# THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM & ANR v. V. MOHAN & ANR

- **Citation:** [2021] 12 S.C.R. 152
- **Court:** Supreme Court of India
- **Decided:** 2021-12-14
- **Case number:** Civil Appeal Nos. 8592-8593 of 2010
- **Bench:** A. M. Khanwilkar, Sanjiv Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-income-tax-officer-circle-i-2-kumbakonam-anr-v-v-mohan-anr-34796
- **Pages:** 43

## Headnote

Smugglers and Foreign Exchange Manipulators (Forfeiture
of Property) Act, 1976: ss. 6(1), (2), 2(2) - Notice of forfeiture -
Illegally acquired property - Claim of the Competent Authority that
the property to be forfeited is that of the convict and ostensibly
held by the relatives of the convict - Issuance of primary notice u/
s. 6(1) upon such convict with copy thereof to his relatives u/s. 6(2)
- Requirement of - Held: Section 6(1) nowhere provides that it is
mandatory to serve the convict or detenu with a primary notice
under that provision whilst initiating action against the relative of
the convict - Section 6(1)posits that notice must be given to the
person who is holding the tainted property and is likely to be affected
by the proposed forfeiture of the property - Person immediately
and directly to be affected is the person who is the recorded owner
of the property and in possession thereof himself or through some
other person on his behalf - Burden of proof u/s. 8 is not to be
discharged by the convict or detenu, but by the person who holds
the illegally acquired property either by himself or through any other
person on his behalf - Thus, it is not mandatory to serve a primary
notice u/s. 6(1) upon such convict with copy thereof to his relatives
u/s. 6(2) - Non-service of such primary notice upon the convict
would not vitiate the entire proceedings initiated only against his
relatives - Order passed by the High Court that the action against
the respondents-relatives of the convict, initiated by the Competent
Authority was vitiated for lack of notice to the convict, set aside.
Allowing the appeals, the Court
HELD: 1.1 Pivot of The Smugglers and Foreign Exchange
Manipulators (Forfeiture of Property) Act, 1976 is to reach the
"illegally acquired properties" of the specified convict/detenu in
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whosoever's name they are kept or by whosoever they are held,
whatever be the length of time. [Para 32][178-H; 179-A]
1.2 The dispensation under the 1976 Act applies only to
persons specified in Section 2(2) of the Act. Section 2(2)(a) refers
to the category of persons who are convicted under the specified
enactments. Whereas, Section 2(2)(b) refers to persons detained
under the specified detention law. The expression "person" to
whom the 1976 Act applies, has been broadened by including
every person who is a relative of a person referred to in clause
(a) being convict under the specified laws or clause (b) being
detenu under the Conservation of Foreign Exchange and
Prevention of Smuggling Activities Act, 1974. The expression
"relative" has been further elaborated in Explanation 2, of Section
2, so as to expand the scope of taking corrective measures for
reaching up to the illegally acquired properties of a convict or
detenu, as the case may be. Section 2(2)(d) further expands the
sweep so as to include associate of a convict or detenu, as the
case may be; and Section 2(2)(e) takes within its ambit any holder
(the present holder) of any property, which was at any time
previously held by a person referred to in clause (a) or clause
(b), namely, convict or detenu, as the case may be. The objective
and purpose of the enactment is reinforced in the encircling
Explanation 4. The intent is to ensure that the convict/detenu
cannot get away by adopting camouflage or screening, including
legal transfer of properties in the name of his relative, associate
or any other person covered under clause (e) to Section 2(2) of
the Act. This expanded ambit of clauses (c) to (e) is to be
interpreted in the context of the object and purpose of the Act,
but the scope of the Act does not extend to include every property
held by a relative or an associate unless the link and the
connection with the illegal activities of the convict/detenu is
established. For, the Act is only directed to forfeiture of 'illegally
acquired properties' of a person falling under clause (a) or clause
(b) of Section 2(2) including their specified properties held

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SUPREME COURT REPORTS
[2021] 12 S.C.R.
[2021] 12 S.C.R. 152
152
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
& ANR.
v.
V. MOHAN & ANR.
(Civil Appeal Nos. 8592-8593 of 2010)
DECEMBER 14, 2021
[A. M. KHANWILKAR AND SANJIV KHANNA, JJ.]
Smugglers and Foreign Exchange Manipulators (Forfeiture
of Property) Act, 1976: ss. 6(1), (2), 2(2) - Notice of forfeiture -
Illegally acquired property - Claim of the Competent Authority that
the property to be forfeited is that of the convict and ostensibly
held by the relatives of the convict - Issuance of primary notice u/
s. 6(1) upon such convict with copy thereof to his relatives u/s. 6(2)
- Requirement of - Held: Section 6(1) nowhere provides that it is
mandatory to serve the convict or detenu with a primary notice
under that provision whilst initiating action against the relative of
the convict - Section 6(1)posits that notice must be given to the
person who is holding the tainted property and is likely to be affected
by the proposed forfeiture of the property - Person immediately
and directly to be affected is the person who is the recorded owner
of the property and in possession thereof himself or through some
other person on his behalf - Burden of proof u/s. 8 is not to be
discharged by the convict or detenu, but by the person who holds
the illegally acquired property either by himself or through any other
person on his behalf - Thus, it is not mandatory to serve a primary
notice u/s. 6(1) upon such convict with copy thereof to his relatives
u/s. 6(2) - Non-service of such primary notice upon the convict
would not vitiate the entire proceedings initiated only against his
relatives - Order passed by the High Court that the action against
the respondents-relatives of the convict, initiated by the Competent
Authority was vitiated for lack of notice to the convict, set aside.
Allowing the appeals, the Court
HELD: 1.1 Pivot of The Smugglers and Foreign Exchange
Manipulators (Forfeiture of Property) Act, 1976 is to reach the
"illegally acquired properties" of the specified convict/detenu in
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whosoever's name they are kept or by whosoever they are held,
whatever be the length of time. [Para 32][178-H; 179-A]
1.2 The dispensation under the 1976 Act applies only to
persons specified in Section 2(2) of the Act. Section 2(2)(a) refers
to the category of persons who are convicted under the specified
enactments. Whereas, Section 2(2)(b) refers to persons detained
under the specified detention law. The expression "person" to
whom the 1976 Act applies, has been broadened by including
every person who is a relative of a person referred to in clause
(a) being convict under the specified laws or clause (b) being
detenu under the Conservation of Foreign Exchange and
Prevention of Smuggling Activities Act, 1974. The expression
"relative" has been further elaborated in Explanation 2, of Section
2, so as to expand the scope of taking corrective measures for
reaching up to the illegally acquired properties of a convict or
detenu, as the case may be. Section 2(2)(d) further expands the
sweep so as to include associate of a convict or detenu, as the
case may be; and Section 2(2)(e) takes within its ambit any holder
(the present holder) of any property, which was at any time
previously held by a person referred to in clause (a) or clause
(b), namely, convict or detenu, as the case may be. The objective
and purpose of the enactment is reinforced in the encircling
Explanation 4. The intent is to ensure that the convict/detenu
cannot get away by adopting camouflage or screening, including
legal transfer of properties in the name of his relative, associate
or any other person covered under clause (e) to Section 2(2) of
the Act. This expanded ambit of clauses (c) to (e) is to be
interpreted in the context of the object and purpose of the Act,
but the scope of the Act does not extend to include every property
held by a relative or an associate unless the link and the
connection with the illegal activities of the convict/detenu is
established. For, the Act is only directed to forfeiture of 'illegally
acquired properties' of a person falling under clause (a) or clause
(b) of Section 2(2) including their specified properties held by
third party. Independent properties of the relatives and friends
which are not traceable to the illegal activities of the convict/
detenu are neither sought to be forfeited nor are they within the
purview of the Act. [Paras 33, 34, 37, 38][179-A-B; 180-A-C;
181-C-E; 182-A]
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
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1.3 On plain as well as contextual reading of Section 6, it is
crystal clear that the notice under Section 6(1) is required to be
issued to any person to whom the Act applies. As is evident from
Section 2(2) of the 1976 Act, the Act applies not only to convict
or detenu, but also to their relative, associate including holder of
any property being Section 2(2)(c), 2(2)(d) and 2(2)(e) respectively.
The purpose of issuing notice is to enable the person concerned
(noticee) to discharge the burden of proof as propounded in
Section 8 of the 1976 Act. It is then open to him to prove that the
property referred to in the notice is his legally acquired property.
[Para 47][186-B-C]
1.4 In a given case, however, if the property is held by a
person owing to merely being in legal possession thereof, but
the ownership of the property at the relevant time is that of the
convict or detenu or his/her relative, as the case may be, it would
become necessary for the Competent Authority to not only give
notice to the person in possession of the property in question
but also to the person shown as owner thereof in the relevant
records. Similarly, in a case where the person shown as owner in
the relevant records had purchased the subject property from
the convict or detenu and is a subsequent purchaser, notice is
required to be issued to both - the present owner and the erstwhile
owner (convict or detenu), as the case may be. However, if the
ownership of the property in the relevant records at the relevant
time is that of the person in possession (as in these cases), and
not being the convict or detenu, the question of issuing notice to
the latter would serve no purpose. The convict or detenu cannot
be heard to claim any right in such property including proprietary
rights and for the same reason, he is not expected to discharge
the burden of proof under Section 8 of the 1976 Act as to whether
it is his legally acquired property nor can he be said to be the
person affected with the proposed action of forfeiture as such.
[Para 48][186-D-G]
1.5 The expression "held" in Section 6 has to be understood
to mean that the person is entitled to possession of property
being owner of the property in the relevant record or even because
he is in legal possession thereof. In other words, a person may
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be holding the property also when he (at the relevant time) is in
legal possession of the stated property, even if he is not a recorded
owner thereof. In either case, it would be a matter within the
ambit of expression "held" occurring in Section 6 of the 1976
Act. [Para 49][186-G; 187-A-B]
1.6 The third facet of Section 6(1) of the 1976 Act is the
noticee may hold the property either by himself or through any
other person on his behalf. A primary notice under Section 6(1)
can be issued only against person to whom the Act applies. If the
relative of a convict or detenu has acquired property from the
illegal sources of income, earnings or assets of the convict or
detenu, such person would be a person to whom the Act applies
vide Section 2(2)(c) read with Explanation 2. Such person may be
a recorded owner of the property-having acquired it wholly or
partly out of or by means of any income, earnings or assets derived
or obtained from or attributable to unlawful activity (whether
indulged into before or after the commencement of the 1976 Act)
of the convict or detenu which is 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. [Para 50][187-B-D]
1.7 Going by the definition of "illegally acquired property"
in Section 3(1)(c) and of "person" in Section 2(2) to whom the
Act applies, if the property is held in the name of the relative of
the convict or detenu before or after the commencement of the
Act, the notice under Section 6(1) needs to be issued to such
person (recorded owner as well as in possession), who alone can
and is expected to discharge the burden of proof in terms of
Section 8 of the 1976 Act-so as to dissuade the Competent
Authority from proceeding further against such property. Indeed,
if the illegally acquired property is held in the name of the relative,
but the de facto possession thereof is with some other person,
who is not covered by the expression "person" as given in Section
2(2), in such a case primary notice under Section 6 is required to
be issued to the relative of the convict or detenu and copy thereof
served upon "such other person" who is in de facto possession
thereof (albeit for and on behalf of the relative of the convict or
detenu). Even in this situation, notice to the convict or detenu
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
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may not be necessary much less mandatory. For, the 1976 Act
applies even to the relative of the convict or detenu holding
illegally acquired property either by himself or through any other
person on his behalf. [Para 51][187-E-H]
1.8 Section 6(2) merely refers to the requirement of issuing
notice to "such other person". The expression "such person" is
found not only in Section 6(1), but in other provisions of the Act
including the definition clause i.e., Section 3(1)(c) of illegally
acquired property. The expression "such person" and "such other
person" occurring in Section 6(2) may have to be understood in
the context and the setting in which it has been employed in the
concerned provision. A harmonious construction thereof is
imperative. [Paras 52, 53][188-A-C]
1.9 In the first part of Section 6(2), the expression used is
"any person". That is a person to whom primary notice under
Section 6(1) is addressed. This person can be none other than
person referred to in Section 2(2) of the 1976 Act. He can be a
convict or detenu, his relative or associate including the person
who is a holder of the property in question at the relevant time.
Section 6(2) then refers to the subject property in the notice and
the factum of the property being held by concerned person (such
person)-either the primary noticee to whom the Act applies
himself or through "any other person" on his behalf. The latter
is described as "such other person", in the concluding part of
that sub-Section [Section 6(2)]. That, "such other person", is also
covered within the ambit of expression "any other person"
mentioned earlier and holding the property in question on behalf
of the primary noticee. In other words, "such other person" will
be a person other than a person to whom the Act applies being
merely a holder of illegally acquired property on behalf of the
person to whom Act applies. Thus, he may be a person other
than a person referred to in Section 2(2) of the 1976 Act. The
legislative intent is to cover "such other person" so as to reach
up to "illegally acquired property" of the convict/detenu and
unravel/lift the veil created by the person to whom the Act applies.
The legislative intent is to reach to all illegally acquired properties
in whosoever's name they are kept or by whosoever they are
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held irrespective of the time period of such acquisition. This is
to ensure that the persons to whom the Act applies referred to in
Section 2(2), do not use mechanism to shield illegally acquired
properties from the proposed action of forfeiture. [Para 54]
[188-C-H]
Attorney General for India v. Amratlal Prajivandas
(1994) 5 SCC 54 : AIR 1994 SC 2179 : [1994] (1)
Suppl. SCR 1 - followed.
1.10 The expression "such person" employed in Section
6(2) is referable to the primary noticee, who is a person to whom
the Act applies. If, however, the notice mentions that the
properties referred to in the notice are held by the noticee through
any other person on his behalf, that may be a case of holding of
physical possession of the illegally acquired property by person
other than the person to whom the Act applies. In such a case,
sub-section (2) triggers in enabling the Competent Authority to
issue notice even to "such other person"-not covered by the
definition of Section 2(2) of the Act. If that person is merely in
possession of the property and not its owner, he may not be able
to explain or prove the fact that the property is not illegally
acquired property of the primary noticee. Indeed, if "such other
person" is claiming ownership of the property through the relative
of the convict or detenu in relation to illegally acquired property,
who was earlier owner thereof upon receipt of notice under
Section 6(2) can certainly impress upon the Competent Authority
that he is a purchaser in good faith for adequate consideration of
the stated property. Such a plea can be considered by the
Competent Authority on its own merits. [Para 55][189-A-D]
1.11 Section 4 of the Act, which in sub-section (1) uses
similar expression- "any person to whom this Act applies to hold
any illegally acquired property either by himself or through any
other person on his behalf"-which is similar to the wordings/
expressions used in Section 6 of the Act, reinforces the above
interpretation. [Para 56][189-D-E]
1.12 Notice under Section 6(1) cannot be issued in respect
of properties for which the Competent Authority has no evidence
or material to record "reasons to believe" that the properties
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were acquired from the assets or money provided by the convict/
detenu. The expression 'reasons to believe' is a phrase used in
several enactments and interpreted by this court to mean not
'mere subjective satisfaction' based on surmise and conjecture,
but a belief that is 'honest and based upon reasonable grounds'.
The satisfaction should be based upon objective material and not
mere feeling or inkling. The requirement is deliberately legislated
as a check against frivolous and rowing inquiries based upon mere
suspicion and pretence. The reasons to believe to be valid should
refer to facts that have a rational connection or relevant bearing
to the formation of belief and should not be extraneous or
irrelevant for the purpose of initiation of inquiry under Section 6
of the Act. [Para 57][189-E-G; 190-A]
1.13 Recording of the reasons to believe and satisfaction
of the aforesaid conditions is an important condition precedent -
a sine qua non - and its violation would have legal consequences.
It is a jurisdictional requirement, which, unlike a procedural
requirement, would affect the proceedings if not complied with.
Therefore, in such cases, the question of no prejudice is
unavailable as the provision for issue of notice and satisfaction of
the precondition for the issue of notice, i.e., "reasons to believe",
is mandatory and not optional or directory. [Para 58][190-B]
1.14 Section 8 of the Act predicates that when proceedings
in respect of a property are initiated by way of notice under Section
6, the burden of proving that the property is not illegally acquired
shall be on the person affected. The enactment, therefore,
reverses the burden of proof but only after the notice under
Section 6 has been validly issued. By virtue of Section 6, the
enactment requires the Competent Authority to form reasons to
believe, which must be rational and based upon some material
which would show that the conditions mentioned in Section 2(2)
as explained and expounded by this Court in Amratlal Prajivandas
are satisfied. Section 8 does not apply at the initial stage or when
the Competent Authority decides whether or not notice under
Section 6 should be issued. The Competent Authority cannot,
simply by relying upon Section 8, reverse the burden of recording
of reasons to believe and mechanically issue notice under Section
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6. For, Section 8 does not apply at the stage when the Competent
Authority forms and records its reasons to issue notice.
[Para 61][190-G; 191-A-C]
1.15 The respondents are covered under the ambit of
relative-being son and wife of the brother of the convict, to whom
the 1976 Act applied. [Para 35][181-A]
1.16 A priori, Section 6(1) of the 1976 Act nowhere provides
that it is "mandatory" to serve the convict or detenu with a primary
notice under that provision whilst initiating action against the
relative of the convict. Indubitably, if the illegally acquired
property is held by a person in his name and is also in possession
thereof, being the relative of the convict and who is also a person
to whom the Act applies, there is no need to issue notice to the
convict or detenu much less primary notice as held by the High
Court in the impugned judgment. For, Section 6(1) posits that
notice must be given to the person who is holding the tainted
property and is likely to be affected by the proposed forfeiture of
the property. The person immediately and directly to be affected
is the person who is the recorded owner of the property and in
possession thereof himself or through some other person on his
behalf. In the latter case, the burden of proof under Section 8 is
not to be discharged by the convict or detenu, but by the person
who holds the illegally acquired property either by himself or
through any other person on his behalf. [Para 64][192-E-G]
1.17 The expression "such other person" in Section 6(2)
is, thus, referable to a person falling in class "through any other
person on his behalf". That is the person to whom the Act applies,
as noted in the opening part of Section 6(1) of the Act. In such a
case, the convict or detenu is not expected to nor can be called
upon to discharge the burden of proof under Section 8.
Accordingly, this Court may lean in favour of the view taken by
the High Court of Kerala and Calcutta High Court for independent
reasons delineated hitherto. [Para 65][193-A-B]
Sajitha & Ors. vs. Competent Authority & Ors 2005
SCC OnLine Ker 101; The Competent Authority &
Administrator & Anr. vs. Manilal Jalal & Anr. 2013 SCC
OnLine Cal 12911 - approved.
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
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1.18 The impugned judgment is set aside and the parties
are relegated before the High Court for being heard afresh on all
other issues and contentions as may be available to both sides.
Further, this Court may not be understood to have expressed
any opinion either way on any other contention available to the
parties. It is said so because even the impugned judgment makes
it amply clear that the writ petitions filed by the respondents were
being allowed on the sole ground that the action against the
respondents sans primary notice to the convict is vitiated. That
view having been reversed, the matter needs to go back before
the High Court for consideration of all other aspects on its own
merits. [Para 67][193-D-F]
1.19 During the course of the hearing, an issue arose
whether the convict-VP had expired before the issuance of notice
under Section 6 on 19th January 1994. The counsel, at the time
of argument, were not aware of the factual position. However, in
the written submissions, the appellant and the respondents have
accepted that the convict V.P. had expired before impugned
notices under Section 6 dated 19th January 1994 were issued.
Be that as it may, in the instant case, the properties in question
and subject matter of notice under Section 6 are in the name of
and held by the two respondents. No entitlement or right has
been claimed in these properties by the heirs of the deceased
convict VP. If the properties were in the name of the deceased
detenu or convict, then different considerations may have applied.
In the context of the instant case, as the convict VP had expired
before the issuance of notice under Section 6 on 19th January
1994, therefore, the need and requirement to serve notice on
him would not arise. [Paras 68, 69][193-G-H; 194-A-B]
Attorney General for India v. Amratlal Prajivandas
(1994) 5 SCC 54 : AIR 1994 SC 2179 : [1994] (1)
Suppl. SCR 1 - followed.
Shobha Suresh Jumani vs. Appellate Tribunal, Forfeited
Property & Anr. (2001) 5 SCC 755 : [2001] 3 SCR
525; Fatima Mohd. Amin (Dead) through LRs. vs. Union
of India & Anr. (2003) 7 SCC 436; Aslam Mohammad
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Merchant vs. Competent Authority & Ors. (2008) 14
SCC 186 : [2008] 10 SCR 332; Nazir Ahmad vs.
Emperor AIR 1936 PC 253; Chandra Kishore Jha vs.
Mahavir Prasad & Ors. (2008) 14 SCC 186 : [1999] 2
Suppl. SCR 754; Mannalal Khetan & Ors. vs. Kedar
Nath Khetan & Ors. (1977) 2 SCC 424 : [1977] (2)
SCR 190; Asha John Divianathan vs. Vikram Malhotra
& Ors. 2021 SCC OnLine SC 147; Tata Chemicals Ltd.
v. Commissioner of Customs (Preventive), Jamnagar
(2015) 11 SCC 628 : [2015] 7 SCR 132; Kewal Krishan
v. State of Punjab AIR 1967 SC 737 : [1962] Suppl.
SCR 613; Bar Council of Maharashtra v. M. V.
Dabholkar & Ors. (1976) 2 SCC 291 : [1976] 2 SCR
48; S. Narayanappa & Ors. v. Commissioner of Income
tax, Bangalore AIR 1967 SC 523 : [1967] SCR 590 -
referred to.
P. Ramanatha Aiyar's The Major Law Lexicon; G.P.
Singh, in Principles of Statutory Interpretation, 14th
Edition, at page 430 - referred to.
Case Law Reference
[2001] 3 SCR 525
referred to
Para 17
(2003) 7 SCC 436
referred to
Para 20
[2008] 10 SCR 332
referred to
Para 20
[1999] 2 Suppl. SCR 754
referred to
Para 22
[1994] (1) Suppl. SCR 1
followed
Para 28, 29,
61, 63
[1977] (2) SCR 190
referred to
Para 43
[2015] 7 SCR 132
referred to
Para 57
[1976] 2 SCR 48
referred to
Para 57
[1962] Suppl. SCR 613
referred to
Para 57
[1967] SCR 590
referred to
Para 59
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
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CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 85928593 of 2010.
From the Judgment and Order dated 24.03.2008 of the High Court
of Judicature at Madras in Writ Petition Nos.1149-1150 of 2001.
Aman Lekhi, ASG, A. K. Srivastava, Sr. Adv., Rupesh Kumar, S.
A. Haseeb, Adit Khorana, Advs. for the Appellants.
Atul Shankar Vinod, M. P. Vinod, Advs. for the Respondents.
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J.
1. The conundrum in these appeals is: when the Competent
Authority1 claims that the subject property (to be forfeited) is that of the
convict (V.P. Selvarajan) and ostensibly held by the relatives of the convict
(respondents herein), whether it is mandatory to serve a primary notice
under Section 6(1) of the 1976 Act upon such convict with copy thereof
to his relatives under Section 6(2) of the 1976 Act, and non-service of
such primary notice upon the convict would vitiate the entire proceedings
initiated only against his relatives?
2. The High Court of Judicature at Madras2 vide impugned
judgment3 held that Section 6 of the 1976 Act leaves no room for doubt
that the primary notice must be served on the convict, wherein the convict
is required to indicate the sources of his income, earnings or assets, out
of which or by means of which he had acquired the properties sought to
be forfeited; and non-service of such notice upon the convict would
vitiate the action initiated against his relatives, even if the forfeited
properties are ostensibly held by or in the name of the relatives. The
High Court rejected the argument of the appellants herein (Competent
Authority) that only the person in whose name the property is held is
required to be called upon to offer explanation regarding the sources of
his income, earnings or assets, out of which or by means of which he
had acquired such property including the evidence on which he would
rely and other relevant information and particulars. If the property in
1 under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property)
Act, 1976 (for short, "1976 Act")
2 for short, "Madras High Court"
3 in Writ Petition Nos. 1149 & 1150 of 2001 decided on 24.3.2008 reported in 2008
SCC OnLine Mad 244
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question is ostensibly held by the relatives in his name or through any
other person on his behalf, the convict or detenu is not expected to nor
can offer any explanation in that regard. The High Court also rejected
the argument of the appellants herein that no prejudice is likely to be
caused to the noticees (respondents herein) being the relatives of the
convict, who had held the forfeited properties in their name. The High
Court opined that the action against the respondents initiated by the
Competent Authority was vitiated for lack of notice to the convict and it
was, thus, pleased to set aside the entire action initiated against the
respondents by the Competent Authority.
3. A contra view has been taken by at least two other High Courts.
The first is of the High Court of Kerala in Sajitha & Ors. vs. Competent
Authority & Ors.4 wherein after analysing the relevant provisions, it
held as follows:
"11. 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 relatives.
12. Petitioners also have raised a contention that more than six
years have elapsed and the proceedings have not been initiated
within a reasonable period. No time limit has been prescribed
under the Act. The Apex Court in Attorney General for India
v. Amratlal Prajivandas5 has dealt with the scope and ambit of
the Act which requires no reiteration. However we may refer to
the recent decision of the apex court in Kesar Devi v. Union of
India6. The apex court while dealing with Section 2(2)(c) of
the Act has categorically held that the burden of proving
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
v. V. MOHAN [A. M. KHANWILKAR, J.]
4 2005 SCC OnLine Ker 101
5 (1994) 5 SCC 54 : AIR 1994 SC 2179
6 (2003) 7 SCC 427
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that such property is not illegally acquired property will be
upon the person to whom notice has been issued. On facts
petitioners could not establish that the properties were legally
acquired. Competent authority and the Tribunal concurrently found
so and this court in writ jurisdiction will not be justified in a taking
a different view in the absence of any contra evidence. We
therefore find no infirmity in the orders passed by the competent
authority. The writ petition lacks merits and the same would stand
dismissed."
(emphasis supplied)
The second decision is of the Calcutta High Court in The
Competent Authority & Administrator & Anr. vs. Manilal Jalal &
Anr.7. Even in this case, notice was issued only to the wife of the detenu
and not to the detenu. The question was specifically dealt with by the
Calcutta High Court after analysing the relevant provisions in the following
words:
".....
A bare perusal of Section 2 of the Act would show that the
Act not only applies to the detenu but also to the relations
and/or associates of such detenu. Nowhere the said
provision of law mandates that a proceeding against a
relative of a detenu can be initiated only if such detenu is
proceeded against under SAFEMA. Such right to proceed
against the relative/associate is independent of any action
taken against the detenu under SAFEMA. It is wholly
fallacious to argue that the detenu must be proceeded
against under SAFEMA as a condition precedent for any
action against a relative of such detenu. The properties and/
or assets which were sought to be forfeited were standing
in the name of Sarbani Devi Jalan herself and therefore
respondent authorities rightly issued a notice under Section
6 of the Act upon her as "person affected" for the purpose
of initiating a proceeding of forfeiture of such property. There
is nothing in the law that the property standing in the name
of a relation of a detenu which is sought to be proceeded
against must require a notice to be issued upon the detenu
7 2013 SCC OnLine Cal 12911
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also. To infer such a requirement when the same is not
provided in law would amount to rewriting the statutory
provision which is unwarranted. This submission of the
appellants being unfounded must therefore fail.
....."
(emphasis supplied)
4. In view of the above, these appeals not only involve question
regarding interpretation of Section 6 read with other provisions of the
1976 Act, but also call upon us to expound the stated question
authoritatively and resolve the conflicting view taken by different High
Courts.
5. Reverting to the facts of the present case, one V.P. Selvarajan
(convict) - brother-in-law of respondent No.2 and paternal uncle of
respondent No.1, was convicted for an offence punishable under the
Customs Act, 19628 on 23.11.1969. As a result of his conviction, he
came within the ambit of the expression "person" or "such person"
occurring in the 1976 Act - Section 2 in particular. Respondents being
the relatives of the convict in terms of Section 2(2) read with Explanation
2 also came within the ambit of expression "person" defined in the 1976
Act to whom the Act applies.
6. The 1976 Act came into force with effect from 5.11.1975,
pursuant to which the Competent Authority under the Act resorted to
inquiry, investigation or survey under Section 18 of the Act and on the
basis of the information collated had reason to believe that certain
properties are illegally acquired properties having nexus to the unlawful
activities of the convict. As a result, a notice under Section 6(1) of the
1976 Act was issued to the convict on 2.2.1980. In the present appeals,
we are not concerned with the said notice or for that matter illegally
acquired properties of the convict referred to therein.
7. The Competent Authority, however, on the basis of information
gathered had reason to believe that some of the properties were held by
the respondents herein by themselves, which were illegally acquired
properties within the meaning of Section 3(1)(c) of the 1976 Act.
Accordingly, notice under Section 6(1) of the 1976 Act dated 19.1.1994
was issued to V. Mohan, respondent No.1 herein being nephew of the
convict, calling upon him to disclose the sources of his income, earnings
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
v. V. MOHAN [A. M. KHANWILKAR, J.]
8 for short, "1962 Act"
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or assets, out of which or by means of which he had acquired the
properties referred to in the stated notice by himself. The description of
the properties had been given in the Schedule, which reads thus:
8. Similarly, a notice dated 28.2.1994 was issued to Smt. V.
Padmavathy, respondent No.2 herein being the relative of the convict in
respect of properties referred to in the said notice purportedly illegally
acquired properties. The Schedule reads thus:
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9. The Competent Authority after giving opportunity to the
respondent(s) eventually passed separate forfeiture order(s) on 30.4.1998
against Smt. V. Padmavathy, respondent No.2 and on 28.5.1998 against
V. Mohan, respondent No.1 in exercise of powers under Section 7(1) of
the 1976 Act. It held that an order of forfeiture of the stated properties
had become inevitable as the respondent(s) had failed to produce any
credible evidence or explanation to discharge the burden of proving that
the properties referred to in the impugned notice were legally acquired
properties by them.
10. Being aggrieved, the respondents took the matter in appeal
bearing Nos. F.P.A.No.31/MDS/98 (of respondent No.2) and
F.P.A.No.32/MDS/98 (of respondent No.1) before the Appellate Tribunal
for Forfeited Property, New Delhi-II, Camp: Bangalore9. These appeals
came to be dismissed by the Appellate Tribunal vide common order dated
15.11.2000. Resultantly, the order of forfeiture of subject properties passed
by the Competent Authority was upheld.
11. The respondents then carried the matter before the Madras
High Court by way of Writ Petition No.1149 of 2001 (of respondent
No.1) and Writ Petition No.1150 of 2001 (of respondent No.2). Both
these writ petitions came to be allowed by common judgment and order
dated 24.3.2008 passed by the Division Bench of the Madras High Court
taking the view that the action initiated against the respondents had vitiated
owing to lack of notice to V.P. Selvarajan (convict), which in its view
was mandatory requirement under Section 6 of the 1976 Act.
12. The appellants, being aggrieved by the said decision, have
approached this Court by way of present appeals. According to the
appellants, the view taken by the Madras High Court vide impugned
judgment on the interpretation of Section 6 of the 1976 Act is untenable.
Whereas, the issue has been rightly concluded in favour of the appellants
by two other High Courts, namely, High Court of Kerala and Calcutta
High Court.
13. It is urged that notice under Section 6 of the Act is required to
be given to the person to whom the 1976 Act applies in respect of
properties held by him, either by himself or through any other person on
his behalf, being illegally acquired property within the meaning of the
Act and proposed to be forfeited by the Central Government under the
Act. It does not require issuing notice to the convict or detenu, as the
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
v. V. MOHAN [A. M. KHANWILKAR, J.]
9 for short, "Appellate Tribunal"
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case may be, if the properties are not held by him or in his name. Indeed,
if the properties in question are held in the name of any other person on
his behalf, the notice is required to be given to such person. To buttress
this submission, reliance has been placed on Section 2 of the Act providing
for application of the Act to the persons specified in Section 2(2). The
spouse of the brother of the convict as well as the son of the brother of
the convict are plainly covered within the expression "relative" as clarified
in Explanation 2 of Section 2 of the 1976 Act and for which reason, the
Act applies to the respondents as well. Emphasis is placed on the
expression "held" occurring in Section 6 of the 1976 Act in particular
which in terms of definition in P. Ramanatha Aiyar's The Major Law
Lexicon10 would cover (i) those entitled to possession of property; and
(ii) those in possession thereof.
14. It is urged that respondents were admittedly holding the
properties in their name and thus, they were entitled to possession of
such property and in fact they were in physical possession thereof.
Therefore, they alone were expected to offer explanation and discharge
the burden of proving that the properties are their legally acquired
properties. They were, in fact, the persons directly affected by the
proposed action of forfeiture and, hence, notice under Section 6 was
required to be issued to the respondents alone. There is no mandate in
Section 6 that a primary notice be served on the convict to require him to
indicate his sources of income as noted by the Madras High Court.
More so, the convict is not expected to offer explanation with regard to
the properties held by his relatives and not by him.
15. As regards the purport of Section 6(2) of the 1976 Act, it is
urged that the plain and literal interpretation does not mandate issuing
notice to the convict even if the property proposed to be forfeited is not
held by him at the relevant time. It is a different matter that the convict
can also be issued notice, but it is not a mandatory requirement when the
properties proposed to be forfeited were held by the relatives of the
convict at the relevant time when the action is initiated.
16. The appellants have placed reliance on the decisions of the
High Court of Kerala and Calcutta High Court referred to earlier. In
addition, reliance has also been placed on the dictum of the Constitution
Bench of this Court in Amratlal Prajivandas11, which has decoded the
10 4th Edition, Vol. 3 at pages 3050-51
11 Supra at Footnote No. 5
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intent of the legislation and all relevant provisions while rejecting the
argument regarding constitutional validity of the enactment. It held that
the burden of establishing that the properties mentioned in Section 6
notice held on that date by a relative or an associate of the convict or
detenu are not illegally acquired properties, lies upon such relative or
associate. Further, the Act is intended to frustrate all attempts at screening
properties irrespective of how the relatives/associates hold the property
(whether benami or as name-lender or through transferee) and wherein
the said relative/associate cannot disclose that the properties have not
been acquired with the monies or assets belonging to a detenu/convict,
but the failure to discharge the burden would justify their forfeiture there
being a prohibition on any person to whom the Act applies from holding
illegally acquired properties.
17. Reliance has also been placed on the dictum in Shobha Suresh
Jumani vs. Appellate Tribunal, Forfeited Property & Anr.12, wherein
a show-cause notice under Section 6 was issued to the detenu Suresh
Manoharlal Jumani and his wife Shobha Suresh Jumani. Right to file
appeal by Shobha Suresh Jumani was questioned by the competent
authority. Nevertheless, this Court upheld the action initiated against the
relative (wife) of the detenu as the properties were held by her. It is
submitted that the impugned judgment be set aside and the contra view
taken by the High Court of Kerala and Calcutta High Court be affirmed.
18. Per contra, learned counsel for the respondents has supported
the view taken by the Madras High Court in the impugned judgment and
would urge that the appellants had all throughout proceeded against the
respondents on the assumption that the respondents are only ostensible
owners and the properties in question, in fact, belonged to the convict.
Further, the respondents were holding the subject properties on behalf
of the convict. In that context, the Madras High Court examined the
purport of Section 6 and the interplay of two sub-sections therein to
conclude that primary notice to the convict was a mandatory requirement,
in such a fact situation. Now, in the present appeals, the appellants have
taken a completely different position, namely, that the respondents are,
in fact, the recorded owners of the subject properties and, therefore, no
notice is required to be given to the convict.
19. The respondents have invited our attention to the definition of
"persons" and Explanation 2 in Section 2 of the 1976 Act. It is also
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
v. V. MOHAN [A. M. KHANWILKAR, J.]
12 (2001) 5 SCC 755
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urged that the properties referred to in the impugned notices issued to
the respondents were not made subject matter of notice under Section 6
issued to the convict on 2.2.1980.