2022 (11) TMI 744 - HC - Indian Laws

Forfeiture of properties of the first respondent - COFEPOSA - allegation that properties acquired out of the proceeds of illegal activities of her father, against whom proceedings under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 were launched - theory of presumption and burden to disprove - HELD THAT - Supreme Court in Attorney General for India and Others v. Amratlal Prajivandas and others, 1994 (5) TMI 235 - SUPREME COURT held that though Section 8 of the Act of 13 of 1976, places the burden of establishing that the properties mentioned in the show cause notice issued under Section 6 of the Act of 13 of 1976, are not illegally acquired properties lies upon the noticee, the Competent Authority will have to at the least establish the connecting link between acquisition of those properties and the illegal earnings of the detenue and it is the burden of disproving such link that is placed on the noticee by operation of Section 8 of the Act of 13 of 1976. The question that would arise in the case on hand is not one of burden of proof, but as to whether the Competent Authority has made out the jurisdictional fact, namely the link or the nexus between the acquisition of the property and the illegal income of the father of the first respondent/detenue. If we are to look at the notice under Section 6(1) of the Act of 13 of 1976, and the subsequent proceedings there is nothing in the said notice to connect the purchase of the property with the illegal income of the detenue. The notice proceeds on the footing that once the relationship between the noticee and the detenue is established the property in the hands of the noticee would automatically become illegally acquired property. No doubt the learned Additional Solicitor General would be right in his submission that the Writ Court ought not to have invoked Section 102 of the Evidence Act, to conclude that the burden is on the Competent Authority, but at the same time, he cannot succeed unless he is able to go one step further and establish the nexus or the link. A perusal of the notice issued under Section 6 and the order of the Competent Authority passed under Section 7 of the Act of 13 of 1976, would demonstrate that such a link or nexus is totally absent and no effort or endeavour has been made to establish such link or nexus - there are no reason to interfere with the conclusion of the Writ Court in quashing the proceedings. Appeal dismissed.

Summary

Issues Involved:
1. Validity of forfeiture proceedings under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976.
2. Burden of proof under Section 8 of the Act.
3. Requirement of establishing a nexus between illegal earnings and property acquisition.

Detailed Analysis:

1. Validity of Forfeiture Proceedings:
The Competent Authority issued a notice under Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, to the first respondent, alleging that the properties were acquired using funds illegally earned by her father, who was detained under the COFEPOSA Act. The Authority, after providing an opportunity for explanation, ordered the forfeiture of the properties. The first respondent appealed, and the Appellate Tribunal partially allowed the appeal, leading to further proceedings that culminated in the High Court setting aside the forfeiture order due to the lack of evidence linking the properties to illegal earnings.

2. Burden of Proof:
The core issue debated was the interpretation of Section 8 of the Act, which places the burden of proving that the property is not illegally acquired on the person affected. The Writ Court held that the Competent Authority failed to establish the necessary link between the illegal earnings and the property acquisition, thereby invalidating the forfeiture order. The appellant contended that Section 8 creates a special rule of evidence, overriding the general provisions of the Indian Evidence Act, specifically Section 102, which deals with the burden of proof.

3. Requirement of Establishing Nexus:
The High Court emphasized that the Competent Authority must establish a "jurisdictional fact" or a clear nexus between the illegal earnings of the detenue and the acquisition of the properties. The notice issued under Section 6 and the subsequent proceedings lacked any evidence or reasoning to demonstrate this link. The Court referred to various judgments, including those of the Supreme Court, which underscored the necessity of proving such a connection before invoking forfeiture provisions.

Conclusion:
The High Court concluded that the Competent Authority failed to establish the essential link or nexus between the illegal earnings and the acquisition of the properties. Consequently, the forfeiture proceedings were deemed invalid. The Court clarified that while the Writ Court's interpretation of the burden of proof was not entirely accurate, the fundamental requirement of establishing the jurisdictional fact was not met by the Competent Authority. Therefore, the appeal was dismissed, and the forfeiture order was quashed.