IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 05..08..2010 CORAM THE HONOURABLE MR. JUSTICE S.NAGAMUTHU W.P.No.16313 of 2001 V.P.Ranganathan ... Petitioner -Versus- 1.Appellate Tribunal for Forfeited Properties, New Delhi, Rep. by its Registrar, 4th Floor , Lok Naik Bhavan, Khan Market, New Delhi. 2.The Competent Authority, Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 and Narcotic Drugs and Psychotropic Substance Act, No.64/1, G.N.Chetty Street, T.Nagar, Chennai 600 017. ... Respondents Petition filed under Article 226 of the Constitution of India, for issuance of a Writ of Certiorari calling for the records comprised in the proceedings of the 1st respondent dated 04.07.2001 in FPA No.41/MDS/99 and of the 2nd respondent dated 30.08.1999 in F.No.OCA/MDS/2744/88 and quash the same. For petitioner : Mr.Raghul Balaji for M/s.Satish Parasaran For respondent (s): Mr.M.L.Ramesh for R2 ORDER The petitioner is the brother of one Mr.V.P.Selvaraj. The said Mr.V.P.Selvaraj was convicted under the provisions of the Customs Act, 1962 for an offence relating to seizure of 100 bars of gold in November 1969. The said conviction has become final. Some of the properties belonging to the convict were ordered to be forfeited on 23..03..1996 by the competent authority under Section 7(i) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 [hereinafter referred to as "the Act"]. Subsequently, the competent authority issued a notice to the petitioner, the brother of the convict, calling upon him to explain as to why some of the properties belonging to the petitioner should not be forfeited as they are all illegally acquired properties as defined in the said Act. The petitioner submitted an explanation https://hcservices.ecourts.gov.in/hcservices/ stating that the properties are not illegally acquired properties in terms of the provisions of the Act and, therefore, they are not liable to be forfeited. Thereafter, the competent authority, by order dated 30.08.1999 rejected all the contentions of the petitioner and held that the properties are illegally acquired properties and, therefore, ordered for forfeiture of the same in favour of the Government. Challenging the same, the petitioner appealed before the appellate tribunal under the Act in FLA No.41/MDS/99. The appellate tribunal by order dated 04.07.2001, rejected the appeal thereby holding that the forfeited properties were acquired by the petitioner with the illegal earnings of the convict Mr.V.P.Selvaraj. Accordingly, the tribunal dismissed the appeal. Aggrieved over the same, the petitioner is, now, before this Court with this writ petition. 2. In this writ petition, the petitioner would raise mainly the following grounds:- (i) The competent authority, in the notice issued under 6(1) of the Act, had not indicated the reasons which made him to believe that the properties are illegally acquired properties in terms of the Act. (ii) The competent authority had failed to record such belief in writing before issuing the notice under Section 6(1) of the Act. Therefore, the entire proceeding is without jurisdiction. (iii) In the absence of notice to the convict as required under Section 6(2) of the Act, issuance of notice to the petitioner under Section 6(1) of the Act is wholly without jurisdiction. (iv) There is total non application of mind on the part of the competent authority into the facts of the case and thus, the entire proceeding is vitiated. (v) Though the petitioner happens to be the brother of the convict, there is not even any prima facie material to show that there has been nexus between the properties and the alleged illegal earnings of the convict. (vi) The properties in question were purchased during 1960's which were duly accounted for. The petitioner was doing gold business and various other businesses. It is further stated that the income derived from such sources have been properly assessed to income-tax. Further, under Voluntary Disclosure Scheme, some more income was declared and the same was also assessed by the Income-tax Department. Therefore, it https://hcservices.ecourts.gov.in/hcservices/ cannot be said that the improvements made on the said properties by the petitioner from out of the declared income under the Voluntary Disclosure Scheme would amount to illegal acquisition. The presumption that the properties are illegally acquired properties in terms of the Act also stands rebutted. On these grounds, the impugned order is liable to be quashed, it is contended. 3. The learned counsel appearing for the 2nd respondent would oppose the writ petition on the following grounds:- (i) There is no legal necessity under the Act to indicate in the notice itself the reasons for the belief of the competent authority that the properties are illegally acquired properties in terms of the Act and it would be suffice, if reasons are supplied to the party on demand. (ii) The legal requirement is only to record the reasons for such belief and, as a matter of fact, in the instant case, such reasons have clearly been recorded by the competent authority before issuing the notice. Such belief is based on sufficient materials available on record and, therefore, it cannot be said that there was total non application of mind on the part of the competent authority. (iii) There has been clear nexus established between the properties in question and the convict. (iv) Under Section 8 of the Act, there is a presumption that the properties of the relatives of the convict are illegally acquired properties and to rebut the said presumption, such relative should prove to the satisfaction of the competent authority that the properties were not acquired from out of the illegal earnings of the convict. Such presumption raised under Section 8 of the Act would also form the basis for issuing notice by the competent authority. (v) The competent authority as well as the appellate authority have found that the petitioner has failed to discharge his burden under Section 8 of the Act to prove that the properties in question are not illegally acquired properties in terms of the Act. From out of the materials available on record, the competent authority as well as the appellate authority were https://hcservices.ecourts.gov.in/hcservices/ fully satisfied that the properties are illegally acquired properties and, therefore, they have rightly ordered for forfeiture which does not require any interference at the hands of this Court, it is contended. 4. I have considered the rival submissions and also perused the records carefully. 5. At the outset, I have to state that it is settled law that recording of reasons for belief that the properties are illegally acquired properties in terms of the Act alone gives rise to jurisdiction to the competent authority to issue notice U/s.6 of the Act and to proceed further under Section 7 of the Act. In the absence any such reason having been recorded by the competent authority , surely, the very issuance of the notice should be held to be without jurisdiction. For this legal proposition, I may refer to the judgement of the Hon'ble Supreme Court in Kesar Devi v. Union of India, (2003) 7SCC 427 wherein the Hon'ble Supreme Court in para 10 has held as follows:- "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. Section 8 of the Act which deals with burden of proof is very important. It lays down that in any proceedings under the Act, the burden of proving that any property specified in the notice served under Section 6 is not illegally acquired property, shall be on the person affected. The combined effect of Section 6(1) and Section 8 is that the competent authority should have reason to believe (which reasons have to be recorded in writing) that properties ostensibly standing in the name of a person to whom the Act applies are illegally acquired properties, he can issue a notice to such a person. Thereafter, the burden of proving that such property is not illegally acquired property will be upon the person to whom notice has been issued. The statutory provisions do not show that the competent authority, in addition to recording reasons for his belief, has to further mention any nexus or link between the convict or detenu (as described in Sub-section (2) of Section 2) and the property which is sought to be forfeited in the sense that money or https://hcservices.ecourts.gov.in/hcservices/ consideration for the same was provided by such convict or detenu. If a further requirement regarding establishing any link or nexus is imposed upon the competent authority, the provisions of Section 8 regarding burden of proof will become otiose and the very purpose of enacting such a Section would be defeated." 6. In the case on hand, the learned counsel appearing for the 2nd respondent has produced the original records. A perusal of the same would go to show that the competent authority under the Act has recorded the reasons for issuance of notice under Section 6 (1) of the Act on 28.07.1988. A further perusal of the same would show that there is a reference about the convict Mr.V.P.Selvaraj and there is also a reference that the petitioner being a relative is a person within the meaning of Section 2 (2)(c) of the Act r/w Section 2(2)(a)(i) and explanation thereunder. There are also details with reference to the dates of taking possession by the petitioner and the cost of purchase of these properties. The following are the details regarding the house properties owned by the petitioner:- Sl.No. Location Date of possession Cost 1 No.7, West Kadalangudy Street, Kumbakonam Constructed in 1975 Rs.,60,040/ - 2 No.50, Iyengar Street, Kumbakonam 1/12/92 Rs. 6038/- 3 No.102 and 103 , 103A, Big Street, Kumbakonam 2/8/62 Rs.36000/- 4 No.101, Big Street, Kumbakonam 9/7/69 7. It is also stated in the said order that the nature and sources of funds invested in the above mentioned immovable properties were not assessable from the available records. 8. The order further reflects that the petitioner demolished the existing construction at No.101 to 103, Big Street, Kumbakonam and constructed a lodge on the same. In the wealth tax assessment made for the assessment years 1969-70 to 1972-73 certain additions to the wealth returns have been shown. The order further gives the details of the additions made between assessment years 1969-70 to 1972-73 as follows:- Sl.No . Assessmen t Year Nature of addition Amount 1 1969-70 Value of understatement attributable to the cost of construction of building at 101 to 103 , Big Street, Kumbakonam up to 31.03.1969 Rs.11,000/- https://hcservices.ecourts.gov.in/hcservices/ Sl.No . Assessmen t Year Nature of addition Amount 2 1970-71 Value of understatement attributable to the cost of construction of building at 101 to 103 , Big Street, Kumbakonam up to 31.03.1970 Rs.22,000/- 3 1971-72 Value of understatement attributable to the cost of construction of building at 101 to 103 , Big Street, Kumbakonam up to 31.03.1971 Rs.33,000/- 4 1972-73 Value of understatement attributable to the cost of construction of building at 101 to 103 , Big Street, Kumbakonam up to 31.03.1972 Rs.44,000/- 9. The order further states that the petitioner made declaration under Section 3(1) of the Voluntary Disclosure Scheme, 1975 to the tune of Rs.25,000/-. In the said disclosure, the petitioner had stated that the sources of the said amount was cash earned over a period of years not easily assessable. From these materials, the competent authority has stated that the unexplained investments in the construction of house properties and the disclosure of income under the Voluntary Disclosure Scheme of 1975 indicate that he was in possession of substantial income, sources of which were not identified. On the basis of the information gathered from the available records relating to income tax and wealth tax assessment of V.P.Ranganathan, the petitioner herein, the recording states "I have reason to believe that the illegally earned income of V.P.Ranganathan, had been invested in the acquisition of the above mentioned movable and immovable assets". 10. A perusal of the above recording, in my considered opinion, would go to show that it satisfies the requirements of Section 6 of the Act. It cannot be said that there was non application of mind on the part of the authority. A detailed documentation of all the materials which were gathered by the competent authority and the discussion made thereunder would go to clearly establish that the competent authority had proper application of mind to find as to whether there were reasons to believe that the properties in question were illegally acquired properties in terms of the Act. Therefore, the contention of the learned counsel for the petitioner that the notice and the consequential proceedings are vitiated for non application of mind on the part of the competent authority is only liable to be rejected. 11. Nextly, a perusal of the above order would also go to show that the competent authority had recorded reasons for the belief that the properties are the illegally acquired properties https://hcservices.ecourts.gov.in/hcservices/ warranting issuance of notice under Section 6 of the Act. Thus, the requirements of Section 6(1) of the Act have been satisfied and so the notice cannot be stated to be without jurisdiction. 12. The learned counsel for the petitioner would submit that it is not as though, every alleged illegally earned property of the petitioner is liable for being proceeded against under the Act, but only those properties which have got some nexus with the income of the convict alone could be proceeded with. It is true that the properties which are acquired by the relative of the convict independently out of his own resources cannot be proceeded against simply because the individual happens to be the relative of the convict. The very object of the Act is to deprive the persons engaged in smuggling activities and foreign exchanges manipulations of their illegally acquired properties so as to effectively prevent smuggling and other clandestine operations. Therefore, it is needless to say that there has to be nexus established between the illegal earnings of the convict and the properties held by a close relative. 13. Under Section 8 of the Act, however, there is a burden cast upon such a relative to prove the fact that the properties are his own legally acquired properties and they have got nothing to do with the illegal activities of the convict. This burden is to be discharged at the time of enquiry by the competent authority. While recording the reasons for such belief for issuing notice under Section 6 (1) of the Act, the competent authority can take into account the presumption under Section 8 of the Act also. Apart from that, the phrase "reasons to believe" does not mean clear proof of nexus between the properties in question and the convict. Such proof is required only for passing final order of forfeiture. For the purpose of Section 6(1) of the Act, to issue notice , belief based on the reasons from out of the materials available on record would be sufficient. In the instant case, it cannot be said that there were no materials available on record to form the reasons for the competent authority to believe that the properties were illegally acquired properties from out of the illegal earnings of the convict. Therefore, the contention of the petitioner that the reasons recorded in this case, would not satisfy the requirement of section 6(1) of the Act cannot be countenanced. 14. The next contention of the learned counsel for the petitioner is that it is incumbent, under Section 6(1) of the Act, on the competent authority to indicate in the notice itself his reasons for such belief. For this proposition , the learned counsel has relied on the judgement in Fatima Mohd. Amin v. Union of India, (2003) 7 SCC 436. 15. But , the learned counsel appearing for the 2nd respondent would rely on a Judgement in P.P.Adbulla and another v. Competent Authority and others , (2007) 2 SCC 510 the Hon'ble Supreme Court in para 7 has held as follows:- https://hcservices.ecourts.gov.in/hcservices/ "7.Learned 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 paragraph 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 required 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 case." [Emphasis supplied] 16. I am also of the view, after perusing the above judgement and after carefully going through the provisions of the Act, that it would be sufficient if such reasons are stated in the counter and the same has been duly done by the respondents in this case. As a matter of fact, Fatima Mohd. Amin's case cited supra, has been distinguished on facts in P.P.Abdulla's case cited supra. In this case, as held in P.P.Abdulla's case the authority has furnished the recordings for perusal along with the counter. Thus, the competent authority has satisfied the said legal requirement. 17. The next contention of the learned counsel for the petitioner is that in the absence of any notice under Section 6(2) of the Act to the convict, issuance of notice and continuance of proceeding against a relative of the convict, is not sustainable. The learned counsel, for this proposition, relies on a judgement of a Division Bench of this Court in V.Mohan and others v. Income-tax Officer, 2008 CRI.L.J. 2821 wherein the Division Bench in para 17 has held as follows:- " 17.In the present case, since the basic requirement of service of notice under Section 6 (1) on the convict had not been complied with, in our considered opinion, the competent authority had no further jurisdiction to proceed in the matter by merely serving a notice on the petitioner purporting to be under Section 6(2). As a matter of fact, Section 6(2) contemplates that upon service of notice under Section 6(1) on the convict, if the property sought to be forfeited stands in the name of the relative, a copy of such notice shall also be served upon https://hcservices.ecourts.gov.in/hcservices/ such other person. Therefore, there is no escape from the conclusion that in the present case the proceedings got vitiated from that stage onwards." 18. The learned counsel appearing for the 2nd respondent would rely on an unreported judgement of a Division Bench of the Kerala High Court on the same issue in O.P.No.15835 of 1996 (I) [Sajitha and others v. The Competent Authority, SAFEMFOP and NDPS Act and others] dated 16.02.2005 wherein it has been held thus: "Section 2 (c) refers to every person who is a relative of a person referred to in Clause (a) or clause (b). Section 2 (e) refers to any holder of any property which was at any time previously held by a person referred to in clause (a) or clause (b). When we read Section 6(1) and 6(2) along with Section 2(2)(e) it is evident that notice contemplated under Section 6(2) is to any other person if the property does not stand in the name of the detenu. So far as this case is concerned, property stands in the name of wife and brothers. Admittedly, notices have been issued to them as contemplated under Section 6 (1). We are of the view, non issue of notice to the detenu will not vitiate the proceedings as against their relative. 19. Aggrieved over the said judgement of the Kerala High Court, the petitioner therein took up the matter before the Hon'ble Supreme Court in Special Leave to Appeal (Civil) No.36959 of 2009 wherein the Hon'ble Supreme Court passed the following order:- ".... In our view , the impugned order does not suffer from any legal infirmity. It is not in dispute that O.P.No.15835 of 1996 filed by the petitioner for quashing orders dated 17.11.1994 and 06.09.1996 passed by the competent authority and the tribunal respectively was dismissed by the High Court on 16.02.2005 and Special Leave Petition (c) No.10348 of 2005 was dismissed on 10.05.2005. This being the position, the Division Bench of the High Court did not commit any error by refusing to review order dated 16.02.2005 and we do not find any valid ground to interfere with the impugned order." 20. Thus, the Hon'ble supreme Court has confirmed the view taken by the Hon'ble Kerala High Court to the effect that for issuance of notice on the relative of a detenu / convict, it is not at all necessary that simultaneously a notice should also be served on the detenu / convict. In view of the above position, in the case on hand, I hold that though there was no notice served on the convict in respect of the properties in question, the notice https://hcservices.ecourts.gov.in/hcservices/ served on the petitioner, who is a relative of the convict is sustainable and the same cannot be stated to be without jurisdiction. Thus, this ground of attack also fails. 21. At this juncture, the leaned counsel for the 2nd respondent has brought to the notice of this Court an earlier order passed by this Court in W.P.No.2110 of 1989 along with connected writ petitions by means of a common order dated 16.10.1990. In the said writ petitions, the petitioner herein had challenged the very same notice issued under Section 6(1) of the Act which culminated in the present impugned order. One of the grounds raised before this court earlier was that the notice did not contain the reasons for the belief on the part of the competent authority. This court in the said writ petition has held as follows :- "I have also taken notice of the contents of the impugned notice. It cannot be called all that vague. It gives sufficient indication of the nature of the satisfaction of the competent authority. It has made a specific mention of the application of clause (c) of sub-section (1) of Section 3 of the Act. A reference to clause (c) of sub-section (1) of Section 3 will evidently enable any person receiving notice that he is either one such person who himself had been convicted as aforesaid or he falls in one or the other category which shall attract the law. If the person reeiving notice is not one to whom the Act would apply, he may appear and show cause and state that he did not come under the Act. If the satisfaction of the competent authority has to be questioned, that can be question only by questioning the reasons recorded in writing by him. The order of the competent authority has not been challenged." 22. Thus, this Court has already negatived the challenge to the validity of the notice issued under Section 6(1) of the Act. The said order has become final. Therefore, it is not open for the petitioner to once again raise the very same question regarding the validity of the notice stating that either the notice does not contain the reason for the belief or there is total non application of mind on the part of the competent authority. In that case, this court has clarified that the reasons recorded could alone be challenged in future. The petitioner has not challenged the same by filing