

Talab Haji Hussein Sumbhania was detained under Section 3(1) of

COFEPOSA by an order dated 2.4.1976. Before the detention order, in

February, 1975, Tahira Sultana, second wife of Talab Haji Hussein

Sumbhania purchased a flat in Mumbai. On 15.2.1977, a notice was

issued by the Competent Authority under Section 6(1) of SAFEMA to

Tahira Sultana calling upon her to show cause why the said flat should not

be forfeited as the illegally acquired property of the COFEPOSA detenu,

her husband. On 12.10.1977, a forfeiture order relating to that flat was

passed under Section 7. The said order was challenged by her in the

Page 18

Bombay High Court. She undertook before the High Court not to alienate

the said flat. However, on 30.7.1981, Tahira Sultana sold the said flat to

Tayab Ali in breach of the undertaking given to the High Court. Tayab Ali

received an information on 5.11.1982 that the flat purchased by him was

already forfeited by the Central Government and based on that information

he filed a writ petition before Bombay High Court on 13.12.1982. Tayab Ali

raised the plea that he was a bona fide purchaser for value without notice.

The High Court dismissed the writ petition filed by Tayab Ali and

consequently the order of the Competent Authority forfeiting the flat was

confirmed. The matter reached this Court at the instance of successor in

interest of Tayab Ali. In the backdrop of these facts, this Court referred to

Section 11 of SAFEMA (Pgs. 713-714) and then proceeded to hold as

under:

“It is no doubt true that on the express language of the said section transfer of any property pending the proceedings under Section 6 or 10 of the said Act and prior to the order of forfeiture shall be treated to be null and void. The purchaser's transaction is after the order of forfeiture of the said property. Still the consequence of the said transaction being null and void could not be avoided by the purchaser on the plea that this transaction was subsequent to the original order of forfeiture. The original order of forfeiture was stayed at the time of the purchase. It got confirmed by the Bombay High Court ultimately when the Miscellaneous Petition No. 1680 of 1977 moved by Tahira Sultana was disposed of and the subsequent Writ Petition No. 1527 of 1995 was dismissed by the High Court and the SLP filed by her in this Court was also dismissed. We may

Page 19

also note that as the Miscellaneous Petition No. 1680 of 1977 was withdrawn on 19-6-1995 and ultimately the forfeiture order came to be confirmed in the subsequent Writ Petition No. 1527 of 1995 on 21-8-1995, the transaction of transfer in favour of Tayab Ali would be said to have been effected after the notice under Section 6, issued to Tahira Sultana, and before the order of forfeiture ultimately got confirmed by the High Court and by this Court and which had back effect of confirming the same from 1977. It must, therefore, be held that the transaction of purchase by the appellants' predecessor Tayab Ali was also hit by Section 11 of SAFEMA. Consequently in 1981 when the purchaser purchased this property from Tahira Sultana she had no interest in the said flat which she could convey to the appellants' predecessor. In substance it amounted to selling of Central Government's property by a total stranger in favour of the purchaser. No title, therefore, in the said property passed to the appellants' predecessor …..”

(Emphasis Supplied)

25. The above position wholly and squarely applies to the present

case. Admittedly, SAFEMA was applicable to both vendors here. One of

the vendors, a detenu, who was covered by Section 2(2)(b), was issued

notice way back on 8.12.2003 under Section 6(1) of SAFEMA. The other

vendor, wife of the detenu, was also issued notice under Section 6(1) in

2004 once it transpired that she held 50% share in the said flat. Both

vendors were served with notices under Section 6(1) before transaction of

sale in favour of the appellants. After the issuance of notices under

Section 6(1) of SAFEMA to the vendors, the transaction of sale in favour of

the appellants has to be ignored by virtue of Section 11 and on passing of

Page 20

the order of forfeiture under Section 7, the sale in favour of the appellants

had become null and void. The order of forfeiture dated 23.06.2005 under

Section 7 of SAFEMA relates back to the issuance of first notice under

Section 6(1) to one of the vendors.

26. Section 11 is unequivocal and its object is clear. It intends to

avoid transfer of property by the persons who are covered by clauses (a)

to (e) of sub-section (2) of Section 2 during the pendency of forfeiture

proceedings. The provision says that for the purposes of proceedings

under the Act, transfer of any property referred to in the notice under

Section 6 or under Section 10 shall be ignored. In respect of a transfer

after issuance of notice under Section 6, the property referred to therein,

the holder cannot set up plea that he is a transferee in good faith or a bona

fide purchaser for adequate consideration. Such plea is not available to a

transferee who has purchased the property during pendency of forfeiture

proceedings.

27. Learned Additional Solicitor General referred to a decision of

Madras High Court in the case of Parvathi Bai3. The Division Bench of

Madras High Court referred to the two decisions of this Court in Amratlal

Prajivandas1 and Aamenabai Tayebaly2 and after noticing the relevant

provisions of SAFEMA held that the protection given to a bona fide sale

under Section 2(2)(e) would not extend to a sale made subsequent to the

Page 21

issuance of notice under Section 6 and in violation of Section 11 of

SAFEMA. We are in complete agreement with the view of the Madras High

Court in Parvathi Bai3.

28. It is true that the appellants had obtained encumbrances

certificates from the Sub-Registrar prior to purchase which show that there

were no encumbrances to the subject flat. It is also true that the appellants

had obtained loan from Vijaya Bank, Brigade Road Branch, Bangalore for

purchase of the said flat. It is a fact that sale consideration to the tune of

Rs. 26 lakhs was paid directly by the Bank to the vendors after the Bank

was satisfied about the title of the vendors. The appellants had also

mortgaged the flat with the Vijaya Bank as a security towards loan. But

unfortunately these facts are of no help to the appellants as the sale in

their favour was effected after notices under Section 6(1) were issued to

the vendors. Such sale has no legal sanction. The sale is null and void on

the face of Section 11; it is not protected so as to enable the purchaser to

prove that he is transferee in good faith for adequate consideration. As a

matter of law, no title came to be vested in the appellants by virtue of sale-

deed dated 10.02.2005 as the vendors could not have transferred the

property after service of the notice under Section 6(1) and during

pendency of forfeiture proceedings under SAFEMA. The title in the subject

flat is deemed to have vested in the Central Government on or about

Page 22

08.12.2003 when the first notice under Section 6(1) was issued and served

on one of the vendors. The vendors ceased to have any title in the subject

flat on the date of transfer i.e. 10.02.2005. They had no transferable right.

The appellants cannot claim any right in the flat. In the circumstances,

question of according any opportunity to the appellants to prove that they

are transferees in good faith with adequate consideration does not arise.

29. In view of the above, we find no merit in the appeal. The

impugned order does not call for any interference. Civil Appeal is

dismissed with no order as to costs.

…………………….J. (R.M. Lodha)

…………………….J. (Anil R. Dave)

NEW DELHI. OCTOBER 4, 2012.