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TMI Blog2021 (12) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... ed (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 definitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject 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. - CIVIL APPEAL NOS. 8592-8593 OF 2010 - - - Dated:- 14-12-2021 - (A.M. Khanwilkar) And (Sanjiv Khanna) , JJ. For the Appellant : Mr. B. V. Balaram Das, AOR For the Respondent : Mr. M. P. Vinod, AOR JUDGMENT A.M. KHANWILKAR, J. 1. The conundrum in these appeals is: when the Competent Authority under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (for short, 1976 Act ) 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), whether it is mandatory to serve a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on referred to in clause (a) or clause (b). Section 2(e) refers to any holder of any property which was at any time previously held by a person referred to in clause (a) or clause (b). When we read Section 6(1) and 6 (2) along with Section 2 (2)(e) it is evident that notice contemplated under Section 6(2) is to any other person if the property does not stand in the name of the detenu. So far as this case is concerned, property stands in the name of wife and brothers. Admittedly notices have been issued to them as contemplated under Section 6(1). We are of the view, non issue of notice to the detenu will not vitiate the proceedings as against their relatives. 12. Petitioners also have raised a contention that more than six years have elapsed and the proceedings have not been initiated within a reasonable period. No time limit has been prescribed under the Act. The Apex Court in Attorney General for India v. Amratlal Prajivandas (1994) 5 SCC 54 : AIR 1994 SC 2179 has dealt with the scope and ambit of the Act which requires no reiteration. However we may refer to the recent decision of the apex court in Kesar Devi v. Union of India (2003) 7 SCC 427 . The apex court while dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above, these appeals not only involve question regarding interpretation of Section 6 read with other provisions of the 1976 Act, but also call upon us to expound the stated question authoritatively and resolve the conflicting view taken by different High Courts. 5. Reverting to the facts of the present case, one V.P. Selvarajan (convict) - brotherinlaw of respondent No.2 and paternal uncle of respondent No.1, was convicted for an offence punishable under the Customs Act, 1962 for short, 1962 Act on 23.11.1969. As a result of his conviction, he came within the ambit of the expression person or such person occurring in the 1976 Act - Section 2 in particular. Respondents being the relatives of the convict in terms of Section 2(2) read with Explanation 2 also came within the ambit of expression person defined in the 1976 Act to whom the Act applies. 6. The 1976 Act came into force with effect from 5.11.1975, pursuant to which the Competent Authority under the Act resorted to inquiry, investigation or survey under Section 18 of the Act and on the basis of the information collated had reason to believe that certain properties are illegally acquired properties havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding at No.123. Big Street, Kumbakonam. V. Padmavathy 2. Agricultural lands at Thepprumalnallur Village at Kumbakonam as specified below. Do 3. Investment in the firm of M/s V.P.V. Prema Jewellery, Kumbakonam. Do 4. Jewellery disclosed under Voluntary Disclosure Scheme (i.e.) 518 gms of gold and 28 ets. of diamond. Do 9. The Competent Authority after giving opportunity to the respondent(s) eventually passed separate forfeiture order(s) on 30.4.1998 against Smt. V. Padmavathy, respondent No.2 and on 28.5.1998 against V. Mohan, respondent No.1 in exercise of powers under Section 7(1) of the 1976 Act. It held that an order of forfeiture of the stated properties had become inevitable as the respondent(s) had failed to produce any credible evidence or explanation to discharge the burden of proving that the properties referred to in the impugned notice were legally acquired properties by them. 10. Being aggrieved, the respondents took the matter in appeal bearing Nos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act applies to the respondents as well. Emphasis is placed on the expression held occurring in Section 6 of the 1976 Act in particular which in terms of definition in P. Ramanatha Aiyar s The Major Law Lexicon 4th Edition, Vol. 3 at pages 3050-51 would cover (i) those entitled to possession of property; and (ii) those in possession thereof. 14. It is urged that respondents were admittedly holding the properties in their name and thus, they were entitled to possession of such property and in fact they were in physical possession thereof. Therefore, they alone were expected to offer explanation and discharge the burden of proving that the properties are their legally acquired properties. They were, in fact, the persons directly affected by the proposed action of forfeiture and, hence, notice under Section 6 was required to be issued to the respondents alone. There is no mandate in Section 6 that a primary notice be served on the convict to require him to indicate his sources of income as noted by the Madras High Court. More so, the convict is not expected to offer explanation with regard to the properties held by his relatives and not by him. 15. As regards the purport of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras High Court in the impugned judgment and would urge that the appellants had all throughout proceeded against the respondents on the assumption that the respondents are only ostensible owners and the properties in question, in fact, belonged to the convict. Further, the respondents were holding the subject properties on behalf of the convict. In that context, the Madras High Court examined the purport of Section 6 and the interplay of two subsections therein to conclude that primary notice to the convict was a mandatory requirement, in such a fact situation. Now, in the present appeals, the appellants have taken a completely different position, namely, that the respondents are, in fact, the recorded owners of the subject properties and, therefore, no notice is required to be given to the convict. 19. The respondents have invited our attention to the definition of persons and Explanation 2 in Section 2 of the 1976 Act. It is also urged that the properties referred to in the impugned notices issued to the respondents were not made subject matter of notice under Section 6 issued to the convict on 2.2.1980. In other words, no notice had ever been given to the convict in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was believed that the properties of the respondents were illegally acquired. Relying on the dictum in Nazir Ahmad vs. Emperor AIR 1936 PC 253 and Chandra Kishore Jha vs. Mahavir Prasad Ors. (1999) 8 SCC 266 , it is urged that when a statute provides something to be done in a particular manner it ought to be done in that manner alone and in no other manner. Whereas, the Competent Authority failed to record proper reasons to believe as stipulated in Section 6 of the 1976 Act. 23. It is then contended that on account of inordinate and undue delay, the proceedings suffer from the vice of arbitrariness and irrationality. In that, the convict was convicted on 23.11.1969 for an offence punishable under the 1962 Act. The properties in question belonging to the respondents were acquired between 1959 till 1980. Whereas, the impugned notices were issued on 19.1.1994 and 28.2.1994. Further, as aforesaid, the stated properties have not been referred to in the criminal proceedings against the convict nor in the notice issued to him on 2.2.1980. No explanation has been offered or forthcoming from the Competent Authority about the delay in issuing notice after 25 years, calling upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olations of wealthtax, incometax or other laws or by other means and have thereby been increasing their resources for operating in clandestine manner; AND WHEREAS such persons have in many cases been holding the properties acquired by them through such gains in the names of their relatives, associates and confidants; (emphasis supplied) 28. This Court dealt with the legislative intent in extenso. It also analysed the relevant provisions of the 1976 Act which would reinforce the legislative intent. While dealing with the definition of illegally acquired properties (re: question No.4 in paragraph 43), it had noticed that the stated expression is quite expansive. It not only takes within its ambit the property acquired after the Act, but also the property acquired before the Act, whatever be the length of time . Secondly, it takes in the property which may have been acquired partly from out of illegal activity - in which case, of course, the provision of Section 9 would be attracted. Further, illegal activity is not confined to violation of the laws mentioned in Section 2 of the 1976 Act but all laws which Parliament has power to make, such as if a smuggler ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said definition can be questioned nor is there any warrant for reading down the clear and unambiguous words in the clause. So far as justification of such a provision is concerned, there is enough and more. After all, all these illegally acquired properties are earned and acquired in ways illegal and corrupt - at the cost of the people and the State. The State is deprived of its legitimate revenue to that extent. These properties must justly go back where they belong - to the State. .. (emphasis supplied) 30. After having said that while dealing with the ambit of Section 2(2) of the Act, the Court observed thus: Question No. 5 44. It is contended by the counsel for the petitioners that extending the provisions of SAFEMA to the relatives, associates and other holders is again a case of overreaching or of overbreadth, as it may be called - a case of excessive regulation. It is submitted that the relatives or associates of a person falling under clause (a) or clause (b) of Section 2(2) of SAFEMA may have acquired properties of their own, may be by illegal means but there is no reason why those properties be forfeited under SAFEMA just because they are relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purview of SAFEMA That this was the object of the Act is evident from para 4 of the preamble which states: And whereas such persons have in many cases been holding the properties acquired by them through such gains in the names of their relatives, associates and confidants. We are not saying that the preamble can be utilised for restricting the scope of the Act, we are only referring to it to ascertain the object of the enactment and to reassure ourselves that the construction placed by us accords with the said object. (emphasis supplied) . We may proceed to explain what we say. Clause (c) speaks of a relative of a person referred to in clause (a) or clause (b) (which speak of a convict or a detenu). Similarly, clause (d) speaks of associates of such convict or detenu. If we look to Explanation (3) which specifies who the associates referred to in clause (d) are, the matter becomes clearer. Associates means - (i) any individual who had been or is residing in the residential premises (including outhouses) of such person [ such person refers to the convict or detenu, as the case may be, referred to in clause (a) or clause (b)]; (ii) any individual who had been or is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach the properties of the convict/detenu or properties traceable to him, wherever they are, ignoring all the transactions with respect to those properties. By way of illustration, take a case where a convict/detenu purchases a property in the name of his relative or associate - it does not matter whether he intends such a person to be a mere namelender or whether he really intends that such person shall be the real owner and/or possessor thereof - or gifts away or otherwise transfers his properties in favour of any of his relatives or associates, or purports to sell them to any of his relatives or associates - in all such cases, all the said transactions will be ignored and the properties forfeited unless the convict/detenu or his relative/associate, as the case may be, establishes that such property or properties are not illegally acquired properties within the meaning of Section 3(c). In this view of the matter, there is no basis for the apprehension that the independently acquired properties of such relatives and associates will also be forfeited even if they are in no way connected with the convict/detenu. So far as the holders (not being relatives and associates) mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te holds the illegally acquired property of the convict/detenu whether as a benami, or as a mere namelender or through transferee or in any other manner. The objective and purpose of the Act is to counteract devices that are or may be adopted by persons mentioned in clauses (a) or (b) of Section 2(2), hence, their relatives or associates mentioned in clauses (c) or (d) of the said subsection are also brought within the purview of the Act. The relatives or associates holding or possessing the illegally acquired property of the convict/detenu is the link between the convict/detenu. The idea is to forfeit the properties of the convict/detenu wherever they are, and to reach properties in whosoever s name they are kept or held. 32. In the backdrop of the dictum of the Constitution Bench and the subsequent decisions of this Court, we may hasten to add that pivot of the 1976 Act is to reach the illegally acquired properties of the specified convict/detenu in whosoever s name they are kept or by whosoever they are held, whatever be the length of time. 33. Concededly, the dispensation under the 1976 Act applies only to persons specified in Section 2(2) 2. Application.- (1) The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relative of a person referred to in clause (a) or clause (b); (d) every associate of a person referred to in clause (a) or clause (b); (e) any holder (hereafter in this clause referred to as the present holder) of any property which was at any time previously held by a person referred to in clause (a) or clause (b) unless the present holder or, as the case may be, any one who held such property after such person and before the present holder, is or was a transferee in good faith for adequate consideration. Explanation 1.- For the purposes of subclause (i) of clause (a), the value of any goods in relation to which a person has been convicted of an offence shall be the wholesale price of the goods in the ordinary course of trade in India as on the date of the commission of the offence. Explanation 2.- For the purposes of clause (c), relative in relation to a person, means- (i) spouse of the person; (ii) brother or sister of the person; (iii) brother or sister of the spouse of person; (iv) any lineal ascendant or descendant of the person; (v) any lineal ascendant or descendant of the spouse of the person; (vi) spouse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets derived or obtained from or attributable to any activity prohibited by or under any law for the time being in force relating to any matter in respect of which Parliament has power to make laws; or (ii) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets in respect of which any such law has been contravened; or (iii) any property acquired by such person, whether before or after the commencement of this Act, wholly or partly out of or by means of any income, earnings or assets the source of which cannot be proved and which cannot be shown to be attributable to any act or thing done in respect of any matter in relation to which Parliament has no power to make laws; or (iv) any property acquired by such person, whether before or after the commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property referred to in subclauses (i) to (iii) or the income or earnings fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Section 2(2) of the Act. 38. This expanded ambit of clauses (c) to (e) is to be interpreted in the context of the object and purpose of the Act, but the scope of the Act does not extend to include every property held by a relative or an associate unless the link and the connection with the illegal activities of the convict/detenu is established. For, the Act is only directed to forfeiture of illegally acquired properties of a person falling under clause (a) or clause (b) of Section 2(2) including their specified properties held by third party. Independent properties of the relatives and friends which are not traceable to the illegal activities of the convict/detenu are neither sought to be forfeited nor are they within the purview of the Act. 39. Section 3 is the definition clause. The expression illegally acquired property has been expounded in clause (c) of subSection (1) thereof. The other relevant definition clause is expression property in Section 3(1)(e) (e) property includes any interest in property, movable or immovable; . 40. As aforementioned, in Amratlal Prajivandas Supra at Footnote No. 5 , whilst interpreting the definition of illegally acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without notice, for adequate consideration, his property - even though purchased from a convict/detenu - is not liable to be forfeited. 42. In the present judgment, it is not necessary for us to dilate on the definition of illegally acquired property as the sole issue involved is: whether it is mandatory to issue a primary notice under Section 6 of the 1976 Act to the convict and not merely to the relatives of the convict who hold the properties proposed to be forfeited? Nevertheless, it may be useful to advert to Section 4 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 subsection (1), such property shall be liable to be forfeited to the Central Government in accordance with the provisions of this Act. of the 1976 Act which prohibits holding of illegally acquired property. 43. On the literal construction of this provision, it must follow that it shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perties and forfeited to the Central Government under this Act. (2) Where a notice under subsection (1) to any person specifies any property as being held on behalf of such person by any other person, a copy of the notice shall also be served upon such other person. (emphasis supplied) of the 1976 Act to such person who holds the properties proposed to be forfeited being illegally acquired properties. That person may hold the property either by himself or through any other person on his behalf. If the property is held by person concerned, the notice under Section 6(1) needs to be issued to such person to whom the Act applies calling upon him to disclose the sources of his income, earnings or assets out of which or by means of which he has acquired such property, the evidence on which he relies and other relevant information and particulars. 45. Before we proceed to analyse Section 6 of the 1976 Act, it would be apposite to reproduce Section 18 18. Power of competent authority to require certain officers to exercise certain powers.- (1) For the purposes of any proceedings under this Act or the initiation of any such proceedings, the competent authority shall have power to cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. However, if the ownership of the property in the relevant records at the relevant time is that of the person in possession (as in these cases), and not being the convict or detenu, the question of issuing notice to the latter would serve no purpose. 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. 49. The expression held in Section 6 has to be understood to mean tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eit 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. 52. Learned counsel appearing for the parties had commended us with the purport of Section 6(2) of the 1976 Act. Different interpretation has been given by both sides to the expressions occurring therein. Section 6(2) merely refers to the requirement of issuing notice to such other person . 53. The expression such person is found not only in Section 6(1), but in other provisions of the Act including the definition clause i.e., Section 3(1)(c) of illegally acquired property. The expression such person and such other person occurring in Section 6(2) may have to be understood in the context and the setting in which it has been employed in the concerned provision. A harmonious construction thereof is imperative. 54. In the first part of Section 6(2), the expression used is any person . That is a person to whom primary notice under Section 6(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the property and not its owner, he may not be able to explain or prove the fact that the property is not illegally acquired property of the primary noticee. Indeed, if such other person is claiming ownership of the property through the relative of the convict or detenu in relation to illegally acquired property, who was earlier owner thereof upon receipt of notice under Section 6(2) can certainly impress upon the Competent Authority that he is a purchaser in good faith for adequate consideration of the stated property. Such a plea can be considered by the Competent Authority on its own merits. 56. Section 4 of the Act, which in subsection (1) uses similar expression any person to whom this Act applies to hold any illegally acquired property either by himself or through any other person on his behalf which is similar to the wordings/expressions used in Section 6 of the Act, reinforces the above interpretation. 57. 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory, it must be obeyed and followed. This is especially so in case of jurisdictional requirements, i.e., preconditions that have to be fulfilled before any action is taken. 60. In the context of the present enactment, it is unnecessary to underscore that when a notice under Section 6 of the Act is issued, the consequences entail forfeiture of property or fine in lieu of forfeiture as envisaged by Sections 7 and 9, respectively, of the Act. We have not quoted Section 11, but the said provision postulates that transfer of property referred to in a notice under Section 6 is null and void. Therefore, transactions after issuance of notice under Section 6 or 10 (which applies to the procedure in respect of certain trust properties) are void and are to be ignored. 61. Section 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. of the Act predicates that when proceedings in respect of a property are initiated by way of notice under Section 6, the burden of proving that the property is not illegally acquired shall be on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egister the Central Government as the transferee of such shares. of the Act, which is titled Forfeiture of property in certain cases , supports the above interpretation as it envisages that the Competent Authority shall consider the explanation, if any, to the showcause notice issued under Section 6 and the material before it. After giving notice to the person affected, and in case the person affected holds any property specified in the notice through any other person, then to such other person, a reasonable opportunity of being heard would be afforded to them. Thereafter, the Competent Authority may pass an order, recording findings whether or not the listed properties are illegally acquired properties. 63. In Kesar Devi Supra at Footnote No. 6 this Court held that the language of Section 6(1) does not indicate any requirement of mentioning any link or nexus between the convict or the detenu and the property ostensibly standing in the name of the person covered under clauses (c), (d) and (e) to Section 2(2) and also referred to Section 8 which incorporates reverse burden of proof. However, the said observations must be read in light of the Constitution Bench judgment in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur attention to other judgments of this Court. However, those judgments have not dealt with the question that arise for consideration in the present appeals. 67. Having said this, we need to set aside the impugned judgment and relegate the parties before the High Court by restoring the writ petitions to the file to its original number for being heard afresh on all other issues and contentions as may be available to both sides including the argument that there is an inordinate, undue and unexplained delay in initiating the action against the respondents (writ petitioners) and as a result of which it would be iniquitous to call upon the respondents to offer explanation by reopening the adjudication of the entire proceedings. We do not wish to dilate on any other plea in these appeals. Further, we may not be understood to have expressed any opinion either way on any other contention available to the parties. We say so because even the impugned judgment makes it amply clear that the writ petitions filed by the respondents were being allowed on the sole ground that the action against the respondents sans primary notice to the convict is vitiated. That view having been reversed, the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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