The Cabinet recently approved the sale of ‘enemy shares’ that are in the custody of the Ministry of Home Affairs or the Custodian of Enemy Property of India. This is expected to shore up government revenues by about ₹3,000 crore. So who are these enemies and why have they left us Indians this rich haul of shares?

What is it?

As per the Enemy Property Act, 1968, ‘enemy property’ refers to any property that was belonging to a person who migrated from India to an enemy country when a war broke out.

During World War II, the US and the UK took over the properties of people who fled their shores to settle in ‘enemy’ countries such as Germany and Japan. This was touted as a move to protect their turf from hostile forces in enemy States who might take control of such assets and use it to their advantage.

Similarly, in India too, after the war with China and Pakistan in 1962 and 1965, the government took over the properties, under the Defence of India Act, from persons who migrated to these countries. The confiscated property included both movable and immovable properties — securities, jewellery, land, and buildings.

Later in 1968, a law called the Enemy Property Act was enacted to regulate such properties and entrusted with the Custodian of Enemy Property. Now, for the first time, the government has decided to sell off the property held in the form of shares (‘enemy shares’) which are lying with the custodian.

It expects to use the proceeds from sale for development and social welfare programmes. With the Cabinet rubber-stamping this sale of shares, the disposal of other properties such as land and building could also be in the offing.

Why is it important?

In a year where the government is leaving no stone unturned to unearth new ways to balance its Budget, these enemy shares have come in handy.

The property now approved for sale consists of about 6.5 crore shares which are under the custody of CEPI belonging to 20,323 shareholders in 996 companies.

Of these, 588 companies are currently functional and 139 are listed on stock exchanges.

Selling these shares will lead to monetisation of assets that have been lying dormant for decades.

In a twist to this decision, last year, the government also made amendments to The Enemy Property Act, 1968 to include even the property lawfully transferred by the ‘enemy’ (the fleeing citizen) to his/her legal heir or successor before migrating to Pakistan or China.

To illustrate, say a person ‘A’ transferred his property to his son in 1963 and migrated to Pakistan during the war in 1965.

After the amendment to the Act, the property transferred by A before migrating, now owned by his son, also falls under the definition of ‘enemy property’ and can be confiscated. The government introduced this amendment to put an end to the long-lasting disputes on claims made by the legal heirs.

Why should I care?

If you are among those legal heirs who nursed hopes of enjoying ownership rights over shares left by your forefathers who fled to ‘enemy’ states, it’s the time to swallow the bitter pill, as your shares will now be sold and proceeds added to the disinvestment kitty of the government.

If you are someone who tracks the economy closely and have been worried about the Centre’s fiscal deficit overshooting targets, you can feel better that all possible options are being explored to address this.

But keep in mind that the expected sale proceeds of ₹3,000 crore amount to a few drops of water in the mighty ocean of the fiscal deficit.

The bottomline

If you are the government, you can even count on your enemy to bail you out of a tight corner.

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