Detention revoked, but properties still forfeited — SC rules why

His detention was revoked. His criminal case was thrown out. But the government still took his house, his hotel, and his bank deposits. In a Delhi courtroom, the air was thick with the smell of old legal paper as a man who had already won freedom from preventive detention watched helplessly while the state argued that forfeiting his entire life's assets was a separate matter entirely.

The question before the Supreme Court was deceptively simple: If the government cancels a detention order and a court discharges the criminal case, can it still seize the detained person's properties under a different law? The answer, delivered on November 9, 2023, turned on four exceptions written into a 1976 statute — and a man named Thanesar Singh Sodhi learned that winning one legal battle does not mean winning the war.

When the detention order arrived

In January 1978, the government passed a detention order against Sodhi under COFEPOSA (the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 — a law that allows the state to detain someone without trial if they are suspected of smuggling or manipulating foreign exchange). The order accused him of smuggling and foreign exchange manipulation. Sodhi challenged it before the Delhi High Court, which dismissed his petition on merits in September 1978.

His wife then filed a petition before the Supreme Court. The courtroom fell silent as the judges considered the matter. But before the court could decide, the government made an offer: it would revoke the detention order and file a regular criminal complaint instead. The petition was withdrawn. On November 9, 1978, the detention order was revoked.

The criminal case that vanished

The government kept its word. It filed a criminal complaint against Sodhi under the Customs Act, 1962 and the Gold (Control) Act, 1968. But in October 1981, the Additional Chief Metropolitan Magistrate in New Delhi discharged him — the case was closed, no conviction, no penalty. The magistrate's desk held a thin stack of papers, the matter disposed of with a single order. To any ordinary observer, Sodhi had beaten the system twice: first his detention was revoked, then the criminal case was thrown out.

But the government was not done.

The SAFEMA notice that changed everything

In February 1981 — while the criminal case was still pending — the government issued a show-cause notice under SAFEMA (the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 — a law that allows the state to seize properties acquired through smuggling or foreign exchange violations). The notice asked Sodhi why his house, his hotel, and his bank deposits should not be forfeited as "illegally acquired" properties.

Sodhi argued that since his detention was revoked and the criminal case was discharged, the SAFEMA proceedings could not survive. The government's response was blunt: SAFEMA does not depend on a criminal conviction or a valid detention order. It depends on whether a detention order was made — not whether it was later revoked.

In September 1983, the Competent Authority under SAFEMA ordered the forfeiture of all three properties.

The companion case: Sujata Shetty

A similar battle was fought by Sujata Shetty, who challenged SAFEMA forfeiture after her COFEPOSA detention was revoked in 2009. The Bombay High Court dismissed her second petition, and the matter travelled alongside Sodhi's case to the Supreme Court. The same legal question bound them together: could a revoked detention order still support a property forfeiture?

The four exceptions that saved the forfeiture

Sodhi appealed to the Appellate Tribunal under SAFEMA, which upheld the forfeiture in 1995. He then approached the Delhi High Court, which dismissed his petition in 2010. By the time the case reached the Supreme Court, Sodhi had died — his legal heirs continued the fight.

The Supreme Court examined Section 2(2)(b) of SAFEMA, which defines who the law applies to. The section says SAFEMA applies to every person against whom a detention order was made under COFEPOSA. But the proviso — an exception clause — lists four situations where revocation of the detention order would make SAFEMA inapplicable:

• If the detention order was revoked on the recommendation of the Advisory Board (a body that reviews whether detention is justified);
• If it was revoked under Section 9 of COFEPOSA (a review mechanism);
• If it was revoked under Section 12A of COFEPOSA (another review mechanism); or
• If it was set aside by a court.

The court found that Sodhi's detention was revoked for none of these reasons. It was revoked because the government chose to file a criminal complaint instead — a purely executive decision that fell outside the four exceptions. Therefore, SAFEMA continued to apply.

Why the criminal discharge did not matter

The court also rejected the argument that the discharge in the criminal case made SAFEMA untenable. The two laws, the bench of Justice Vikram Nath and Justice Ahsanuddin Amanullah held, are independent statutory frameworks. A criminal case under the Customs Act or the Gold (Control) Act requires proof beyond reasonable doubt. SAFEMA forfeiture requires only a finding that the properties were illegally acquired — a lower standard of proof.

In its judgment, the court directly stated: "The discharge of an accused in criminal proceedings under the Customs Act, 1962 or the Gold (Control) Act, 1968, and the withdrawal of penalties thereunder, are irrelevant to the applicability of SAFEMA proceedings, as they are independent statutory frameworks."

The court relied on its earlier judgment in Attorney General for India v. Amratlal Prajivandas and Others (1994), which had already established that SAFEMA proceedings are not dependent on criminal convictions.

What this means for you

For practitioners, the ratio is narrow but sharp: revocation of a COFEPOSA detention order does not automatically kill SAFEMA proceedings. Only revocation falling within the four specific exceptions in the proviso to Section 2(2)(b) will do that. A client who has been discharged in a criminal case or whose detention has been revoked on executive grounds still faces the risk of property forfeiture.

THE PLAY: When challenging a SAFEMA forfeiture after detention revocation, check whether the revocation falls within one of the four proviso exceptions — if it does not, the forfeiture will likely survive.

The walk-off

The Supreme Court dismissed both appeals. Sodhi's house, hotel, and bank deposits stayed with the government. The detention was gone. The criminal case was gone. But the forfeiture remained — because in the architecture of SAFEMA, a detention order, once made, leaves a permanent mark that only four specific keys can erase.