Statutory Vesting of Enemy Properties under the Enemy Property Act, 1968

Introduction:

Enemy property refers to property that was abandoned by individuals who moved from India to Pakistan and China following the conflicts of 1965 and 1971. The term “enemy” denotes any nation that engages in aggressive actions against India.

The Custodian of Enemy Property for India is a government department responsible for managing property claims arising from wars. The Custodian is appointed by the Central Government of India and has the authority to confiscate the property of enemy nationals located in India.

The Enemy Property Act of 1968, enacted by the Indian Parliament, governs the administration of properties deemed as enemy properties. This law allows the government to acquire assets abandoned by individuals who moved to nations classified as adversaries of India.

The law also ensures that descendants of individuals who migrated to China and Pakistan during the partition and subsequent years will not be able to make any claims on the properties left in India by their ancestors.

The recent amendments to the Guidelines for the disposal of Enemy Property, particularly the Enemy Property Act, 1968, have raised pertinent questions regarding the statutory vesting of such properties and the implications on ownership. This article aims to analyze the amendments, highlight key provisions, and delve into the recent Supreme Court judgment in the case of Lucknow Nagar Nikam and others vs Kohli Brothers Color Lab, dated 22 February 2024.

Amendments to the Guidelines:

On 17 March 2023, the Ministry of Home Affairs released a Notification regarding the updated Guidelines for the disposal of Enemy Property (Amendment) Order, 2023. The amendments primarily impact Para 9 of the 2018 Guidelines, focusing on the sale of immovable enemy property.

Under the new provisions, the eviction process for occupied enemy properties must now be initiated with the assistance of the District Magistrate or Deputy Commissioner. Furthermore, the revised guidelines dictate that occupants of properties valued below Rs. One Crore have the first opportunity to purchase the property. Properties valued between Rs. One Crore and below Rs. Hundred Crore can be disposed of by the Custodian of Enemy Property for India through e-auction or other specified methods.

Observations and Implications:

An important point to consider is that Indians living abroad who still hold Indian citizenship could be seen as enemy subjects, firms, or companies if their residing country is declared an enemy. This could mean that their properties in India may be governed by the Enemy Property Act. The Custodian’s responsibilities in these situations are restricted to handling and overseeing these properties.

Analysis of Judgment in Lucknow Nagar Nikam and others vs Kohli Brothers Color:

The recent Supreme Court judgment in Lucknow Nagar Nikam and others vs Kohli Brothers Color Lab  [decision dated 22^nd February 2024] provides valuable insights into the nature of statutory vesting under the Enemy Property Act, 1968.

Case Background: The disagreement stemmed from a property situated in Lucknow, which was labeled as “enemy property” when the original owner moved to Pakistan in 1947. The property was rented out to Kohli Brothers Colour Lab, who opposed the Municipal Corporation’s request for property tax payment, asserting their right to exemption as per Article 285 of the Constitution.

The judgement states that although the respondent cannot receive refunds for taxes already paid in the past, they will be liable for taxes starting from the current fiscal year (2024-2025). This decision helps to ensure that the tax law is applied consistently and transparently.

Key Points: The key points emanating from the judgment are as follows:

1. The Custodian of Enemy Property does not acquire ownership of the vested properties; instead, they function as a trustee for management and administration.
2. Rule 15 of the Rules allows the Central Government to initiate a divestment process, transferring the enemy property from the Custodian to the original owner or another designated person.
3. The Union of India cannot claim ownership of enemy properties upon vesting in the Custodian. There is no transfer of ownership, and therefore, no ownership rights are conveyed to the Union.
4. As enemy properties are not Union properties, Article 285(1) does not apply, and Article 285(2) is only applicable if the enemy properties are considered Union properties.

This judgement specifies the tax status of enemy property, guaranteeing a source of income for municipal corporations. It reaffirms the idea of equal treatment under the law, preventing any special advantages for owners/occupants of enemy property. The ruling also has broader consequences for other cases concerning the Enemy Property Act and Article 285. This significant ruling has extensive effects, ensuring fair tax treatment, explaining the duties of the Custodian, and supporting the concept of property rights. It establishes a clear framework for dealing with the intricate legal and financial aspects related to enemy property in India.

Conclusion:

The recent changes to the Guidelines for handling Enemy Property and the Supreme Court’s thoughtful ruling have brought attention to the intricate legal details of the Enemy Property Act, 1968. The transfer of enemy properties to the Custodian is not seen as expropriation, and the Custodian’s duties are seen as temporary and akin to that of a trustee. As legal matters progress, it is important for those involved to understand and work through these complexities according to the law.

The decision reaffirms the constitutional structure and emphasizes the Custodian’s role as a temporary trustee of enemy properties. It offers clarification and direction for future tax disputes, ensuring that constitutional principles are followed and tax burdens are distributed fairly.