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TMI Blog2021 (12) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 of 2001 decided on 24.3.2008 reported in 2008 SCC OnLine Mad 244 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 nonservice 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 reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a taking a different view in the absence of any contra evidence. We therefore find no infirmity in the orders passed by the competent authority. The writ petition lacks merits and the same would stand dismissed." (emphasis supplied) The second decision is of the Calcutta High Court in The Competent Authority & Administrator & Anr. vs. Manilal Jalal & Anr. 2013 SCC OnLine Cal 12911. Even in this case, notice was issued only to the wife of the detenu and not to the detenu. The question was specifically dealt with by the Calcutta High Court after analysing the relevant provisions in the following words: "..... A bare perusal of Section 2 of the Act would show that the Act not only applies to the detenu but also to the relations and/or associates of such detenu. Nowhere the said provision of law mandates that a proceeding against a relative of a detenu can be initiated only if such detenu is proceeded against under SAFEMA. Such right to proceed against the relative/associate is independent of any action taken against the detenu under SAFEMA. It is wholly fallacious to argue that the detenu must be proceeded against under SAFEMA as a condition precedent for any action against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erties 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: "SCHEDULE S. No. Description of the Property Name of the present holder of property 1 2 3 1. Investment in the firm M/s V.P.V. Jewellery Mart, Kumbakonam 2. Investment in the Proprietary Concern M/s V.P.V. Gold Palace Kumbakonam 3. Residential Property in the form of house being land and building at No.113, Sarangapani East Street, Kumbakonam 4. Agricultural Lands 1 Acre & 8 cents at south pattam, Paganasam Taluk 1 Acre & 75 Cents at Thepperumal nallur village." 8. Similarly, a notice dated 28.2.1994 was issued to Smt. V. Padmavathy, respondent No.2 herein bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view taken by the Madras High Court vide impugned judgment on the interpretation of Section 6 of the 1976 Act is untenable. Whereas, the issue has been rightly concluded in favour of the appellants by two other High Courts, namely, High Court of Kerala and Calcutta High Court. 13. It is urged that notice under Section 6 of the Act is required to be given to the person to whom the 1976 Act applies in respect of properties held by him, either by himself or through any other person on his behalf, being illegally acquired property within the meaning of the Act and proposed to be forfeited by the Central Government under the Act. It does not require issuing notice to the convict or detenu, as the case may be, if the properties are not held by him or in his name. Indeed, if the properties in question are held in the name of any other person on his behalf, the notice is required to be given to such person. To buttress this submission, reliance has been placed on Section 2 of the Act providing for application of the Act to the persons specified in Section 2(2). The spouse of the brother of the convict as well as the son of the brother of the convict are plainly covered within the expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s upon such relative or associate. Further, the Act is intended to frustrate all attempts at screening properties irrespective of how the relatives/associates hold the property (whether benami or as namelender or through transferee) and wherein the said relative/associate cannot disclose that the properties have not been acquired with the monies or assets belonging to a detenu/convict, but the failure to discharge the burden would justify their forfeiture there being a prohibition on any person to whom the Act applies from holding illegally acquired properties. 17. Reliance has also been placed on the dictum in Shobha Suresh Jumani vs. Appellate Tribunal, Forfeited Property & Anr. (2001) 5 SCC 755, wherein a showcause notice under Section 6 was issued to the detenu Suresh Manoharlal Jumani and his wife Shobha Suresh Jumani. Right to file appeal by Shobha Suresh Jumani was questioned by the competent authority. Nevertheless, this Court upheld the action initiated against the relative (wife) of the detenu as the properties were held by her. It is submitted that the impugned judgment be set aside and the contra view taken by the High Court of Kerala and Calcutta High Court be affirme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperties cannot be forfeited without substantiating the link or nexus between the properties of the relatives with the activity of the convict or detenu and more so when the relatives are not his immediate relatives such as parents or children or spouse. For lack of nexus between the properties sought to be forfeited being that of the convict, the statutory presumption is not attracted; and it must follow that Section 8 requiring burden of proof to be discharged by the noticee being the relative of the convict, would not come into play. Moreover, the notice contains a bald unreasoned averment - that the properties in question were acquired during the time when the convict was engaged in gold smuggling, the only inescapable conclusion is that the said properties were acquired by the funds of such convict. As a matter of fact, the respondents had furnished copious materials before the Authorities to establish that the properties in question are, in fact, personal properties purchased by them out of their business earnings, gifts, etc. The plea so taken by the respondents has been completely discarded. 22. It is urged that neither the Competent Authority nor the Appellate Tribunal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants have not chosen to initiate despite the fact that there was no interim stay given by this Court in that regard. 25. We have heard Mr. Aman Lekhi, learned Additional Solicitor General of India, Mr. A.K. Srivastava, learned senior counsel for the appellants and Mr. Atul Shankar Vinod, learned counsel for the respondents. 26. Before we proceed to examine the different viewpoints in reference to the provisions of the 1976 Act, it is essential to notice the legislative intent for enacting the 1976 Act. That can be discerned from the Preamble of the Act and also exhaustively dealt with by the nineJudges Constitution Bench of this Court, in Amratlal Prajivandas Supra at Footnote No. 5. 27. The Preamble of the 1976 Act reads thus: "An Act to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto. WHEREAS for the effective prevention of smuggling activities and foreign exchange manipulations which are having a deleterious effect on the national economy it is necessary to deprive persons engaged in such activities and manipulations of their illgotten gains; AND W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime have all got mixedup. Evasion of taxes is integral to such activity. It would be difficult for any authority to say, in the absence of any accounts or other relevant material that among the properties acquired by a smuggler, which of them or which portions of them are attributable to smuggling and foreign exchange violations and which properties or which portions thereof are attributable to violation of other laws (which Parliament has the power to make). It is probably for this reason that the burden of proving that the properties specified in the showcause notice are not illegally acquired properties is placed upon the person concerned. May be this is a case where a dangerous disease requires a radical treatment. Bitter medicine is not bad medicine. In law it is not possible to say that the definition is arbitrary or is couched in unreasonably wide terms. Further, in view of clear and unambiguous language employed in clause (c) of Section 3, it is not possible or permissible to resort to the device of reading down. The said device is usually resorted to save a provision from being declared unconstitutional, incompetent and ultra vires. We are, therefore, of the opinion that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the properties of convict/detenu - whether as a benami or as a mere namelender or as a bona fide transferee for value or in any other manner. He cannot claim those properties and must surrender them to the State under the Act. Since he is a relative or associate, as defined by the Act, he cannot put forward any defence once it is proved that that property was acquired by the detenu - whether in his own name or in the name of his relatives and associates. It is to counteract the several devices that are or may be adopted by persons mentioned in clauses (a) and (b) of Section 2(2) that their relatives and associates mentioned in clauses (c) and (d) of the said subsection are also brought within the purview of the Act. The fact of their holding or possessing the properties of convict/detenu furnishes the link between the convict/detenu and his relatives and associates. Only the properties of the convict/detenu are sought to be forfeited, wherever they are. The idea is to reach his properties in whosoever's name they are kept or by whosoever they are held. The independent properties of relatives and friends, which are not traceable to the convict/detenu, are not sought to be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vict/detenu are held on his behalf by any other person, such other person. It would thus be clear that the connecting link or the nexus, as it may be called, is the holding of property or assets of the convict/detenu or traceable to such detenu/convict. Section 4 is equally relevant in this context. It declares that "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". All such property is liable to be forfeited. The language of this section is indicative of the ambit of the Act. Clauses (c) and (d) in Section 2(2) and the Explanations (2) and (3) occurring therein shall have to be construed and understood in the light of the overall scheme and purpose of the enactment. The idea is to forfeit the illegally acquired properties of the convict/detenu irrespective of the fact that such properties are held by or kept in the name of or screened in the name of any relative or associate as defined in the said two Explanations. The idea is not to forfeit the independent properties of such relatives or associates which they may have acquired il ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this view of the matter, the apprehension and contention of the petitioners in this behalf must be held to be based upon a mistaken premise. The bringing in of the relatives and associates or of the persons mentioned in clause (e) of Section 2(2) is thus neither discriminatory nor incompetent apart from the protection of Article 31B." (emphasis supplied) 31. While examining the contention whether clauses (c) to (e) of Section 2(2) is a case of overreach or overbreadth, it held that this argument of excessive regulation was based on a misconception as the Act is only directed towards forfeiture of "illegally acquired properties of the person falling under clause (a) or clause (b) of Section 2(2)". The relative and associates are brought in only to ensure that the 'illegally acquired properties' of the convict or the detenu, acquired or kept in the names of relatives or associates do not escape the net of the Act. There could be cases where the persons mentioned in clauses (a) and (b) could transfer 'illegally acquired properties' to their relatives and associates "and even further", with the intent to transfer the ownership and title. Therefore, it is immaterial how such rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such order of detention, being an order to which the provisions of section 9 or section 12A of the said Act do not apply, has not been revoked on the report of the Advisory Board under section 8 of the said Act or before the receipt of the report of the Advisory Board or before making a reference to the Advisory Board; or (ii) such order of detention, being an order to which the provisions of section 9 of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the review under subsection (3) of section 9, or on the report of the Advisory Board under section 8, read with subsection (2) of section 9, of the said Act; or (iii) such order of detention, being an order to which the provisions of section 12A of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the first review under subsection (3) of that section, or on the basis of the report of the Advisory Board under section 8, read with subsection (6) of section 12A, of that Act; or (iv) such order of detention has not been set aside by a court of competent jurisdiction; (c) every person who is a relative of a person referred to in clause (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such person; or (b) the value of the assets contributed by such person (including the value of the assets, if any, contributed by him earlier) to the trust amounts, on the date on which the contribution is made, to not less than twenty per cent. of the value of the assets of the trust on that date; (vii) where the competent authority, for reasons to be recorded in writing considers that any properties of such person are held on his behalf by any other person, such other person. Explanation 4.- For the avoidance of doubt, it is hereby provided that the question whether any person is a person to whom the provisions of this Act apply may be determined with reference to any facts, circumstances or events (including any conviction or detention) which occurred or took place before the commencement of this Act. (emphasis supplied) 3. Definitions.- (1) In this Act, unless the context otherwise requires, (a) and (b).... (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of taking corrective measures for reaching up to the illegally acquired properties of a convict or detenu, as the case may be. 35. As regards the respondents herein, it is obvious that they are covered under the ambit of relative - being son and wife of the brother of the convict, to whom the 1976 Act applied. 36. Section 2(2)(d) further expands the sweep so as to include associate of a convict or detenu, as the case may be; and Section 2(2)(e) takes within its ambit any holder (the present holder) of any property, which was at any time previously held by a person referred to in clause (a) or clause (b), namely, convict or detenu, as the case may be. 37. The objective and purpose of the enactment is reinforced in the encircling Explanation 4 as reproduced hereinbefore. Obviously, the intent is to ensure that the convict/detenu cannot get away by adopting camouflage or screening, including legal transfer of properties in the name of his relative, associate or any other person covered under clause (e) to Section 2(2) of the Act. 38. This expanded ambit of clauses (c) to (e) is to be interpreted in the context of the object and purpose of the Act, but the scope of the Act does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) occurring therein shall have to be construed and understood in the light of the overall scheme and purpose of the enactment. The idea is to forfeit the illegally acquired properties of the convict/detenu irrespective of the fact that such properties are held by or kept in the name of or screened in the name of any relative or associate as defined in the said two Explanations. 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/detenu or properties traceable to him, wherever they are, ignoring all the transactions with respect to those properties..." On the issue of the applicability of the Act to holders mentioned in Section 2(2)(e) of the Act, this Court held that they fall in a different class from relatives and associates who are dealt with on a separate footing. If a person covered under clause (e) to Section 2(2) proves that he is a transferee in good faith without notice, for adequate consideration, his property - even though purchased from a convict/detenu - is not liable to be forfeited. 42. In the present judgment, it is not necessary for us to dila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperties 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 subsection (1) to any person specifies any property as being held on behalf of such person by any other person, a copy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property referred to in the notice is his legally acquired property. of the 1976 Act provisioning for burden of proving that the property referred to in the notice is legally acquired property of the noticee. 47. On plain as well as contextual reading of Section 6, it is crystal clear that the notice under Section 6(1) is required to be issued to any person to whom the Act applies. As is evident from Section 2(2) of the 1976 Act, the Act applies not only to convict or detenu, but also to their relative, associate including holder of any property being Section 2(2)(c), 2(2)(d) and 2(2)(e) respectively. The purpose of issuing notice is to enable the person concerned (noticee) to discharge the burden of proof as propounded in Section 48. In a given case, however, if the property is held by a person owing to merely being in legal possession thereof, but the ownership of the property at the relevant time is that of the convict or detenu or his/her relative, as the case may be, it would become necessary for the Competent Authority to not only give notice to the person in possession of the property in question but also to the person shown as owner thereof in the relevant reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going by the definition of "illegally acquired property" in Section 3(1)(c) and of "person" in Section 2(2) to whom the Act applies, if the property is held in the name of the relative of the convict or detenu before or after the commencement of the Act, the notice under Section 6(1) needs to be issued to such person (recorded owner as well as in possession), who alone can and is expected to discharge the burden of proof in terms of Section 8 of the 1976 Act - so as to dissuade the Competent Authority from proceeding further against such property. Indeed, if the illegally acquired property is held in the name of the relative, but the de facto possession thereof is with some other person, who is not covered by the expression "person" as given in Section 2(2), in such a case primary notice under Section 6 is required to be issued to the relative of the convict or detenu and copy thereof served upon "such other person" who is in de facto possession thereof (albeit for and on behalf of the relative of the convict or detenu). Even in this situation, notice to the convict or detenu may not be necessary much less mandatory. For, the 1976 Act applies even to the relative of the convict or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in whosoever's name they are kept or by whosoever they are held irrespective of the time period of such acquisition. This is to ensure that the persons to whom the Act applies referred to in Section 2(2), do not use mechanism to shield illegally acquired properties from the proposed action of forfeiture. 55. Be it noted that the expression "such person" employed in Section 6(2) is referable to the primary noticee, who is a person to whom the Act applies. If, however, the notice mentions that the properties referred to in the notice are held by the noticee through any other person on his behalf, that may be a case of holding of physical possession of the illegally acquired property by person other than the person to whom the Act applies. In such a case, subsection (2) triggers in enabling the Competent Authority to issue notice even to "such other person" - not covered by the definition of Section 2(2) of the Act. If that person is merely in possession of the property and not its owner, he may not be able to explain or prove the fact that the property is not illegally acquired property of the primary noticee. Indeed, if "such other person" is claiming ownership of the property thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of notice and satisfaction of the precondition for the issue of notice, i.e., "reasons to believe", is mandatory and not optional or directory. 59. G.P. Singh, in Principles of Statutory Interpretation, 14th Edition, at page 430, has laid down principles and rules for ascertaining the mandatory or directory nature of provisions, and has noted that this depends on the intent of the legislature and not necessarily on the language that the intent is clothed in. The nature and design of the statute, the effects which would follow from construing it one way or the other, and the severity or triviality of consequences that flow therefrom have to be considered. At times, the courts examine whether the statute provides for the contingency of noncompliance and whether noncompliance is visited with some penalty etc., but this is not a necessary or sufficient basis for determining whether the provision is mandatory or directory in nature. Lastly, if a provision is mandatory, it must be obeyed and followed. This is especially so in case of jurisdictional requirements, i.e., preconditions that have to be fulfilled before any action is taken. 60. In the context of the present enactment, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed properties. (2) Where the competent authority is satisfied that some of the properties referred to in the showcause 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 judgment, are illegally acquired properties and record a finding accordingly under subsection (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. of the Act, which is titled 'Forfeiture of property in certain cases', supports the above interpretation as it envisages that the Competent Authority shall consider the expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. 65. The expression "such other person" in Section 6(2) is, thus, referable to a person falling in class "through any other person on his behalf". That is the person to whom the Act applies, as noted in the opening part of Section 6(1) of the Act. In such a case, the convict or detenu is not expected to nor can be called upon to discharge the burden of proof under Section 8. Accordingly, we may lean in favour of the view taken by the High Court of Kerala and Calcutta High Court reproduced above, for independent reasons delineated hitherto. The view taken by the Madras High Court in the impugned judgment, therefore, does not commend to us and is reversed. 66. The parties had invited our attention to other judgments of this Court. However, those judgments have not dealt with the question that arise for consideration in the present appeals. 67. Having said this, we need to set aside the impugned judgment and relegate the parties before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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