Col. Sawai Bhawani Singh & Ors vs Union Of India & Ors on 28 April, 2010

[Cites 33, Cited by 0]

Delhi High Court

Col. Sawai Bhawani Singh & Ors vs Union Of India & Ors on 28 April, 2010

1. The Petitioners state that they are members of the Hindu Undivided Family („HUF‟) of late Maharaja Sawai Man Singhji (hereafter late „Maharaja‟). By this petition they have challenged the validity of an order dated 31st March 1981 passed by the Department of Revenue, Ministry of W.P. (Civil) No. 2363/1981 Page 1 of 26 Finance, Government of India under the provisions of the Gold (Control) Act, 1968 („GCA‟) disposing of their revision application. The impugned order holds the confiscation of 11.512 kg of gold coins and ornaments forming part of Lakshmi gold buried in the foundation of Moti Doongri Palace and of 644 gold coins to be unsustainable in law. The penalty of Rs. 5 lakhs imposed on Petitioner No. 1 Col. Sawai Bhawani Singh, as the karta of the HUF, was remitted. However, the seizure and confiscation of the remaining gold was sustained and the fine in lieu of confiscation of such gold was reduced from Rs. 1.5 crores to Rs. 80 lakhs. To that extent the Petitioners were still aggrieved and therefore filed this petition. Background Facts

2. Between 11th February 1975 and 13th June 1975, the officers of the Income-tax Department acting under the authorization of the Director of Inspection (Investigation), conducted searches under Section 132 of the Income Tax Act, 1961 („IT Act‟) at various premises at Jaipur belonging to and/or occupied by the members of the erstwhile ruling family of Jaipur, including the petitioners. The authorized officers came across considerable quantities of gold in the form of coins, bars, sovereigns, pieces as well as in the form of articles/ornaments including studded and unstudded jewellery. On coming to know of this find, the Gold Control Officers of Jaipur also associated themselves with the search operations. They had search warrants under Section 58 (2) of the GCA. Gold coins, sovereigns, gold bars/mohars, studded and unstudded gold ornaments, gold biscuits with foreign markings, primary gold, two broken pieces of articles of gold and gold coins/mohars/sovereigns issued by different rulers of the erstwhile Indian W.P. (Civil) No. 2363/1981 Page 2 of 26 States were also seized from the ground pit and cupboards of the Moti Doongri Palace (Takht-i-Shahi) and from beneath and corner of the Moti Doongri Strong Room, Raj Bagh Palace and Rajmahal Palace. The total quantity of gold seized was 867 kgs 961.200 gms Apart from this, 1728 silver coins weighing 19 kgs 878 gms were also seized.

The Collector's order

3. Two separate show cause notices were issued to the Petitioners under the GCA. The first dated 22nd August 1975 was in respect of gold weighing 867.961.200 kgs and silver weighing 19.878.000 kgs. The second show cause notice dated 3rd September 1975 was in respect of gold weighing 27.145.500 kgs and silver weighing 1.172.75 kgs. After replies were filed to the show cause notices, the Collector of Central Excise and Customs passed an order dated 7th February 1977 holding that the Petitioners had contravened Sections 8 and 16 GCA and had therefore rendered themselves liable to penal action under Section 74 GCA. A penalty of Rs. 5 lakhs was imposed on the Petitioner No.1 Col. Sawai Bhawani Singh in his capacity as the karta of the HUF (incidentally Col. Sawai Bhawani Singh is also arrayed as Petitioner No. 2 herein in his individual capacity). The Collector decided not to take any penal action against Smt. Gayatri Devi and Shri Jai Singh, Petitioner Nos. 3 and 4 respectively, since both of them in their replies stated that Petitioner No.1 was the karta of the HUF and as such he represented all of them. The Collector also ordered the confiscation of the primary gold, gold articles and gold ornaments weighing 895.106.700 kg seized from the different palaces belonging to the parties and mentioned in the two show cause notices under Section 71 (1) GCA. It was directed that the seized gold W.P. (Civil) No. 2363/1981 Page 3 of 26 would however be released and handed over to the owners on payment of a fine of Rs. 1.50 crores in lieu of confiscation, as provided for under Section 73 GCA. The option to redeem the same had to be exercised within three months from the date of receipt of the order. After redemption, the primary gold, except gold mohars and other gold articles of ancient origin and historical interest, were permitted to be sold to a licensed dealer or got converted into ornaments. A certificate has to be furnished by the owners within one month of taking back the gold into their possession. As regards the gold mohars and other gold articles of ancient origin and historical interest, they were not to be melted but registered with the competent authorities under the Antiquities & Treasures Act, 1972. The Administrator's order in appeal

4. Aggrieved by the above order, the Petitioner filed a Gold Control Appeal which was disposed of by an order dated 31 st March 1980 passed by the Gold Control Administrator („Administrator‟) under the Department of Revenue, Ministry of Finance, Government of India. It was held by the Administrator in the aforementioned order dated 31st March 1980 that the source of the seized gold had been fully explained and was covered by the gold mentioned in the Covenant of 1949 entered into by the erstwhile Maharaja of Jaipur with the Government of India at the time of the merger of Jaipur State with the United States of Rajasthan. It was held that the late Maharaja who died on 24th June 1970 did receive the Jaipur coins as „Nazrana‟. It was further held that "the source of no gold remained unexplained" and "no gram of gold seized had absolutely any link with smuggling." The Administrator agreed with the appellants that "there was no W.P. (Civil) No. 2363/1981 Page 4 of 26 need to confiscate the Lakshmi gold consisting of 11.512.400 kgms. It is customary to place such gold beyond the reach of human beings in the foundation of palaces. Thirdly, the four pieces of gold in Item E (1) weighing 4.285.000 kgs are part of the photo frame and hence articles covered by the declaration made. Further 10.856.000 kgs coins are of numismatic value and there is no offence in possessing them." The Administrator held that the Petitioner No.1 Col. Sawai Bhawani Singh had no knowledge of the existence of the huge quantity of gold buried in the pit in the strong room. However, as the karta of the HUF, he did not seem to have taken steps to assert his authority or to discharge his responsibility. Impliedly negativing the Appellants‟ contention that the Government was fully aware of the existence of such gold and was expected to keep a track of the possession of huge quantities of such gold from its own records, it was held that "this is no excuse for the clear cut omission which is there on the part of the karta of the HUF consisting of erstwhile ruling family of Jaipur." Accordingly, the confiscation order was held to be justified. Nevertheless, the fine was reduced from Rs. 1.50 crores to Rs. 1 crore. The personal penalty of Rs. 5 lakhs on Col. Sawai Bhawani Singh, Petitioner No.1 as the karta of the HUF was sustained.

Order of the Central Government in Revision

5. Aggrieved by the above order of the Administrator, the Petitioners filed a revision application before the Central Government. By the impugned order dated 31st March 1981 the Special Secretary to the Government of India, Department of Revenue, Ministry of Finance disposed of the said revision in the following terms:

W.P. (Civil) No. 2363/1981 Page 5 of 26

(a) The view of the Administrator that there was no smuggling of gold and that since the origin of the gold had been explained, the case did not deserve to be viewed seriously, was concurred with.

(b) Merely because the late Maharaja as the karta of the HUF had failed to declare the gold in question, it would be against the canons of natural justice and equity if the other members of the HUF were deprived of their legitimate share.

(c) At the highest, the entire share of the late Maharaja could be confiscated.

(d) There was no justification for the confiscation of Lakshmi gold which was buried at the time of construction of the palace and which consisted of 16 gold coins, studded and unstudded gold ornaments weighing in all 11.512 kgs.

(e) However, four pieces of gold in item E (1) which were part of the photo frame could not be held to be covered by the declaration made since they were not to be found in the list attached to the declaration.

The list included only hookas and gold plated articles.

(f) There was no justification for confiscation of 644 gold coins weighing 4.281 kgs mentioned as item B (3) of the Administrator‟s order since they were declared.

W.P. (Civil) No. 2363/1981 Page 6 of 26

(g) After deducting the value of Lakshmi gold as well as the value of 644 gold coins, both of which were not liable for confiscation, the value of the remaining gold worked out to about Rs. 483 lakhs. One- sixth share of this would be slightly more than Rs. 80 lakhs. This would be the share of the late Maharaja.

(h) Thus, while setting aside the confiscation of 11.512 kgs of gold coins and ornaments as well as 644 gold coins weighing 4.281 kgs, the fine in lieu of confiscation for the remaining gold was reduced from Rs. 1.5 crores to Rs. 80 lakhs.

(i) It would be wrong to hold Petitioner No.1 as the karta of the HUF guilty of the offence of not declaring the gold in question. He had risked his life in the service of the nation and had been awarded the Mahavir Chakra for his gallantry during the 1971 Indo-Pakistan Operations. Petitioner No.1 could not be held responsible for any contravention. The penalty of Rs. 5 lakhs imposed on him was remitted.

Fine and penalty paid

6. It requires to be noticed that soon after the Collector passed an order dated 7th November 1977 Petitioner No. 1 Col. Sawai Bhawani Singh exercised the option and paid the fine of Rs. 1.5 crores in lieu of confiscation. He also paid the personal penalty of Rs. 5 lakhs and took delivery of the seized gold. He also informed the Collector on 27th March 1978 of his compliance with the Collector‟s directions about the disposal of the gold so released to him on W.P. (Civil) No. 2363/1981 Page 7 of 26 payment of fine in lieu of compensation. In the written submissions subsequently filed by the Petitioners it has been pointed out that even the gold which was so redeemed was sold as per the orders of the Collector and all the proceeds realized went towards payment of taxes and repayment of loans obtained from the bank for paying the redemption fine. Later, after the amount of redemption fine was reduced from Rs. 1.50 crore to Rs. 80 lakhs by the central government and the penalty amount of Rs. 5 lakhs was remitted, those amounts were also attached by the authorities. It is stated that even though later the confiscation was quashed in respect of the share of gold of the Petitioners it could not give any actual benefit to them. Therefore, the present petition was confined to the challenge to the imposition of a fine of Rs. 80 lakhs in lieu of confiscation which has already been paid to the Central Government.

7. During the pendency of this case, Petitioner No. 3 Rajmata Gayatri Devi expired and her legal representatives have been brought on record.

8. At one stage it is urged before this Court that Suit No. 870 of 1986 was pending in this Court in which the question was whether the HUF of the late Maharaja was in existence. It was submitted that till such time the said suit was decided, the present petition should be deferred. It was further pointed out that Income Tax Reference No. 438 of 1983 has also been adjourned sine die on the same ground.

9. Although the present petition was also being adjourned from time to time for the same reason, this Court felt that the question arising for consideration W.P. (Civil) No. 2363/1981 Page 8 of 26 in the present petition could be decided independent of the outcome of the suit. If the Petitioners succeeded, the said amount would become refundable to the estate of the late Maharaja and if not, the writ petition would in any event be dismissed. If any amount was recoverable after accounting for any other undisputed statutory or determined legal liability the question of the respective shares of the individual Petitioners could thereafter be decided in accordance with the decision in Suit No. 870 of 1986.

Submissions of counsel

10. This Court has heard the submissions of Mr. Shyam Moorjani, Advocate for Petitioner Nos. 3 and 4, Mr. Manoj Kumar Rathi, learned counsel for the Petitioner Nos. 1 and 2 and Mr. S.K. Dubey, learned counsel for the Respondents.

11. Among the questions raised by Mr. Moorjani, the principal one is, whether the provisions of Sections 71, 78 and 79 GCA envisage an action against a dead person and consequently, whether the gold falling to the share of a dead person can be ordered to be confiscated. It is submitted that the language in Sections 71, 78 and 79 indicated that action has to be taken only in presenti against a living person and not against a dead person. No action can be taken without giving a show cause notice to the owner and without giving an opportunity of being heard. This requirement can never be fulfilled in respect of a dead person. Reliance is placed on the decisions in Commissioner of Income-tax Bombay v. Ellis C. Reid AIR 1931 Bombay 333, The Commissioner of Income-tax, Bombay v. James Anderson AIR 1964 SC 1761 and Commissioner of Income-tax, Bombay City -1, Bombay W.P. (Civil) No. 2363/1981 Page 9 of 26 v. Amarchand N. Shroff AIR 1963 SC 1448.

12. It is pointed out that the late Maharaja died on 24th June 1970 and during his lifetime, no action was initiated under the GCA. The show cause notices against the Petitioners were issued only on 22nd August 1975 and 3rd September 1975 respectively. There was no legal basis to proceed against the legal heirs of a dead person for any liability arising under the GCA for an omission on the part of such dead person. Further, the legal heirs had satisfactorily explained their position which had been accepted by the authorities under the GCA as well as the Central Government. It had been held that they could not be answerable for the omission of the late Maharaja to make a declaration of the gold held by him. In the circumstances, there was no justification in determining the „notional‟ share of the late Maharaja and ordering confiscation and levying a fine in lieu of confiscation on that basis. It is also submitted that in any event, the redemption fine to the extent of the whole value of the 1/6th share of the late Maharaja was arbitrary and wholly unjustified.

13. It is submitted that at the time of confiscation, between 11th February and 13th June 1975, the entire property of the late Maharaja had devolved on his legal heirs, i.e. the Petitioners. Therefore, the property no longer remained that of the late Maharaja. As far as the legal heirs were concerned, they had explained their position to the complete satisfaction of the authorities. Therefore, there was no question of confiscation of any gold said to belong to the late Maharaja in terms of the GCA. It is pointed out that the late Maharaja had duly declared the entire gold at the time the Covenant was W.P. (Civil) No. 2363/1981 Page 10 of 26 drawn up. The declared gold was listed out in the Schedule to the Covenant of 4th April 1949 between the Maharaja and the Government of India. Further, on 8th February 1963 the Maharaja made a declaration under the Defence of India Rules. It is submitted that declarations so made could be taken to be sufficient for the purposes of the GCA and the failure to make a separate declaration under the GCA should be viewed as an irregularity at the highest. Moreover, no sooner did the Petitioner No.1 realize that there was gold in the possession of the legal heirs, he made a declaration under the Voluntary Disclosure Scheme (VDS) under the Income-tax Act and the Collector of Customs and the Gold Control Officer before the searches took place. Therefore, the existence of the gold was in the knowledge of the Central Government even prior to the searches. In the circumstances, there was no justification for imposing a penalty of Rs. 80 lakhs in lieu of confiscation.

14. Mr. S.K. Dubey, learned counsel appearing for the Respondents on the other hand submitted that the liability to make a declaration of the gold possessed by a person did not cease upon his death. It continued even thereafter. The liability was in rem and not in personam. Reliance is placed upon the decisions in Union of India v. Mustafa & Najibai Trading Co. (1998) 6 SCC 79 and State of West Bengal v. Sujit Kumar Rana (2004) 4 SCC 129. He argued for a purposive construction of the relevant provisions of the GCA which made the non-declaration of gold punishable in law and the holder of the gold liable to penalty. He submitted that the petitioners had already been given every possible relief under the orders in appeal and later in revision. The value of the gold seized was much higher than the W.P. (Civil) No. 2363/1981 Page 11 of 26 redemption fine. The order in revision was a fair and reasonable one which did not call for interference.

Can proceedings under the GCA be maintained against a dead person?

15. The conspectus of the orders passed by the authorities under the GCA, the Administrator in appeal and the Central Government in revision show that the area of dispute has narrowed down considerably. The impugned order dated 31st March 1981 reveals that the Central Government had accepted most of the contentions advanced on behalf of the Petitioners. In effect, none of the individual legal heirs was found liable under the GCA for any failure to make a declaration of the gold held by all of them collectively through the karta of the HUF i.e. Petitioner No.1.

16. Significantly, the Administrator was satisfied that "the source of the gold seized is fully explained and they are fully covered by the gold mentioned in the covenant." The reference was to the Covenant entered into on 4th April 1949 between the Maharaja and the Government of India, a copy of which is part of the record. Appended to the Covenant in Item 4 (b) of List 2 is a detailing of all the movable properties of the Maharaja. Under the heading „List of Gold Mohars, Sovereigns and Gold Bullion‟ is included 1,30,625 Jaipur Gold Mohars, 487 sovereigns, 1,031-1/2 gold coins, gold weighing 25,797 tolas and one gold piece in a mohar size. In the circumstances the Administrator concluded that "no gram of gold seized has absolutely any link with smuggling." If the main object of the GCA was to prevent and punish smuggling of gold then clearly the above finding by itself should have been sufficient for the entire proceedings to be held illegal and treated W.P. (Civil) No. 2363/1981 Page 12 of 26 as closed.

17. The Central Government agreed with the above finding and held that the confiscation of the Lakshmi gold weighing 11.512.400 kgs as well as 10.858.000 kgs gold was not justified. The Central Government also agreed that the confiscation of 644 gold coins was not justified. However, while the Administrator in his order dated 31st March 1980 held that four pieces of gold in Item No. E (1) weighing 4.285.000 kgs were part of the photo frame and hence articles covered by the declaration, the Central Government differed and held that they were not so included and therefore not declared. It is not understood how in a revision application filed by the Petitioners, such a finding could be rendered by the Central Government.

18. Be that as it may, no provision of the GCA has been cited either by the Administrator or the Central Government to justify the determination of the „nominal‟ one-sixth share of the total value of the gold as that of the late Maharaja‟s and valuing it at "slightly more than Rs. 80 lakhs" and further ordering that a fine to that extent should be imposed in lieu of confiscation of the seized gold. In other words, no legal justification has been shown either by the Administrator or the Central Government for the continuation of the proceedings against the late Maharaja under the GCA and making him liable thereunder five years after his death.

19. Nevertheless, in view of the submissions advanced at the bar, this Court proposes to undertake an analysis of the provisions of the GCA to determine if the submission on behalf of the Respondents is legally tenable. Section 8 W.P. (Civil) No. 2363/1981 Page 13 of 26 (1) GCA states that no person shall (i) own or have in his possession, custody or control or (ii) acquire or agree to acquire the ownership, possession, custody or control of; or (iii) buy, accept or otherwise receive or agree to buy or otherwise receive; any primary gold. Section 8 (2) contains a similar provision concerning ornaments which required to be included in a declaration and have not been so included. Section 8 (3) deals with articles of gold. Under Section 16 of the GCA mandates that every person who owns, or is in possession, custody or control of any article or ornament at the commencement of the GCA shall make within thirty days from such commencement or from such acquisition, as the case may be a declaration in the prescribed form as to the "quantity, description and other prescribed particulars of any article, or ornament, or both, owned, possessed, held or controlled by him". The two provisos to Section 16 envisage situations where such a declaration need not be made by such person.

20. The tenor of the above provisions of the GCA indicate clearly that the liability under the GCA is of a person who is alive and not one who is dead. The above position gets further strengthened by Section 16 (2) (e) which states that "for the removal of doubts, it is hereby declared that the declaration referred to in this section shall be made, in relation to any article, or ornament, or both vested in an executor or an administrator of a will or other testamentary disposition, by such executor or administrator". Therefore there is no question of a dead person being made liable for making a declaration under the GCA. It is not the case of the Respondents that there is any Will or testamentary disposition of the late Maharaja by virtue of which an executor or administrator was required to file any declaration. In W.P. (Civil) No. 2363/1981 Page 14 of 26 any event, that is not the case made out in the show cause notices.

21. The GCA does not contain any provision which indicates what should happen if a person who was supposed to make a declaration during his life time fails to do so and later, after his death, the said default is discovered. The GCA also does not contain any provision whereby the liability for the failure by the deceased person to make a declaration during his lifetime gets transferred to his legal heirs. Under Section 16 (3) it is possible to fasten liability on a person on whom the gold devolves for not making a declaration. There is, under Section 99 GCA, a presumption of ownership of the person in whose possession the gold is found. Still, there is no provision which states that the liability of a person under the GCA survives his death. The inescapable conclusion is that proceedings under the GCA which have not been initiated against a person during his lifetime cannot be initiated and continued against his estate after his life time.

22. There are other aspects which buttress the above conclusion. Section 71 of the GCA provides for confiscation of any gold in respect of which there is a contravention of any provision of the GCA. Section 74 provides for imposition of penalty for the same event. These provisions are located in Chapter XIII under the heading "Confiscation and Penalties." They are of a quasi-criminal nature and admit of strict construction particularly since they entail severe consequences for the person in contravention. For instance, while passing an order imposing a penalty under Section 74 for a contravention of Section 16 GCA, the adjudicating authority can under Section 16 (12) direct the person so penalized to make the declaration within W.P. (Civil) No. 2363/1981 Page 15 of 26 a particular time. The failure to do so entails a punishment with imprisonment of a period up to two years in terms of Section 86 GCA. Therefore, the failure to make a declaration has penal and punitive consequences. This is the background against which the provisions in Chapter XIV GCA which spell out the mandatory procedure that has to be followed before any confiscation can take place or any penalty imposed have to be viewed. Section 78 provides for a statutory adjudication by the Gold Control Officer and Section 79 talks of "giving an opportunity to the owner of the gold etc." Section 79 of the GCA reads as under:

"79. Giving of an opportunity to the owner of gold etc.

- No order of adjudication of confiscation or penalty shall be made unless the owner of the gold, conveyance, or animal or other person concerned is given a notice in writing -

(i) informing him of the grounds on which it is proposed to confiscate such gold, conveyance or animal or to impose a penalty; and

(ii) giving him a reasonable opportunity of making a representation in writing within such reasonable time as may be specified in the notice against the confiscation or imposition of penalty mentioned therein and, if he so desires of being heard in the matter:

Provided that the notice and the representation referred to in this section may, at the request of the owner or other person concerned, be oral:

Provided further that where no such notice is given within a period of six months from the date of the seizure of the gold, conveyance or animal or such further period as the Collector of Central Excise or of Customs may W.P. (Civil) No. 2363/1981 Page 16 of 26 allow, such gold, conveyance or animal shall be returned after the expiry of that period to the person from whose possession it was seized.

Explanation - Where any fresh adjudication is ordered under this Act, the period of six months specified in the second proviso shall be computed from the date on which such order for fresh adjudication is made."

23. Although in the show cause notices in the instant case the case was that the failure to make declaration was that of the petitioners, in the adjudication that followed that was held to be not proved even by the authorities themselves. The only liability found and sought to be enforced was that of the late Maharaja who was dead five years prior to the show cause notice. There is no provision in the GCA that permits this. Sections 71, 73 and 79 of the GCA do not permit instituting proceedings under the GCA against a person five years after his death much less seizing gold notionally determined to belong to him. Also, no such determination could be arrived at without following the mandatory procedure under Sections 78 and 79 vis-a- vis such person. There is a plain impossibility of complying with Section 79 GCA vis-à-vis a dead person.

24. In Commissioner of Income-tax v. Ellis C. Reid the Division Bench of the Bombay High Court while interpreting the Section 2 (2) of the Income- tax Act 1922 and the definition of „assessee‟ under Section 2 (2) thereof, held that it refers only to a living person and not a dead person. It was held that in construing a taxing statute the Court is not justified in straining the language in order to hold a subject liable to tax. It was emphasised that fiscal W.P. (Civil) No. 2363/1981 Page 17 of 26 statutes must be interpreted strictly in favour of the subject. The treasury could not tax without the express permission of the legislature.

25. Likewise, in Commissioner of Income-tax, Bombay City I, Bombay v. Amarchand N. Shroff the Supreme Court held that Section 24-B of the Income-tax Act 1922 does not authorise levy of tax on receipts by the legal representatives of a deceased person in the years of assessment succeeding the year of account being the previous year in which such person died. It was explained that Section 24 B was enacted to bring to tax after the death of a deceased, income received during his life time. To fill up the lacuna which was pointed out by the Bombay High Court in Commissioner of Income-tax v. Ellis C. Reid Section 24 B had been inserted. However, it did not extend the tax liability of the Estate of the deceased person "beyond the previous or the account year in which that person dies."

26. Thereafter, in The Commissioner of Income-tax, Bombay v. James Anderson AIR 1964 SC 1761 it was held that for the purpose of Section 24 B of the Income-tax Act, the legal personality of the deceased person came to an end at the end of the account year "in which such person died and that no tax could be levied on the dividends deemed to have been received by him or his legal representative after the end of that year."

27. The above legal position as regards a fiscal statute should a fortiori apply to the confiscation and penalty provisions of the GCA which are quasi-criminal in nature. Section 85 GCA talks of punishment for illegal possession etc. of gold. As already noticed, Section 71 talks of confiscation W.P. (Civil) No. 2363/1981 Page 18 of 26 of gold and Section 74 talks of liability to penalty. Therefore, unless there is an express provision in the GCA permitting the levy and collection of penalties and fines in lieu of confiscation from a person even after his death, the impugned order cannot be sustained in law.

28. The decisions cited by learned counsel for the Respondent in support of his contention that the liability under the GCA is a civil liability which is in rem and not in personam require to be discussed next. In Union of India v. Mustafa & Najibai Trading Co. the Supreme Court was interpreting the provisions of the Customs Act 1962. In para 33 of the judgment a reference was made to the earlier decision in Collector of Customs v. D. Bhoormall (1974) 2 SCC 544 where while discussing Section 167 (8) of the Sea Customs Act 1878, it was held that "proceedings for confiscation of contraband goods are proceedings in rem and the penalty of confiscation is enforced against the goods irrespective of whether the offender is known or unknown and it is not necessary for the Customs authorities to prove that any particular person is concerned with their illicit importation or exportation and it is enough if the Department furnishes prima facie proof of the goods being smuggled stocks." It was further explained that "the second kind of penalty which is enforced against the person concerned in the smuggling of the goods is one in personam and in the case of the said penalty, the Department have to prove further that the person proceeded against was concerned in the smuggling." Further, as regards the first kind of penalty it was against the goods and it was enough that the Department furnished "prima facie proof of the goods being smuggled stocks." Thereafter, in para 34 it was observed as under:

W.P. (Civil) No. 2363/1981 Page 19 of 26

"34. This distinction between the nature of the two penalties, viz., penalty in rem and penalty in personam, has been maintained in the Act. The provision regarding confiscation of goods contained in Sections 111 and 113 of the Act is a penalty in rem which is enforced against the goods, while the personal penalties imposed under Section 112 and other provisions of the Act are in the nature of penalty in personam which was enforced against the person concerned."

29. This Court is of the view that the provisions of the Customs Act concerning confiscation and penalties do not bear comparison with the corresponding provisions of the GCA. This is because of the language of the relevant provisions. Section 71 read with Section 79 GCA requires the confiscation orders to be passed only after "the owner of the gold, conveyance, or animal or other person concerned is given a notice in writing". While it is true that the confiscation under Section 71 of GCA is of gold, that order confiscating the gold cannot be passed without the owner of the gold being given under Section 79 an opportunity of being heard. The distinction is that under the Customs Act once the goods are shown to be smuggled for the purposes of Section 111, the goods can be straightway confiscated. Under the GCA there is no such automatic confiscation without complying with Section 79 GCA. In any event, in the instant case there is a clear finding that the gold seized has not been smuggled since its source was fully explained. This Court is therefore unable to hold that a parallel can be drawn with the provisions of the Customs Act for interpreting the order of confiscation under Section 71 GCA.

30. Reliance was placed by learned counsel for the Respondents on the decision in State of West Bengal v. Sujit Kumar Rana to submit that the W.P. (Civil) No. 2363/1981 Page 20 of 26 proceedings under the GCA are not quasi-criminal. The above case concerned confiscation proceedings under Section 59 G of the Forest Act 1927 as amended by the West Bengal Act 22 of 1988. In the context of those provisions it was observed in para 43 as under:

"43. A confiscation envisages a civil liability whereas an order of forfeiture of the forest produce must be preceded by a judgment of conviction. Although indisputably having regard to the phraseology used in sub-section (2) of Section 59-A, there cannot be any doubt whatsoever that commission of a forest offence is one of the requisite ingredients for passing an order of confiscation, but the question as to whether the order of acquittal has been passed on that ground and what weight should be attached thereto is a matter which, in our opinion, should not be gone into at this stage."

31. The above decision cannot help the Respondents since phraseology of Sections 16 and 71 GCA does not permit the extension of the liability of a person after his death. Even if confiscation under the GCA were to be considered to be a civil liability, it has to mandatorily be preceded by an adjudication under Section 78 GCA which simply cannot happen in the case of a dead person. Importantly, neither the decision in Sujit Kumar Rana nor the decision in Mustafa & Najibai Trading Co. deal with the case of the liability of a dead person either under the Customs Act or under the Forest Act 1927.

32. To summarise this part of the discussion it is reiterated that proceedings under the GCA which have not been initiated against a person during his lifetime cannot be initiated and continued against his estate after his life time. Absent a specific provision in the GCA that can make a dead person W.P. (Civil) No. 2363/1981 Page 21 of 26 liable it is not possible to sustain the impugned order dated 31 st March 1981 passed by the Central Government.

No legal justification for the fine in lieu of confiscation

33. The other issue which remains to be addressed concerns the basis on which the central government has imposed a fine of Rs. 80 lakhs in lieu of confiscation of the gold. This figure has been arrived at by estimating that it represents the one-sixth „notional‟ share of the late Maharaja of the value of the gold. However, there is no explanation why the redemption fine should also be fixed at Rs. 80 lakhs.

34. In the first place, it must be observed that this question does not arise for determination in view of this Court having held that the late Maharaja cannot after his death be made liable under the GCA particularly since no proceedings thereunder were instituted against him during his lifetime. Secondly, there was no provision in the GCA permitting the imposition of any penalty on a dead person for failure to comply with a provision of the GCA. If one were to proceed on the assumption that the liability was of the legal heirs in terms of Section 16 (3) GCA, then again as far as the present case is concerned no such liability survives. The order of the Collector in the present case holds that the contravention was of Sections 8 and 16 GCA but does not hold Petitioner Nos. 3 and 4 liable to penal action under Section 74 GCA.

35. It must be recalled here that the central government has proceeded on the footing that upon the death of the late Maharaja, the entire property devolved W.P. (Civil) No. 2363/1981 Page 22 of 26 on his legal heirs comprising Petitioner Nos. 2, 3 and 4. It has proceeded on the footing that Col. Sawai Bhawani Singh as the karta of the HUF was liable to make the declaration under the GCA as he was answerable for the entire estate of the late Maharaja. Under Section 16 (2) (g) where the gold is owned, possessed, held or controlled by a HUF, the declaration has to be made by the head or karta of such family. In the instant case, the Government has after a detailed adjudication concluded that neither the HUF nor the individual members can be held liable. Even the penalty of Rs. 5 lakhs levied on Petitioner No.1 has been remitted.

36. In fact, the central government accepted several of the Petitioners‟ contentions in coming to the above conclusion. First, it agreed that Petitioner No. 1 took voluntary retirement and relinquished charge of the Para Commando Regiment only on 23rd November 1974 whereas the search took place on 11th February 1975, only three months thereafter. This was too short a period for him to know all the details of the vast properties and other duties and responsibilities that he had as a karta. The central government accepted the contention that "it would be wrong to hold Col. Bhawani Singh guilty of the offence of not declaring the gold as the karta of the family." The central government accepted that Col. Bhawani Singh had by serving in the army "risked his life in spite of his parentage and position in life in the service of the nation and so devoted was he to the cause of the country that he was commanding the Para Commando." The central government also agreed that "a person of such high devotion to the country‟s cause would not go and break the laws of the country knowingly."

W.P. (Civil) No. 2363/1981 Page 23 of 26

37. Once it was clear that none of the Petitioners was liable under the GCA the only logical step was to drop the entire proceedings against them. Yet, inexplicably the central government persisted with enforcing the presumed liability of the late Maharaja which it could not under the provisions of the GCA. And in doing so it grievously erred. There was no justification for either ordering the confiscation of any gold nor imposing any fine in lieu of such confiscation. The impugned orders are declared illegal on this ground as well.

38. Unfortunately for the Petitioners, it has taken thirty-five years for the proceedings against them under the GCA to be brought to a close. What compounds the misery is that, as pointed out in the written submissions of the Petitioners, the gold seized which was released on payment by Petitioner No. 1 of Rs. 1.5 crores (the amount of fine in lieu of confiscation as originally determined) and the penalty of Rs. 5 lakhs, has been sold and those proceeds have been used to pay the taxes and the loans borrowed to pay the fine. So, the seized gold which was redeemed does not exist. The moneys realized have been spent. It is stated that even the penalty and the fine to the extent it stood reduced from Rs. 1.5 crores to Rs. 80 lakhs was attached to meet other legal liabilities. It is unclear in relation to the sum of Rs. 80 lakhs which is now liable to be returned to the estate of the late Maharaja how much will be left after adjusting any other legal liability or dues that may be outstanding. Meanwhile, thanks to the long drawn litigation spanning over three decades, a whole generation has passed by. There are other disputes between the legal heirs as regards their rightful shares in the estate of the late Maharaja. Hopefully, with this the curtain will W.P. (Civil) No. 2363/1981 Page 24 of 26 be drawn on the forgettable episode of the searches that took place between 11th February and 13th June 1975 and the proceedings that followed which have resulted in the members of the erstwhile royal family of Jaipur being involved in avoidable litigation with the central government. Conclusion and Directions

39. For all the aforesaid reasons, the impugned order dated 31st March 1981 of the central government to the extent that it sustains the order of the Administrator dated 31st March 1980 ordering confiscation and imposing a fine of Rs. 80 lakhs in lieu of confiscation of the seized gold is hereby set aside. Consequently the amount of Rs. 80 lakhs will now be refunded to the estate of the late Maharaja together with simple interest @ 6% per annum from the date on which the fine in lieu of confiscation was paid by Petitioner No.1 while getting the seized gold released till the date of its refund to the estate by the central government. The said amount shall be deposited in this Court by the central government, together with costs of this petition which are quantified at Rs.50,000/- within a period of eight weeks. Any delay in making the deposit will attract penal simple interest at 12% per annum for the period of delay. The disbursement of the money so deposited to the Petitioners and any other legal heirs entitled to succeed to the estate of the late Maharaja will be subject to the final orders that may be passed in Suit No. 870 of 1986 and/or Income Tax Reference No. 438 of 1983 and any other consequential appellate or other proceedings. The question of the said amount being used towards discharge of any legal liability of the estate of the late Maharaja will also be decided in those proceedings. W.P. (Civil) No. 2363/1981 Page 25 of 26

40. The writ petition is allowed in the above terms. The applications are disposed of.

S. MURALIDHAR, J.

APRIL 28, 2010 rk W.P. (Civil) No. 2363/1981 Page 26 of 26

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