IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:8.04.2010 CORAM: The Hon'ble Mr.Justice T.S.Sivagnanam W.P.Nos. 7609 of 2001 and 26466 of 2001 W.P.No.26466 of 2001 R.Ramakrishnan … Petitioner Vs. 1.The Appellate Tribunal for Forfeited Property, New Delhi rep. by its Registrar, 4th Floor, Lok Nayak Bhavan, Khan Market, New Delhi. 2.The Competent Authority, Smugglers, Foreign Exchange Manipulators (Forfeiture of Properties) Act, 1976 and Narcotic Drugs Psychotropic Substance Act, 69/1, G.N.Chetty Street, Chennai – 600017. … Respondents W.P.No.7609 of 2001 Mohammed Thaha Umma (Deceased) 1.S.S.A. Hayarunisha 2.S.S.A. Sheik Kamal 3.S.S.A. Aminath Fathima 4.S.S.A. Ayshath Zulaiha 5.S.S.A. Seyed Anifa 6.S.S.A. Husain Jalal 7.S.S.A. Kathija Rilwana 8.S.S.A. Basheer … Petitioners P1 to P8 substituted as LRs in the place of the deceased petitioner vide court order dated 24.03.2011 in W.P.M.P.No.104/11. Vs. 1.Competent Authoirty, Smugglers, Foreign Exchange Manipulators (Forfeiture of Properties) Act, Chennai. 2.Appellate Tribunal for Forfeited Property, New Delhi. … Respondents https://hcservices.ecourts.gov.in/hcservices/ Prayer in W.P.No.26466 of 2001:- Writ Petitions filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari to call for the records of the first respondent dated 01.10.2001 in F.P.A.No.70/MDS/98 and the order of the second respondent dated 28.09.1998 in F.No.OCA/MDS/2846/94 and quash the same. Prayer in W.P.No.7609 of 2001:- Writ Petitions filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari to call for the records of the second respondent the Appellate Tribunal for forfeited Property, New Delhi in the order dated 31.01.2001 made in FPA.No.66/MDS/95 confirming the findings of the Competent Authority, Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, Chennai in OCA/MDS/348-352/76 dated 02.02.2000 and quash the same. For Petitioner :Mr.Rahul Balaji for M/s.Sathish Parasaran in W.P.No.26466 of 2001 Mr.B.Kumar Senior counsel for R.Loganathan in W.P.7609/01 For Respondents :Mr.M.L.Ramesh Senior Standing counsel for RR1-2 Mr.S.Haja Mohideen Gisti Senior Standing counsel for RR1-2 C O M M O N O R D E R In these writ petitions the interpretation and the application of the provisions of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976 (SAFEMA; the Act) and the effect of the orders passed under the Act are in question. The writ petitioners are the relatives of the detenue/convict and the challenge is to the orders of forfeiture passed under SAFEMA in respect of properties standing in the name of the petitioners. 2. I have elaborately heard the submission of the learned Senior counsel Mr.B.Kumar for the petitioner in W.P.No.7609 of 2001, Mr.Rahul Balaji, learned counsel for the petitioner in W.P.No.26466 of 2001, Mr.Hajamoideen Gisti learned Senior Standing counsel for the Respondents and Mr.M.L.Ramesh, learned Senior Standing counsel for the Respondents. 3. Before I proceed to examine the facts in each of the writ petitions and the validity of the orders passed by the competent authority under the Act which were confirmed by the revisional authority, it would be necessary to refer to the relevant provisions of SAFEMA. 4. SAFEMA was enacted to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto. In the https://hcservices.ecourts.gov.in/hcservices/ statement of objects and reasons of the Act it has been stated that in many cases persons engaged in smuggling activities and foreign exchange manipulation have been holding properties acquired through ill-gotten wealth in the name of their relatives, associates and confidants and as these activities posed a serious threat to economy and as one of the steps taken by the Government for cleansing the social fabric and resuscitating the national economy it became necessary to assume powers to deprive such persons of their illegally acquired properties so as to effectively prevent the smuggling and other clandestine operations. For the purpose of the present cases the following provisions of the Act would be relevant. 2-A. Act not to apply to certain persons.—On and from the commencement of the provisions of Chapter VA of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the provisions of this Act shall not apply to persons in relation to whom any order, or proceeding, may be made or taken under that Chapter] 3. Definitions.—(1) In this Act, unless the context otherwise requires,— (a) “Appellate Tribunal” means the Appellate Tribunal for Forfeited Property constituted under Section 12; (b) “competent authority” means an officer of the Central Government authorised by it under sub-section (1) of Section 5 to perform the functions of a competent authority under this Act; (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 derived or obtained from or attributable to any activity prohibited by or under any law for the time being in force relating to any matter in respect of which Parliament has power to make laws; or (ii) 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 in respect of which any such law has been contravened; or (iii) 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 the source of which cannot be proved and which cannot be shown to be attributable to any act or thing done in respect of any matter in relation to which Parliament has no power to make laws; or https://hcservices.ecourts.gov.in/hcservices/ (iv) any property acquired by such person, whether before or after the commencement of this Act, for a consideration, or by any means, wholly or partly traceable to any property referred to in sub-clauses (i) to (iii) or the income or earnings 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; 4. Prohibition of holding illegally acquired property.—(1) 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. (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 Act. 6. Notice of forfeiture.—(1) If, having regard to the value of the properties 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 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 also be served upon such other person. https://hcservices.ecourts.gov.in/hcservices/ 7. Forfeiture of property in certain cases.—(1) The competent authority may, after considering the explanation, if any, to the show-cause notice issued under Section 6, 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 properties. (2) Where the competent authority is satisfied that some of the properties referred to in the show-cause 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 judgement, are illegally acquired properties and record a finding accordingly under sub-section (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. 8. Burden of proof.— In any proceedings under this 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. 9. Fine in lieu of forfeiture.—(1) Where the competent authority makes a declaration that any property stands forfeited to the Central Government under Section 7 and it is a case where the source of only a part, being less than one- half, of the income, earnings or assets with which such property was acquired has not been proved to the satisfaction of the competent authority, it shall make an order giving an option to the person affected to pay in lieu of forfeiture, a fine equal to one and one-fifth times the value of such part. Explanation.—For the purposes of this sub-section, the value of any part of income, earnings or assets, with which any property has been acquired, shall be,— (a) in the case of any part of income or earning, the amount of such part of income or earnings; (b) in the case of any part of assets, the proportionate part of the full value of the consideration for the acquisition of such assets. https://hcservices.ecourts.gov.in/hcservices/ (2) Before making an order imposing a fine under sub-section (1), the person affected shall be given a reasonable opportunity of being heard. (3) Where the person affected pays the fine due under sub- section (1), within such time as may be allowed in that behalf, the competent authority may, by order, revoke the declaration of forfeiture under Section 7 and thereupon such property shall stand released. 11. Certain transfers to be null and void.—Where after the issue of a notice under Section 6 or under Section 10, any property referred to in the said notice is transferred by any mode whatsoever such transfer shall, for the purposes of the proceedings under this Act, be ignored and if such property is subsequently forfeited to the Central Government under Section 7, then, the transfer of such property shall be deemed to be null and void. 15. Competent authority and Appellate Tribunal to have powers of civil court.—The competent authority and the Appellate Tribunal shall have all the powers of a civil court while trying a suit under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely— (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavits; (d) requisitioning any public record or copy thereof from any court or office; (e) issuing commissions for examination of witnesses or documents; (f) any other matter which may be prescribed. 16. Information to competent authority.—(1) Notwithstanding anything contained in any other law, the competent authority shall have power to require any officer or authority of the Central Government or a State Government or a local authority to furnish information in relation to such persons, points or matters as in the opinion of the competent authority will be useful for, or relevant to, the purposes of this Act. (2) Any officer of the Income-tax Department, the Customs Department or the Central Excise Department or any officer of enforcement appointed under the Foreign Exchange Regulation https://hcservices.ecourts.gov.in/hcservices/ Act, 1973 (46 of 1973), may furnish suo motu any information available with him to the competent authority if in the opinion of the officer such information will be useful to the competent authority for the purposes of this Act. 17. Certain officers to assist competent authority and Appellate Tribunal.— For the purposes of any proceedings under this Act, the following officers are hereby empowered and required to assist the competent authority and the Appellate Tribunal, namely:— (a) officers of the Customs Department; (b) officers of the Central Excise Department; (c) officers of the Income-tax Department; (d) officers of enforcement appointed under the Foreign Exchange Regulation Act, 1973 (46 of 1973); (e) officers of police; (f) such other officers of the Central or State Government as are specified by the Central Government in this behalf by notification in the Official Gazette. 18. Power of competent authority to require certain officers to exercise certain powers.—(1) For the purposes of any proceeding under this Act or the initiation of any such proceedings, the competent authority shall have power to cause to be conducted any inquiry, investigation or survey in respect of any person, place, property, assets, documents, books of account or any other relevant matters. (2) For the purposes referred to in sub-section (1) the competent authority may, having regard to the nature of the inquiry, investigation or survey, require an officer of the Income-tax Department to conduct or cause to be conducted such inquiry, investigation or survey. (3) Any officer of the Income-tax Department who is conducting or is causing to be conducted any inquiry, investigation, or survey required to be conducted under sub- section (2), may, for the purpose of such inquiry, investigation or survey, exercise any power (including the power to authorise the exercise of any power) which may be exercised by him for any purpose under the Income Tax Act, 1961 (43 of 1961), and the provisions of the said Act shall, so far as may be, apply accordingly. 24. Act to have overriding effect.—The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. 5. In terms of Section 2(2), the provisions of the SAFEMA applies to every person who is a relative of a person referred to in clause a or clause b of Section 2(2) and the explanation No.2 has been widely couched to bring in all persons closely related to the detenue/convict within the ambit of “relative” as mentioned in clause (c) of Section 2(2). Section 3(1)(c) exhaustively defines the term “illegally acquired property”. In terms of the Section 4, it shall https://hcservices.ecourts.gov.in/hcservices/ not be lawful for any person to whom the act applies to hold any illegally acquired properties either by himself or through any other person on his behalf and if he holds any “illegally acquired property” in contravention of Section 4 such property shall be liable to be forfeited to the Central Government in accordance with the provisions of the Act. Section 6 deals with the notice of forfeiture, which is the subject matter of interpretation in these writ petitions and in the latter part of the judgment the same will be elaborately dealt with. 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 in terms of Section 8. In terms of Section 11 any property referred to in the notice under Section 6 or under Section 10 (Trust properties), if transferred after issue of notice, such transfers shall be deemed to be null and void. The competent authority as defined under Section 3(1)(b) of the Act means an officer of the Central Government authorised under Section 5 (1) to perform the functions of a competent authority under the Act. In terms of Section 3(1)(a) the Appellate Tribunal shall mean the Tribunal constituted under Section 12. In terms of Section 15 both the competent authority and the Appellate Tribunal shall have all powers of Civil Court while trying a suit under the Code of Civil Procedure (CPC). By virtue of the power conferred under Section 16, the competent authority can require any officer or authority of the Central or a State Government or a local authority to furnish information and Section 17 gives the list of officers who are required to assist the competent authority and the Appellate Tribunal. Section 18 gives power to the competent authority for conducting enquiry, investigation, survey etc., among other things. In terms of Section 24, the provisions of SAFEMA shall have an overriding effect notwithstanding anything inconsistent therewith contained in any other law. 6. During 1976, when emergency was in force the Parliament enacted SAFEMA and it replaced an ordinance to the same effect which was brought into force on 05.11.1975. The constitutional validity of SAFEMA and the Conservation of Foreign Exchange and Prevention of Smuggling Activity Act, 1974, (COFEPOSA) were challenged before various High Courts in the Country and Attorney General of India applied for transfer of all the writ petitions to the Hon’ble Supreme Court, which was granted. The Hon’ble Supreme Court in Attorney General of India vs. Amratlal Prajivandas, 1994 5 SC 1279, in a nine Judge Bench Judgment considered the validity of both COFEPOSA and SAFEMA. The Hon’ble Supreme Court framed six questions for consideration of which question No.1, 2, 4 and 5 would be relevant for the purpose of these writ petitions. The questions framed and the decision of the Hon’ble Supreme Court on the above four questions are given in a tabulated statement below for easy and convenient reference. Question No. Question framed Decision 1) Whether Parliament was not competent to enact COFEPOSA and SAFEMA? Parliament was perfectly competent to enact both the COFEPOSA and the SAFEMA. https://hcservices.ecourts.gov.in/hcservices/ 2) Whether an order of detention under Section 3 read with Section 12- A of COFEPOSA made during the period of emergency proclaimed under Article 352(1) of the Constitution of India, — with the consequent ‘suspension’ of Article 19 and during which period the right to move the court to enforce the rights conferred by Articles 14, 21 and 22 was suspended — can form the foundation for taking action under Section 6 of SAFEMA against the detenu, his relatives and associates? And if it does, can the validity of such order of detention be challenged by the detenu and/or his relatives and associates, when proceedings are taken against him/them under SAFEMA, even though the said order of detention has ceased to be operative and was not either challenged — or not successfully challenged — during its operation? (3) If the answer to Question 1 is in the affirmative, should the validity of the order of detention be tested with reference to the position of law obtaining at the time of making the said order and during its period of operation or with reference to the position of law obtaining on the date of issuance of the show-cause notice under Section 6 of SAFEMA? For the reasons given in the body of this judgment, we do not express any opinion on the validity of the 39th and 40th Amendment Acts to the Constitution of India placing COFEPOSA and SAFEMA in the Ninth Schedule. We assume them to be good and valid. No arguments have also been addressed with respect to the validity of 42nd Amendment Act to the Constitution either. https://hcservices.ecourts.gov.in/hcservices/ 4) Whether the definition of “illegally acquired property” in clause (c) of Section 3(1) of SAFEMA is violative of the fundamental rights of the petitioners guaranteed by Articles 14, 19 and 21 and whether the inclusion of SAFEMA in the Ninth Schedule to the Constitution cures such violation, if any? The definition of “illegally acquired properties” in clause (c) of Section 3 of SAFEMA is not invalid or ineffective. 5) Whether the application of SAFEMA to the relatives and associates of detenus is violative of Articles 14, 19 and 21? Whether the inclusion of the said Act in the Ninth Schedule cures such violation, if any? 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. 7. Thus, the constitutional validity of both the enactment were upheld by the Hon’ble Supreme Court and the definition of “illegally acquired properties” in clause 3 of Section 3 was held to be valid and the application of SAFEMA to relatives and associates was also held to be valid and effective as the purpose and object of bringing such persons within the net of the SAFEMA is to reach the properties of the detenue or the convict, wherever they are, howsoever they are held and whomsoever they are held. Further, it was held that the Act https://hcservices.ecourts.gov.in/hcservices/ was not conceived with the view to forfeit the independent properties of such relatives and associates, if they are in no way connected with the convict/detenue and holders and being relatives and associates, are dealt with on a separate footing and if such person proves that he is a transferee in good faith for consideration, his property – even though purchased from a convict/detenue – is not liable to be forfeited. It has been further held that the burden lies on the relative/associate to prove that the property has not been acquired with the monies provided by the detenue and the intention of the Act is not to say that the properties of all the relatives and associates that may be illegally acquired, will be forfeited just because they happened to be the relatives or associates of the convict/detenue. The Hon’ble Supreme Court further held there ought to be the connecting link between those properties and the convict/detenue, the burden of disproving which, is upon the relative/associate. 8. In Fatima Mohd. Amin vs. Union of India, (2003) 7 SCC 436, the validity of an order of confiscation of the property standing in the name of the mother of a convict came up for consideration, at the instance of the mother who was the appellant before the Hon’ble Supreme Court. Contention was raised that the case stands concluded by the decision of the Hon’ble Supreme Court in Attorney General of India, (supra). The Hon’ble Supreme Court after considering the legal and factual issues held that there are no averments in the show cause notice to the effect that the property acquired by the appellant therein is a benami property of her son or the