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2011 (2) CWC 1, 2011 (6) MLJ 661
High Court of Judicature at Madras
T.S. SIVAGNANAM
R. Ramakrishnan
Versus
The Appellate Tribunal for Forfeited Property, New Delhi & Others
W.P.Nos. 7609 of 2001 & 26466 of 2001
Decided On: 08-04-2011
The judgment deals with the interpretation and application of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976 (SAFEMA) and the effect of the orders passed under the Act. The court analyzed various provisions of SAFEMA, including the definition of "illegally acquired property," the burden of proof, and the powers of the competent authority and Appellate Tribunal. The court also considered relevant case law, including decisions of the Supreme Court of India, to establish legal principles and guidelines for the application of SAFEMA.
Fact of the Case:
The case involved several writ petitions challenging orders of forfeiture passed under SAFEMA against properties belonging to relatives of detenues/convicts. The petitioners argued that the orders were illegal and violative of their fundamental rights.
Finding of the Court:
The court held that the show-cause notices issued under Section 6(1) of SAFEMA were illegal and invalid as they failed to establish a link or nexus between the properties sought to be forfeited and the income or assets illegally acquired by the detenues/convicts. The court also held that the subsequent proceedings, including the orders of forfeiture, were vitiated due to the illegality of the show-cause notices. The court set aside the orders of forfeiture and allowed the writ petitions.
Issues: 1. Whether the show-cause notices issued under Section 6(1) of SAFEMA were valid and satisfied the legal requirements for initiation of forfeiture proceedings. 2. Whether the competent authority had established a link or nexus between the properties sought to be forfeited and the income or assets illegally acquired by the detenues/convicts. 3. Whether the subsequent proceedings, including the orders of forfeiture, were vitiated due to the illegality of the show-cause notices.
Ratio Decidendi: 1. The court held that a show-cause notice issued under Section 6(1) of SAFEMA must satisfy certain legal requirements, including the value of the property, the known source of income or earnings of the person concerned, and any other information or material available to the competent authority. The court also held that the competent authority must establish a link or nexus between the properties sought to be forfeited and the income or assets illegally acquired by the detenues/convicts. 2. The court held that the competent authority failed to establish a link or nexus between the properties sought to be forfeited and the income or assets illegally acquired by the detenues/convicts. The court found that the reasons recorded by the competent authority were insufficient and did not satisfy the legal requirement for issuance of a show-cause notice under Section 6(1). 3. The court held that the subsequent proceedings, including the orders of forfeiture, were vitiated due to the illegality of the show-cause notices. The court relied on the principle that if an order is bad in its inception, it does not get sanctified at a later stage.
Final Decision: The court allowed the writ petitions, set aside the orders of forfeiture, and held that the show-cause notices issued under Section 6(1) of SAFEMA were illegal and invalid. The court also held that the subsequent proceedings, including the orders of forfeiture, were vitiated due to the illegality of the show-cause notices.
1. 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”
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