TMI Blog2008 (7) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... R,V.S., JJ. JUDGMENT S.B. SINHA, J : INTRODUCTION 1. Interpretation and application of Chapter VA of the Narcotic Drugs and Psychotropic Substances Act, 1985 (for short, "the Act") providing for forfeiture of property derived from or used in illicit traffic, is in question in this batch of appeals which arise out of a judgment and order dated 27.11.2002 passed by the High Court of Bombay in Criminal Writ Petition No. 1095 of 2002. OVERVIEW 2. One Iqbal Mohammed Memon alias Iqbal Mirchi ("Mirchi", for short) is related to the appellants. Appellants No. 2 is his first wife, Appellant No.3 is second wife, Appellant No. 4, Abdul Kadar Mohd. Merchant, is one of his brothers, Appellant No. 5, Shir Firoz Mohd. Memen, is his second brother whereas Petitioner No. 6, Aslam Mohd. Merchant, is his third brother. Appellant No.7, Nazma Aslam Merchant, is his brother's wife, Appellant No.8, Zaibunnisa Memon, is his sister and Appellant No. 9, Arij Mohd. Merchant, is the brother-in-law of the said Iqbal Mohammed Memon. An order of preventive detention was passed against him for his alleged involvement in illicit trafficking under the Prevention of Illicit Traffic in Narco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed by the competent authority, it would appear that one of the properties had been purchased by one of the appellants herein much prior to her marriage to `Mirchi' and as such the question of such a property having been acquired out of the "illegally acquired property" does not and cannot arise. (ii) Appellants having filed their income tax returns and wealth tax returns wherein the properties were shown to have been purchased from their own income, the impugned order is wholly unsustainable. Although orders of assessment passed by an authority under the said Act having regard to the provisions contained in Section 68W thereof may not be conclusive, but, the same carry a presumption of correctness and thus were required to be treated as evidence. (iii) The competent authority, on the basis of the purported investigation report or otherwise, was required to show that the properties in question were in fact purchased from the tainted money and it was not for the appellants to prove contra. (iv) As the only relevant consideration for passing an order in terms of Section 68H of the Act is that the property had been acquired from the tainted income, it is sufficient for the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. It also applies to persons who are relatives of a person inter alia against whom an order of detention has been issued or his associate(s). Section 68B is the interpretation section. We may notice some of the provisions contained therein. "Section 68B. Definitions - In this Chapter, unless the context otherwise requires - **** **** **** **** **** (b) "Associate" in relation to a person whose property is liable to be forfeited under this Chapter, means, - (i) Any individual who had been or is residing in the residential premises (including out houses) of such person; **** **** **** **** **** (ii) Any individual who had been or is managing the affairs or keeping the accounts of such person; (iii) Any association of persons, body of individuals, partnership firm, or private company within the meaning of the Companies Act, 1956, of which such person had been or is a member, partner or director; **** **** **** (vi) The trustee of any trust, where, - (1) The trust has been created by such person; or (2) The, value of the asset contributed by such person (including the value of the assets, if any, contributed by him earlier) to the trust amounts on the date on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the following terms:- "68C. Prohibition of holding illegally acquired property - (1) As from the commencement of this Chapter, it shall not be lawful for any person to whom this Chapter 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 Chapter: Provided that no property shall be forfeited under this Chapter if such property was acquired, by a person to whom this Act applies, before a period of six years from the date he was arrested or against whom a warrant or authorisation of arrest has been issued for the commission of an offence punishable under this Act or from the date the order or detention was issued, as the case may be." Section 68E provides as to how illegally acquired property shall be identified, stating: "68E. Identifying illegally acquired property - (1) Every officer empowered under section 53 and every officer-in-charge of a police station shall, on receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice upon such person (hereinafter referred to as the person affected) calling upon him within a period of thirty days specified in the notice to indicate the sources of his income, earning 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 Chapter. (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 be served upon such other person: Provided that no notice for forfeiture shall be served upon any person referred to in clause (cc) of sub- section 68 A or relative of a person referred to in that clause or associate of a person referred to in that clause or holder of any property which was at any time previously held by a person referred to in that clause. 68I. Forfeiture of property in certain cases - (1) The competent authority may, after considering the explanation, to the show ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Section 68-H is not illegally acquired property shall be on the person affected." Section 68W provides:- 68W. Findings under other laws not conclusive for proceedings under this Chapter - No finding of any officer or authority under any other law shall be conclusive for the purposes of any proceedings under this Chapter. THE PROCEEDINGS 10. The Show Cause Notice was issued on 17.12.1999. It detailed as many as forty items of properties. In their reply to show cause notice, noticees-appellants contended that they were concerned only with 11 properties which was accepted. Proceedings in respect of the unrelated properties were dropped and, thus, continued in respect of the said 11 properties stating:- "27. After the replies to the Show Cause Notice were received from the affected person it was found that many of the properties were disclaimed by them. This necessitated further verification and enquiries were conducted and it was found that most of the properties are under ownership/possession of different persons who are not noticees. The affected person have disclaimed the properties mentioned at Sl. Nos. 6, 7, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a massive scale and also the fact that AP2 to AP11 have no source of legal income of their own by means of which they could have acquired such huge and valuable properties mentioned hereinbefore, I have reason to believe that the said properties and assets as mentioned in para 14 have been acquired from the illegal income or source generate or earned by AP1 through or out of drug trafficking and have to be considered as illegally acquired property as defined under sub-section (g) of section 68B of the NDPS Act." 11. From a perusal of the said notice to show cause, it is evident that admittedly another proceeding had been initiated against them. 12. Four properties were directed to be forfeited; seven were released. 13. The second proceedings with which we are concerned herein continued in respect of the 11 properties. Indisputably again in the earlier proceedings, income tax returns had been brought on records. 14. The relevant provisions of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (for short "SAFEMA") and Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS) are in pari materia. 15. Contentions were raised that the show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize or freeze such a property. 20. Before, however, the actual order of forfeiture of such illegally acquired property is passed, issuance of a notice to show cause is essential so as to fulfill the requirements of natural justice. Such a notice is to be issued by the 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 68-E of the Act or otherwise. 21. When the aforementioned conditions are satisfied, the competent authority would be entitled to issue a show cause notice, if he has reason to believe, wherefore reasons are to be recorded in writing that the properties are illegally acquired properties. 22. Once the notice to show cause is found to be satisfying the statutory requirements which are condition precedent therefor, a valid proceeding can be said to have been initiated for forfeiture of the property. Only in a case where a valid proceeding has been initiated, the burden of proof that any property specified in the notice is not illegally acquired pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority alone. 27. We are unable to accept the contention of Mr. Raju Ramchandran, the learned senior counsel appearing for the appellants that only because a large number of properties had been mentioned in the show cause notice, the same by itself is demonstration of complete non-application of mind on the part of the competent authority. Identification of such a property although might have been made in an inquiry made by the officer in-charge of a Police Station; however, when the proceeding was initiated, the question as to whether such properties were illegally acquired properties or not, was required to be ultimately determined by the competent authority alone. 28. It is, however, beyond any doubt or dispute that a proper application of mind on the part of the competent authority is imperative before a show cause notice is issued. Section 68-H of the Act provides for two statutory requirements on the part of the authority viz: (i) he has to form an opinion in regard to his `reason to believe'; and (ii) he must record reasons therefor. Both the statutory elements, namely, reason to believe' and `recording of reasons' must be premised on the materials produced befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces that may be adopted by the persons concerned, it was stated:- "By way of illustration, take a case where a convict/detenu purchases a property in the name of his relative or associate - it does not matter whether he intends such a person to be a mere name lender or whether he really intends that such person shall be the real owner and/or possessor thereof - or gifts away or otherwise transfers his properties in favour of any of his relatives or associates, or purports to sell them to any of his relatives or associates -in all such cases, all the said transactions will be ignored and the properties forfeited unless the convict/detenu or his relative/associate, as the case may be, establishes that such property or properties are not "illegally acquired properties" within the meaning of Section 3(c). In this view of the matter, there is no basis for the apprehension that the independently acquired properties of such relatives and associates will also be forfeited even if they are in no way connected with the convict/detenu. So far as the holders (not being relatives and associates) mentioned in Section 2(2)(e) are concerned, they are dealt with on a separate footi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs under SAFEMA did not exist, impugned orders of forfeiture cannot be sustained. In that view of the matter, the appeals deserve to be allowed. The order under challenge is set aside." 31. Our attention, however, has been drawn to a decision of a two Judge Bench of this Court in Kesar Devi (Smt.) Vs. Union of India and Others [(2003) 7 SCC 427] wherein Fatima Mohd. Amin (supra) was distinguished by a Bench of this Court, inter alia, opining that no nexus or link between the money of the debt and property sought to be forfeited is required to be established under the Scheme of the Act, stating; " 10...The condition precedent for issuing a notice by the competent authority under Section 6(1) is that he should have reason to believe that all or any of such properties are illegally acquired properties and the reasons for such belief have to be recorded in writing. The language of the section does not show that there is any requirement of mentioning any link or nexus between the convict or detenu and the property ostensibly standing in the name of the person to whom the notice has been issued... "13. We are, therefore, clearly of the opinion that und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued strictly, and the statute must be strictly complied with, otherwise the order becomes illegal." It was also observed:- "10. In the present case, in the notice dated 15-3-1988 issued to the appellant under Section 6(1) of the Act (copy of which is annexed as Annexure P-1 to this appeal), it has not been alleged therein that there is any such link or nexus between the property sought to be forfeited and the alleged illegally acquired money of the appellant." 34. 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. 35. Mr. B.B. Singh, however, has drawn our attention to a decision of this Court in State of Gujarat and Another Etc. Vs. Mehboob Khan Usman Khan Etc. [1968 3 SCR 746]. This Court therein, was considering the provisions of the Bombay Police Act of 1951. The said statute postulated externment of the noticee on the basis of `general allegations' made ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, this Court in Phool Chand Bajrang Lal Vs. ITO : [1993] 203 ITR 456] held:- "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, profits or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs. Joint Commissioner of Income Tax, Mumbai and Another [(2007) 6 SCC 329], this Court held: "86. It is of some significance that in the standard pro forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the assessing officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non- application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. Vs. CIT)" RECORDING OF REASONS 41. Submission of Mr. Singh that the appellants have not been able to discharge the burden of proof which was on them from the impugned orders, it would appear that they have utterly failed to prove their own independent income; they being close relative of the detune as in terms of the statutory requirements , it w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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