Aslam Mohd. Merchant
Vs. Competent Authority & Ors.  INSC 1052 (8 July 2008)
IN THE SUPREME COURT
OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO. 1053 OF 2003 Aslam
Mohd. Merchant ...Appellant Versus Competent Authority & Ors. ...Respondent
CRIMINAL APPEAL NO. 1054 OF 2003 WITH
CRIMINAL APPEAL NO.
1055 OF 2003 WITH
CRIMINAL APPEAL NO.
1056 OF 2003 WITH
CRIMINAL APPEAL NO.
1057 OF 2003
S.B. SINHA, J :
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, 2 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.
Iqbal Mohammed Memon alias Iqbal Mirchi ("Mirchi", for short) is
related to the appellants. aPPELLANT 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 Narcotic Drugs
and Psychotropic Substances Act, 1988 (for short the "PITNDPS") on or
about 29.9.1994. The same, however, could not be served on him as he had left
India. A pre execution writ petition filed on his behalf was dismissed. The
said order of detention is still operative.
said Iqbal Mirchi is, thus, a `person' within the meaning of Section
68A(C) of the Act. Appellants being his relatives in terms of Section 68H
of the Act were issued with notices directing them to show cause as to why
the properties mentioned therein should not be forfeited being `illegally
acquired properties'. Causes were shown pursuant thereto. Opportunities of
hearing were also afforded. Whereas some of the properties belonging to the
appellants were directed to be forfeited, some were released.
Tribunal on appeals having been preferred thereagainst by the appellants by a
common order dated 26.7.2002 affirmed the said findings. Some more properties,
however, were directed to be released opining that they did not come within the
purview of the defeinition of `illegally acquired properties'.
Petitions preferred thereagainst by the appellants have been dismissed by
the High Court by reason of the impugned judgment, holding that the
proceedings were validly initiated against them.
on one hand, the submissions of the learned counsel appearing on behalf of
the appellants is that the conditions precedent for initiating a valid
proceeding, namely, formation of `reason to believe' on the part of the
authority wherefor reasons are required to be recorded in writing had not
been fulfilled, the submission of Mr. B.B. Singh, the learned counsel
appearing on behalf of the respondent on the other hand, is that a notice
containing general allegations would meet the requirements of law.
According to the learned counsel, once the noticees were informed that
they were relatives of the `person' referred to in Section 68A and
valuable properties stand in their name, which were acquired beyond their
known source of income, it will be for them to satisfy the authority that
acquisition of the property by them has nothing to do with the purported
income derived by `Mirchi' out of illicit trafficking of narcotic, drug and
On behalf of the
appellants, it was furthermore urged:
a perusal of from the order passed 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' 5 and as such the question of such a
property having been acquired out of the "illegally acquired
property" does not and cannot arise.
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
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
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
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 noticee to show that the said allegations were not correct.
competent authority was required to keep distinction between his function and
the one under the Income Tax Act and the Wealth Tax Act in mind; his
jurisdiction being limited, that is, whether the properties were illegally
acquired properties or not, wherefor he could not have gone further and hold
that only because the noticees had not been able to trace the source of their
income, the properties were to be treated to be illegally acquired property,
which may be only a relevant factor but would not necessarily lead to the said
Act was enacted to consolidate and amend the law relating to narcotic
drugs, to make stringent provisions for the control and regulation of
operation relating to narcotic drugs and psychotropic substances, to
provide for the forfeiture of property derived from, or used in, illicit
traffic in narcotic drug and psychotropic substances, to implement the
provisions of the International Convention on Narcotic Drugs and
Psychotropic Substances and for matters connected therewith.
VA was inserted in the Act by Act No. 2 of 1989. It appears that the said
amendment was carried out having regard to the International Convention as
referred to in Section 2(ix) of the Act, which read as under:- "2.
Definitions. - In this Act, unless the context otherwise requires, - (i)
***** ***** ***** ***** ****** ***** ***** ***** (ix) "International
Convention" means - (
a. the Single Convention
on Narcotic Drugs, 1961 adopted by the United Nations Conference at New York in
b. the protocol,
amending the Convention mentioned in sub-clause (a), adopted by the United
Nations Conference at Geneva in March, 1972;
c. the Convention on
Psychotropic Substances, 1971 adopted by the United Nations Conference at
Vienna in February, 1971 ; and (d) any other international convention, or
protocol or other instrument amending an international convention, relating to
narcotic drugs or psychotropic substances which may be ratified or acceded to
by India after the commencement of this Act."
68A of the Act applies to persons specified in sub-section (2) thereof
which would, inter alia, include every person in respect of whom an order
of detention has been made under the PITNDPS.
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). 8 Section
68B is the interpretation section.
We may notice some of
the provisions contained therein.
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, -
individual who had been or is residing in the residential premises (including
out houses) of such person; **** **** **** **** ****
individual who had been or is managing the affairs or keeping the accounts of
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; **** **** ****
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 which contribution is made, to not less
than twenty per cent of the value of the assets of the trust on that date, 9
(g) "Illegally acquired property" in relation to any person to whom
this Chapter applies, means, - (i) Any property acquired by such person,
whether before or after the commencement of this Chapter, wholly or partly out
or by means of any income, earnings or assets derived or obtained from or
attributable to the contravention of any provisions of this Act; or (ii) Any
property acquired by such person, whether before or after the commencement of
this Chapter, for a consideration, or by any means wholly or partly traceable
to any property referred to in sub-clause (i) or the income or earning from
such property, And includes, -
A. Any property held by
such person which would have been, in relation to any previous holder thereof,
illegally acquired property under this clause if such previous holder had not
ceased to hold it, unless such person or any other person who held the property
at any time after such previous holder or, where there are two or more such
previous holders, the last of such previous holders is or was a transferee in
good faith for adequate consideration;
B. Any property acquired
by such person, whether before or after the commencement of this Chapter, for a
consideration or by any means, wholly or partly traceable to any property
falling under item (A), or the income or earnings therefore;
"Property" means property and assets of every description, whether
corporeal or incorporeal, movable or immovable, tangible or intangible and
deeds and instruments, evidencing title to, or interest in, such property or
assets derived from, or used in, the illicit traffic, (i) "Relative"
1. Spouse of the person;
2. Brother or sister of
3. Brother or sister of
the spouse of the person;
4. Any lineal ascendant
or descendant of the person;
5. Any lineal ascendant
or descendant of the spouse of the person;
6. Spouse of a person
referred to in sub-clause (2) or sub-clause (3), sub-clause (4) or sub-clause
7. Any lineal descendant
of a person referred to in sub-clause (2) or sub-clause (3);
"Tracing" means determining the nature, source, disposition,
movement, title or ownership of property; Section 68(C) provides for
prohibition in respect of holding illegally acquired property 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 of information is satisfied that any person to whom this
Chapter applies holds any illegally acquired property, he may, after recording
reasons for doing so, proceed to take all steps necessary for tracing and
identifying such property.
2. The steps referred to
in sub-section (1) may include any inquiry' investigation or survey in respect
of any person, place, property, assets, documents, books of account in any Bank
or public financial institution or any other relevant matters.
3. Any inquiry,
investigation or survey referred to in sub-section (2) shall be carried out by
an officer mentioned in sub-section (1) in accordance with such directions or
guidelines as the competent authority may make or issue in this behalf."
Section 68F provides
for seizure or freezing of illegally acquired property in the following terms:-
"68F. Seizure or freezing of illegally acquired property - (1) Where any
officer conducting an inquiry or investigation under Section 68E has reason to
believe that any property in relation to which such inquiry or investigation is
being conducted is an illegally acquired property and such property is likely
to be concealed, transferred or dealt with in any manner which will result in
frustrating any proceeding relating to forfeiture of such property under this
Chapter, he may make an order for seizing such property and where it is not
practicable to seize such property, he may make an order that such property
shall not be transferred or otherwise dealt with, except with the prior
permission of the officer making such order, or of the competent authority and
a copy of such order shall be served on the person concerned."
The procedure in relation
to forfeiture of property is contained in Sections 68H and 68I thereof in the
following terms:- "68H. Notice of forfeiture of property –
1. If, having regard to
the value of the properties held by any person to whom this Chapter 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 a report from any officer making an investigation under
Season 68-E 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 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
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 cause notice
issued, under Section 68-H and the materials available before it and after
giving to the person affected (and in a case where the person affected holds
any property specified in the notice through any other person, to such other
person also) a reasonable opportunity of being heard, by order, record a
finding whether all or any of the properties in question are illegally acquired
Provided that if the
person affected (and in a case where the person affected holds any property
specified in the notice through any other person such other person also) does
not appear before the competent authority or represent his case before it
within a period of thirty days specified in the show- cause notice, the
competent authority may proceed to record finding under this sub-section ex
parte on the basis of evidence available before it.
2. Where the competent
authority is satisfied that some of the properties referred to in show cause
notice are illegally acquired properties but is not bale 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
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 Chapter, stand forfeited to the Central
Government free from all encumbrances.
Provided that no
illegally acquired property of any person who is referred to in clause (cc) of
sub- section (2) of section 68A 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 shall stand forfeited.
4. Where any shares in a
company stand forfeited to the Central Government under this Chapter, then, the
company shall, notwithstanding anything contained in the Companies Act, 1956 or
the articles of association of the company, forthwith register the Central
Government as the transferee of such shares."
Section 68J provides
for burden of proof as;
"68J. Burden of
proof - In any proceedings under this Chapter, the burden of proving that any
property specified in the notice served under Section 68-H is not illegally
acquired property shall be on the person affected."
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.
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, 23, 24, 25, 26, 27 and 38.
It was further informed that the properties at Sl. No. 36 i.e., (i) Rabia
Mansion (ii) Mariam Lodge and (iii) Sea View are owned by "Sir Mohammed
Yusuf Trust". It was further stated that the properties at sr. nos. 3 and
33 are not owned by them but are tenanted properties. After preliminary
inquiries conducted by office it was felt that in these cases provisions of
Section 68-H (2) / 68-L of the NDPS Act need to be complied with and therefore,
in the interest of justice it has been decided to take up those cases
therefore, is confined only to the properties which have been claimed by the
affected persons, i.e., properties at Sl. Nos. 1, 2, 4, 5, 8, 9, 10, 11, 12,
28, 29, 30, 31, 32, 34, 35, 37 and 39."
The material part of
the said show cause notice is contained in paragraphs 15 and 16 thereof which
read as under:- "15. Whereas AP1 had been absconding since the issue of
the detention order and is reportedly living in England with AP3. Exhaustive
investigations into the properties of the AP1 by various enforcement agencies
including the Anti-Narcotic Cell, C.B. C.I.D. /C.B.I. Mumbai had resulted in
issue of freezing orders in respect of 11 properties in the name of AP1 &
AP3 and 5 others. These freezing orders were confirmed by the then Competent
Authority, SAFEMA/NDPS, Mumbai.
The Aps filed
detailed and voluminous submissions before the Competent Authority which
included Income-tax and Wealth-tax returns and other relevant documents. On the
basis of these submissions, the then Competent Authority released 7 properties
and forfeited the remaining 4 to the Central Government free from all
encumbrances. It is pertinent to note that the 4 properties which were finally
forfeited were in the name of AP3 with one property jointly held with AP1. The
Aps could not prove the legality of the sources by which these properties were
acquired by them. The property in question now are jointly held by AP1 to AP11
in similar manner. These properties have never found any mention in the
submissions made by the APs nor they were declared by the Aps in the
proceedings under Chapter V A of the NDPS Act considered by the then Competent
Authority nor it was disclosed to any enforcement agencies in any manner.
considering the above and the background of AP1 and his involvement in drug
smuggling & in drug trafficking 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
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 cause notice shows complete non-application of mind on the
part of the competent authority, as ;
(i) 28 unconnected
properties including the property of Late Fatima Amin which formed part of the
separate proceeding had been included.
(ii) The properties
mentioned therein had never been mentioned by the appellants in the previous
proceedings, although they did not form part thereof.
16. The core question
which, therefore, arises for consideration is what are the statutory
requirements for initiating a valid proceeding.
17. Chapter VA
contains stringent provisions. It provides for forfeiture of property. Such
property, however, as the heading of the Chapter shows, must be derived from or
used in illicit traffic. Illegally acquired property in relation to any person
to whom the chapter applies would mean only such property which was acquired
wholly or partly out of or by means of any income attributable to the
contravention of any provision of the Act or for a consideration wholly or
partly traceable to any property referred to in sub-clause (i) or the income or
earning from property.
18. It is, therefore,
evident that the property which is sought to be forfeited must be the one which
has a direct nexus with the income etc. derived by way of contravention of any
of the provisions of the Act or any property acquired therefrom. What is meant
by identification of such property having regard to the definition of
`identifying' is, that the property was derived from or used in the illicit
19. The property
having regard to the said definition would include any of the properties
described therein and deeds of instruments evidencing interest therein derived
from or used in the illicit traffic.
In the aforementioned
context, the word "person" also assumes importance which leads to
determining the nature, source, disposition, movement, title or ownership of
the property. Direction to forfeiture of a property is in two parts. Firstly,
it has to be identified in terms of Section 68-F of the Act. For the said
purpose, a satisfaction must be arrived at by the authority specified therein
to the effect that the person concerned had been holding any illegally acquired
property. Secondly, on the basis of such information, he is entitled to take
steps for tracing and identifying the property. The Authority is also entitled
to seize 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
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 property, would be on the `person'
23. Before, however,
an order of forfeiture can be passed, the Competent Authority must not only
comply with the principles of natural justice, he is also required to apply his
mind on the materials brought before him. It is also necessary that a finding
that all or any of the properties in question were illegally acquired
properties is recorded
24. The competent
authority has a vast power as is provided under Section 68-R of the Act. He is
not bound by any finding of any officer or authority under any other law as the
same would not be conclusive for the purpose of any proceeding under the said
Analysis of the
aforementioned provisions clearly establish that a link must be found between
the property sought to be forfeited and the income or assets or properties
which were illegally acquired by the person concerned.
25. We may, however,
at this juncture also notice that during the course of the proceedings, the
learned advocate of the appellants by a letter dated 19.2.2000 requested the
competent authority to supply the reasons for issuing the notice. In response
thereto, the prescribed authority by a letter dated 23.2.2000, stated that the
reasons had been incorporated in the respective show cause notices. Evidently,
therefore, no other reason was available for being supplied.
26. We may also
notice some observations made in the proceeding sheet of the Competent
Authority dated 29.12.2000 which is in the following terms :- "On going
through the certificate in respect of SP/Satara it may be seen that they have
simply informed details of the ownership in re present and past only. Nowhere
they have mentioned in clear words whether nexus between the present holder and
sh. Iqbal mirchi is there nor are properties claimed by sh. Iqbal mirchi and
his family members mentioned in Show Cause Notice dated 17/11. as per
(illegible) association/ nexus of present holder of properties between iqbal mirchi
can't be established as still they are silent on the issue.However, the matter
shall be decided on merits by C.A. during the course of proceedings. Put up for
It shows that till
the said date, no material had been brought on record to show that any nexus or
a link between the properties sought to be forfeited and thus in case of
`Mirchi' it was merely a perception of the competent 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
before him. Such materials must have been gathered during the investigation
carried out in terms of Section 68-E or otherwise.
therefore, he must have some materials before him. If no such material had been
placed before him, he cannot initiate a proceeding. He cannot issue a show
cause notice on his own ipse dixit.
A roving enquiry is
not contemplated under the said Act as properties sought to be forfeited must
have a direct nexus with the properties illegally acquired.
29. It is now a trite
law that whenever a statute provides for `reason to believe', either the
reasons should appear on the face of the notice or they must be available on
the materials which had been placed before him.
We have noticed
hereinbefore that when the authority was called upon to disclose the reasons,
it was stated that all the reasons were contained in the show cause notices
themselves. They, however, in our opinion, do not contain any reason so as to
satisfy the requirements of sub-section (1) of Section 68H of the Act. A
Constitution Bench of this Court in Attorney General for India considering the
validity of the provisions of the Smugglers and Foreign Exchange Manipulators
(Forfeiture of Property) Act, 1976, opined:
relatives and associates are brought in only for the purpose of ensuring that
the illegally acquired properties of the convict or detenu, acquired or kept in
their names, do not escape the net of the Act. It is a well-known fact that
persons indulging in illegal activities screen the properties acquired from
such illegal activity in the names of their relatives and associates. Sometimes
they transfer such properties to them, may be, with an intent to transfer the
ownership and title. In fact, it is immaterial how such relative or associate
holds the properties of convict/detenu - whether as a benami or as a mere
name-lender 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..." Holding that such provisions had been enacted to counteract
several devices 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 footing. If such person proves
that he is a transferee in good faith for consideration, his property - even
though purchased from a convict/detenu - is not liable to be forfeited.
It is equally
necessary to reiterate that the burden of establishing that the properties
mentioned in the show-cause notice issued under Section 6, and which are held
on that date by a relative or an associate of the convict/detenu, are not the
illegally acquired properties of the convict/detenu, lies upon such
relative/associate. He must establish that the said property has not been
acquired with the monies or assets provided by the detenu/convict or that they
in fact did not or do not belong to such detenu/convict."
The relevant portion
of the summary of the said judgment reads as under:- "(4) The definition
of "illegally acquired properties" in clause (c) of Section 3 of
SAFEMA is not invalid or ineffective.
(5) The application
of SAFEMA to the relatives and associates [in clauses (c) and (d) of Section
2(2)] is equally valid and effective inasmuch as the purpose and object of
bringing such persons within the net of SAFEMA is to reach the properties of
the detenu or convict, as the case may be, wherever they are, howsoever they
are held and by whomsoever they are held. They are not conceived with a view to
forfeit the independent properties of such relatives and associates as
explained in this judgment. The position of `holders' dealt with by clause (e)
of Section 2(2) is different as explained in the body of the judgment."
30. A similar
question again came up before a Three Judges' Bench of of India and Another
[(2003) 7 SCC 436], wherein relying upon Amratlal Prajivandas (supra), it was
"7. ......We do
not find any averments to the effect that the property acquired by the appellant
is a benami property of her son or the same was illegally acquired from her
8. The contents of
the said notices, even if taken at their face value do not disclose any reason
warranting action against the appellant. No allegation whatsoever has been made
to this effect that there exists any link or nexus between the property sought
to be forfeited and the illegally acquired money of the detenu(s).
9. As the condition
precedent for initiation of the proceedings under SAFEMA did not exist, the
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
31. Our attention,
however, has been drawn to a decision of a two 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;
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 under the scheme of the Act, there is no
requirement on the part of the competent authority to mention or establish any
nexus or link between the money of the convict or detenu and the property
sought to be forfeited. In fact, if such a condition is imposed, the very
purpose of enacting SAFEMA would be frustrated, as in many cases it would be
almost impossible to show that the property was purchased or acquired from the
money provided by the convict or detenu. In the present case, the appellant is
the wife of the detenu and she has failed to establish that she had any income
of her own to acquire the three properties.
In such circumstances,
no other inference was possible except that it was done so with the money
provided by her husband."
32. We, with utmost
respect to the learned Judges express our inability to agree to the said
observations. The necessity of establishing link or nexus in our opinion is
writ large on the face of the statutory provision as would appear from the
definition of `illegally acquired property' as also that of `property'. The
purport and object for which the Act was enacted point out to the same effect.
33. Fatima Mohd. Amin
(supra) was followed by a Bench of this wherein it was observed :
counsel submitted that it has been expressly stated in Section 6(1) that the
reason to believe of the competent authority must be recorded in writing. In
the counter-affidavit it has also been stated in para 8 that the reasons in the
notice under Section 6(1) were recorded in writing. In our opinion this is not
sufficient. Whenever the statute requires reasons to be recorded in writing,
then in our opinion it is incumbent on the respondents to produce the said
reasons before the court so that the same can be scrutinised in order to verify
whether they are relevant and germane or not. This can be done either by
annexing the copy of the reasons along with the counter-affidavit or by quoting
the reasons somewhere in the counter-affidavit. Alternatively, if the notice
itself contains the reason of belief, that notice can be annexed to the
counter-affidavit or quoted in it. However, all that has not been done in this
8. It must be stated
that an order of confiscation is a very stringent order and hence a provision
for confiscation has to be construed 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 Usman Khan Etc. [1968 3 SCR
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 against him Keeping in view the statutory requirements, this
Court opined that `general allegations' made in the notice would subserve the
statutory requirements stating:- ".....Without attempting to be exhaustive
we may state that when a person is stated to be a "thief", that
allegation is vague. Again, when it is said that "A stole a watch from X
on a particular day and at a particular place", the allegation can be said
to be particular. Again, when it is stated that "X is seen at crowded bus
stands and he picks pockets" it is of a general nature of a material
allegation. Under the last illustration, given above, will come the
allegations, which, according to the Gujarat High Court, suffer from being too
general, or vague. Considering it from the point of view of the party against
whom an order of externment is proposed to be passed, it must be emphasized
that when he has to tender an explanation to a notice, under Section 59, he can
only give an explanation, which can be of a general nature. It may be open to
him to take a defence, of the action being taken, due to mala fides, malice or
mistaken identity, or he may be able to tender proof of his general good
conduct, or alibi, during the period covered by the notice and the like. The
allegations made in the notices, issued under Section 59, as against the
respective respondents, in our opinion, contain the general nature of the
material allegations made against each of them, in respect of which the
respondents had been given a reasonable opportunity of tendering an
explanation, regarding them......"
This Court, therefore, in the fact situation obtaining in the said case was
satisfied as regards compliance of the statutory requirements.
General or vague
allegations in a case of this nature would not subserve the statutory purposes
36. Reliance has also
been placed on Pandharinath Shridhar SCC 372]. Therein again the provisions of
the Bombay Police Act were involved.
The said decision
ex-facie has no application to the fact of the present case.
REASON TO BELIEVE
37. This brings us to
the next question as to what does the term "reason to believe" mean.
We may in this behalf notice some precedents operating in the field.
38. In the context of
the provisions of Section 147 of the Income Tax 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 information. Since the belief is
that of the Income- tax Officer, the sufficiency of reasons for forming this
belief is not for the court to judge but it is open to an assessee to establish
that there in fact existed no belief or that the belief was not at all a bona
fide one or was based on vague, irrelevant and non- specific information. To
that limited extent, the court may look into the conclusion arrived at by the
Income-tax Officer and examine whether there was any material available on the
record from which the requisite belief could be formed by the Income-tax
Officer and further whether that material had any rational connection or a live
link for the formation of the requisite belief." 103 ITR 437].
Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007 (8)
SCALE 396], interpreting the term `reason to believe' as used under Section 247
(a) of the Income Tax Act, 1961, it was opined : "To confer jurisdiction
under Section 247(a) two conditions were required to be satisfied firstly the
AO must have reason to believe that income profits or gains chargeable to
income tax have escaped assessment, and secondly he must also have reason to
believe that such escapement has occurred by reason of either (i) omission or
failure on the part of the assessee to disclose fully or truly all material
facts necessary for his assessment of that year. Both these conditions were
conditions precedent to be satisfied before the AO could have jurisdiction to
issue notice under Section 148 read with Section 147(a). But under the
substituted Section 147 existence of only the first condition suffices. In
other words, if the assessing officer for whatever reason has reason to believe
that income has escaped assessment, it confers jurisdiction to reopen the
NON APPLICATION OF
MIND Applying these tests, it is evident that the statutory requirements have
not been fulfilled in the present case.
39. Non- application
of mind on the part of the competent officer would also be evident from the
fact that a property named `Rose Villa' which was the subject matter of the
decision of this Court in Fatima Amin (supra), was also included herein. Once
the show cause notice is found to be illegal, the same would vitiate all
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 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 was for them to
show that they had sufficient income from those properties.
42. Had the show
cause notice been valid, Mr. B.B. Singh, might have been right, but if the
proceedings themselves were not initiated validly, the competent authority did
not derive any jurisdiction to enter into the merit of the matter.
validity of the notice had been questioned at several stages of the
proceedings. Despite their asking, no reason was disclosed by the authority to
the appellants. They had asked for additional reasons, if any, which were not
reflected in the show cause notices. None was disclosed.
43. It is also
relevant to notice that the High Court opined that there had been a proper
application of mind on the part of the Competent Authority and Appellate
Tribunal as they had released some items of properties. Application of mind on
the part of the Competent Authority and the Appellate Tribunal at the
subsequent stage was not in question; what was in question was non application
of mind on the part of the authority prior to issuance of the notice.
44. We are not
unmindful of the purport and object of the Act. Dealing in narcotics is a
social evil that must be curtailed or prohibited at any cost. Chapter VA seeks
to achieve a salutary purpose. But, it must also be borne in mind that right to
hold property although no longer a fundamental right is still a constitutional
right. It is a human right.
The provisions of the
Act must be interpreted in a manner so that its constitutionality is upheld.
The validity of the provisions might have received constitutional protection,
but when stringent laws become applicable as a result whereof some persons are
to be deprived of his/her right in a property, scrupulous compliance of the
statutory requirements is imperative.
45. For the reasons
aforementioned, the impugned judgments cannot be sustained. They are set aside
accordingly. The appeals are allowed.
However, it would be
open to the respondents to initiate fresh proceeding (s) in accordance with
law, if they are so advised. In the facts and circumstances of the case, we
make no order as to costs.
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