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When nations go to war, they often seize the properties in their countries of the citizens and corporations of the enemy country. This happened during the First and the Second World Wars when both the United States and the United Kingdom seized properties of German corporations and citizens. Properties that are seized under these circumstances are referred to as ‘alien properties’ or ‘enemy properties’. The idea behind seizing these properties is that an enemy country should not be allowed to take advantage of its assets in the other country during war.
India too seized properties belonging to Pakistani and Chinese citizens when it was at war with these countries. Parliament last week passed The Enemy Property (Amendment and Validation) Bill, 2016, incorporating comprehensive amendments to the law relating to confiscation of enemy property in India.
When wars broke out between India and China in 1962, and India and Pakistan in 1965 and 1971, the central government took over properties of citizens of China and Pakistan in India under the Defence of India Acts. These Acts defined an ‘enemy’ as a country that committed an act of aggression against India, and its citizens. The properties of enemies in India were classified as enemy property. The properties included land, buildings, shares held in companies, gold and jewellery of the citizens of enemy countries. The responsibility of the administration of enemy properties was handed over to the Custodian of Enemy Property, an office under the central government.
The Defence of India Acts were temporary laws that ceased to operate after the wars ended. To administer the enemy property seized during the wars, the government enacted the Enemy Property Act in 1968. This law laid down the powers of the Custodian of Enemy Property for management and preservation of the enemy properties.
Till date, about 9,500 enemy properties have been identified. A majority of them belong to Pakistani citizens from the time of the wars, and are valued at Rs 1,04,339 crore. Pakistan enacted similar laws to take over properties and assets of Indian citizens and companies in Pakistan during the wars. Unlike India, it sold off these properties in 1971.
The Enemy Property Act gave enemy citizens certain rights with respect to their properties vested in the Custodian. But the ambiguity in their rights and the powers of the Custodian to administer these properties resulted in disputes being raised before the courts. Some of these disputes related to Indian citizens challenging whether they could inherit enemy properties belonging to their ancestors who were nationals of enemy countries.
The Supreme Court settled some of these questions in 2005. It ruled that the Custodian of Enemy Property was administering the property as a trustee, and the enemy continued to be its owner. Therefore, on the death of the enemy, the enemy property should be inherited by their legal heirs.
In 2010, the government issued an Ordinance to expand the powers of the Custodian regarding enemy property. It sought to permanently vest enemy property in the Custodian even in case of the enemy’s death or a change in his nationality. However, the Ordinance lapsed.
The issue of enemy property attracted legislative interest again in 2016 when five more Ordinances were issued on the subject. These Ordinances went a step further and vested ownership rights over enemy property in the Custodian. This effectively negated the Supreme Court decision of 2005, and made the central government the owner of enemy property. While the first four Ordinances lapsed, the last Ordinance, issued in December 2016, has been replaced by the law passed by Parliament this week.
The Bill passed by Parliament makes the Custodian the owner of enemy property retrospectively from 1968.
Second, it voids the legal sales undertaken by enemies of enemy properties since 1968. This means that a person who may have bought an enemy property in good faith when such sale and purchase was legal, now stands to lose the property.
Third, it prohibits Indian citizens who are legal heirs of enemies from inheriting enemy property, and brings them within the definition of ‘enemy’.
Fourth, it prohibits civil courts and other authorities from hearing certain disputes relating to enemy property.
The new law creates a situation where an Indian citizen who has legally bought and developed an enemy property after 1968, will be divested of his rights in the property. This situation could be challenged in court as a violation of Article 14 , which guarantees the right to equality and protects people from arbitrary actions of the government.
Further, following the passage of the Bill, judicial recourse on enemy property disputes will only be available before High Courts and the Supreme Court, limiting the options available to people whose property rights have been affected.
Over the last decade, it has taken an SC judgment, six Ordinances and a law passed by Parliament to address the ownership issue of enemy properties. It remains to be seen whether this brings finality to the debate.
The authors are with PRS Legislative Research, New Delhi