2021 (12) TMI 732 - SC - Indian Laws

SAFEMA - Service of primary notice - illegally acquired properties - relatives of the convict - Competent authority claims that the subject property (to be forfeited) is that of the convict (V.P. Selvarajan) and ostensibly held by the relatives of the convict (respondents herein) - requirement to serve a primary notice under Section 6(1) of the 1976 Act upon such convict with copy thereof to his relatives under Section 6(2) of the 1976 Act - whether nonservice of such primary notice upon the convict would vitiate the entire proceedings initiated only against his relatives? HELD THAT - On plain as well as contextual reading of Section 6, it is crystal clear that the notice under Section 6(1) is required to be issued to any person to whom the Act applies. As is evident from Section 2(2) of the 1976 Act, the Act applies not only to convict or detenu, but also to their relative, associate including holder of any property being Section 2(2)(c), 2(2)(d) and 2(2)(e) respectively. The purpose of issuing notice is to enable the person concerned (noticee) to discharge the burden of proof as propounded in Section. In a given case, however, if the property is held by a person owing to merely being in legal possession thereof, but the ownership of the property at the relevant time is that of the convict or detenu or his/her relative, as the case may be, it would become necessary for the Competent Authority to not only give notice to the person in possession of the property in question but also to the person shown as owner thereof in the relevant records. Similarly, in a case where the person shown as owner in the relevant records had purchased the subject property from the convict or detenu and is a subsequent purchaser, notice is required to be issued to both - the present owner and the erstwhile owner (convict or detenu), as the case may be. The convict or detenu cannot be heard to claim any right in such property including proprietary rights and for the same reason, he is not expected to discharge the burden of proof under Section 8 of the 1976 Act as to whether it is his legally acquired property nor can he be said to be the person affected with the proposed action of forfeiture as such. Going by the definition of illegally acquired property in Section 3(1)(c) and of person in Section 2(2) to whom the Act applies, if the property is held in the name of the relative of the convict or detenu before or after the commencement of the Act, the notice under Section 6(1) needs to be issued to such person (recorded owner as well as in possession), who alone can and is expected to discharge the burden of proof in terms of Section 8 of the 1976 Act - so as to dissuade the Competent Authority from proceeding further against such property. Indeed, if the illegally acquired property is held in the name of the relative, but the de facto possession thereof is with some other person, who is not covered by the expression person as given in Section 2(2), in such a case primary notice under Section 6 is required to be issued to the relative of the convict or detenu and copy thereof served upon such other person who is in de facto possession thereof (albeit for and on behalf of the relative of the convict or detenu). Even in this situation, notice to the convict or detenu may not be necessary much less mandatory. For, the 1976 Act applies even to the relative of the convict or detenu holding illegally acquired property either by himself or through any other person on his behalf. Notice under Section 6(1) cannot be issued in respect of properties for which the Competent Authority has no evidence or material to record reasons to believe that the properties were acquired from the assets or money provided by the convict/detenu. The expression reasons to believe is a phrase used in several enactments and interpreted by this court to mean not mere subjective satisfaction based on surmise and conjecture, but a belief that is honest and based upon reasonable grounds - Recording of the reasons to believe and satisfaction of the aforesaid conditions is an important condition precedent a sine qua non and its violation would have legal consequences. It is a jurisdictional requirement, which, unlike a procedural requirement, would affect the proceedings if not complied with. Therefore, in such cases, the question of no prejudice is unavailable as the provision for issue of notice and satisfaction of the precondition for the issue of notice, i.e., reasons to believe , is mandatory and not optional or directory. Thus, in the present case, the properties in question and subject matter of notice under Section 6 are in the name of and held by the two respondents. No entitlement or right has been claimed in these properties by the heirs of the deceased convict V. P. Selvarajan. If the properties were in the name of the deceased detenu or convict, then different considerations may have applied. In the context of the present case as the convict V.P. Selvarajan had expired before the issuance of notice under Section 6 on 19th January 1994, therefore, the need and requirement to serve notice on him would not arise. Appeal allowed.

Summary

Issues Involved:
1. Interpretation of Section 6 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (1976 Act) regarding mandatory notice to the convict.
2. The validity of proceedings initiated against relatives of the convict without serving a primary notice to the convict.
3. Conflicting views of different High Courts on the necessity of issuing notice to the convict.
4. The burden of proof and the requirement of establishing a link between the properties and illegal activities of the convict.
5. The impact of delay in initiating proceedings under the 1976 Act.

Detailed Analysis:

1. Interpretation of Section 6 of the 1976 Act:
The central issue in these appeals is whether it is mandatory to serve a primary notice under Section 6(1) of the 1976 Act to the convict, with a copy to his relatives under Section 6(2), and whether non-service of such notice to the convict vitiates the proceedings initiated against his relatives. The Supreme Court examined the legislative intent, the language of Section 6, and the broader context of the Act to determine that Section 6(1) does not mandate serving a primary notice to the convict if the properties are held by his relatives. The Court emphasized that the notice must be given to the person holding the property proposed to be forfeited, who is directly affected by the forfeiture.

2. Validity of Proceedings Against Relatives Without Notice to the Convict:
The Madras High Court had held that the lack of notice to the convict vitiated the proceedings against his relatives. However, the Supreme Court reversed this view, stating that the Act applies to the relatives of the convict, and they are required to discharge the burden of proof regarding the legality of the properties. The Court clarified that if the properties are held by the relatives, they are the ones who must be served with the notice and not necessarily the convict.

3. Conflicting Views of Different High Courts:
The Supreme Court noted the conflicting views of various High Courts on this issue. The Kerala High Court in Sajitha & Ors. vs. Competent Authority & Ors. and the Calcutta High Court in The Competent Authority & Administrator & Anr. vs. Manilal Jalal & Anr. had held that non-issuance of notice to the convict does not vitiate the proceedings against the relatives. The Supreme Court affirmed these views, emphasizing that the Act aims to reach the illegally acquired properties of the convict, irrespective of whose name they are held in.

4. Burden of Proof and Establishing a Link:
The respondents argued that there must be a nexus between the properties sought to be forfeited and the illegal activities of the convict. The Supreme Court, referring to the Constitution Bench judgment in Attorney General for India v. Amratlal Prajivandas, reiterated that the burden of proof lies on the person to whom the notice is issued to establish that the properties are legally acquired. The Court emphasized that the Act is designed to prevent convicts from shielding their illegally acquired properties by holding them in the names of their relatives.

5. Impact of Delay in Initiating Proceedings:
The respondents also raised the issue of inordinate delay in initiating proceedings, arguing that it was unjust and impractical to call upon them to explain the sources of their properties after such a long time. The Supreme Court did not delve into this issue in detail but remanded the matter to the High Court to consider all other aspects, including the argument of delay, on its own merits.

Conclusion:
The Supreme Court set aside the Madras High Court's judgment, holding that it is not mandatory to serve a primary notice to the convict under Section 6(1) of the 1976 Act if the properties are held by his relatives. The Court restored the writ petitions to the High Court for fresh consideration on all other issues, including the argument of inordinate delay. The Court's interpretation aligns with the views of the Kerala and Calcutta High Courts, emphasizing that the Act's objective is to reach the illegally acquired properties of the convict, irrespective of whose name they are held in.