Allowed

Aminath Fathima v. the Competent Authority

Madras HC25 Apr 2017WP/15020/2002

Case brief

AI extract

What is this about?

The High Court allowed a writ petition challenging the forfeiture order under SAFEMFOPA against the petitioner. The Court quashed the order, holding that the competent authority failed to establish a necessary nexus between the petitioner's properties and the detained father, rendering the forfeiture legally unsustainable.

What did the court decide?

Notice u/s 6(1) of SAFEMFOPA quashed; order of forfeiture set aside.

Aminath Fathima Vs the Competent Authority — Writ and Judicial Review | Madras HC (2017)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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Reserved on: 30.01.2017

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Pronounced on:25.04.2017

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Coram:

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The Hon'ble Dr. Justice ANITA SUMANTH

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W.P.No.15020 of 2002

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Aminath Fathima .. Petitioner

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Versus

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The Competent Authority,

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Smugglers and Foreign Exchange Manipulators (Forfeiture of Property ) Act, T. Nagar,

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Chennai 600 017.

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Appellate Tribunal for Forfeited Property,

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4th Floor, Lok Nayak Bhawan,

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Khan Market, New Delhi 110 003. .. Respondents

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Prayer: Writ Petition filed under Article 226 of the Constitution of India praying for issuance of Writ of Certiorari to call for the records of the Appellate Tribunal for forfeited property made in Appeal No.FPA.17/MDS/2001 dated 27.2.2002, confirming the order passed by the Competent Authority under Smugglers and Foreign Exchange Manipulators Forfeiture of Property Act 1976 in F.No.OCA/MDS/2389/81 dated 28.2.2001 and quash the same.

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For Petitioner .. Mr. B. Kumar, Senior counsel

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for R. Loganathan;

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For respondent .. Mr.G.Rajagopalan

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ASG

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for Mr.B.Rabu Manohar

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for R1 and R2.

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ORDER

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This Writ Petition challenges an order passed by the Appellate Tribunal for Forfeited Properties (in short ‘Tribunal’) dated 27.2.2002 confirming the order of the Competent Authority dated 28.2.2001 in terms of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (in short’ SAFEMFOPA’).

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The petitioner is the daughter of one S.S.A. Shahul Hameed alias Lucky Savanna, Keelakarai who was detained in terms of the Conservation of foreign exchange (Protection of smuggling) Act (in short ‘COFEPOSA’). There is no dispute with the position that she comes within the definition of ‘person' in terms of section 2(2)(c) of the SAFEMFOPA and was issued a notice in terms of Section 6(1) of the said Act calling upon her to show cause why properties at Lingi Chetty Street, Keelakarai, jewellery, Bank Account and cash on hand do not constitute ‘illegally acquired properties’ liable to be forfeited in terms of the SAFEMFOPA. Despite objections of the petitioner, an order of forfeiture was passed, that was confirmed by the Tribunal vide order dated 27.2.2002 giving way to the present writ petition.

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Mr. B. Kumar, learned Senior Advocate appearing for Mr.Loganathan on behalf of the petitioner would draw my attention to the provisions of section 6(1) of the Act, wherein a notice to show cause may be issued by the competent

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authority upon the recording of reasons in writing leading to the belief that all or any of the properties sought to be addressed in the notice are illegally acquired.

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According to him, the reasons recorded in the present case do not reveal the link between the properties in issue and the detenu which is a precondition to their forfeiture as ‘illegally acquired properties’. In the absence of such nexus being drawn by the competent authority, the very foundation of the proceedings fail and are, according to him, liable to be quashed. He would rely on judgments of the Supreme Court in the cases of Attorney General of India Vs. Amratlal Prajivandas and others (1994 AIR SC 2179(1) (Constitutional Bench) , Fatima Mohd.Amin Vs. Union of India and another [(2003) 7 SCC 436] (Full Bench) and Aslam Mohammed Merchant Vs. Competent Authority and others [(2008) 14 SCC 186] (Division Bench) as well as the First Bench of this Court in the case of the Competent Authority Vs. M.Khader Moideen . Learned senior counsel would also bring to our notice that the mother of the petitioner, against whom similar proceedings had been initiated under SAFEMFOPA, had been cleared of all the charges by this Court by order dated 08.04.2001in W.P.No:7609 of 2001 ((2011) 6 MLJ 661).

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Per contra, Mr.G.Rajagopal, learned Addl. Solicitor General appearing for the respondent would support the order of forfeiture as confirmed by the Tribunal stating that the reasons had duly taken into account the fact that the properties are nothing, if not illegally acquired. He would emphasize the position that the petitioner was, in 1965, merely 21 years of age and a Pardanashin lady with neither means nor resources to acquire such substantial assets on her own.

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In such circumstances, he would urge that the order of the Tribunal be upheld.

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I have heard the submissions of learned Senior counsel appearing for

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both parties, perused the records and the case-law relied upon.

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The Supreme Court in the case of Attorney General of India Vs. Amratlal Prajivandas and others (supra) has dealt in detail with the provisions of the SAFEMFOPA and the need for the Legislation. The Bench has specifically dealt with the scope of the Act and its application to third parties. In the context of its applicability to relatives and associates of the detenue, the Bench states thus:

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‘ ....We do not think that Parliament ever intended to say that the properties of all the relatives and associates, may be illegally acquired, will be forfeited just because they happen to be the relatives or associates of the convict/detenu. There ought to be the connecting link between those properties and the convict/detenu, the burden of disproving which, as mentioned above, is upon the relative/associate.....’

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The connecting link or nexus between the property and the detenu has

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to emanate from the ‘reasons recorded’ prior to issue of show cause notice under section 6(1) of the Act. The entire superstructure or edifice of the proceedings lies on the strength of the material set out in the reasons to believe. It is at this stage that the competent authority has to justify the link between the assets that stand in the names of the relatives, and the detenu himself so as to establish, at least prima facie, that the relative/associate is a mere name lender for property that has been acquired by the detenu out of the funds, incomes, earnings or assets derived, obtained from or attributable to any activity prohibited

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by or under/contravening any law for the time being in force relating to any matter in respect of which Parliament has the power to make laws.

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Mr.Rajagopal, Learned Senior Counsel, however, would draw attention to the definition of ‘ illegally acquired property’ under the SAFEMFOPA and the Narcotics Drugs and Psychotropic Substances Act 1985, pointing out the differences in language between the two enactments. Both definitions are extracted below:

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The definition of 'illegally acquired property' set out in section 3(c) of the SAFEMFOPA reads thus:

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(c) illegally acquired property, in relation to any person to whom this Act applies, means-

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(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

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(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

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(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

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(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;

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and includes-

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(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;

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(B) 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 falling under item (A), or the income or earnings therefrom;….

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(emphasis supplied)

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The definition of ‘illegally acquired property in terms of the

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Narcotics Drugs and Psychotropic Substances Act reads thus:

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68B. Definitions.—In this Chapter, unless the context otherwise requires,—

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(g) illegally acquired property, in relation to any person to whom this Chapter applies, means, —

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(i) any property acquired by such person, whether before or after thecommencement of this Chapter, wholly or partly out of or by means of any income, earnings or assets derived or obtained from or attributable to the contravention of any provisions of this Act or the equivalent value of such property; or….

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(emphasis supplied)

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According to him, the definition of ‘ illegally acquired property’ under the SAFEMFOPA is much wider and consequently, the acquisition of the property, whether illegal or not, would have to be viewed in the context of all other enactments by Parliament as opposed to the Narcotics Act where the definition refers only to violations under that specific Act. That may be so. However, this court is of the opinion that the wider ambit of the definition under SAFEMFOPA does not, in any way, obviate the requirement in the reasons recorded, for the establishment of a link between the property in issue and the detenu. I draw support, in this regard, from the judgments of the Supreme Court in the cases of Aslam Mohammad Merchant and others (supra), Fatima Mohd Amin (supra) and P.P.Abdulla vs Competent Authority ((2007) 2 SCC 510). The latter two judgments have been rendered in the context of the SAFEMFOPA and the conclusion reached is that the Act would not be attracted in a case where the notice and the reasons recorded do not allege a link or nexus between the property sought to be forfeited and the illegally acquired money/activity of the detenu. Thus, the unambiguous and settled position of law is to the effect that unless the funds for acquisition of the property standing in the name of a relative are traced back to the detenu, and the reasons recorded contain the basis of the link or nexus drawn in this regard, the provisions of SAFEMFOPA would not stand attracted.

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Let us now apply the above proposition to the reasons recorded in the present case, extracted below:

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Reasons recorded for the Issue of Notice Under section 6(1) of SAFEM (FOP) Act, 1978

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Case of Smt. Ameenath Fathima,

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425, Mint Street, Madras – 600 001.

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Smt. Ameenath Fathima is the daughter of Shri S.S.A. Shahul Hameed, alias Lucky Saravana, Kilakarai, who is a COFEPOSA detenue. Hence she is a ‘Person’ under sec.2(2)(o) of SAFEM (FOP) ACT, 1976.

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2. A perusal of the Income-tax records show that she purchased a house property at Old No. 286, (New No.135), Linghi Chetty Street, Madras – 1 in December, 1965 for Rs. 45,000/- including the expenditure on stamp paper and registration charges, the total investment was around Rs.50,000/-. This was claimed to have been met as under :-

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(i) Amount disclosed under Sec.24 of Finance (No.2) Act,
1965 brought into account. Rs.22,000
(ii) Credit on 31-3-1965 said to be proceeds on sale of Jewels but could not be proved and offered for assessment. Rs. 4,000
(iii) Credit on 30-11-1965 said to be proceeds of sale of Jewels but could not be proved and offered for assessment. Rs. 4,000
(iv) Prior mortgage taken over. Rs. 20,000 -------------------
Total Rs. 50,000 --------------------

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It is also seen that this property was demolished and new construction was undertaken from the previous year relevant for the assessment year 1968-69 onwards and the construction continued year after year in stages.

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3. It is apparent from the above facts that out of the total investment of Rs.50,000/- in the house property aforesaid, the sources for Rupees : 30,000/- could not be proved and hence were either voluntarily disclosed under the Voluntary

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Disclosure Scheme (Rs.22,000/-) or offered for assessment as income from ‘Undisclosed Sources’ (Rs.8,000/-). Therefore, atleast to the extent of Rs.30,000/on the admission of Smt. Ameenath Fathima herself, the investment in this house property is from undisclosed sources. Hence it is apparent that this (is) an ‘illegally acquired property’.

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4. In addition to the above property, she has a house property at her native place viz., Kilakarai. It is seen from the Income-tax records for the assessment year 1975-76 that she claimed that this partly constructed building at the native place valued at Rs.35,000/- was gifted to her by her mother on 4-12-1974. From the assessment records it is seen that further construction in this property was carried out and the value of building has been admitted at Rs.60,000/- in the Wealth-tax return for the assessment year 1979-80. There is no evidence on record to show that Smt.Ameenath Fathima’s mother was possessed of funds to construct a building for Rs.35,000/- and gift it to her. In the absence of any evidence to prove the sources for her mother to construct a building at her native place, it is to be taken that the property is an ‘illegally acquired property’.

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5. It is seen from the Wealth-tax records that this lady is possessed of Jewellery worth Rs. 55,000/- as also a bank account with Indian Bank. The Incometax records show that there are no debits for the purchase of jewellery. In fact, in the Wealth-tax Return for 1971-72, no jewellery had been disclosed. In the Wealth-tax return for 1972-73, jewellery of the value of Rs.21,000/- had been admitted. The sources for the acquisition of the jewellery had not been disclosed. The value of Rs.21,000/- was continued to be disclosed up to the assessment year 1973-74. However, for the assessment year 1974-75, the value admitted was Rs.52,500/-. The sources for the acquisition of the additional jewellery had not been disclosed. No list of jewellery had been filed. Therefore, it has to be considererd, prima-facie, that the jewellery has also the bank account are illegally acquired properties and hence a notice under section 6(1) will be issued in respect of the following properties:

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(1) Land and building at 135, Linghi Chetty Street, Madras-1

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(2) Land and building at Kilakarai.

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(3) Jewellery of the value of Rs.55,000 as on 31-3-1979 and

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further acquisition.

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(4) Bank Account in Indian Bank which stood at Rs.493 as on

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31-3-1979 and further accretions thereto.

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(5) Cash on hand as on 31-3-1979, Rs.2,910 with further Accretions thereto.

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The assets in question are five fold. With respect to the house

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property at Linghi Chetty Street, the explanation given by the petitioner for the

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investment of Rs.50,000/- was accepted to the extent of Rs.20,000/-. The

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competent authority, however states that the sources for the balance of Rs.30,000/- cannot be proved and assumes that since a voluntary disclosure under Income tax law was made by the assessee, the property is illegally acquired. While this may be undisclosed income in the hands of the petitioner for the purposes of income tax duly offered under the voluntary disclosure scheme, we fail to see how it would satisfy the definition of illegally acquired property under SAFEMFOPA. The wider definition under SAFEMFOPA cannot be pressed into service to bring within the fold of the Act all and every income unless the competent authority draws a link between the same and the detenu. We cannot lose sight of the position that other enactments like the Income and Wealth Tax Acts contain their own mechanisms for addressing undisclosed income/assets and the purpose of the SAFEMFOPA is different as seen from the Preamble of the Act that reads ‘ An act to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto .’ The presence of undisclosed income/wealth has thus to be seen in the context of illegal acts of omission and commission by the detenu only and none other. In the present case, there is not even an allegation made, let alone a link/nexus drawn in this regard.

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With respect to the house property at Kilakkarai, the explanation by the petitioner was to the effect that the building was gifted to her by her mother and further construction was carried out by her. The competent authority states that there was no evidence to establish that the petitioner's mother had enough funds in this regard and thus assumes that the property is illegally acquired

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property in the petitioners’ hands. Jewellery and the bank account with Indian Bank were also held to be illegally acquired on the 'prima facie' consideration that the sources for the acquisition of the jewellery were not proved by the petitioner. Nowhere in the reasons have the properties traced back to the detenu and his acts prohibited/contravening the law. The conclusion of illegal acquisition has been drawn on the mere ipse dixit of the authority.

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In this context, it would be relevant to quote the Bench, at para 8 of the judgment in P.P.Abdulla’s case (supra):

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‘ 8. It must be stated that an order of confiscation is a very stringent order and hence a provision for confiscation has to be construed strictly, and the statute must be strictly complied with, otherwise the order becomes illegal.’

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In the light of the above discussion, the Reasons recorded by the competent authority do not satisfy the parameters of the Act. As a consequence, the notice u/s 6(1) based on the reasons as aforesaid, stands quashed and the order of forfeiture is set aside. The writ petition stands allowed without costs.

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25.04.2017

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Msr

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Speaking order/non-speaking order Index: Yes/No To

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