NDPS Act | Freezing of 'Illegally Acquired Property' Upheld as Burden of Proof Under S.68J Lies with Affected Person; Alternate Remedy Available: Telangana High Court - 2025-04-23

Telangana High Court Upholds NDPS Act Property Freezing Orders, Citing Burden of Proof on Accused

Hyderabad: The Telangana High Court, in a judgment delivered by The Honourable Sri Justice N.V. Shravan Kumar on April 21, 2025, dismissed a writ petition challenging the freezing of movable and immovable properties under the Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act). The Court emphasized that the burden of proving that such properties are not "illegally acquired property" lies squarely with the person affected under Section 68J of the Act and that the petitioner had failed to exhaust the statutory alternative remedy of appeal.

The petitioner, Gundumalla Venkataiah , challenged the order dated March 20, 2024, passed by the Competent Authority (Respondent No.2) confirming the freezing order issued by the Inspector of Police, Shadnagar Police Station (Respondent No.3) dated February 20, 2024. The freezing was carried out under Section 68F of the NDPS Act in relation to a crime registered against the petitioner concerning the alleged seizure of Alprazolam . The petitioner sought to quash these orders and be permitted to deal with his and his family's properties and bank accounts.

Case Background:

The case originated from Cr.No.894 of 2023 registered on December 25, 2023, at Shadnagar Police Station under Sections 8(C) read with 22(C) and 29 of the NDPS Act, following the alleged seizure of 2 KGs of Alprazolam near a residential building. The petitioner was named as Accused No.3 in this case. It was also submitted that the petitioner is Accused No.7 in another NDPS case (Cr.No.1386 of 2023) registered by Gachibowli Police Station, where a charge sheet has been filed.

Based on the registration of Cr.No.894/2023, the Investigating Officer (Empowered Officer) formed a "reason to believe" that the petitioner and his family members' movable and immovable properties were acquired from the illicit trade of narcotic drugs, especially considering the petitioner's alleged involvement in another similar case and the lack of sufficient disclosed income. Consequently, a freezing order under Section 68F(1) was issued on February 20, 2024. This order was subsequently confirmed by the Competent Authority under Section 68F(2) on March 20, 2024, after issuing a show cause notice and considering the petitioner's reply. The confirmed order restrained the transfer or dealing of the specified properties and bank accounts of the petitioner, his wife, and son.

Arguments Presented:

The Petitioner , represented by learned senior counsel Mr. Vedula Venkatramana , argued that the freezing orders were illegal and arbitrary. Key contentions included: * The investigation in Cr.No.894/2023 was still at the crime stage (though later noted charge sheet filed). * The recovery of 2 KGs of Alprazolam did not justify presuming all family properties were acquired by illicit means. * Most properties were acquired before the registration of the two crimes, lacking a nexus to recent alleged drug trafficking income. * The Competent Authority failed to record adequate reasons for confirming the seizure, despite being a quasi-judicial authority. * The alternative remedy of appeal under Section 68O of the NDPS Act was not effective given the patent illegality and lack of jurisdiction in the impugned orders, citing exceptions to the rule on alternate remedy from Whirlpool Corporation v. Registrar of Trademarks and PHR Invent Educational Society v. UCO Bank . * The freezing of bank accounts severely hampered the petitioner's livelihood.

The Respondents , represented by learned Assistant Solicitor General Mr. B. Narasimha Sharma for Respondent No.2 and learned Government Pleader for Home Mr. Mahesh Raje for Respondent No.3, opposed the petition. Their submissions highlighted: * The freezing was based on "reasons to believe" derived from a financial investigation under Section 68E, showing a significant disparity between the declared income (approx. Rs. 35 lakhs over 6 years) and the value of properties acquired (approx. Rs. 95 lakhs + cash/bank balances). * The petitioner and his family members (wife and son, shown as non-earning) failed to provide a satisfactory explanation for the source of funds for acquiring the properties. * The petitioner's involvement in another NDPS case strengthened the belief that properties were linked to drug trafficking. * Under Section 68J of the NDPS Act, the burden of proving that the properties are not illegally acquired rests with the person affected, which the petitioner failed to discharge. * The procedure under Section 68F was duly followed, including communication of the initial order and providing a hearing opportunity before confirmation. * A statutory and effective remedy of appeal is available before the Appellate Tribunal under Section 68O, which the petitioner had not exhausted. Bypassing this remedy by filing a writ petition was unwarranted.

Court's Analysis and Decision:

Justice N.V. Shravan Kumar carefully considered the arguments, the judgment copies, and the materials on record, including the Income Tax returns and property details furnished by the police. The Court noted that the Competent Authority's "reasons to believe" were based on the financial investigation revealing the significant discrepancy between declared income and property acquisitions, and the petitioner's failure to satisfactorily explain the source of funds, particularly for properties held by his non-earning wife and son.

The Court placed strong reliance on Section 68J of the NDPS Act , which mandates that the burden of proving property is not illegally acquired lies with the person affected. The Court observed that the petitioner had not made a serious attempt to discharge this burden, failing to explain the nature of his business or the source of credits in his bank accounts, especially when faced with the evidence presented by the respondents regarding the value of acquired properties versus disclosed income.

Regarding the alternative remedy, the Court acknowledged the exceptions cited by the petitioner but found they were not applicable here. The Court held that the statutory procedure under Section 68F was followed, a hearing was granted, and the confirmatory order was based on recorded reasons. The Appellate Tribunal for Forfeited Property is the specialized forum competent to examine such freezing orders, and the petitioner's failure to approach it without demonstrating compelling reasons rendered the writ petition on this ground not maintainable.

The Court referred to the Supreme Court's judgment in Aslam Mohammad Merchant v. Competent authority , which emphasized scrupulous compliance with statutory requirements in stringent laws like the NDPS Act. The High Court found that in this case, the respondents had followed the prescribed procedure under Sections 68E and 68F, including recording reasons for the belief that the properties were illegally acquired.

Consequently, the Court found no reason to interfere with the impugned confirmatory order dated March 20, 2024, and dismissed the writ petition to that extent.

Conditional Relief for Bank Accounts:

However, acknowledging that the freezing of bank accounts impacts the petitioner's fundamental right to life under Article 21 of the Constitution, the Court granted a limited, conditional relief. It permitted the petitioner and his family members access to the frozen accounts for legitimate livelihood and medical expenses. This access is conditional upon the petitioner providing proof of legal income credits into these accounts and obtaining permission from the concerned Trial Court or Competent Court before withdrawing such forthcoming credits. The Court clarified that this conditional access is based on bonafide requirements and does not validate any past transactions or challenge the freezing itself.

The judgment explicitly stated that the order is confined to the observations regarding the confirmation order and shall not be construed as an expression on the merits of the criminal cases or future forfeiture proceedings, which are to proceed independently.

The Court's decision reinforces the stringent provisions of the NDPS Act regarding the forfeiture of illegally acquired property and highlights the significant burden placed upon individuals to prove the legitimate source of their assets when suspected of being linked to drug trafficking. It also underscores the importance of exhausting statutory remedies before approaching the High Court under its writ jurisdiction.