UNION OF INDIA v. PANKAJ PRANJIVAN DAMANI — 1983 DIGILAW 207 (GUJ)

A. P. RAVANI, J. ( 1 ) WHAT is stolen property or property fraudulently obtained? Is it open to a Magistrate to direct that the muddamal property alleged to be stolen and/or fraudulently obtained be handed over to the person from whose custody it has been seized even when the police submits that the investigation is in progress and the same is not completed ? At any rate would it be proper for the learned Magistrate to resort to the provisions of Section 457 of the Criminal Procedure Code and order to hand over the muddamal property i. e. currency notes to the tune of Rs. 2 70 0 (Rupees two lakhs and seventy thou sand only) seized from the person at the interim stage even though he does not claim that the property belonged to him and that he has lawfully obtained the same ? The aforesaid questions arise in the background of the following facts: ( 2 ) THAT on September 23 1983 at about 10. 35 a. m. opponent No. 1 got down from Saurashtra Janata Express at Rajkot railway station. On suspicion he was detained by the Railway Police. His person and other belongings with him were searched. It was found that he was in possession of currency notes to the tune of Rs. 2 70 0 (Rupees Two lakhs and Seventy thousand only ). Therefore he was detained under the provisions of Section 41 (d) of the Criminal Procedure Code. In accordance with law the police took possession of the currency notes and certain other articles found from opponent No. 1 ( 3 ) ON the same day the police informed the Income Tax Authorities about the seizure of currency notes from opponent No. 1. The Income Tax Authorities under the relevant provisions of Income Tax Act requested the Railway Police that the amount in question may not be released without consultation of the Income Tax Officer Ward H Circle II Rajkot. The Income Tax Authorities recorded the statement of opponent No. 1 on September 23 1983 and were further investigating the matter. ( 4 ) MEANWHILE it so happened that on September 26 1983 opponent No. 1 submitted an application before the learned JMFC (Railways) Rajkot. By this application he submitted that he was detained under the provisions of Section 41 (d) of the Criminal Procedure Code. ( 4 ) MEANWHILE it so happened that on September 26 1983 opponent No. 1 submitted an application before the learned JMFC (Railways) Rajkot. By this application he submitted that he was detained under the provisions of Section 41 (d) of the Criminal Procedure Code. But the said provision empowers the police only to detain a person and it is not an offence. There is no allegation against him of having committed any offence. At this stage the police was not even in a position to point out as to for what offence he was detained. Therefore he prayed that since the currency notes were seized from his possession and there was nothing to connect the same with any offence whatsoever the police should be directed to return the same to him. ( 5 ) AFTER hearing the parties the learned Magistrate by his order dated October 13 1983 directed the Railway Police to hand over the currency notes the muddamal property of Rs. 2 70 0 to opponent No. 1 on the condition that he should produce the muddamal property as and when it is so directed by the Court and on the further condition that opponent No. 1 should furnish two sureties one each for Rs. 1 35 0 and also furnish a bond in the same amount. ( 6 ) IT may be noted that opponent No. 1 did not disclose before the Court that in respect of this very amount he was interrogated by the Income Tax Department and that the proceedings initiated by the Income Tax Department were in progress. This fact was not brought to the notice of the Court even by the learned Asst. Public Prosecutor who appeared on behalf of the State. When the Income Tax Authorities again approached the Railway Police for taking possession of the muddmal property (the currency notes) the police expressed its inability to hand over the property in view of the order passed by the learned Magistrate (Railway) Rajkot. Thereupon the Union of India through Income Tax Officer Rajkot filed a revision application being Criminal Revision Application No. 90 of 1983 on November 15 1983 in the Court of Sessions Judge Rajkot District Rajkot. Thereupon the Union of India through Income Tax Officer Rajkot filed a revision application being Criminal Revision Application No. 90 of 1983 on November 15 1983 in the Court of Sessions Judge Rajkot District Rajkot. ( 7 ) WHEN the revision application was pending before the learned Sessions Judge a complaint dated October 19 1983 for offence under Section 124 of the Bombay Police Act was already filed by the Railway Police. This fact appears to have been brought to the notice of the learned Sessions Judge. In fact the learned Sessions Judge has referred to this fact in para 3 of his judgment. However the learned Sessions Judge found that against opponent No. 1 there was no assessment proceeding pending; and that there was no legal demand. Therefore there was no reason to interfere with the order of the learned JMFC (Railway) Rajkot. In the opinion of the learned Sessions Judge adequate safeguards were provided for by the learned Magistrate by imposing condition as regards production of the amount and condition as to sureties. The learned Sessions Judge rejected the revision application by his order dated November 30 1983 ( 8 ) THEREUPON the Union of India through its Income Tax Officer Rajkot has preferred the present special criminal application and has prayed that the orders passed by the learned Magistrate (Annexure A) and the order passed by the learned Sessions Judge (Annexure B ) be quashed and set aside. It is further prayed that the State Government as well as the police authorities be restrained from releasing the amount in question pending final hearing and disposal of the petition and also prayed for any other appropriate relief that may be deemed fit. ( 9 ) COUNSEL for opponent No. 1 submitted that the police authorities i. e. the authorities of the State Government have not preferred any revision application against the order passed by the learned Magistrate. Therefore in his submission the legality and validity of the order passed by the lower courts cannot be examined on the basis as to whether the order passed by the lower courts is otherwise legal or not. In his submission this could be done only if the opponent No. 1-accused is given proper notice to the effect that the legality and validity of the order is to be adjudged even from the aspects other than that of Income Tax laws. In his submission this could be done only if the opponent No. 1-accused is given proper notice to the effect that the legality and validity of the order is to be adjudged even from the aspects other than that of Income Tax laws. In this view of the matter the counsel for the opponent-accused was given to understand that it would be open to this High Court to examine the legality and validity of the order passed by the lower courts from all the angles. Therefore he prayed for time and sufficient time was granted to him to show as to whether the order passed by the courts below can be sustained even from the point of view of the provisions of the Criminal Procedure Code and the Bombay Police Act. ( 10 ) THE orders passed by the lower courts may now be examined. The reasons given by the learned Magistrate are as follows:1 Till the date of order no charge-sheet was filed nor any FIR was lodged on the basis of which it could be inferred that opponent-accused committed any offence. There is nothing on record to show that the amount in question has been obtained by the accused by committing theft or by indulging in any unlawful activity. 2 No other person has requested to return this amount to him nor anyone has claimed this amount. 3 The argument of the learned Asst. Public Prosecutor that an offence under Section 124 of the Bombay Police Act is made out is not borne out from record. There is no such material on record and hence his argument cannot be accepted. 4 That though sufficient time was given the Investigating Officer has not remained present before the Court but a report dated September 29 1983 was produced stating that investigation was in progress and therefore time was prayed for. Thereafter again the matter was adjourned but no chargesheet has been filed nor any FIR has been filed. It was only stated that the Investigating Officer had gone out of station for the purpose of investigation. Therefore it could reasonably be inferred that no offence whatsoever was registered by the Investigating Officer so far. On the basis of the aforesaid reasons the learned Magistrate thought it fit to pass an order under Section 457 of the Criminal Procedure Code and order to return the muddamal property (currency notes) of Rs. Therefore it could reasonably be inferred that no offence whatsoever was registered by the Investigating Officer so far. On the basis of the aforesaid reasons the learned Magistrate thought it fit to pass an order under Section 457 of the Criminal Procedure Code and order to return the muddamal property (currency notes) of Rs. 2 70 0 to opponent No. 1 on the conditions stated hereinabove. ( 11 ) THE learned Sessions Judge has proceeded on the footing that there was no assessment proceeding pending and there was no legal demand and there was nothing on record to show that the amount found from the custody of opponent-accused related to some concealed income and when the amount was returned with the conditions as imposed by the learned Magistrate there should be no need to interfere with the order passed by the learned Magistrate. ( 12 ) THAT even in the application submitted by opponent No. 1 he does not state that he is entitled to possession of the property in question. He has only stated to the effect that the property was recovered from his possession. According to him the property was not connected with any offence whatever and therefore it was illegally seized from him. Hence the same should be returned to him. In the entire application submitted by opponent No. 1 no where it is stated that he was entitled to possession. The words entitled to possession in their import should mean that he is lawfully entitled to possession. Simply because the property was seized from him it could not be said that opponent No. 1 was entitled to possession thereof. ( 13 ) IN fact the learned Magistrate has not diverted his attention on this aspect at all. As per the provisions of Section 457 of the Criminal Procedure Code when the muddamal property is produced before a Magistrate in respect of which there is no inquiry/or trial pending he can definitely pass orders by invoking the provisions thereof. But in that case he can order to deliver the same to the person entitled to the possession thereof. If at all the learned Magistrate thought it fit to resort to the provisions of Section 457 of the Criminal Procedure Code he ought to have inquired as to whether. But in that case he can order to deliver the same to the person entitled to the possession thereof. If at all the learned Magistrate thought it fit to resort to the provisions of Section 457 of the Criminal Procedure Code he ought to have inquired as to whether. 1 opponent No. 1-a ccused was entitled to possession of the property in question ?2 was there any other person who might have been entitled to possession of the property in question and whether it was possible to ascertain as to who that person is ?3 if the learned Magistrate could not ascertain as to who was the person entitled to the possession of the property in question was it not necessary for him to follow the procedure laid down under sub-section 2 of Section 457 of the Criminal Procedure Code ?in the instant case the learned Magistrate nor the learned Sessions Judge has inquired as to whether the opponent-accused is entitled to possession of the property in question or not. In tact in the application submitted by opponent-accused it is no where stated that he is entitled to the possession of the property and that he is the lawful owner thereof. It is not even stated that he was in lawful possession there of. Therefore judging from the point of view of the provisions of Section 457 of the Criminal Procedure Code it is clear that the order passed by the learned Magistrate and confirmed by the learned Sessions Judge is clearly erroneous and the same is passed without holding any inquiry as to the real points involved. ( 14 ) AS per the provisions of Section 457 (2) of the Criminal Procedure Code if the learned Magistrate did not know as to whom the property belonged and to whom the property could be handed over he should have issued a proclamation specifying the articles of which such property consists and requiring any person who may have a claim thereto to appear before him and establish his claim within six months from the date of such proclamation. In the instant case the learned Magistrate ought to have realised that opponent No. 1 did not claim to be the owner of the property; he did not even claim to be in lawful possession of the property in question. In the instant case the learned Magistrate ought to have realised that opponent No. 1 did not claim to be the owner of the property; he did not even claim to be in lawful possession of the property in question. He laid his claim to the property only on account of the fact that at was seized from him and according to him it was an illegal seizure. On the basis of such a claim the property could never have been delivered to opponent No. 1. Both the lower courts ought to have seen further that it was pointed out by the learned Asst. Public prosecutor who appeared in the case before the trial court that a case under Section 124 of the Bombay Police Act was made out. As a matter of fact at least two applications were submitted respectively on October 3 1983 and October 10 1983 indicating that the matter was being investigated by the officer concerned. In application dated October 10 1983 (Exhibit 6) it was also pointed out that the Investigating Officer had gone out of station for the purpose of investigation end therefore it was requested that no decision may be taken in respect of the muddamal property. Still however the learned Magistrate proceeded further to decide the application submitted by opponent No. 1 and passed the impugned order. When the order was passed by the learned Sessions Judge the complaint for offence under Section 12 of the Bombay Police Act was already lodged. The learned Sessions Judge him-self has mentioned in para 3 of his judgment that a complaint as stated above was registered on October 19 1983 Therefore it is not understood why the learned Sessions Judge did not think it proper to wait till the conclusion of the trial of the case filed against opponent No. 1 for offence under Section 124 of the Bombay Police Act ? ( 15 ) IT appears that both the courts below have proceeded on the footing that opponent No. 1 is not the person who has stolen the property and/or he is not the person who has obtained the same fraudulently. This is the basis of the order passed by the courts below. This is patently erroneous. The offence under Section 124 of the Bombay Police Act is with regard to the property in question. This is the basis of the order passed by the courts below. This is patently erroneous. The offence under Section 124 of the Bombay Police Act is with regard to the property in question. Here the character of the property is to be taken into consideration. The words stolen property or property fraudulently obtained denote the attributes-or character of the property. The property might have been stolen by any one or might have been obtained fraudulently by any one. It is not that the accused himself should have obtained the property fraudulently or that the accused should have stolen the same. The vice aimed at by the provisions of Section 124 of the Bombay Police Act is the nature of property meaning thereby once the property is reasonably suspected to be stolen property or property fraudulently obtained the provisions of Section 124 of the Bombay Police Act are attracted. Had it been that the property should have been obtained fraudulently by the accused or stolen by him the Legislature would have incorporated the words by him after the words stolen property or property fraudulently obtained in Section 124 of the Bombay Police Act. In this connection the Supreme Court has laid down the law in the case of Champaelal v. State of Maharashtra reported in AIR 1975 SC 160 as follows:". . . . The words stolen property or fraudulently obtained merely denote the attribute or characteristic of the property. If the property is capable of being described as stolen property or property fraudulently obtained by whomsoever it might have been stolen or fraudulently obtained that would be sufficient to comply with the requirements of the section. The section merely speaks of the character of the property whether it satisfies the particular description and does not say by whom it should have been stolen or fraudulently obtained. The theft or the fraudulent obtaining of the property may be by any person. It is not the act of stealing or fraudulent obtaining that is sought to be hit by the section. For that there are other laws such as the Indian Penal Code the Customs Act and the Import and Export Control Act. In the case before the Supreme Court the property in question was 20 brand new wrist watches of Sandoz manufacture. For that there are other laws such as the Indian Penal Code the Customs Act and the Import and Export Control Act. In the case before the Supreme Court the property in question was 20 brand new wrist watches of Sandoz manufacture. There the question was as to whether the property in question was imported into the country in conformity with the provisions of law or imported clandestinely in violation of import or customs regulations. The Supreme Court in this connection observed as follows:. ". . . It can hardly be disouted that when anything is imported into the country clandestinely in violation of import or customs regulations it is fraudulently obtained that is obtained by committing a fraud on the regulations. . . . "in the instant case the case of the Income Tax Department is that it was a concealed income. Concealed income would mean the income obtained and-retained in contravention of the provisions of Income Tax Act or any other relevant provisions of law that is to say by committing fraud upon the relevant provisions of the Income Tax Act or any other relevant provisions of law. ( 16 ) IN the case before the Supreme Court it was the question as to whether the fraud was committed on the relevant provisions of regulations pertaining to Import and Export Control. While in the instant case the question is as to whether the property was obtained by committing fraud upon the provisions of the Income Tax Act. By applying the aforesaid principle laid down by the Supreme Court prima facie it would appear that this is the property in respect of which it can be said that it is a property fraudulently obtained. May be the fraud might have been committed by opponent No. 1 or by anyone else or it may be that ultimately the accused may be in a position to explain the source and may get out of the accusation laid against him. But at this stage when the accused has not even claimed to be the awful owner of the property and has not even claimed to be in lawful possession thereof and prima facie at least at this stage when he has failed to give any satisfactory explan ation it was not open to the lower courts to order to hand over the property to opponent No. 1. ( 17 ) THE lower courts also should have taken into consideration the provisions of Section 457 (2) of the Criminal Procedure Code. Admittedly the lower courts have not inquired into the question as to whether opponent No. 1 was entitled to possession of the property in question and therefore they have not given the finding that opponent No. 1 was legally entitled to the property and therefore it should be handed over to him. In this view of the matter let us assume for a moment that there is no prosecution under Section 124 of the Bombay Police Act against opponent No. 1 Even then it was the bounden duty of the learned Magistrate to issue proclamations under the provisions of Section 457 (2) of the Criminal Procedure Code and make it known to the public that if any one claims to be the owner of the property the claim thereof may be made in accordance with law. Thereafter the learned Magistrate is required to wait for a period of six months. ( 18 ) EVEN when such is the clear provision of law it is not understood why the learned Magistrate was in hot haste to dispose of the application submitted by opponent No. 1 within a period of little over a fortnight. The learned Magistrate acted in this fashion despite the fact that on every occasion the learned Asst. Public Prosecutor submitted an application and requested for time and also pointed out that the investigation in respect of the property in question was in progress. It is quite understandable that the criminal courts may be and as a matter of fact should be zealous to safeguard the liberty of the people; but it is not understandable as to why they should be zealous to restore the property in question i. e. currency notes to the tune of Rs. 2 70 0 to a person who does not even claim to be the owner thereof and who does not even claim in his application that he was in lawful possession thereof. It is unfortunate that even the learned Sessions Judge has lost sight of this fact. ( 19 ) THE learned Sessions Judge relied upon a decision of the Supreme Court in the case of J. R. Malhotra v. Addl. Sessions Judge Jullundur reported in AIR 1976 SC 219 . It is unfortunate that even the learned Sessions Judge has lost sight of this fact. ( 19 ) THE learned Sessions Judge relied upon a decision of the Supreme Court in the case of J. R. Malhotra v. Addl. Sessions Judge Jullundur reported in AIR 1976 SC 219 . In that case all that is laid down is that the Income Tax Department cannot retain the money without the authority of law or without there being any legal order in respect thereof. With utmost respect for the learned Sessions Judge I am constrained to say that the principles laid down in the aforesaid decision of the Supreme Court are not at all applicable to the facts and circumstances of the case. As stated hereinabove the lower courts ought to have considered the case from the point of view of the character of the property as provided under Section 124 of the Bombay Police Act and ought to have decided the case first under the provisions of Section 457 of the Criminal Procedure Code. As per the provision of Section 457 of the Criminal Procedure Code once the court is not in a position to ascertain as to whom the property belongs the court must issue proclamation and wait for six months. In the instant case when the complaint was filed on October 19 1983 for an offence under Section 124 of the Bombay Police Act the case and therefore the property (i. e. Rs. 2 70 0 was taken out of the purview of Section 457 of the Criminal Procedure Code. Hence at any rate there was no justification whatsoever for the learned Sessions Judge to confirm the order passed by the learned Magistrate under Section 457 of the Criminal Procedure Code. ( 20 ) ONE of the reasons advanced by the counsel for opponent No. 1 and which appears to have weighed with the learned Sessions Judge is that necessary safeguards for the production of the property as and when required have been made in the order passed by the learned Magistrate; and therefore the order should not be disturbed. Here also the lower courts have lost sight of the fact that the property is required to be examined under the provisions of Section 124 of the Bombay Police Act. Here also the lower courts have lost sight of the fact that the property is required to be examined under the provisions of Section 124 of the Bombay Police Act. Ultimately it will have to be found out as to whether the property is a stolen property or a property fraudulently obtained. It may be that some one to whom the property belongs may come and say that in the currency notes he has put his initials or has put some other identification marks. It may be that the bank which issued the currency notes might have put its dated stamps. Therefore these very currency notes would be required for the purpose of determination as to whom the property belongs. Therefore it is very much necessary that the property be retained for the purpose of investigation and trial and be not disposed of till the conclusion of the trial. . ( 21 ) THE argument that the property can be produced as and when required has no basis in view of the aforesaid facts. These very currency notes cannot be produced by the opponent-accused in future. On the other hand if he is to produce these very currency notes then surely the safer custody of these currency notes is either that of the police or that of the Court and not that of the accused. Assuming that the accused may even produce the very currency notes as and when required by the Court there is no guarantee that he may no remove certain identification marks which may be there on the currency notes. There is no guarantee that he may not replace the same. Moreover if he is to retain the very currency notes with him without placing the same to any use whatsoever then it is better that the risk of protecting the same may be taken either by the police or by the Court. In no case the risk of protection of the property to the extent of Rs. 2 70 0 should be allowed to be taken by the accused. It will not be his risk but it would be the risk of the society at large. In no case the risk of protection of the property to the extent of Rs. 2 70 0 should be allowed to be taken by the accused. It will not be his risk but it would be the risk of the society at large. ( 22 ) IN above view of the matter the order passed by the learned Magistrate and confirmed by the learned Sessions Judge is neither legal nor proper and the same is not in any way justifiable as far as the provisions of Section 124 of the Bombay Police Act and the provisions of the relevant Sections of the Criminal Procedure Code are concerned. On this point alone it is not necessary to discuss the other points advanced by the counsel for opponent No. 1. Still however to avoid any arguments on this score they are also being dealt with briefly. ( 23 ) COUNSEL for the opponent-accused submitted that the trial court had passed the order and the Sessions Court had confirmed the same and it was well within the powers of the learned Magistrate to pass such an order. Therefore the same should not be interfered with. As stated hereinabove it matters little as to whether the revision application filed by the Income Tax Department before the Sessions Court has failed or not. Once an it legal and improper order has come to the notice of this Court it has got to be quashed and set aside. ( 24 ) COUNSEL for the opponent-accused has further submitted that it was the case of the Income Tax Department that the property in question was either a concealed income or that there was a possibility that tax was evaded in respect of this property. In his submission therefore the property should not be handed over to the Income Tax Department at this stage. At the most the Income Tax Department can approach the Court at the proper stage and get the property produced at the conclusion of the trial. ( 25 ) HERE at this stage there is no question of handing over the property in question to the Income Tax Department. At this stage nature and character of the muddamal property is to be ascertained. ( 25 ) HERE at this stage there is no question of handing over the property in question to the Income Tax Department. At this stage nature and character of the muddamal property is to be ascertained. As stated hereinabove as per the decision of the Supreme Court in Champaklals Case (supra) in respect of any property where fraud is committed meaning thereby fraud upon the statute is committed the property should be held to have been obtained fraudulently. Following the principles laid down by the Supreme Court if it is ultimately found that the property in question is a concealed income or there is a possibility of evasion of tax in respect of this property or that the property was obtained or retained meaning thereby retained either by the accused or by any person in contravention of the relevant provisions of the Income Tax Act or any other law the same will come within the purview of the term fraudulently obtained. In this view of the matter the argument that since the two courts below have given concurrent finding and passed orders in favour of the opponent-accused this Court should not interfere with the order cannot be accepted. ( 26 ) IN the result this special criminal application is allowed. The judgment and order passed by the learned JMFC (Railway) Rajkot dated October 13 1983 in Criminal Case No. 10 of 1983 and confirmed by the learned Sessions Judge Rajkot by his order dated November 30 1983 in Criminal Revision Application No. 90 of 1983 is hereby quashed and set aside. The trial court is directed to treat the property (currency notes) of Rs. 2 70 0 (Rupees two lakhs and seventy thousand only) as a muddamal property of Criminal Case No. 481 of 1983 and the trial court shall not dispose of the mudda-mal property without affording an opportunity of being heard to the Income Tax Department. R and P to be sent back immediately. Rule made absolute to the aforesaid extent. Rule made absolute. .