2017 (4) TMI 1069 - HC - Indian Laws

Order passed by the Appellate Tribunal for Forfeited Properties confirming the order of the Competent Authority in terms of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act - Held that - The wider definition under SAFEMFOPA cannot be pressed into service to bring within the fold of the Act all and every income unless the competent authority draws a link between the same and the detenu. We cannot lose sight of the position that other enactments like the Income and Wealth Tax Acts contain their own mechanisms for addressing undisclosed income/assets and the purpose of the SAFEMFOPA is different as seen from the Preamble of the Act that reads An act to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto. The presence of undisclosed income/wealth has thus to be seen in the context of illegal acts of omission and commission by the detenu only and none other. In the present case, there is not even an allegation made, let alone a link/nexus drawn in this regard. With respect to the house property at Kilakkarai, the explanation by the petitioner was to the effect that the building was gifted to her by her mother and further construction was carried out by her. The competent authority states that there was no evidence to establish that the petitioner s mother had enough funds in this regard and thus assumes that the property is illegally acquired property in the petitioners hands. Jewellery and the bank account with Indian Bank were also held to be illegally acquired on the prima facie consideration that the sources for the acquisition of the jewellery were not proved by the petitioner. Nowhere in the reasons have the properties traced back to the detenu and his acts prohibited/contravening the law. The conclusion of illegal acquisition has been drawn on the mere ipse dixit of the authority. The Reasons recorded by the competent authority do not satisfy the parameters of the Act. As a consequence, the notice u/s 6(1)

Summary

Issues Involved:
1. Validity of the order passed by the Appellate Tribunal for Forfeited Properties.
2. Compliance with the requirements of Section 6(1) of SAFEMFOPA.
3. Establishment of a link between the properties and the detenu.
4. Interpretation of "illegally acquired property" under SAFEMFOPA.

Issue-wise Detailed Analysis:

1. Validity of the Order Passed by the Appellate Tribunal for Forfeited Properties:
The petitioner challenged the order of the Appellate Tribunal for Forfeited Properties dated 27.2.2002, which confirmed the Competent Authority's order dated 28.2.2001 under SAFEMFOPA. The Tribunal upheld the forfeiture of properties, including real estate, jewelry, a bank account, and cash, alleged to be illegally acquired by the petitioner, the daughter of a COFEPOSA detenu.

2. Compliance with the Requirements of Section 6(1) of SAFEMFOPA:
The petitioner argued that the reasons recorded under Section 6(1) of SAFEMFOPA did not establish a link between the properties and the detenu, which is a prerequisite for forfeiture. Section 6(1) mandates that a notice to show cause can only be issued upon recording reasons in writing, leading to the belief that the properties are illegally acquired. The petitioner contended that the Competent Authority failed to meet this requirement, rendering the forfeiture proceedings invalid.

3. Establishment of a Link Between the Properties and the Detenu:
The Supreme Court's judgments in Attorney General of India Vs. Amratlal Prajivandas and others, Fatima Mohd.Amin Vs. Union of India, and Aslam Mohammed Merchant Vs. Competent Authority, emphasized the necessity of establishing a nexus between the properties and the detenu. The court reiterated that the properties of relatives or associates could not be forfeited solely based on their relationship with the detenu. There must be a demonstrable link between the properties and the detenu's illegal activities. The petitioner highlighted that the Competent Authority failed to establish such a link in their case.

4. Interpretation of "Illegally Acquired Property" Under SAFEMFOPA:
The definition of "illegally acquired property" under SAFEMFOPA is broader compared to the Narcotics Drugs and Psychotropic Substances Act. However, the court clarified that this wider definition does not eliminate the requirement to establish a connection between the property and the detenu's illegal activities. The court referred to judgments in Aslam Mohammad Merchant, Fatima Mohd Amin, and P.P.Abdulla vs Competent Authority, which underscored that the Act would not apply unless the funds for acquiring the property were traced back to the detenu.

Application of Legal Principles to the Case:
The court examined the reasons recorded by the Competent Authority for issuing the notice under Section 6(1). The Competent Authority assumed that properties were illegally acquired based on undisclosed income and voluntary disclosures under income tax laws. However, the court found that these reasons did not establish a link between the properties and the detenu's illegal activities. The court noted that the purpose of SAFEMFOPA is to target properties acquired through illegal activities related to smuggling and foreign exchange manipulation, not merely undisclosed income.

Conclusion:
The court concluded that the reasons recorded by the Competent Authority did not satisfy the requirements of SAFEMFOPA. Consequently, the notice under Section 6(1) and the order of forfeiture were quashed. The writ petition was allowed without costs, and the forfeiture order was set aside.