Sushil
Kumar Porwal & Ors Vs. Vipin Maneklal & Ors [1987] INSC 230 (27 August
1987)
DUTT,
M.M. (J) DUTT, M.M. (J) MISRA RANGNATH
CITATION:
1987 AIR 2167 1987 SCR (3)1116 1987 SCC (4) 276 JT 1987 (3) 448 1987 SCALE
(2)488
ACT:
Gold
Control Act, 1968--proviso to section 71--interpretation of--Whether it covers
primary gold.
HEADNOTE:
One
Kesharimal Porwal, who had one of his businesses as gold and silver shop, died
on October 7, 1952 leaving behind surviving a widow Ratanbai, a daughter
Shantabai and a son Nem Kumar. Kesharimal left a will whereby he bequeathed
gold and silver. To his grandsons--sons of Shantabai and Nem Kumar--providing
that each grandson would receive 500 tolas of gold at the time of marriage and
the remaining gold would be equally divided among them. The genuineness and
validity of the will were not challenged at any stage.
On
July 9, 1968, the officers of the Central Excise, Nagpur, searched the
residential premises of Nem Kumar and seized 10 slabs and 9 pieces of gold and
230 gold coins having at that time a market value of Rs.7,63,000. The gold
seized was primary gold. The officials of the Central Excise separately
recorded the statements of Ratanbai and Nem Kumar. Ratanbai stated that the
seized gold was the 'self earned property' of her late husband, and had been
kept in the iron-safe about 8/9 years ago, and that keys of the shelf had all
along remained in her possession. Nem Kumar in his statement denied any
knowledge of the gold and said that he had come to know of the existence of the
gold for the first time during the search. A declaration in respect of the
seized gold was filed by Ratanbai with the Central Excise.
The
Collector of Central Excise served separate notices on Ratanbai and Nem Kumar,
calling upon them to show cause why the seized gold should not be confiscated
and a penalty imposed for violation of the provision of paragraph 9(1)(i) of
the Gold Control Ordinance, 1968. The notices were replied by both. The
Collector came to the finding that Ratanbai had full knowledge of the gold and
was in conscious possession of it for at least 8/9 years. As for Nem Kumar, the
Collector held that it was difficult to sustain the charge of possession and
custody of the gold against him.
Accordingly,
the Collector, held that only Ratanbai had violated the provision of paragraph
9(1)(i) of the 1117 Gold Control Ordinance, 1968, and directed the confiscation
of the gold and imposition of a penalty of Rs.38,000 on Ratanbai under
paragraph 75 of the Gold Control Ordinance, 1968, which was replaced by the
Gold Control Act, 1968. Nem Kumar was acquitted.
An
appeal preferred by Ratanbai against the order of the Collector was dismissed
by the Administrator under the Gold Control Act, Ratanbai then filed an
application for revision before the Central Government, challenging the order
of the Administrator. The appellant No. 1, Sushil Kumar son of Nem Kumar, who
had by then attained majority, also filed a revisional application before the
Central Government. Both the revisional applications were dismissed. Thereupon,
the appellants Nos. 1 to 5 and Surendra Kumar since deceased, son of Shantabai,
filed a writ petition in the High Court.
The
High Court (Single Judge) quashed the order of confiscation and penalty and
directed the return of the gold to the petitioners.
The
respondents preferred an appeal to the Division Bench of the High Court. The
Division Bench did not agree with the interpretation of the learned Single
Judge on section 71(1) of the Gold Control Act, including the proviso thereto,
and set aside the judgment of the Single Judge.
Aggrieved
by the decision of the High Court, the appellants moved this court for relief
by special leave.
Allowing
the appeal, the Court,
HELD:
The ground that weighed with the Central Excise Authorities in confiscating the
gold was that the acquisition, possession, custody or control of primary gold
in question by Ratanbai became illegal and liable to confiscation, as she had
not filed any declaration required under rule 126-1 of the Defence of India
Rules, 1962, nor had she disposed of the gold by sale or converted the gold
into ornaments in contravention of clause (i) of sub-rule (I-B), but had
possessed the same in violation of sub-rule (I-A) of Rule 126-H of the Defence
of India (Fourth Amendment) Rules, 1966. But, after the amendment of section
71(1) of the Gold Control Act, 1968, by addition of a proviso, the appellants
placed reliance upon the proviso. It was contended on behalf of the appellants
that Ratanbai by her omission to dispose of the gold by sale or to convert the
same into ornaments in accordance with the provision of rule 126-H, as amended
by the Defence of India (Fourth Amendment) Rules, 1966 rendered the gold liable
to confiscation without the knowledge or connivance of the owners of the gold,
namely, the grandsons of Kesharimal Porwal, but the same could not be 1118
confiscated in view of the proviso to section 71(1) of the Gold Control Act.
The Learned Single Judge of the High Court had upheld the contention and
directed the release of the gold in favour of the appellants. [1122F-H;
1123G-H] The principal question that fell for the consideration of this Court
was whether the proviso to section 71(1) also related to primary gold. [1124D]
Power of confiscation of gold including primary gold is conferred by
sub-section (1) of section 71. The expression "any gold" refers to
all kinds of gold, including primary gold. In view of section 8(1) of the Gold
Control Act, no person can acquire or retain possession, custody or control of
primary gold. Under clause (i) of sub-rule (I-B) of rule 126-H of the Defence
of India (Fourth Amendment) Rules, 1966, the owner in possession, custody or
control of primary gold is bound to either sell such primary gold to a licensed
refiner or dealer or deliver the same to a licensed or certified dealer or
goldsmith for conversion thereof into ornaments within a period of six months
from September 1, 1967, the date of the Commencement of the said Rules, Subrule
(1-A) of Rule 126-H prohibits the possession, custody or control of any primary
gold after the expiry of the said period of six months. [1124D-E; 1125B-C] In
this case, it was Ratanbai who had failed to either sell or convert the primary
gold within the grace period of six months without the knowledge and connivance
of the owners thereof, that is, the grandsons of Kesharimal Porwal.
If
the contention of the respondents was accepted, it would mean that the owner of
the primary gold had to lose the same on account of default committed by somebody
who was not the owner. It was also difficult to accept the contention that
while the substantive provision of sub-section (1) of section 71 related to all
kinds of gold, including primary gold, the proviso, a part of the substantive
provision, would not include primary gold within its scope and ambit.
The
proviso lays down the circumstances under which any gold which is liable to
confiscation will not be confiscated.
Where
primary gold is not to be confiscated in view of the proviso to section 71(1),
the owner thereof gets it back, but it does not mean that he will be entitled
to retain possession of such primary gold which is forbidden by section 8(1) of
the Gold Control Act. Thus there would be no difficulty in not confiscating the
primary gold under the proviso, for after such release the owner of the primary
gold will have to dispose it of or convert the same into ornaments. The Court
did not agree with the view expressed by the Division Bench of the High Court
that the proviso to section 71(1) of the 1119 Gold Control Act did not relate
to primary Gold. The interpretation put on section 71 (1) by the Court would
not run counter to the provision of section 8(1) as the primary gold, not
confiscated, would not be allowed to be possessed by the owner but had to be
disposed of by him or converted into ornaments in the manner mentioned above or
as directed by order date 30.7.76 of the Administrator under the Gold Control
Act. [1125D-G; 1127A-B] The Court set aside the order of the Division Bench and
modified the order of the Single Judge of the High Court, directing that the
seized primary gold should be released in favour of the appellants and the
appellants would either sell the same to a licensed dealer or deliver
possession thereof to a licensed dealer or a certified goldsmith, as might be
specified by the Administrator, immediately on the release of such primary
gold. [1127C] Badri Prasad v. Collector of Central Excise, [1971] Supp. S.C.R.
254, referred to.
Civil
Appellate Jurisdiction: Civil Appeal No. 5807 of 1983.
From
the Judgment and Order dated 10.12.1982 of the Delhi High Court in L.P.A. No.
28 of 1982.
Soli
J. Sorabjee, Harish N. Salve, P.H. Parekh and Dr. D.Y. Chandrachud for the
Appellants.
Govind
Das, Girish Chandra and C.V. Subba Rao for the Respondents.
The
Judgment of the Court was delivered by DUTT, J. This appeal by special leave
involves an interpretation of the proviso to section 71 of the Gold Control
Act. 1968.
One
Kesharimal Porwal, who had two flourishing businesses--a bidi factory at
Kamptee and a gold and silver shop at Mandsaur--died on October 7, 1952 leaving
behind him surviving a widow Ratanbai, a daughter Shantabai and a son Nem
Kumar. Both Shantabai and Nem Kumar had each a son at the time of death of
Kesharimal. After the death of Kesharimal, Nem Kumar had four more sons.
1120
The said Kesharimal also left a will dated February 10, 1952 whereby he
bequeathed certain gold and silver to his grandsons. It was provided in the
will that each grandson would receive totals of gold at the time of marriage
and the remaining gold would be equally divided among them. It may be stated
here that at no stage the genuineness and validity of the will was questioned,
nor have they been challenged before us.
On
July, 9, 1968 the officers of the Central Excise, Nagpur, searched the
residential premises of Nem Kumar and seized 10 slabs and 9 pieces of gold and
230 gold coins, weighing about 42,404 grams having at that time a market value
of Rs.7,63,000, which were kept in a cupboard inside a big Godrej iron-safe. It
is not disputed that the seized gold was primary gold.
On
July 10, 1968, the officials of the Central Excise separately recorded the
statements of Ratanbai and Nem Kumar. It was stated by Ratanbai that the seized
gold was the 'self-earned property' of her late husband, and that the same had
been kept in the iron-safe about 8/9 years ago. She admitted that the keys of
the shelf had all along remained in her possession. Nem Kumar in his statement
denied any knowledge about the gold. He said that he had come to know of the
existence of the gold for the first time when it was found out during the
search. A declaration in respect of seized gold was filed by Ratanbai to the
Central Excise, Nagpur, on July 29, 1968.
The
Collector of Central Excise, Nagpur, served two separate notices on Ratanbai
and Nem Kumar calling upon them to show cause why the seized gold should not be
confiscated and a penalty imposed for the violation of the provision of
paragraph 9(1)(i) of the Gold Control Ordinance, 1968. Both Ratanbai and Nem
Kumar showed cause against the proposed confiscation and penalty.
The
Collector came to the findings that Ratanbai had full knowledge of the gold and
was in conscious possession of it for at least 8 9 years. So far as Nem Kumar
was concerned, the Collector held that it was difficult to sustain the charge
of possession, custody and control of the gold against him in view of the
vagueness of the evidence and lacunae in investigation. Accordingly, by his
order dated May 15, 1970, the Collector came to the conclusion that it was only
Ratanbai who had violated the provision of paragraph 9(1)(i) of the Gold
Control Ordinance, 1968 and directed confiscation of the gold and imposition of
penalty of Rs.38,000 on Ratanbai under paragraph 75 of the 1121 Gold Control
Ordinance, 1968. Nem Kumar was acquitted of the charges levelled against him.
The Ordinance was replaced by the GoAd Control Act, 1968. Being aggrieved by
the said order of the Collector.
Ratanbai
preferred an appeal against the same to the Administrator under the Gold
Control Act, 1968. The Administrator, however, dismissed the appeal by his
order dated February 23, 1972.
Ratanbai
filed an application for revision before the Central Government challenging the
propriety of the order of the Administrator. The appellant No. 1 Sushil Kumar,
son of Nem Kumar, who had by now attained majority, also filed a revisional
application before the Central Government. Both the revisional applications
were dismissed by the Central Government.
Thereafter,
the appellants Nos. 1 to 5 and Surendra Kumar, since deceased, son of
Shantabai, filed a writ petition in the Delhi High Court. The learned Single
Judge of the Delhi High Court, on an interpretation of section 71(1) of the
Gold Control Act including the proviso thereto, took the view that the seized
gold could not be ordered to be confiscated and no penalty could be imposed on
Ratanbai. In that view of the matter, the learned Judge quashed the order of
confiscation and penalty and directed the return of gold to the petitioners.
The
respondents could not accept the decision of the learned Judge and accordingly,
preferred an appeal to the Division Bench of the High Court. The Division Bench
did not agree with the interpretation of the learned Judge on section 71(1) of
the Gold Control Act including the proviso thereto. We shall have occasion to
refer to the interpretation put forward on section 71(1) by the Division Bench
of the High Court and it is sufficient to state here that the Division Bench
set aside the judgment of the learned Single Judge and allowed the appeal of
the respondents. Hence this appeal by special leave by the sons of Nem Kumar,
Shantabai and Nem Kumar himself.
Under
rule 126-I of the Defence of India Rules 1962, every person other than a dealer
was required to make a declaration as to the quantity, description and other
prescribed particulars of gold (other than ornaments) owned by him within
thirty days from January 9, 1963, the date on which the Defence of India
(Amendment) Rules, 1963 came into force. Rule 126-H was amended by the Defence
of 1122 India (Fourth Amendment) Rules, 1966. Sub-rules (1-A) to (I-G) were
added to rule 126-H. Sub-rule (1-A) provided as follows:
"(1-A)--No
person (other than a dealer or refiner licensed under this Part) shall, after
the expiry of a period of six months from the commencement of the Defence of
India (Fourth Amendment) Rules, 1966, either own or have in his possession,
custody or control any primary gold." Clause (i) of sub-rule (1-B), which
is also important for our purpose, reads as follows:"(1-B)--Every person
who owns or has in his possession, custody or control at the commencement of
the Defence of India (Fourth Amendment) Rules, 1966, any primary gold which has
been included in a declaration or further declaration made under rule 126-1 (as
in force immediately before the commencement of the said Rules) or in respect
of which no such declaration is required to be made under that rule, shall
dispose of such primary gold in the following manner, namely:
(i)
If he, being the owner, is in possession, custody or control thereof at such
commencement, he shall, within a period of six months from such commencement,
either sell such primary gold to a refiner or dealer licensed under this Part
or deliver the same to a dealer or goldsmith licensed or certified, as the case
may be, under this Part for conversion thereof into ornaments ;" The
ground that weighed with the Central Excise Authorities in confiscating the
gold was that the acquisition, possession, custody or control of primary gold
in question by Ratanbai became illegal and contraband and liable to
confiscation, as she did not file any declaration required under rule 126-I of
the Defence of India Rules, 1962 within thirty days from January 9, 1963 nor
did she dispose of the gold by sale nor convert the same into ornaments in
contravention of clause (i) of sub-rule (1-B), but possessed the same in
violation of sub-rule (1-A) of rule 126-H of the Defence of India (Fourth
Amendment) Rules, 1966. But, after the amendment of section 71(1) of the Gold
Control Act, 1968 by the addition of a proviso, the appellants have placed
reliance upon the proviso.
1123
Initially section 71(1) was as follows:"71(1)--Any gold in respect of
which any provision of this Act or any rule or order made there under has been,
or is being, or is attempted to be, contravened, shall be liable to
confiscation." This Court in Badri Prasad v. Collector of Central Excise,
[1971] Supp. SCR 254 held that section 71 placed an unreasonable restriction on
the right of a person to acquire, hold and dispose of gold articles or gold
ornaments.
In
that view of the matter, this Court struck down section 71 as unconstitutional.
Thereafter, by Gold (Control) Amendment Act, 197 1, a new section 71(1) was
enacted with retrospective effect from 1-9-1968. Sub-section (1) of section 71,
with which we are concerned, is as follows:"Sec. 71(1)--Any gold in
respect of which any provision of this Act or any rule or order made there under
has been, or is being, or is attempted to be, contravened, together with any
package, covering or receptacle in which such gold is found, shall be liable to
confiscation:
Provided
that where it is established to the satisfaction of the officer adjudging the
confiscation that such gold or other thing belongs to a person other than the
person who has, by any act or omission, rendered it liable to confiscation, and
such act or omission was without the knowledge or connivance of the person to
whom it belongs, it shall not be ordered to be confiscated but such other
action, as is authorized by this Act, may be taken against the person who has,
by such act or omission, rendered it liable to confiscation." It is
contended on behalf of the appellants that Ratanbai by her omission to dispose
of the gold by sale or to convert the same into ornaments in accordance with
the provision of rule 126-H, as amended by the Defence of India (Fourth
Amendment) Rules, 1966, rendered the gold liable to confiscation without the
knowledge or connivance of the owners thereof, namely, the grandsons of
Kesharimal Porwal, the same cannot be confiscated in view of the proviso to
section 71(1) of the Gold Control Act. The learned Single Judge of the High
Court upheld the contention and directed the release of the gold in favour of
the appellants.
1124
On the other hand, the Division Bench of the High Court took a contrary view.
According to the learned Judges of the Division Bench, the proviso will apply
only to such gold the possession of which can be retained. As the gold in
question was not converted or sold within the grace period of six months from
March 1, 1967, such gold became contraband and the possession thereof by
Ratanbai was illegal. Moreover, under section 8(1) of the Gold Control Act,
1968, no person can own, acquire or possess primary gold. In the view of the
Division Bench, confiscation of primary gold is mandatory under section 8(1) of
the Gold Control Act and earlier under the Defence of India Rules. According to
the Division Bench, the proviso cannot be so construed as to permit primary
gold to be retained by prohibiting an order of confiscation from being passed.
The Division Bench held that possession of primary gold could never be
legalised.
The
principal question that falls for our consideration is whether the proviso to
section 71(1) also relates to primary gold. It is not disputed that the power
of confiscation of gold including primary gold is conferred by subsection (1)
of section 71. The expression "any gold" refers to all kinds of gold
including primary gold. Indeed, section 2(j) defines "gold" as
meaning gold, including its alloy (whether virgin, melted or re-melted, wrought
or unwrought) in any shape or form, of a purity of not less than nine carats
and includes primary gold, article and ornament.
We
may now consider the contention made on behalf of the respondents that the
proviso does not relate to primary gold. The reason for this contention is that
as, in view of section 8(1) of the Gold Control Act, nobody can retain
possession of primary gold, the proviso cannot relate to primary gold, for, if
the conditions mentioned in the proviso are fulfilled, the gold shall not be
ordered to be confiscated. In other words, the gold would be allowed to be
retained by the owner thereof. It is submitted that such interpretation would
render section 8(1) nugatory. Section 8(1) is in the following terms:"Sec.
8(1). Save as otherwise provided in this Act, 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 1125 (iii) buy, accept or
otherwise receive or agree to buy, accept or otherwise receive, any primary
gold." There can be no doubt that in view of section 8(1), no person can
own, acquire or retain possession, custody or control or primary gold. It has
already been noticed that under clause (i) of sub-rule (1-B) of rule 126-H of
the Defence of India (Fourth Amendment) Rules, 1966, it was enjoined that the
owner in possession, custody or control of primary gold was bound to either
sell such primary gold to a licensed refiner or dealer or deliver the same to a
licensed or certified dealer or goldsmith for conversion thereof into ornaments
within a period of six months from September 1, 1967, the date of commencement
of the said Rules. Sub-rule (1-A) of rule 126-H prohibits possession, custody
or control of any primary gold after the expiry of the said period of six
months.
In
the instant case, it was Ratanbai who had failed to either sell or convert the
primary gold in question within the grace period of six months without the
knowledge and connivance of owners thereof, that is, the grandsons of
Kesharimal Porwal.
If
the contention of the respondents is accepted, it will mean that the owner of
primary gold has to lose the same on account of default committed by somebody
who is not the owner. It was perhaps one of the considerations that weighed
with this Court in Badri Prasad's case (supra), namely, that the Pawnee who is
the owner has to suffer confiscation or to pay a fine in lieu of confiscation
not exceeding twice the value as provided in section 73 of the Gold Control Act
before the same was amended, not for any fault of his, but for the omission of
the pawn broker to file declarations or monthly statements and this Court
struck down the un amended provision of section 71 as unconstitutional.
Therefore, in interpreting the provision of section 71(1) including the proviso
thereto, we shall have to keep in view the above decision of this Court. It is
with a view to removing the unconstitutionality of the un amended provision of
section 71 that section 71(1) has been reenacted with a proviso added to
sub-section (1) of section
71.
In that view of the matter, it is difficult to hold that the proviso does not
relate to primary gold but to other kinds of gold.
It
is also difficult to accept the contention that while the substantive provision
of sub-section (1) of section 71 relates to all kinds of gold 1126 including
primary gold, the proviso which is a part of the substantive provision, will
not include within its scope and ambit primary gold. It is true that under
section 8(1) of. the Gold Control Act, retention of possession of primary gold
is prohibited. But because of that, it will not be reasonable and justified to
ignore the plain meaning of the proviso and to interpret it in such a manner as
to render it inconsistent with the substantive part of sub-section (1) of
section 71.
The
proviso lays down the circumstances under which any gold which is liable to
confiscation will not be confiscated. Confiscation deprives the owner of his
property to his loss and detriment. Where primary gold is not to be confiscated
in view of the proviso to section 71(1), the owner thereof gets it back, but it
does not mean that he will be entitled to retain possession of such primary
gold which is forbidden by section 8(1) of the Gold Control Act. In such a
case, the owner has to sell the primary gold to a licensed refiner or dealer or
deliver the same to a dealer or goldsmith, licensed or certified, as the case
may be, that is to say, in the same manner and following the same procedure as
was laid down in sub-rule (1-B) of rule 126-H of the Defence of India (Fourth
Amendment) Rules, 1966 and, in our opinion, so interpreted there will be no
conflict between the proviso to section 71(1) and the provision of section 8(1)
of the Gold Control Act. Indeed, the Administrator under the Gold Control Act
has issued an order No. 11/76 F. 13 1/41/75GC.II dated 30-7-1976 whereby it is
directed, inter alia, that where gold is seized and confiscated and thereafter
released and if such release relates to primary gold, it is further directed:
(a) such primary gold shall be sold to a licensed dealer or got converted into
ornaments; (b) the person concerned shall, within one month of taking back into
his possession, custody or control of such primary gold, furnish to the
concerned Gold Control Officer a certificate from the licensed dealer that such
primary gold has been sold to him and where such primary gold has been
converted into ornaments, a certificate from the licensed dealer or the
certified goldsmith, as the case may be, that such primary gold has been so
converted.
Thus,
there will be no difficulty in not confiscating the primary gold under the
proviso, for after such release the owner of primary gold will not be entitled
to retain possession of the same, but will have to dispose it of or convert the
same into ornaments. We do not, therefore, agree with the view expressed by the
Division Bench of the High Court that the proviso to section 71(1) of the Gold
Control Act does not relate to primary gold. The Division Bench was greatly
influenced by the fact that in view of section 8(1) of the Gold Control Act,
the possession of primary gold cannot be retained by any person. But, as 1127
already discussed above, such an interpretation is not possible to be made of
the proviso to section 71(1). The interpretation that we have put on section
71(1) will not run counter to the provision of section 8(1), in view of the
fact that although the primary gold is not confiscated, it will not be allowed
to be possessed by the owner, but has to be disposed of by him or converted
into ornaments in the manner as mentioned above or as directed by the
Administrator by his said order dated 30-7-1976.
For
the reasons aforesaid, we set aside the order of the Division Bench and modify
the order of the learned Single Judge of the High Court directing that the seized
primary gold shall be released in favour of the appellants with a further
direction that the appellants shall either sell the same to a licensed dealer
or deliver possession of the same to a licensed dealer or a certified
goldsmith, as may be specified by the Administrator, immediately on the release
of such primary gold.
The
appeal is allowed, but in view of the peculiar facts and circumstances of the
case, there will be no order as to costs.
S.L.
Appeal allowed.
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