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TMI Blog2011 (4) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... oideen Gisti learned Senior Standing counsel for the Respondents and Mr. M.L. Ramesh, learned Senior Standing counsel for the Respondents. 3. Before I proceed to examine the facts in each of the writ petitions and the validity of the orders passed by the competent authority under the Act which were confirmed by the revisional authority, it would be necessary to refer to the relevant provisions of SAFEMA. 4. SAFEMA was enacted to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto. In the statement of objects and reasons of the Act it has been stated that in many cases persons engaged in smuggling activities and foreign exchange manipulation have been holding properties acquired through ill-gotten wealth in the name of their relatives, associates and confidants and as these activities posed a serious threat to economy and as one of the steps taken by the Government for cleansing the social fabric and resuscitating the national economy it became necessary to assume powers to deprive such persons of their illegally acquired properties so as to effectively prevent the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person who held the property at any time after such previous holder or, where there are two or more such previous holders, the last of such previous holders is or was a transferee in good faith for adequate consideration; 4. Prohibition of holding illegally acquired property.(1) As from the commencement of this Act, it shall not be lawful for any person to whom this Act applies to hold any illegally acquired property either by himself or through any other person on his behalf. (2) Where any person holds any illegally acquired property in contravention of the provisions of sub-section (1), such property shall be liable to be forfeited to the Central Government in accordance with the provisions of this Act. 6. Notice of forfeiture.(1) If, having regard to the value of the properties held by any person to whom this Act applies, either by himself or through any other person on his behalf, his known sources of income, earnings or assets, and any other information or material available to it as a result of action taken under Section 18 or otherwise, the competent authority has reason to believe (the reasons for such belief to be recorded in writing) that all or any of such prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares. 8. Burden of proof.- In any proceedings under this Act, the burden of proving that any property specified in the notice served under Section 6 is not illegally acquired property shall be on the person affected. 9. Fine in lieu of forfeiture.-(1) Where the competent authority makes a declaration that any property stands forfeited to the Central Government under Section 7 and it is a case where the source of only a part, being less than one-half, of the income, earnings or assets with which such property was acquired has not been proved to the satisfaction of the competent authority, it shall make an order giving an option to the person affected to pay in lieu of forfeiture, a fine equal to one and one-fifth times the value of such part. Explanation.- For the purposes of this sub-section, the value of any part of income, earnings or assets, with which any property has been acquired, shall be, (a) in the case of any part of income or earning, the amount of such part of income or earnings; (b) in the case of any part of assets, the proportionate part of the full value of the consideration for the acquisition of such assets. (2) Before making an order imposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal.For the purposes of any proceedings under this Act, the following officers are hereby empowered and required to assist the competent authority and the Appellate Tribunal, namely: (a) officers of the Customs Department; (b) officers of the Central Excise Department; (c) officers of the Income-tax Department; (d) officers of enforcement appointed under the Foreign Exchange Regulation Act, 1973 (46 of 1973); (e) officers of police; (f) such other officers of the Central or State Government as are specified by the Central Government in this behalf by notification in the Official Gazette. 18. Power of competent authority to require certain officers to exercise certain powers.(1) For the purposes of any proceeding under this Act or the initiation of any such proceedings, the competent authority shall have power to cause to be conducted any inquiry, investigation or survey in respect of any person, place, property, assets, documents, books of account or any other relevant matters. (2) For the purposes referred to in sub-section (1) the competent authority may, having regard to the nature of the inquiry, investigation or survey, require an officer of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(1)(a) the Appellate Tribunal shall mean the Tribunal constituted under Section 12. In terms of Section 15 both the competent authority and the Appellate Tribunal shall have all powers of Civil Court while trying a suit under the Code of Civil Procedure (CPC). By virtue of the power conferred under Section 16, the competent authority can require any officer or authority of the Central or a State Government or a local authority to furnish information and Section 17 gives the list of officers who are required to assist the competent authority and the Appellate Tribunal. Section 18 gives power to the competent authority for conducting enquiry, investigation, survey etc., among other things. In terms of Section 24, the provisions of SAFEMA shall have an overriding effect notwithstanding anything inconsistent therewith contained in any other law. 6. During 1976, when emergency was in force the Parliament enacted SAFEMA and it replaced an ordinance to the same effect which was brought into force on 05.11.1975. The constitutional validity of SAFEMA and the Conservation of Foreign Exchange and Prevention of Smuggling Activity Act, 1974, (COFEPOSA) were challenged before various High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the definition of illegally acquired property in clause (c) of Section 3(1) of SAFEMA is violative of the fundamental rights of the petitioners guaranteed by Articles 14, 19 and 21 and whether the inclusion of SAFEMA in the Ninth Schedule to the Constitution cures such violation, if any? The definition of illegally acquired propertiesin clause (c) of Section 3 of SAFEMA is not invalid or ineffective. 5) Whether the application of SAFEMA to the relatives and associates of detenus is violative of Articles 14, 19 and 21? Whether the inclusion of the said Act in the Ninth Schedule cures such violation, if any? The application of SAFEMA to the relatives and associates [in clauses (c) and (d) of Section 2(2)] is equally valid and effective inasmuch as the purpose and object of bringing such persons within the net of SAFEMA is to reach the properties of the detenu or convict, as the case may be, wherever they are, howsoever they are held and by whomsoever they are held. They are not conceived with a view to forfeit the independent properties of such relatives and associates as explained in this judgment. The position of holdersdealt with by clause (e) of Section 2(2) is differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng action and there is no allegation to the effect that their exists any link or nexus between the property sought to be forfeited and illegally acquired money of the detenue. In the said case, their Lordships held that as the condition precedent for initiation of proceedings under SAFEMA did not exists the order of forfeiture cannot be sustained. However, the Hon ble Supreme Court granted liberty to the Department to issue fresh notice, if it is permissible under law. 9. In Kesar Devi vs. Union of India, (2003) 7 SCC 427, the wife of the detenu challenged the correctness of an order of forfeiture, which was upheld by the High Court. In the said Judgment, their Lordships analysed the combine effect of Section 6 (1) of the Act and Section 8 as well as Section 2(2)(c) and Explanation (2) therein and held that there is no requirement on the part of the competent authority to mention or establish any nexus or link between the money of the convict or detenue and the property sought to be forfeited. It was observed that, if such a condition is imposed, the very purpose of enacting SAFEMA would be frustrated, as in many cases it would be almost impossible to show that the property was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Hon ble Supreme Court in Aslam Mohammad Merchand vs. Competent Authority, 2008 14 SCC 186, in the said Judgment it was held that the relevant provisions of SAFEMA and the Narcotics Act are in pari materia. The core question which arose for consideration in the said case is as to what are the statutory requirements for initiation of valid proceedings of forfeiture under Chapter VA of the Narcotics Act. It is relevant to mention that in the said judgment the Hon'ble Supreme Court took note of the earlier decisions in Attorney General, Kesar Devi, Fatima Mohd Amin PP. Abdulla (all referred supra) among other decisions. The Hon ble Supreme Court held that a notice is to be issued by the authority under the said provision having regard to (i) the value of the property held by the person concerned, (ii) his known source of income, earning or assets, (iii) any other information or material made available as a result of a report from any officer making an investigation under Section 68-E of the Narcotics Act or otherwise. 12. The Hon ble Supreme Court further held if the aforementioned conditions are satisfied the competent authority would be entitled to issue a show ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar from the definition of illegally acquired property as also that of property. The purport and object for which the Act was enacted point to the same effect. Further the Hon ble Supreme Court held :- 47.In the final order, the rule of evidence as envisaged under Section 68-I read with Section 68-J of the Act must be applied. A person affected would be called upon to discharge his burden provided a link or nexus is traced between the holder of the property proceeded against and an illegal activity of the detenu. Such a formation of belief is essential. 15. On the next question regarding reason to believe the Hon ble Supreme Court took note of precedents under the Income Tax Act and held as follows 50. This brings us to the next question as to what does the term reason to believemean. We may in this behalf notice some precedents operating in the field. 51. In the context of the provisions of Section 147 of the Income Tax Act, this Court in Phool Chand Bajrang Lal v. ITO7 held: (SCC pp. 95-96, para 25) 25. From a combined review of the judgments of this Court, it follows that an Income Tax Officer acquires jurisdiction to reopen an assessment under Section 147(a) read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the assessing officer could have jurisdiction to issue notice under Section 148 read with Section 147(a) but under the substituted Section 147 existence of only the first condition suffices. In other words if the assessing officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. 16. While concluding, the Hon'ble Supreme Court had borne in mind the purport and object of the Act (Narcotics Act) and observed as follows 60. We are not unmindful of the purport and object of the Act. Dealing in narcotics is a social evil that must be curtailed or prohibited at any cost. Chapter V-A seeks to achieve a salutary purpose. But, it must also be borne in mind that right to hold property, although no longer a fundamental right, is still a constitutional right. It is a human right. 61. The provisions of the Act must be interpreted in a manner so that its constitutionality is upheld. The validity of the provisions might have received constitutional protection, but when stringent laws become applicable as a result whereof some persons are to be deprived of his/her right in a property, scrupulous complia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act on the convict is a jurisdictional defect and the authorities concerned cannot say that no prejudice is caused and held that the proceedings were vitiated. 19. In Sajitha Vs. Competent Authority, 2005 Cr.L.W.3255, a Hon'ble Division Bench of the Kerala High Court considered the question whether the entire forfeiture proceedings were vitiated, if no notice under Section 6(1) was served on the detenue. The Hon'ble Division Bench after analysing the provisions of the Act, more particularly Explanation (4) contained in Section 2(2), Section 2(c), Clauses a b of Section 2(2)(e) held that non-issuance of notice to the detenue, will not vitiate the proceedings, as against the relatives. It appears that as against the Judgement of the Division Bench of the Kerala High Court, SLP (C) No.10348 of 2005 was filed before the Hon'ble Supreme Court and the same was dismissed on 10.05.2005. After the dismissal of the SLP, Review Petition No. 720 of 2005 was filed before the Division Bench of the Kerala High Court, which was dismissed on 26.06.2009. Challenging the Judgment and order in Review Petition in RP.No.720 of 2005 and the original Judgment in OP.15835 of 1996 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to issue show cause notice, if has reason to believe, which are to be recorded in writing that the properties are illegally acquired. (c) A valid proceedings can be said to have been initiated for forfeiture, upon satisfying the statutory requirement, which are condition precedent. (d) Only in case where a valid proceeding has been initiated, the burden of proof would be on a person affected. (e) Before passing an order of forfeiture the competent authority must comply with the principles of natural justice and apply his mind on the materials placed before him. (f) It is necessary to record a finding that all or any of the properties in question were illegally acquired properties. (h) Competent authority is not bound by any finding of any officer or authority under any other law as the same would not be conclusive for the purpose of any proceeding under SAFEMA. (i) That a link must be found between the property sought to be forfeited and income or assets which where illegally acquired by the person concerned. (j) The idea is to forfeit the illegally acquired properties of the convict/detenue irrespective of the fact that such properties are held by are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called upon to discharge his burden provided a link or nexus is traced between the holder of the property proceeded against and an illegal activity of the detenue and such a formation of belief is essential. (z) The Court can examine whether there was any material available on record from which the requisite believe could be formed by the authority. (aa) Once show notice is found to be illegal, the same would vitiate all subsequent proceedings. (ab) Failure to delete the inappropriate words in a standard performa notice indicates non-application of mind. (ac) It cannot be disputed that the object of SAFEMA is to achieve a salutary purpose, but it is to be borne in mind that the right to hold property, although no longer a fundamental right, is still a constitutional right. It is a human right. (ad) When stringent laws like SAFEMA become applicable as a result of which some persons are deprived of their right in a property, scrupulous compliance with the statutory requirements is imperative. (ae) If notice issued under Section 6(1) is found to be defective and consequently, the order of forfeiture is set aside, it would be open to the competent authority to initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 1. Investment in the immovable properties at 104, 105, 105-A, Big Street, Kumbakonam. 2. Investment with M/s.Siva Trust, Big Street, Kumbakonam. 3.Investment with M/s.Siva Corporation. 4.Investment in VRS Jewellerly, Kumbakonam. 5.Investment made with Sri.V.P.Renganathan. 24. The petitioner through his Charatered Accountant submitted a reply dated 09.06.1998 interalia stating that Smt.Bhagyathyammal purchased a property in 1957 and it was let out by her for many years and the savings from the income was availed in M/s.Siva Trust to the extent of ₹ 12,000/-. The copy of the Trust deed was enclosed along with accounts copies of Sri.Ramakrishnan from 01.04.1978 to 31.08.1984 in the books of Siva Trust, the account copies from 01.04.1984 to 31.03.1992 in the books of M/s.Siva Corporation, the account copies from 31.03.1978 to 31.03.1992 with Sri.V.P.Ranganathan, the account copies from 31.03.1978 to 31.03.1992 with M/s.V.R.S. Jewellery and the account copies from 19.03.1976 to 31.03.1981 with Sri.R.Sukumar are enclosed. Apart from the above records, the income tax assessment order of M/s.Siva Trust from assessment year 1979-80 to 1984-85 and of M/s.Siva Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ablish any nexus between the property acquired and the convict and in any absence of any such nexus the impugned order is bad in law. The learned counsel further submitted that the petitioner explained that the properties are traceable to the income generated by him in 1978 through a Trust and also through his father and it is impossible to prove the said source after nearly a decade. Further, it is contended that the approach of the second respondent is wholly unreasonable in doubting the very source of income of the petitioners grandmother for having purchased a property in 1946 from which she earned rental income out of which a sum of ₹ 12,000/- was invested in the name of the petitioner in Siva Trust in 1978. Therefore, to question a transaction which took place in 1946 is not only absurd, but unreasonable. The learned counsel for the petitioner placed reliance on the decisions of the Hon'ble Supreme Court in Attorney General, Kesar Devi, Fatima Mohd Amin PP. Abdulla and the decision of this Court in W.P.No.16313 of 2001 dated 05.08.2010 relating to the petitioners father. 27. The learned Senior standing counsel appearing for the respondent would at the outset su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property held by the person concerned, (ii) his known source of income, earning or assets, (iii) any other information or material made available as a result of a report from any officer making an investigation under Section 18 of SAFEMA or otherwise. When the aforementioned conditions are satisfied the authority would be entitled to issue show cause notice, if he has reason to believe, which are to be recorded in writing that the properties are illegally acquired. The copy of the notice under Section 6(1) has been filed in page No.10 of the typed set of papers which is a printed format. As noticed above, the relevant details have not been marked and the irrelevant portions of the show cause notice have not been struck off. This itself is a primary indication of non-application of mind. It is true that a sweeping statement cannot be made by stating that in all cases where a statutory authorities adopts a printed format, there is no application of mind. Yet, while adopting a printed format the authority should apply his mind and retain such information as is required in a particular case and strike of the other irrelevant information or details in the format. As this has not been do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hows certain credits by way of interest received from M/s.VRS Jewellery interest received from VPR, sale of old furniture etc. and no mention is made about the investments made in the above concerns which yielded interest to the person concerned and the same stands disproved and hence explained for the purpose of this act. Moreover originally Shri Ramakrishnan was found to be a beneficiary in M/s.Siva Trust and subsequently he becomes a partner in 1984 in M/s.Siva Corporation. The source for the capital employed in these concerns remained unexplained. Thus taking a overall picture and considering the persons failure to adduce any corroborative tangible evidence in support of the source for acquisition of the above properties, I have reason to believe that the following investments partakes the character of illegally acquired properties and notice u/s 6(1) of the Act is issued calling for the explanation for the source of the following properties. 1. Investment in the immovable properties at 104, 105, 105-A, Big Street, Kumbakonam. 2. Investment with M/s.Siva Trust, Big Street, Kumbakonam. 3.Investment with M/s.Siva Corporation. 4.Investment in VRS Jewellerly, Kumbakonam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Therefore, without tracing the link, the petitioner cannot be directed to show cause as to why the properties should not be forfeited. Therefore, this Court has no hesitation to hold that the notice issued under Section 6(1) does not satisfy the test laid down by the Hon'ble Supreme Court in the decisions cited supra and is found to be illegal and consequently, the subsequent proceedings initiated for forfeiture are also vitiated. 33. For all the above reasons, the writ petition is allowed and the impugned orders are set aside. However, it would be open to the respondents to initiate fresh proceedings in accordance with law, if they are so advised. No costs. W.P.No.7609 of 2001 34. The writ petitioner Mrs.Mohammed Daha Umma is the wife of the detenue Late Mr.S.S.A.Shahul Hameed. During the pendency of the writ petition, the petitioner died and her legal representatives were brought on record by order passed by this Court on 24.03.2011 and the cause title has been suitably amended. 35. The deceased writ petitioner was issued a notice under Section 6(1) of the Act, dated 09.02.1976, by the second respondent. The notice is in a printed format as in the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shahul Hameed and she has no known sources of income or funds and the properties mentioned are in the name of the writ petitioner and the value of the properties can be estimated at ₹ 25,000/- and these properties must have been acquired from out of unexplained sources of fund and hence, it would be taken that they are all illegally acquired properties. On receipt of the notice, the writ petitioner submitted her reply dated 09.05.1997, wherein she claimed that she received the lands in survey No.195/3 and other survey numbers as gift from her mother-in-law, mother, brother and uncle and purchased the plots in survey No.86/4, 86/3B, 486/1 and 509/1 out of her agriculture income. The competent authority considered the reply given by the deceased writ petitioner along with the other show cause notices issued to her sons and daughters and grandson and passed a common order dated 28.04.1995, forfeiting the properties mentioned in para 19 of the order. Aggrieved by the said common order, the writ petitioner and other noticees filed appeals before the Tribunal, which were dismissed by a common order, dated 31.01.2001. The validity of the orders passed against the writ petitioner is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submitted the notice under Section 6(1) of the Act was issued to the detenue and a copy of the notice was issued to the petitioner under Section 6(2) of the Act and a separate notice was issued to the petitioner under Section 6(1) in the capacity of a relative as per the provisions of Section 2(2)(c) of the Act. The other family members of the detenue were also issued with the separate notices under Section 6(1) of the Act. It is further submitted that while passing the order of forfeiture dated 28.04.1995, the first respondent has clearly analysed each and every source claimed by the petitioner and held that the petitioner has failed to substantiate her claims and prayed for dismissal of the writ petition. 39. Before going into the factual aspects, it is first necessary to examine as to whether the notice issued under Section 6(1) of the Act satisfies the requirements of law as laid down by the Hon ble Supreme Court. As noticed earlier, though the show cause notice is a printed format, the irrelevant details have been struck off which prima facie establishes, application of mind by the competent authority. The next question to be decided is as to whether the notice issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e properties is estimated as ₹ 25,000/- and the properties must have been acquired from unexplained sources of fund and therefore, it will be taken that they are illegally acquired properties. In my opinion the reason do not satisfy the requirement of law as the link or nexus has not been mentioned which is the essential and only factor which would empower the competent authority to invoke Section 6(1). The Hon ble Supreme Court in Fatima Mohd. Amin, (supra) held that in the absence of allegation to the effect that the property acquired by the petitioner is the benami property of the petitioner or the same was illegally acquired from the detenue/convict, the condition precedent for initiation of proceedings under SAFEMA did not exist and the order of forfeiture cannot be sustained. The said decision squarely applies to the facts of the case. As seen from the impugned orders, the competent authority ordered forfeiture alleging the petitioner s inability to adduce evidence that it is her own property. However, the competent authority lost sight of the fact that there is statutory requirement on the part of the authority to first indicate the link or nexus between the holder of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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