Tribunal upholds order on forfeiture

The Tribunal’s order is now sought to be challenged in the Bombay High Court by the appellant. This week, the High Court heard the appellant/petitioner, Harshad Mehta (not the Big Bull), and has directed SAFEMA authorities to file an affidavit.

The CA’s order itself was the culmination of the Enforcement Directorate’s investigation in the famous FERA case, in 1996, unravelling a scam of Rs 1,000 cr. The investigation led to the detention of ten accused, and kicked off the process of forfeiture of propertiesunder the SAFEMA. The other detenues, besides Mehta, were Hemant Barot, Dhankumar C Shah, Dilip Doshi, Yogesh D Mehta, Deepak G Melwani, Dinesh Bhuva, Mahendra Shanklecha, Nilesh Trivedi and Ramesh Nahar.

The ED stumbled upon a slew of bank accounts of fake companies that were being used to siphon out money from the country. Over Rs 1,000 cr were siphoned out during 1991-96 through these banks, against fake imports. The money was then parked in foreign accounts abroad. In some cases, the money was also routed back into India through hawala channels.

The main players, Harshad P Mehta, Hemant Barot and Dinesh Bhuva used several persons, including unemployed youth, to open these accounts, and deposited cash, brought to the banks in gunny sacks! The FERA authorities, after months of investigation, got Mehta detained under COFEPOSA in February 1997. (The ED, of course is still trying to identify whose money this was, though it is obviously a case of laundering).

Though Mehta’s detention order (as alsoDoshi’s) was revoked by the government, the CA ordered the forfeiture of properties of Mehta and his relatives in April 1998. The CA took the view that Mehta was an associate of the other detenues and therefore his properties were liable for forfeiture. Mehta challenged the order (after evading replies to show-cause notices) before the Tribunal on the ground that his detention had been revoked.

SAFEMA applies to those who are either convicted under FERA or Customs, or they are covered by PIT NDPS which itself provides for forfeiture of property. The other category of offenders to whom SAFEMA can be applied is those facing COFEPOSA detention orders.

The law, however, cannot be applied to a detenue if his detention order has been revoked by the advisory board or the government.

The scope of SAFEMA however, is very broad, encompassing the property held by relatives and associates also. The act presumes that all property of the relatives and associates must be forfeited unless proven that it was purchasedfrom independent (of the detenue) means.

Mehta and his family held vast properties in Mumbai and Ahmedabad. The collective property — valued at Rs 2.44 cr also figured in the Income Tax department’s records and Mehta admitted that he was being paid Rs 20,000 to Rs 25,000 per crore that was remitted outside against the fraudulent imports.

Challenging the SAFEMA order before the Tribunal, Mehta and his family claimed that since his detention was revoked, his property could not be forfeited. None of the properties could be traced to any of the other detenues, their argument went.

SAFEMA authorities argued that since Mehta himself was the associate of the other detenues, he having actively participated by managing the remittances, his properties were illegally acquired, and therefore liable to be forfeited.

The tribunal upheld this view, and ruled: “It is therefore clear that sub section 1 of Section 4 covers associate/detenue also and the said provision is not confined only to associate/convict andthat being so, Harshad P Mehta, to whom the Act applies, is prohibited under Section 4 from holding illegally acquired property either by himself or through any other person, namely his relatives, on his behalf.”