Madras High Court
R.Ramakrishnan vs The Appellate Tribunal For Forfeited ... on 8 April, 2011
Author: T.S.Sivagnanam
Bench: T.S.Sivagnanam
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 08.04.2011 CORAM: The Hon'ble Mr.Justice T.S.Sivagnanam W.P.Nos. 7609 of 2001 and 26466 of 2001 W.P.No.26466 of 2001 R.Ramakrishnan Petitioner Vs. 1.The Appellate Tribunal for Forfeited Property, New Delhi rep. by its Registrar, 4th Floor, Lok Nayak Bhavan, Khan Market, New Delhi. 2.The Competent Authority, Smugglers, Foreign Exchange Manipulators (Forfeiture of Properties) Act, 1976 and Narcotic Drugs Psychotropic Substance Act, 69/1, G.N.Chetty Street, Chennai 600017. Respondents W.P.No.7609 of 2001 Mohammed Thaha Umma (Deceased) 1.S.S.A. Hayarunisha 2.S.S.A. Sheik Kamal 3.S.S.A. Aminath Fathima 4.S.S.A. Ayshath Zulaiha 5.S.S.A. Seyed Anifa 6.S.S.A. Husain Jalal 7.S.S.A. Kathija Rilwana 8.S.S.A. Basheer Petitioners P1 to P8 substituted as LRs in the place of the deceased petitioner vide court order dated 24.03.2011 in W.P.M.P.No.104/11. Vs. 1.Competent Authoirty, Smugglers, Foreign Exchange Manipulators (Forfeiture of Properties) Act, Chennai. 2.Appellate Tribunal for Forfeited Property, New Delhi. Respondents Prayer in W.P.No.26466 of 2001:- Writ Petitions filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari to call for the records of the first respondent dated 01.10.2001 in F.P.A.No.70/MDS/98 and the order of the second respondent dated 28.09.1998 in F.No.OCA/MDS/2846/94 and quash the same. Prayer in W.P.No.7609 of 2001:- Writ Petitions filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari to call for the records of the second respondent the Appellate Tribunal for forfeited Property, New Delhi in the order dated 31.01.2001 made in FPA.No.66/MDS/95 confirming the findings of the Competent Authority, Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, Chennai in OCA/MDS/348-352/76 dated 02.02.2000 and quash the same. For Petitioner :Mr.Rahul Balaji for M/s.Sathish Parasaran in W.P.No.26466 of 2001 Mr.B.Kumar Senior counsel for R.Loganathan in W.P.7609/01 For Respondents:Mr.M.L.Ramesh Senior Standing counsel for RR1-2 Mr.S.Haja Mohideen Gisti Senior Standing counsel for RR1-2 C O M M O N O R D E R
In these writ petitions the interpretation and the application of the provisions of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976 (SAFEMA; the Act) and the effect of the orders passed under the Act are in question. The writ petitioners are the relatives of the detenue/convict and the challenge is to the orders of forfeiture passed under SAFEMA in respect of properties standing in the name of the petitioners.
2. I have elaborately heard the submission of the learned Senior counsel Mr.B.Kumar for the petitioner in W.P.No.7609 of 2001, Mr.Rahul Balaji, learned counsel for the petitioner in W.P.No.26466 of 2001, Mr.Hajamoideen 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 smuggling and other clandestine operations. For the purpose of the present cases the following provisions of the Act would be relevant.
2-A. Act not to apply to certain persons.On and from the commencement of the provisions of Chapter VA of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the provisions of this Act shall not apply to persons in relation to whom any order, or proceeding, may be made or taken under that Chapter]
3. Definitions.(1) In this Act, unless the context otherwise requires,
(a) Appellate Tribunal means the Appellate Tribunal for Forfeited Property constituted under Section 12;
(b) competent authority means an officer of the Central Government authorised by it under sub-section (1) of Section 5 to perform the functions of a competent authority under this Act;
(c) illegally acquired property, in relation to any person to whom this Act applies means
(i) 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 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 sub-clauses (i) to (iii) or the income or earnings from such property;
and includes (A) any property held by such person which would have been, in relation to any previous holder thereof, illegally acquired property under this clause if such previous holder had not ceased to hold it, unless such person or any other 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 properties are illegally acquired properties, it may serve a notice upon such person (hereinafter referred to as the person affected) calling upon him within such time as may be specified in the notice, which shall not be ordinarily less than thirty days, to indicate 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, and to show cause why all or any of such properties, as the case may be, should not be declared to be illegally acquired properties and forfeited to the Central Government under this Act.
(2) Where a notice under sub-section (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.
7. Forfeiture of property in certain cases.(1) The competent authority may, after considering the explanation, if any, to the show-cause notice issued under Section 6, and the materials available before it and after giving to the person affected (and in a case where the person affected holds any property specified in the notice through any other person, to such other person also) a reasonable opportunity of being heard, by order, record a finding whether all or any of the properties in question are illegally acquired properties.
(2) Where the competent authority is satisfied that some of the properties referred to in the show-cause notice are illegally acquired properties but is not able to identify specifically such properties, then, it shall be lawful for the competent authority to specify the properties which, to the best of its judgement, are illegally acquired properties and record a finding accordingly under sub-section (1).
(3) Where the competent authority records a finding under this section to the effect that any property is illegally acquired property, it shall declare that such property shall, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances.
(4) Where any shares in a company stand forfeited to the Central Government under this Act, then, the company shall, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or the articles of association of the company, forthwith register the Central Government as the transferee of such 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 a fine under sub-section (1), the person affected shall be given a reasonable opportunity of being heard.
(3) Where the person affected pays the fine due under sub-section (1), within such time as may be allowed in that behalf, the competent authority may, by order, revoke the declaration of forfeiture under Section 7 and thereupon such property shall stand released.
11. Certain transfers to be null and void.Where after the issue of a notice under Section 6 or under Section 10, any property referred to in the said notice is transferred by any mode whatsoever such transfer shall, for the purposes of the proceedings under this Act, be ignored and if such property is subsequently forfeited to the Central Government under Section 7, then, the transfer of such property shall be deemed to be null and void.
15. Competent authority and Appellate Tribunal to have powers of civil court.The competent authority and the Appellate Tribunal shall have all the powers of a civil court while trying a suit under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) requisitioning any public record or copy thereof from any court or office;
(e) issuing commissions for examination of witnesses or documents;
(f) any other matter which may be prescribed.
16. Information to competent authority.(1) Notwithstanding anything contained in any other law, the competent authority shall have power to require any officer or authority of the Central Government or a State Government or a local authority to furnish information in relation to such persons, points or matters as in the opinion of the competent authority will be useful for, or relevant to, the purposes of this Act.
(2) Any officer of the Income-tax Department, the Customs Department or the Central Excise Department or any officer of enforcement appointed under the Foreign Exchange Regulation Act, 1973 (46 of 1973), may furnish suo motu any information available with him to the competent authority if in the opinion of the officer such information will be useful to the competent authority for the purposes of this Act.
17. Certain officers to assist competent authority and Appellate 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 Income-tax Department to conduct or cause to be conducted such inquiry, investigation or survey.
(3) Any officer of the Income-tax Department who is conducting or is causing to be conducted any inquiry, investigation, or survey required to be conducted under sub-section (2), may, for the purpose of such inquiry, investigation or survey, exercise any power (including the power to authorise the exercise of any power) which may be exercised by him for any purpose under the Income Tax Act, 1961 (43 of 1961), and the provisions of the said Act shall, so far as may be, apply accordingly.
24. Act to have overriding effect.The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
5. In terms of Section 2(2), the provisions of the SAFEMA applies to every person who is a relative of a person referred to in clause a or clause b of Section 2(2) and the explanation No.2 has been widely couched to bring in all persons closely related to the detenue/convict within the ambit of relative as mentioned in clause (c) of Section 2(2). Section 3(1)(c) exhaustively defines the term illegally acquired property. In terms of the Section 4, it shall not be lawful for any person to whom the act applies to hold any illegally acquired properties either by himself or through any other person on his behalf and if he holds any illegally acquired property in contravention of Section 4 such property shall be liable to be forfeited to the Central Government in accordance with the provisions of the Act. Section 6 deals with the notice of forfeiture, which is the subject matter of interpretation in these writ petitions and in the latter part of the judgment the same will be elaborately dealt with. 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 in terms of Section 8. In terms of Section 11 any property referred to in the notice under Section 6 or under Section 10 (Trust properties), if transferred after issue of notice, such transfers shall be deemed to be null and void. The competent authority as defined under Section 3(1)(b) of the Act means an officer of the Central Government authorised under Section 5 (1) to perform the functions of a competent authority under the Act. In terms of Section 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 Courts in the Country and Attorney General of India applied for transfer of all the writ petitions to the Honble Supreme Court, which was granted. The Honble Supreme Court in Attorney General of India vs. Amratlal Prajivandas, 1994 5 SC 1279, in a nine Judge Bench Judgment considered the validity of both COFEPOSA and SAFEMA. The Honble Supreme Court framed six questions for consideration of which question No.1, 2, 4 and 5 would be relevant for the purpose of these writ petitions. The questions framed and the decision of the Honble Supreme Court on the above four questions are given in a tabulated statement below for easy and convenient reference.
Question No. Question framed Decision
1) Whether Parliament was not competent to enact COFEPOSA and SAFEMA?
Parliament was perfectly competent to enact both the COFEPOSA and the SAFEMA.
2) Whether an order of detention under Section 3 read with Section 12-A of COFEPOSA made during the period of emergency proclaimed under Article 352(1) of the Constitution of India, with the consequent suspension of Article 19 and during which period the right to move the court to enforce the rights conferred by Articles 14, 21 and 22 was suspended can form the foundation for taking action under Section 6 of SAFEMA against the detenu, his relatives and associates? And if it does, can the validity of such order of detention be challenged by the detenu and/or his relatives and associates, when proceedings are taken against him/them under SAFEMA, even though the said order of detention has ceased to be operative and was not either challenged or not successfully challenged during its operation? (3) If the answer to Question 1 is in the affirmative, should the validity of the order of detention be tested with reference to the position of law obtaining at the time of making the said order and during its period of operation or with reference to the position of law obtaining on the date of issuance of the show-cause notice under Section 6 of SAFEMA?
For the reasons given in the body of this judgment, we do not express any opinion on the validity of the 39th and 40th Amendment Acts to the Constitution of India placing COFEPOSA and SAFEMA in the Ninth Schedule. We assume them to be good and valid. No arguments have also been addressed with respect to the validity of 42nd Amendment Act to the Constitution either.
4) Whether 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 properties in 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 holders dealt with by clause (e) of Section 2(2) is different as explained in the body of the judgment.
7. Thus, the constitutional validity of both the enactment were upheld by the Honble Supreme Court and the definition of illegally acquired properties in clause 3 of Section 3 was held to be valid and the application of SAFEMA to relatives and associates was also held to be valid and effective as the purpose and object of bringing such persons within the net of the SAFEMA is to reach the properties of the detenue or the convict, wherever they are, howsoever they are held and whomsoever they are held. Further, it was held that the Act was not conceived with the view to forfeit the independent properties of such relatives and associates, if they are in no way connected with the convict/detenue and holders and being relatives and associates, are dealt with on a separate footing and if such person proves that he is a transferee in good faith for consideration, his property even though purchased from a convict/detenue is not liable to be forfeited. It has been further held that the burden lies on the relative/associate to prove that the property has not been acquired with the monies provided by the detenue and the intention of the Act is not to say that the properties of all the relatives and associates that may be illegally acquired, will be forfeited just because they happened to be the relatives or associates of the convict/detenue. The Honble Supreme Court further held there ought to be the connecting link between those properties and the convict/detenue, the burden of disproving which, is upon the relative/associate.
8. In Fatima Mohd. Amin vs. Union of India, (2003) 7 SCC 436, the validity of an order of confiscation of the property standing in the name of the mother of a convict came up for consideration, at the instance of the mother who was the appellant before the Honble Supreme Court. Contention was raised that the case stands concluded by the decision of the Honble Supreme Court in Attorney General of India, (supra). The Honble Supreme Court after considering the legal and factual issues held that there are no averments in the show cause notice to the effect that the property acquired by the appellant therein is a benami property of her son or the same was illegally acquired from her son and the contents of the notice even if taken at their face value do not disclose any reasons warranting 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 Honble 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 purchased or acquired from the money provided by the convict or detenue. In the said case, the appellant is the wife of the detenu and she failed to establish that she had any income of her own to acquire the three properties, in such circumstances, no other inference was possible except that it was done so with the money provided by her husband. The Honble Supreme Court noticed the Judgment in Fatima Mohd. Amin, (Supra), and held that the said Judgment is of no assistance to the case of the appellant therein.
10. In the earlier part of the judgment, Section 6(1)(2) has been referred to and in the terms of the said provision the competent authority was required to record reasons in writing as to how all or such of the property/properties are illegally acquired. In P.P.Abdulla vs, Competent Authority (2007) 2 SCC 510, the question arose as to whether it would be sufficient to state that the authority has recorded the reasons in writing. The Honble Supreme Court held that it is incumbent for the competent authority to produce the said reasons before the court so that the same can be scrutinised in order to verify they are relevant and germane or not and this can be done by annexing the copy of the reasons along with the counter affidavit or by quoting the reasons in the counter affidavit or if the notice itself contains the reason of belief, that notice can be annexed to the counter affidavit or quoted in it. However there is no condition stipulated in the said decision of the Honble Supreme Court that shall reason shall be communicated to the noticee in advance. In fact a reading of Section 6(1) also does not speak of such a requirement. Thus, in the case of P.P. Abdulla, the Honble Supreme Court after relying on in the decision of Fatima Mohd. Amin held that as the notice does not allege any link or nexus between the property sought to be forfeited and the alleged illegally acquired money of the appellant therein, held that the notice issued by the competent authority under Section 6 (1) is illegal and the consequential order as null and void.
11. The Narcotic Drugs and Psychotropic Substances Act, 1985, (hereinafter referred to as the Narcotics Act), in chapter VA provides for forfeiture of property derived from or used in illegal traffic. The interpretation and application of Chapter VA of the Narcotics Act came up for consideration before the Honble 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 Honble 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 Honble 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 Honble Supreme Court further held if the aforementioned conditions are satisfied the competent authority would be entitled to issue a show cause notice, if he has reason to believe, such reasons to be recorded in writing, that the properties are illegally acquired and once the notice is found to be satisfying the statutory requirements which are condition precedent therefor, a valid proceedings can be said to have be initiated for forfeiture of the property. It was further held that only in a case where a valid proceedings has been initiated, the burden of proof that any property specified in the notice is not illegally acquired property, would be on the person affected. Further it was held that a link must be found between the property sought to be forfeited and the income or assets or properties, which were illegally acquired by the person concerned. It was further held that a proper application of mind on the part of the competent authority is imperative, before a show notice is issued.
13. The Honble Supreme Court while analysing Section 68H of the Narcotics Act which is in pari materia with Section 6 (1) of SAFEMA held that there are two statutory requirements to be fulfilled by the authority namely a) he has to form an opinion in regard to his reason to believe; b) he must record reasons there for. In the light of the said provision the Honble Supreme Court has also considered the manner of enquiry contemplated under the Act and held as follows:-
40. Both the statutory elements, namely, reason to believe and recording of reasons must be premised on the materials produced before him. Such materials must have been gathered during the investigation carried out in terms of Section 68-E or otherwise. Indisputably, therefore, he must have some materials before him. If no such material had been placed before him, he cannot initiate a proceeding. He cannot issue a show-cause notice on his own ipse dixit. A roving enquiry is not contemplated under the said Act as properties sought to be forfeited must have a direct nexus with the properties illegally acquired.
14. The Honble Supreme Court also considered the Judgment in Kesar Devi, wherein Fatima Mohd Amin was distinguished by the Honble Supreme Court and in this regard the Honble Supreme Court held as follows We, with utmost respect to the learned Judges, express our inability to agree to the said observations. The necessity of establishing link or nexus in our opinion is writ large on the face of the statutory provision as would appear 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 Honble 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 Honble 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 believe mean. 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 with Section 148 of the Income Tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gain chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief, is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. (See also ITO v. Lakhmani Mewal Das8.)
52. In CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd.9 interpreting the term reason to believe as used under Section 147(a) of the Income Tax Act, 1961, it was opined: (SCC pp. 217-18, para 21) 21. ...To confer jurisdiction under Section 147(a) two conditions were required to be satisfied, firstly, the assessing officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly, he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before 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 Honble 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 compliance with the statutory requirements is imperative.
62. For the reasons aforementioned, the impugned judgments cannot be sustained. They are set aside accordingly. The appeals are allowed. However, it would be open to the respondents to initiate fresh proceeding(s) in accordance with law, if they are so advised. In the facts and circumstances of the case, we make no order as to costs.
17. A Division Bench of the Kerala High Court in Kannan Chery Abdu vs. Competent Authority, W.A1645 of 2007 (E), dated 24.02.2009, after taking note of the decisions of the Honble Supreme Court, in Aslam Mohammad, referred supra, set aside an order of forfeiture on the ground of absence of any allegation in the show cause notice regarding the link or the nexus between the property sought to be forfeited and the illegally acquired money of the detenue under SAFEMA.
18. A Division of this Court in V.Mohan and other Vs. Income Tax officer and another 2008 Cr.L.J 2582, dealt with writ petitions challenging order of forfeiture of property standing in the name of the nephew and son of a convict. In the said case, the Honble Division Bench among other things considered the validity of a notice issued under Section 6(1) of SAFEMA, as to whether it discloses the reasons for the proposed forfeiture and whether there is existence of any nexus; whether the notice under Section 6 was required to be served on the convict and copy was required to be served on the relative as envisaged under Section 6 and whether in the absence of such notice, the proceedings were vitiated; whether the Appellate Tribunal acted illegally in ignoring altogether the report of the income Tax officer which was secured by the competent authority. The Honble Division Bench after taking note of the decisions of the Honble Supreme Court in Attorney General of India, and Kesar Devi, held that as per Section 6, the primary notice is intended to be served on the convict where-under the convict is required to indicate the source of his income out of which he acquired the property sought to be forfeited and when competent authority has reason to believe that the property even if held in the name of the relative is infact the property of the convict, the competent authority is required to send a notice under Section 6 (2) of the Act upon such relative and the absence of a notice under Section 6(1) 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 Honble 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 Honble 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 Honble 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 (2005 Cr.L.W. 3255), Special Leave Petition was filed before the Honble Supreme Court in SLP. (Civil) No.36959 of 2009, which was dismissed by order dated 18.09.2009 on the following terms:-
We have heard learned counsel for the petitioners and perused the record. In our view, the impugned order does not suffer from any legal infirmity. It is not in dispute that O.P.No.15835/1996 filed by the petitioner for quashing orders dated 17.11.1994 and 06.09.1996 passed by the competent authority and the tribunal respectively was dismissed by the High Court on 16.02.2005 and Special Leave Petition (C) No.10348/2005 was dismissed on 10.05.2005. This being the position, the Division Bench of the High Court did not commit any error by refusing to review order dated 16.02.2005 and we do not find any valid ground to interfere with the impugned order. The special leave petition is dismissed.
20. Thus, it is seen that the decision of the Kerala High Court in the case of Sajitha was upheld by the Honble Supreme Court as the SLP stood dismissed on merits and the SLP was not only against the order in review petition, but also against the main judgement in the Original Petition. This order of the Honble Supreme Court being subsequent to the order passed by the Honble Division Bench in the case of V.Mohan, referred supra, resultant conclusion would be that non-issuance of notice to the detenue will not vitiate the proceedings as against their relatives. This conclusion of mine is supported by a decision render by a learned single Judge of this Court in W.P.No.16313 of 2001 dated 05.08.2010 in V.P.Ranganathan vs. Appellate Tribunal. The petitioner in the said case, is the father of the petitioner in W.P.No.26466 of 2001, covered in this order.
21. Thus, on a careful analysis of the decisions cited supra, the legal principle which could be culled out could be broadly summarised as follows:-
(a) Notice issued under Section 6(1) of the Act shall be issued by the competent authority 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 18 of SAFEMA the Act or otherwise.
(b) When the aforementioned conditions are satisfied, the competent authority would be entitled 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 kept in the name of or screened in the name of any relative or associate as defined in the explanation in Section 2(2).
(k) Only the properties of the convict/detenue are sought to be forfeited wherever they are.
(l) The idea is to reach the properties of the detenue/convict, whosoevers name they are kept or by whosoever they are held.
(m) The idea is not to forfeit the independent properties of such relatives or associates which they may have acquired illegally, but only to reach the properties of the convict/detenue or properties traceable to him, wherever they are ignoring all transaction with respect to those properties.
(n) Proper application of mind on the part of the competent authority is imperative before a show cause notice is issued.
(o) The competent authority has to form an opinion in regard to his reason to believe and he must record reasons there for.
(p) Reason to believe and Recording of reasons must be premised on the materials produced before the competent authority. Such materials must have been gathered during investigation carried out in terms of the Act or otherwise.
(q) If no materials have been placed before the competent authority he cannot issue proceedings.
(r) A rowing enquiry is not contemplated under the Act as the properties sought to be forfeited must have a direct nexus with properties illegally acquired.
(s) The reasons should appear on the face of the notice or they must be available on the materials placed before the competent authority.
(t) The competent authority has to produce the reasons before the court so that the same can be scrutinised in order to verify whether they are relevant or germane or not?
(u) The burden of establishing that the properties mentioned in the show cause notice are not illegally acquired properties of the convict/detenue lies upon such relative/associate.
(v) Relative/associate must establish that the said property has not been acquired with the monies are assets provided by the detenue/convict.
(w) The connecting link between the properties and the convict/detenue, the burden of disproving is upon the relative/associate.
(x) The necessity of establishing the link or nexus is writ large on the face of the statutory provision as would appear from the definition illegally acquired property as also that of Property.
(y) 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 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 initiate a fresh proceedings in accordance with law.
22. With the above legal principles in mind, I propose to examine the writ petitions on merits and as to whether they satisfy the principles enunciated by the Honble Supreme Court in the decisions referred supra and whether the orders of forfeiture are legal and valid.
23. W.P.No.26466 of 2001:- The petitioner Mr.R.Ramakrishanan is the son of Mr.V.P.Ranganathan, whose brother Mr.V.P.Selvaraj was the convict. The undisputed facts are that the petitioner is a person as defined under Section 2(2) (c) of the Act being a relative of the convict. According to the petitioner, his father started his life as a shroff during 1949 and ever since, the business had grown substantially, particularly in the field of jewellery trading under the name and style VPR. According to the petitioner the relationship between their family and that of his uncle Mr.V.P.Selvaraj (convict) was strained for several decades. The second respondent issued a notice to the petitioner under Section 6 (1) of SAFEMA, dated 31.04.1994 in a printed format, stating that he (the second respondent), being the competent authority under Section 5 of SAFEMA, have, on the basis of relevant information and/ or relevant material available to him, reason to believe that the property/properties described in the schedule annexed to the notice, which is/are held by the petitioner or on his behalf, is/are illegally acquired property/properties within the meaning of clause (c) subsection 1 of Section 3 of SAFEMA. Based on the above allegation, the second respondent called upon the petitioner to indicate within 35 days of the service of the notice, the sources of his income, earnings or assets, out of which or by means of which he has acquired the property/properties, the evidence on which the petitioner relies and other relevant information and particulars and to show cause why the property/properties should not be declared to be illegally acquired property/properties and forfeited to the Central Government under the said Act. As noticed above, the second respondent adopted a printed format of notice under Section 6 (1) and it is seen that the irrelevant particulars have not been struck off and the options provided under the notice remain as such. In the schedule of the notice under the heading description of property the following details are mentioned:-
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 Rs.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 Corporation from 1985-86 to 1987-88 were enclosed. The bank pass book and compulsory deposit account of the persons referred to were also enclosed.
25. It appears that the petitioner through his Chartered Accountant vide letter dated 28.12.1995, requested for supply of copy of reasons recorded for issue of notice under Section 6(1) and also requested for a personal hearing. The second respondent rejected the request by their letter dated 04.06.1996. Thereafter, the petitioners Chartered Accountant attended the personal hearing and also submitted a written reply. The competent authority, the second respondent herein, by order dated 28.09.1998, ordered for forfeiture of four of the five items of property mentioned in the show cause notice, except the investments with M/s.Siva Trust. Aggrieved by the order passed by the second respondent, the petitioner preferred an appeal to the first respondent Tribunal and Tribunal by its order dated 01.10.2001, dismissed the appeal, challenging the said order, the writ petition has been filed.
26. The learned counsel appearing for the petitioner would contend that the impugned order suffers from non-application of mind and it is in violation of the principles of natural justice. It is submitted that the proceedings initiated under SAFEMA against the petitioners sister and his mother were quashed by this Court in W.P.No.7919 of 1992, dated 09.11.1999 and the proceedings against, the petitioners uncle, (the convict), were set aside by the first respondent by order dated 17.03.1999 and the proceedings initiated against the petitioners father was quashed by this Court by order dated W.P.No.16313 of 2001, dated 05.08.2010 and remanded for fresh consideration. The orders passed in these proceedings have a definite bearing on the case against the petitioner and the proceedings against the petitioner are also liable to be quashed. It is further submitted that the respondents failed to advert to the decisions cited by the petitioner more particularly the decision of the Honble Supreme Court in Vol.214 ITR, 101 and Vol 188 ITR page 88. The learned counsel would further submit that a printed format was adopted by the second respondent and the relevant particulars have not been mentioned and the irrelevant particulars have not been struck off which clearly established non-application of mind. Further, the respondents failed to establish 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 Rs.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 Honble 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 submit that in terms of the decision rendered by the Honble Surpeme Court in the case of P.P.Abdulla the reasons recorded for issue of notice under Section 6(1) of SAFEMA have been furnished along with an additional affidavit filed before this court dated 27.10.2010 and the same may be treated has part and parcel of the counter affidavit. It is submitted that the proceedings initiated against the petitioners sister, mother, father, brother and the orders passed by this Court in their Writ Petitions or appeal petitions are not relevant to the case of the petitioner and the impugned proceedings are independent proceedings initiated against the petitioner in the capacity as relative of the convict. In the counter affidavit, it has been stated that the contention of the petitioner that nexus between the property held by the relative and the detenue/convict should be established for forfeiting the property in the hands of the relative is not correct under SAFEMA and in this regard a decision of the Tribunal dated 19.06.1998 has been relied upon to state that the burden is on the person affected and if he is unable to discharge the burden, the very fact the affected person is a relative is sufficient to hold the nexus with the convict. Therefore, it is contended that the writ petition is liable to be dismissed. It is further contended, the petitioner was not able to properly explain the source of acquisition of the properties and therefore, the authority correctly ordered for forfeiture of four out of the five properties mentioned in the show cause notice. The learned standing counsel placed reliance on the decisions of the Honble Supreme Court in Kesar Devi and prayed for dismissal of the writ petition.
28. I have carefully considered the submission on either side and perused the materials available on record.
29. In the preceding paragraphs of this Judgement the legal principles culled out from the various decisions of the Honble Supreme Court have been set forth in extenso. Therefore, the first aspect which has to be gone into is as to whether, the notice issued under Section 6(1) of SAFEMA has been validly issued and as to whether it satisfies the tests laid down. The Honble Supreme Court held that the competent authority while issuing a notice under Section 6(1) shall have regard to three important factors, namely, (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 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 done, the Court is left with no option except to conclude that there has been non-application of mind. As held by the Honble Supreme Court if the initiation of the proceedings is bad then the consequential orders are to be held to be bad in law. I have perused the show cause notice and it is seen that it does not give any details as regards the value of the property held by the petitioner, regarding his known source of income or earning and as to whether any material or information was available to the second respondent on account of an investigation under Section 18 of the Act. Therefore, prima facie it is clear the aforementioned three pre-conditions for issuance of notice under Section 6(1) are missing.
30. The reasons recorded by the competent authority has been furnished along with the additional counter affidavit. Therefore, I shall proceed to examine the reasons as to whether the same satisfies the legal requirement for issuance of notice under Section 6 (1). Paragraph 1 of the notice deals with aspect that the petitioner is a relative as defined under Section 2(2)(c) of the Act and is liable to be proceeded against. The competent authority has stated that it has come to his knowledge that the petitioner has acquired the immovable property at Kumbakonam in the year 1980 and it has found to be deriving the benefits from Siva Trust and Siva Corporation and he has made certain investments in V.R.S. Jewellery and receiving interest. Therefore, a letter was issued on 29.03.1993, directing the petitioner to furnish details with documentary evidence towards source for investment in immovable property and in response to which the petitioner has furnished certain details. Based on these facts, the second respondent petitioner has recorded the following:-
A perusal of certain unsigned account copies of Shri.R.Ramakrishnan supposed to be from the books of M/s.Siva Trust shows that the relevant properties were purchased in the year 1980 and the last payment towards the sale consideration was made on 26.05.1980 to total consideration passed was found to be Rs.1,82,700. The source for the payment of the consideration was not explained with any contemporaneous evidence and at the relevant point of time of the acquisition of the property his account shows a huge debit balance which is quite abnormal. Further, his account in the books of Siva Trust also shows 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.
5.Investment made with Sri.V.P.Renganathan.
31. A reading of the above reasons does not satisfy the primary requirement for issuance of a notice under Section 6(1) in as much as it does not establish a link between the property sought to be forfeited and the income or assets which were illegally acquired by the person concerned. The Honble Supreme court in Attorney Generals case held that the idea is to forfeit the illegally acquired properties of the convict irrespective of the fact that such properties are held or kept in the name of any relative or associate as defined in Section 2(2) of the Act and therefore, it is only the properties of the convict which are sought to be forfeited, wherever they are and the idea is to reach such property in whosoever name they are kept or by whosoever they are held. The Honble Supreme Court further held the idea is not to forfeit, the independent properties of such relatives or associates, which they may have acquired illegally, but only to reach the properties of the convict or properties traceable to him. Perusal of the reasons, reveals that the competent authority on receipt of certain information received from the petitioner came to a conclusion that because the petitioner failed to adduce any corroborative tangible evidence in support of the source for acquisition of the properties mentioned in the notice, he has reason to believe that the investments partakes the character of illegally acquired properties. The competent authority does not mention about the link between the properties in the name of the petitioner with that of the convict or his assets. Thus the reasons recorded by the competent authority does not satisfy the test laid down by the Honble Supreme Court as dealt with in the preceding paragraphs of the Judgment.
32. It is seen that the second respondent has attempted to conduct a rowing enquiry, which has been specifically held to be not permissible under the Act as per the decision of the Honble Supreme Court in Aslam Mohammad Merchand case. It is seen that there is absolutely no mention in the reasons recoded by the second respondent as to how the nexus or the link has been established between the properties and the convict. In the absence of the connecting link, the burden does not shift upon the petitioner, who is the relative of the convict for disproving the allegation. 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 Honble 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 200134. 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 the earlier writ petition in W.P.No.26466 of 2001, but it is seen that the irrelevant portions of the notice have been struck off to prima facie show that there was some application of mind. In the notice, the agricultural lands and other properties in Kooriyur, Mayakulam and Erwadi villages standing in the name of the writ petitioner were sought to be forfeited. The schedule to the notice furnished the patta numbers, survey numbers, extent and the classification of the property. It is seen that in survey No.509/1, Erwadi village, the property is a dry land with building and rest house. The reasons recorded for issue of notice under Section 6(1) had been furnished along with the additional counter affidavit and also enclosed in the typed set of papers filed by the petitioner. For better appreciation, the same is reproduced hereunder:-
Name of the person: Smt:Mohammed Daha Umma, W/o. Sri S.S.A.Shahul Hameed, West Street, Kilakkorai, Ramnad District.
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She is the wife of S.S.A.Shahul Hameed who is a detenu under COFE POSA and confirms as a person in terms of sub-clause (i) of Explanation 2 to Section 2(2) of the Act.
2.This person has no known sources of income or funds. There are properties in the name of this person as detailed below:-
Name of the G.R.Patta No. S.No. Extent. Asst. Village Classification Kooriyur 57 86/4 2.06 13.91/Wet land 57 86/38 0.37 2.50/Wet land Mayakulam 139 195/3 25.62 9.42/Dry land Erwadi 857 486/1 1.68.5 3.37/Dry land 611 509/1 0.12.0 7.68/Dry land (with building and rest house No.6/105-A).
The value of these properties can be estimated at Rs.25,000. These properties must have been acquired from out of unexplained sources of funds. Hence, it will be taken that these are all illegally acquired properties and notice under Section 6(1) may issue.
36. From a perusal of the above, it is seen that the competent authority premised his reasons by stating that the deceased writ petitioner is the wife of the detenue Mr.S.S.A.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 Rs.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 assailed in this writ petition.
37. Mr.B.Kumar, the learned Senior counsel for the petitioner elaborately set out the facts of the case and the law evolved by the Honble Supreme Court, which has been dealt with in the preceding paragraphs of the Judgment. The learned Senior counsel would submit that the impugned order of forfeiture does not satisfy the conditions laid down by the Honble Supreme Court in the aforementioned decisions and therefore, the same is liable to be quashed. It is submitted that the writ petitioners husband, who was the detenue had been totally exonerated and where there is no activity of smuggling and no link between the properties sought to be forfeited and the smuggling activity, the proceedings are vitiated. The learned Senior counsel made specific reference to the source of funds by which the properties were acquired by the writ petitioner and in that regard referred to paragraph 6 & 7 of the affidavit filed in support of the writ petition. Further, it is submitted that the properties in Erwadi village were purchased in the year 1955 and 1959 and effective prosecution of the notice under Section 6(1) commenced only in 1996 which is nearly 40 years after the date of purchase and it is impossible for any one to meticulously explain with records or account books how the properties were acquired, therefore, the forfeiture proceedings is wholly unjust. The learned Senior counsel would further submit that the notice issued under Section 6(1) does not satisfy the cardinal principles laid down by the Honble Supreme Court, and the same is vitiated and consequently, all further proceedings have to be held to be illegal.
38. The learned Senior Standing counsel for the Department made elaborate submission by referring to the decision of the Honble Supreme Court referred to supra and submitted that the legal requirement has been fully complied with and the competent authority as well as the Tribunal have recorded cogent reasons in support of their conclusion and the impugned orders do not call for interference. In the counter affidavit, it has been stated that since the petitioner failed to establish the nature of source for the acquisition of property as required under Section 8 of the Act, the first respondent was right in treating the property as illegally acquired and traceable to illegal earning of the deceased detenue. It is further 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 Honble 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 satisfies the three requirements which has been laid down by the Honble Supreme Court. The first of the three requirements is the value of the property. The authority held that the value of the property could be estimated at Rs.25,000/-. The second aspect is regards the known source of income, earning or assets. The authority has recorded that the writ petitioner has no known sources of income or funds. The third aspect is regards any other information or material available with the competent authority. In this regard, the authority in the notice has set out the survey number of the property, the extent, the classification, patta number and as to whether any building is situated in the said property. Therefore, I am satisfied that the three cardinal principles set out by the Honble Supreme Court which shall be taken note of by the authority before issuance of show cause notice have been fulfilled. The next aspect which has to be seen is as to whether the link has been established between the properties sought to be forfeited and the income or assets which were illegally acquired by the person concerned. At this stage, it is to be borne in mind that notice was not only issued to the deceased writ petitioner but also to her husband/detenue, sons, daughters and grandson. All these proceedings were taken together and were heard together. After the demise of the detenue, a contention was raised that unless and until all the legal heirs were brought on record, the matter cannot be proceeded further. This contention was rejected by the competent authority and the Tribunal holding that, as few legal heirs were on record, it is sufficient to represent the estate of the deceased detenue. However, these aspects have to be gone into only after being satisfied that the proceedings under the Act have been validity issue and the link or nexus has been made out in the notice issued under Section 6(1) and if the show cause notice is found to be illegal, the same would vitiate all the subsequent proceedings. It has to borne in mind that a rowing enquiry is not contemplated under the Act as properties sought to be forfeited must have direct nexus with the properties illegally acquired.
40.I have seen the reason recorded by the competent authority, extracted above. All that has been stated is that the petitioner did not have any known source of income, the value of the properties is estimated as Rs.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 Honble 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 petitioners 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 the property proceeded against and an illegal activity of the detenue. This is conspicuously absent in the instant case and therefore the entire proceedings are vitiated. In a recent decision of the Honble Supreme Court in State of Orissa and another vs. Mamata Mohanty, (2011) 3 SCC 436, considered the effect and validity of a proceedings which is bad at the inception. In this regard their Lordships observed as follows-
37.It is a settled legal proposition that if an order is bad in its inception, it does not get sanctified at a later stage. A subsequent action/development cannot validate an action which was not lawful at its inception, for the reason that the illegality strikes at the root of the order. It would be beyond the competence of any authority to validate such an order. It would be ironic to permit a person to rely upon a law, in violation of which he has obtained the benefits. If an order at the initial stage is bad in law, then all further proceedings consequent thereto will be non est and have to be necessarily set aside. A right in law exists only and only when it has a lawful origin. (Vide Upen Chandra Gogoi vs. State of Assam (1998) 3 SCC 381, Mangal Prasad Tamoli vs. Narvadeshwar Mishra (1005) 3 SCC 422 and Ritesh Tewari vs. State of U.P. (2010) 10 SCC 677).
Thus having concluded that the very initiation of proceedings against the petitioner is bad all subsequent proceedings are also invalid as the defect cannot be cured and as held by the Honble Supreme Court, the order does not get sanctified at a later stage.
41. For all the above reasons and taking note of the catena of decisions of the Honble Supreme Court, it is held that the show cause notice issued to the writ petitioner order Section 6(1) is illegal and invalid. Once the show cause notice is found to be illegal, the same would vitiate all the subsequent proceedings. In this view, the writ petition is allowed and the order of forfeiture passed against the writ petitioner Late Mrs.Mohammed Thaha Umma is set aside. No costs.
pbn To
1.The Appellate Tribunal for Forfeited Property, New Delhi rep. by its Registrar, 4th Floor, Lok Nayak Bhavan, Khan Market, New Delhi.
2.The Competent Authority, Smugglers, Foreign Exchange Manipulators (Forfeiture of Properties) Act, 1976 and Narcotic Drugs Psychotropic Substance Act, 69/1, G.N.Chetty Street, Chennai 600017