Case Note & Summary
The petitioners, M/s. Neelkamal Realtors Suburban Private Limited (a company registered under the Companies Act, 1956) and its shareholder Mr. Ishaq Balwa, filed a writ petition challenging a notification dated 29th December 2016 issued by the Custodian of Enemy Property of India under Section 7 of the Enemy Property Act, 1968, declaring certain properties of the petitioner company as enemy property. The properties in question were part of a larger property that the petitioner company had developed and was in the process of developing. The notification was based on the ground that some of the shareholders of the petitioner company were Pakistani nationals or enemy subjects. The petitioners contended that the company is a separate legal entity distinct from its shareholders, and its property cannot be treated as enemy property merely because some shareholders are enemy nationals. They also argued that the notification was issued without any opportunity of hearing, violating principles of natural justice. The respondents, including the Custodian and the State, argued that the company was controlled by enemy nationals and that the notification was valid under the Act. The court analyzed the definitions under the Enemy Property Act and the Companies Act, and held that a company incorporated in India is not an 'enemy' or 'enemy subject' under the Act. The court also noted that Section 8A of the Act, which requires a hearing before notification, was inserted in 2017 but applies to pending proceedings. The court found that the notification was issued without hearing the petitioners, violating natural justice. The court allowed the petition, quashed the notification, and directed the respondents to return possession of the properties to the petitioners if taken, and to consider any representation by the petitioners in accordance with law.
Headnote
A) Enemy Property Act, 1968 - Section 2(b) and 2(c) - Definition of 'enemy' and 'enemy subject' - The definition of 'enemy' under Section 2(b) includes any country or government which is an enemy, but does not include a company incorporated in India. The definition of 'enemy subject' under Section 2(c) includes individuals who are citizens of an enemy country, but does not include a company. Therefore, a company incorporated in India cannot be treated as an enemy or enemy subject merely because some of its shareholders are enemy nationals. (Paras 10-12) B) Companies Act, 1956 - Section 34 and Section 45 - Separate legal entity - A company incorporated under the Companies Act is a separate legal entity distinct from its shareholders. The property of the company belongs to the company and not to its shareholders. Therefore, the property of a company cannot be treated as enemy property based on the enemy status of its shareholders. (Paras 13-15) C) Enemy Property Act, 1968 - Section 7 and Section 8A - Notification of enemy property - Section 7 empowers the Custodian to notify property as enemy property if it appears to be enemy property. However, Section 8A, inserted by amendment in 2017, requires that before issuing such notification, the Custodian must give an opportunity of hearing to the person in possession or claiming interest. The notification in this case was issued in 2016, before the insertion of Section 8A, but the proceedings continued after the amendment. The court held that the requirement of hearing under Section 8A is procedural and applies to pending proceedings. (Paras 16-20) D) Enemy Property Act, 1968 - Section 17 - Bar of jurisdiction - Section 17 bars civil courts from entertaining suits or proceedings relating to enemy property. However, the writ jurisdiction of the High Court under Article 226 is not barred. The petitioners have invoked the writ jurisdiction, which is maintainable. (Para 21) E) Natural Justice - Right to be heard - The notification under Section 7 was issued without any notice or opportunity of hearing to the petitioners. Even if Section 8A was not in force at the time of notification, the principles of natural justice require that the person affected be heard before an adverse order is passed. The court held that the notification is violative of natural justice. (Paras 22-24) F) Enemy Property Act, 1968 - Section 8A - Retrospective application - Section 8A was inserted by Act 28 of 2017 with effect from 1st July, 2017. The notification in this case was issued in 2016. However, the court held that the provision is procedural and applies to pending proceedings. The Custodian should have given an opportunity of hearing to the petitioners before confirming the notification. (Paras 25-27)
Issue of Consideration
Whether the property of a company incorporated in India can be declared as enemy property under the Enemy Property Act, 1968, merely because some of its shareholders are enemy nationals, and whether the notification under Section 7 of the Act is valid when issued without following the procedure under Section 8A and without affording an opportunity of hearing.
Final Decision
The court allowed the writ petition, quashed the notification dated 29th December 2016, and directed the respondents to return possession of the properties to the petitioners if taken. The court also directed the respondents to consider any representation made by the petitioners in accordance with law, after giving an opportunity of hearing.
Law Points
- Enemy Property Act
- 1968
- Section 2(b)
- Section 2(c)
- Section 7
- Section 8A
- Section 17
- Companies Act
- 1956
- Section 34
- Section 45
- principle of separate legal entity
- lifting of corporate veil
- notification under Section 7
- retrospective application of Section 8A
- natural justice
- right to be heard
