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SUPREME COURT OF INDIA
(From the High Court of Judicature at Madras)
A.M. KHANWILKAR, SANJIV KHANNA, JJ.
The Income Tax Officer, Circle I (2), Kumbakonam & Anr. - Appellants
Versus
V. Mohan & Anr. - Respondents
Civil Appeal Nos. 8592-8593 of 2010
Decided on : 14-12-2021
Whether it is mandatory to serve a primary notice under Section 6 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (1976 Act) upon the convict and not merely to the relatives of the convict who hold the properties proposed to be forfeited?
Fact of the Case:
The convict (V.P. Selvarajan) was convicted for an offence punishable under the Customs Act, 1962 on 23.11.1969. As a result of his conviction, he came within the ambit of the expression “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. 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 having nexus to the unlawful activities of the convict. As a result, a notice under Section 6(1) of the 1976 Act was issued to the convict on 2.2.1980. In the present appeals, we are not concerned with the said notice or for that matter illegally acquired properties of the convict referred to therein. The Competent Authority, however, on the basis of information gathered had reason to believe that some of the properties were held by the respondents herein by themselves, which were illegally acquired properties within the meaning of Section 3(1)(c) of the 1976 Act. Accordingly, notice under Section 6(1) of the 1976 Act dated 19.1.1994 was issued to V. Mohan, respondent No.1 herein being nephew of the convict, calling upon him to disclose the sources of his income, earnings or assets, out of which or by means of which he had acquired the properties referred to in the stated notice by himself. The description of the properties had been given in the Schedule, which reads thus: Similarly, a notice dated 28.2.1994 was issued to Smt. V. Padmavathy, respondent No.2 herein being the relative of the convict in respect of properties referred to in the said notice purportedly illegally acquired properties.
Finding of the Court:
The view taken by the Madras High Court in the impugned judgment, therefore, does not commend to us and is reversed.
Issues: Whether it is mandatory to serve a primary notice under Section 6 of the 1976 Act upon the convict and not merely to the relatives of the convict who hold the properties proposed to be forfeited?
Ratio Decidendi: Section 6(1) of the 1976 Act nowhere provides that it is “mandatory” to serve the convict or detenu with a primary notice under that provision whilst initiating action against the relative of the convict. Indubitably, if the illegally acquired property is held by a person in his name and is also in possession thereof, being the relative of the convict and who is also a person to whom the Act applies, there is no need to issue notice to the convict or detenu much less primary notice as held by the High Court in the impugned judgment. For, Section 6(1) posits that notice must be given to the person who is holding the tainted property and is likely to be affected by the proposed forfeiture of the property. The person immediately and directly to be affected is the person who is the recorded owner of the property and in possession thereof himself or through some other person on his behalf. In the latter case, the burden of proof under Section 8 is not to be discharged by the convict or detenu, but by the person who holds the illegally acquired property either by himself or through any other person on his behalf.
Final Decision: The common impugned judgment and order dated 24.3.2008 passed by the Madras High Court in Writ Petition Nos.1149 and 1150 of 2001 is set aside. Instead, the writ petitions are restored to the file to its original number for being considered afresh on its own merits in accordance with law on all other issues and contentions available to both sides except the question answered in this judgment. Thus, all other contentions available to both parties are left open. We request the High Court to expeditiously dispose of the remanded writ petitions.
JUDGMENT :
A.M. KHANWILKAR, J.
1. The conundrum in these appeals is: when the Competent Authority? claims that the subject property (to be forfeited) is that of the convict (V.P. Selvarajan) and ostensibly held by the relatives of the convict (respondents herein), whether it is mandatory to serve a primary notice under Section 6(1) of the 1976 Act1 upon such convict with copy thereof to his relatives under Section 6(2) of the 1976 Act, and non-service of such primary notice upon the convict would vitiate the entire proceedings initiated only against his relatives?
1[under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (for short, “1976 Act”) ]
2. The High Court of Judicature at Madras2 vide impugned judgment3 held that Section 6 of the 1976 Act leaves no room for doubt that the primary notice must be served on the convict, wherein the convict is required to indicate the sources of his income, earnings or assets, out of which or by means of which he had acquired the properties sought to be forfeited; and non-service of such notice upon the convict would vitiate the action initiated against his relatives, even if the forfeited properties are ostensibly held by or in the name of the relatives. The High Court rejected the argument of the appellants herein (Competent Authority) that only the person in whose name the property is held is required to be called upon to offer explanation regarding the sources of his income, earnings or assets, out of which or by means of which he had acquired such property including the evidence on which he would rely and other relevant information and particulars. If the property in question is ostensibly held by the relatives in his name or through any other person on his behalf, the convict or detenu is not expected to nor can offer any explanation in that regard. The High Court also rejected the argument of the appellants herein that no prejudice is likely to be caused to the noticees (respondents herein) being the relatives of the convict, who had held the forfeited properties in their name. The High Court opined that the action against the respondents initiated by the Competent Authority was vitiated for lack of notice to the convict and it was, thus, pleased to set aside the entire action initiated against the respondents by the Competent Authority.
2[for short, “Madras High Court” ]
3[Writ Petition Nos. 1149 & 1150 of 2001 decided on 24.3.2008 reported in 2008 SCC OnLine Mad 244]
3. A contra view has been taken by at least two other High Courts. The first is of the High Court of Kerala in Sajitha & Ors. vs. Competent Authority & Ors., 2005 SCC OnLine Ker 101 wherein after analysing the relevant provisions, it held as follows:
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 has, (1994) 5 SCC 54 : AIR 1994 SC 2179, dealt with the scope and ambit of the Act which requires no reiteration. However we may refer to the
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