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Report No. 166

1.6. Constitutionality of the SAFEMA upheld by the Supreme Court.-

The Act provides that where any person is believed to be in possession of illegally acquired property, the appropriate authority shall give him a notice calling upon him to show cause why the said property be not forfeited to the State (section 6). Unless the person concerned establishes that the said properties have been acquired by lawful means, the properties will be forfeited to the State (section 7). In other words, the burden of proving the lawful acquisition of such properties is placed upon him i.e., the holder of such properties, evidently for the reason that he alone should know how has he come to hold or possess the said properties (section 8).

It is equally relevant to notice that the Act extends not only to the persons convicted under specified crimes and those detained under COFEPOSA , who are found in possession of illegally acquired properties but extends to their relatives and associates as well. The expression "relative" takes in not only wife but all near relatives (section 2). When the constitutionality of the said enactment was challenged on the grounds of being unjust, excessive and harsh, a Nine-Judge Constitution Bench of the Supreme Court unanimously rejected the challenge in the Attorney-General of India v. Amratlal Prajivandas, 1994 (5) SCC 54.

It was explained by the Supreme Court that the idea underlying the Act is "to forfeit the illegally acquired properties of the convict/detenue 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 independently but only to reach the properties of the convict/detenue or properties traceable to him, wherever they are, ignoring all the transactions with respect to those properties".

It was held by the Supreme Court that the definition of the expression "illegally acquired property" is not arbitrary or over-inclusive and that having regard to the seriousness of the evil sought to be curbed, the law had to be made strict. In other words, the law must be equal to the mischief sought to be remedied. An insufficient and inadequate law is no law at all. The following observations are relevant:

"We see no substance in the submission that the definition is arbitrary or discriminatory nor do we see any reason for reading down the said definition to confine it to the violation of the acts referred to in section 2(2)(a) of SAFEMA. We can take note of the fact that persons engaged in smuggling and foreign exchange manipulations do not keep regular and proper accounts with respect to such activity or its income or of the assets acquired therefrom. If such person indulges in other illegal activities the position would be no different.

The violation of foreign exchange laws and laws relating to export and import necessarily involves violation of tax laws. Indeed, smuggling, foreign exchange violation, it is well known fact that over the last few decades, tax evasion, drugs and crime have all got mixed-up. 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 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 violations of other laws (which the Parliament has the power to make).

It is probably for this reason that the burden of proving that the properties specified in the show cause notice are not illegally acquired properties is placed upon the person concerned. May be this is the case where a dangerous disease requires a radical treatment. Bitter medicine is not bad medicine in law. It is not possible to say that definition is arbitrary or is couched in unreasonably wide terms."

The Corrupt Public Servants (Forfeiture of Property) Bill Back

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