Shri Ranchhodbhai Bhagwanbhai Tandel vs 1) The Competent Authority

1 (WP-984.2000)

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CRIMINAL APPELLATE JURISDICTION

CRIMINAL WRIT PETITION NO.984 OF 2000

Shri Ranchhodbhai Bhagwanbhai Tandel) since deceased through LR ) 1-A Naresh Ranchhodbhai Tandel, ) Age 45 years, resident of Parkota ) Street, Nani Daman, Daman (U.T.) )..Petitioner

V/s (1) The Competent Authority, Mumbai )

appointed under the Smugglers and ) Foreign Exchange Manipulators ) (Forfeiture of Property) Act, 1976, having ) its office at the Office of the Joint ) Secretary of the Central Government, Law )

and Justice, Income Tax Office, Mumbai )

) (2) State of Maharashtra ) ) (3) Union of India )..Respondents

Mr. G.S. Pikale for the Petitioiner. Ms. Rebecca Gonsalves for Respondent Nos. 1 & 3. Dr. F.R. Shaikh, APP for Respondent No. 2 - State.

CORAM: V. M. KANADE & P.D. KODE JJ.

DATE : FEBRUARY 27, 2012

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ORAL JUDGMENT: (Per V.M. Kanade, J.)

1. By this Petition which is filed under Articles 226 and 227 of the Constitution of India, Petitioner is challenging legality and validity of the orders passed by the Respondents in the

proceedings under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 [For short "SAFEMA") viz the order dated 22/3/1978 of the competent

authority forfeiting the property of the Petitioner, which order

was partly confirmed by the appellate authority by its order dated 28/2/2000. It is an admitted position that the

appellate tribunal partly allowed the appeal filed by the Petitioner and set aside the order of the competent authority to the extent of 7 acres of agricultural land which was

acquired by the Petitioner in the year 1957-58.

2. There is a chequered history in respect of the dispute in

this case. Petitioner was detained by the order of detention dated 4/6/1976 under section 3(1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (For Short "COFEPOSA Act") and while passing the

said order of detention power under section 12A of the COFEPOSA Act was also invoked by the Detaining Authority and he was detained till 21/3/1977 when the order of detention was revoked by the Detaining Authority - Chief Secretary of Goa, Daman and Diu. The period during which

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the Petitioner was detained, there was situation of emergency prevailing in the country and, as such, the

Petitioner could not challenge the order of detention under

Articles 226 and 227 of the Constitution of India. After the emergency was over, the said order was revoked by the competent authority.

3. Thereafter a show cause notice was issued to the Petitioner under section 6(1) of the SAFEMA and order under

section 7 of the Act was passed on 22/3/1978 and his

residential property and other immovable properties were forfeited.

4. During pendency of the appeal before the appellate authority, the Petitioner filed Special Civil Application

No.2145 of 1978 before the High Court of Gujarat wherein

the Petitioner challenged the notice under section 6(1) of the SAFEMA and the order passed by the competent authority

and he also challenged the constitutional validity of SAFEMA. The Gujarat High Court disposed of the Special Civil Application No.2145 of 1978 by order dated 9/8/1994 in view of the decision of the Supreme Court in Attorney General of

India vs. Amratlal Prajivandas and Ors1. Thereafter the order passed by the competent authority was partly confirmed by the appellate tribunal.

1 Judgment Today 1994 (3) SC 583

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5. A preliminary objection was also raised regarding maintainability of this Petition in view of disposal of the

Petition filed by the Petitioner in the Gujarat High Court. The

preliminary objection, however, was heard and decided by Division Bench of this Court by order dated 26/6/2003 and the preliminary objection was rejected. Thereafter, Petition

was heard on merits and by judgment and order dated 25/7/2003, Writ Petition filed by the Petitioner was dismissed and costs of Rs 50,000/- was imposed on the Petitioner.

6. The Judgment ig and order dated 25/7/2003 was challenged by the Petitioner by filing criminal appeal being

Criminal Appeal No.926 of 2005 in the Supreme Court. The Apex Court in its order passed in the said Criminal Appeal observed as under:-

"In our opinion, both the Gujarat High Court and the Bombay High Court had

jurisdiction in the matter because part of the cause of action arose in Gujarat and part of the cause of action arose at Bombay. In our opinion, it was incumbent upon the Bombay

High Court to decide the validity of the order of the Appellate Tribunal dated 28.02.2000 on merits since that issue has not been decided by the Gujarat High Court.

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On the facts and circumstances of the case, we set aside the impugned judgment

of the High Court to a limited extent and

remand the matter to the Bombay High Court for a fresh decision in accordance with law on the question whether the order of the

Appellate Authority dated 28.02.2000 was valid or not. However, the High Court will not go into the question whether the

detention order was valid or not, since that

order has been held to be valid.

The Appeal is allowed without going into merits of the case. The Bombay High Court is requested to decide writ petition

expeditiously."

After this order was passed on 27/10/2010, in view of the directions to decide it expeditiously and since this is one of the oldest matter on the board, this matter was taken up for hearing.

7. Mr. Pikale, learned Counsel appearing on behalf of the Petitioner submits that the order of the competent authority and the order of the appellate tribunal do not satisfy the test of nexus laid down by the Courts. It is submitted that the

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proceedings under SAFEMA can be initiated if there is nexus or link with the illegal income and the property of the

Petitioner and in the absence of any adverse order under the

Customs Act and/or FERA or any other Act, there could not be any illegal income as defined under section 3(1)(c) of the SAFEMA and, in the absence of any illegal income, there

could not be any proceedings under the SAFEMA. Secondly, it is submitted that the Petitioner did not do any activity which was prohibited by law since he was an agriculturist

and fisherman and, therefore, proceedings under SAFEMA

could not have been initiated against the Petitioner. Reliance was placed on the judgments of the Apex Court in

Aslam Mohd. Merchant vs. Competent Authority 1 and in Rajanikant Belekar2. Reliance was also placed on the judgment of Kerala High Court dated 24/2/2009 in W.A.

No.1645, 1658 and 1659 of 2007. Reliance was placed on

the judgments of the Apex Court in Smt. Fatima Mohd. Amin (Dead) Through LR vs. Union of India and Anr in Civil Appeal

Nos. 7400-7401 of 1990 and in P.P. Abdulla and another vs. Competent Authority and Others3. It is then submitted that the Petitioner has been accepted to be the owner of 28 acres agricultural land at Taluka Pardi, District Bulsar

which was in his possession and cultivation since 1957. It is contended that since 1957, Petitioner's wife Smt. Valiben R. Tandel was having 79500 sq.mt. at Kachhi Gaon Nani

1 (2008) 14 SCC 186 2 SLP Civil No.10031 CC 2714 in W.P. No.837 of 2007 3 (2007) 2 SCC 510

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Daman right from 1957 as cultivator/tenant of the land before liberation of Goa, Daman and Diu and there was

sufficient legitimate income even before liberation to fund a

purchase of agricultural land and also to construct/repair the house. It is also submitted that the Petitioner had an ancestral land at Parikota Sheri even before liberation and

the house was repaired for a sum of Rs 35,000/- in 1968. It is then submitted that the Petitioner was illiterate and did not maintain the regular books of accounts. It is submitted that

in the orders which were passed by the income tax

authorities, there was no suggestion that the same was on account of proceeds of violation of Customs Act and/or FERA

or any other Act. It is further submitted that the land on which the house was constructed at Nani Daman having been acquired before liberation of Daman, it could not be the

subject matter of SAFEMA proceedings. It is also submitted

that the residential house (storage shed) at Taluka Pardi, Ditrict Bulsar situated on the agricultural land which was

acquired pre-liberation, also could not be the subject matter of forfeiture by the competent authority and, lastly, it is submitted that the competent authority erred in initiating proceedings under SAFEMA without first complying with the

mandatory pre-requisite requirement of making inquiry as contemplated under the provisions of the Act and establishing nexus of the Petitioner's property with illegal income and, therefore, the show-cause notice was illegal as it disclosed complete non-application of mind.

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8 Ms. Rebecca Gonsalves learned Counsel appearing on

behalf of Respondent Nos. 1 & 3 submitted that the

provisions of SAFEMA were applicable to the Petitioner since he was detained under the valid detention order which was issued under the COFEPOSA Act. It is submitted that the

Petitioner would be squarely covered under section 2(b). Reliance was placed on the judgment of the Apex Court in Attorney General for India vs. Amratlal Prajivandas 1. It is

submitted that the Apex Court had held that detention order

passed under section 3 read with section 12A of COFEPOSA Act would form basis for taking action under the SAFEMA. It

is submitted that, in the present case, valid order of detention was issued against the Petitioner on 04/6/1976. It was not challenged during the period of detention and,

therefore, the same would form the basis for proceeding

under SAFEMA and validity of the same could not be challenged while challenging the proceedings under the

SAFEMA. It is then submitted that since the case of the Petitioner falls within section 2(2)(b) of SAFEMA and not within 2(2)(a) of SAFEMA, there was no requirement of the Petitioner being previously convicted under the Sea Customs

Act, 1878 (8 of 1878), or the Customs Act, 1962 (52 of 1962), the Foreign Exchange Regulation Act, 1947 (7 of 1947), or the Foreign Exchange Regulation Act, 1973 (46 of 1973). It is then submitted that "illegally acquired

1 1995 CRI. L.J. 426

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property", as defined under SAFEMA, does not only include the property acquired by violating the Sea Customs Act,

Customs Act or the Foreign Exchange Regulation Acts and it

could include any property 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. It is submitted that definition of "illegally acquired property" is very wide and includes the property acquired from income earned by

violating any law made by Parliament on any matter, as well

as income the source of which cannot be proved. Reliance was placed on the judgment of the Supreme Court in

Attorney General of India vs. Amratlal Prajivandas and Ors 1 and the observations made by the Apex Court were pointed out by the learned Counsel. She also invited our attention to

the Preamble of SAFEMA in support of the said submission.

Thirdly, it is submitted that "illegally acquired property", as defined under the Narcotic Drugs and Psychotropic

Substances Act, 1985 (For short "NDPS Act") is much narrower than under SAFEMA. It is submitted that, therefore, judgment of the Apex Court in Aslam Mohd.

2 Merchant vs. Competent Authority & Ors would not apply to

the facts of the present case. Fourthly, it is submitted that the judgment in Aslam Mohd Merchant (supra) and other judgments relied upon by the Petitioner were applicable to cases where the property stood in the name of a 1 Judgment Today 1994 (3) SC 583 2 (2008) 14 SCC 186

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relative/associate of a detenu and not the detenu himself as in the present case. Lastly, it is submitted that all conditions

precedent for initiation of valid proceeding under SAFEMA as

laid down under Aslam Mohd. Merchant (supra) were fulfilled in the present case and, therefore, the burden of proof was on the Petitioner and since the Petitioner failed to discharge

the burden, the property was liable for forfeiture.

9. We have heard the learned Counsel appearing on behalf

of the Petitioner and the learned Counsel appearing on

behalf of Respondents at length.

10. In view of the order passed by the Apex Court, the order passed by Division Bench of this Court dated 25/7/2003 has been set aside and, as such, observations

made in the said order also no longer survive. The Apex

Court has made it clear that the matter is remanded to this Court to the limited extent for fresh decision in accordance

with law on the question of validity of the order passed by the appellate authority dated 28/02/2000. The Apex Court has also made it very clear that the High Court will not go into the question whether detention order was valid or not.

The Apex Court also has observed that both, the Gujarat High Court and the Bombay High Court had jurisdiction in the matter because part of the cause of action arose in Gujarat and part of the cause of action arose at Bombay and, therefore, the Apex Court held that the Bombay High Court

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was competent to decide the validity of the order of the appellate tribunal dated 28/02/2000 on merits. In view of the

order of the Apex Court, the question of constructive res

judicata cannot be raised by the Respondents as the express directions are given by the Apex Court.

11. The learned Counsel appearing on behalf of the Petitioner fairly submitted that since the Petitioner was detained under the provisions of COFEPOSA Act, provisions of

SAFEMA were applicable to the Petitioner in view of section

2(2)(b).

12. The only question which falls for consideration before this Court is : whether it is established that there was a direct nexus with the income derived by way of contravention of

any provisions of any Act or acquisition of any property by

illegal means and whether a link has been found between the property sought to be forfeited and the income or assets or

properties which were illegally acquired by the person concerned?

13. Before dealing with the rival submissions made by both

the Counsel, it is necessary to take into consideration the provisions of SAFEMA. The validity of this Act was challenged in Attorney General of India vs. Amratlal Prajivandas and Ors1. The Apex Court also held that the

1 1995 CRL L.J. 426 : AIR 1994 SC 2179

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application of SAFEMA to the relatives and associates 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 detenu or convict. Preamble of the Act reads as under:-

"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."

Section 2 lays down applicability of the provisions of the Act

to the persons specified in sub-section (2). Clause (a) of sub- section (2) applies to person who has been convicted under the Sea Customs Act, 1878 (8 of 1878), under Foreign

Exchange Regulation Act, 1947 (52 of 1962) or convicted

under the Sea Customs Act, 1878 (8 of 1978) and subsequently under the Foreign Exchange Regulation Act,

1947 (52 of 1962). Sub-clause (b) is made applicable even to persons against whom order of detention has been made. In the present case, it is an admitted position that the order of detention was passed against the Petitioner under

COFEPOSA Act and the said order was revoked after the emergency was over. It is an admitted position that it was neither revoked by Advisory Board nor was that order challenged by filing Petition when he was under detention and, therefore, the Petitioner is a person who would fall

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under the category 2(2)(b) and, therefore, provisions of SAFEMA would apply to him. Section 3(1)(c) defines the

term "illegally acquired property". The said term reads as

under:-

"3(1)(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, earning 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

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Parliament has no power to make laws; or

(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 holder is or was a transferee in good

faith for adequate consideration; (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;"

So far as forfeiture of property is concerned, procedure which has to be followed is laid down in section 6 which

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stipulates about issuing notice of forfeiture. The said section 6 reads as under:-

"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 Sec. 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

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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."

The said section is in two parts. The first part is regarding

value of the properties held by any person to whom this Act applies, either by himself or through any other person on his behalf which has taken into consideration in juxtaposition

with all his known sources of income or material available to

the competent authority as a result of action under section 18 or otherwise and the second part is that the competent

authority has reasons to believe which have to be recorded in writing that these properties are illegally acquired properties and that even notice in writing has to be served

upon such person. It is abundantly clear from the perusal of

the said section that before issuance of notice, the competent authority should have reason to believe that

these are illegally acquired properties which ultimately reflects that there has to be some inquiry made, either under section 18 or inquiry regarding valuation of properties of the person or any other person on his behalf and his known

sources of income etc. There must be some material available with the competent authority on the basis of which he has to record his reasons in writing and only, thereafter, he can issue notice under section 6(1). Section 7 empowers forfeiture of property in certain cases and procedure which

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has to be followed after issuance of show cause notice under section 6. Section 8 speaks about burden of proof. Section 8

reads as under:-

"8. Burden of proof.- In any proceedings under this Act, the burden of proving that any

property specified in the notice served under Sec.6 is not illegally acquired property shall be on the person affected."

It would also be relevant to have a look at section 18 which is the power of the competent authority to conduct an

inquiry which is referred to in section 6 which inquiry has to be conducted before issuance of notice. Section 18 reads as under:-

"18. Power of competent authority to require certain officers to exercise

certain powers.-(1) For the purpose of any proceedings 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 sub-section

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(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 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 authorize 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 provision of the

said Act shall, so far as may be, apply accordingly."

14 Having noticed various relevant provisions of the Act, rival submissions will have to be taken into consideration. Mr. Pikale, the learned Counsel appearing on behalf of the

Petitioner in support of his submission has relied on the following judgments:-

(1) Aslam Mohammad Merchant vs Competent

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Authority1 (2) Union of India vs. Shri Rajnikant Raghunath

Belekar2

(3) Union of India Vs. Rajnikant R. Belekar3 (4) Shantidevi vs. Union of India & Ors.4 (5) Competent Authority vs. Shantidevi & Ors.5

(6) Baji Nath Agarwalla vs. Union of India and Ors.6

(7) Smt. Surjit Kaur vs. Union of India7 (8) Bhawarlal Devichand Shah & Ors vs. Union of India &

Ors.8 (9) Champabai D. Shah vs. Union of India & Ors.9

(10) Mohinder Singh Gill and another vs. The Chief Election Commissioner, New Delhi and Others10

(11) Makanbhai Govanbhai Tandel & Anr. vs. Union of India & Others11 (12) Central Board of Dawood Bohra Community vs. State of Maharashtra12

(13) Smt. Fatima Mohd. Amin (Dead) Through LR vs.

Union of India and anr.13 (14) P.P. Abdulla and another vs. Competent Authority and others14

(15) Judgment of the Division Bench of Kerala High

1 (2008) 14 SCC 186 2 Division Bench Judgment dated 22/7/2008 in W.P. No.837/2007 3 Order of the Apex Court in SLP 7637 of 2009 dated 13/5/2009.

4 73 (1993) Delhi Law Times 477 (DB) 5 Order of Apex Court in Special Leave to Appeal (Civil) CC2714/1999 dated 14/7/1999 6 99 (2002) Delhi Law Times 684 (DB) 7 1997 CRI. L.J. 3863 8 Order in Writ Petition No.3 of 1995 dated 1/8/2001 9 Order in W.P. No.2485 of 1994 dated 19/3/2009 10 (1978) 1 SCC 405 11 Judgment of the Delhi High Court in W.P. (C) 2317 / 1998 dated 3/11/2008. 12 Case Note from (2005) 2 SCC 673 13 Order dated 16/1/2003 of the Apex Court in Civil Appeal Nos.7400-7401 of 1996 14 (2007) 2 SCC 510

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Court1

It is submitted that in all these cases it has been held that

the property which was sought to be forfeited must be one which had a direct nexus with the income etc. derived by way of contravention of any of the provisions of the Act. It is

submitted that it was further held in all these cases that the competent authority must show that there exists any link or nexus between the property sought to be forfeited and

illegally acquired money of the detenu and this should be a

condition precedent for initiation of proceedings and if this condition does not exist, the entire proceedings are vitiated.

It is submitted that in all these decisions it was also held that if the notice which was issued showed that there was non- application of mind on the part of the competent authority

then, on that ground also, the entire subsequent proceedings

would stand vitiated.

15. On the other hand, the learned Counsel appearing on behalf of the Respondent Nos. 1 and 3 has sought to distinguish these judgments on which reliance is placed by the learned Counsel for the Petitioner. She submitted that

the judgment in Aslam Mohd. Merchant2 (supra), was delivered in a case arising under the NDPS Act. She submitted that the term "illegally acquired property" had a much restricted and narrow meaning under NDPS Act as 1 W.A. Nos.1645, 1658 and 1659 of 2007 2 (2008) 14 SCC 186

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compared to the definition of the same term under the SAFEMA. It is submitted that definition of section 3(1)(c)(i)

and (iii) included the property which was acquired in

contravention not only of the Sea Customs Act, FERA & COFEPOSA but it also included the illegally acquired property in contravention of any Act passed by the Parliament and,

therefore, the said definition did not restrict "illegally acquired property" to the property acquired by violation of the Sea Customs Act, 1878, Customs Act, 1962, Foreign

Exchange Regulation ig Act, 1947 or Foreign Exchange Regulation Act, 1973. The learned Counsel has invited our attention to para 42, pages 449-450, of the judgment in

Attorney General of India vs. Amratlal Prajivandas and Ors 1 So far as other judgments are concerned, she submitted that those judgments pertain to the properties standing in the

name of relatives or any other person on behalf of detenu

and, therefore, ratio of these judgments would not apply since, in the present case, property was standing in the

name of the Petitioner.

16. In our view, there is much substance in the submissions made by the learned Counsel appearing on behalf of the

Petitioner. Perusal of the show cause notice reveals that no inquiry has been made by the competent authority before issuance of notice under section 6(1). Admittedly, no inquiry has been made under section 18 of the said Act prior to

1 Judgment Today 1994 (3) SC 583

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issuance of the notice. Initially, when the show cause notice was issued by the competent authority, all the properties

belonging to the Petitioner also included the property which

was acquired by the Petitioner before liberation of Goa, Daman and Diu, which was noted by the appellate tribunal and, to that extent, the said property was excluded from the

other forfeited property. This itself discloses complete non- application of mind. The only basis on which the competent authority appears to have proceeded is the income-tax

returns which were filed by the Petitioner and on that basis

the competent authority has come to the conclusion that sufficient explanation was not given regarding the source

from which the said income was generated and, therefore, it came to the conclusion that it was illegally acquired property. It is a matter of record that Diu was liberated in

1962. Prior to 1962, Goa, Daman and Diu were under the

control of Portugal and there was no provision for filing income-tax returns during their regime and, as such, practice

of maintaining Books of Accounts was not followed. Petitioner has stated that he is a fisherman by profession and, as such, he never maintained any Books of Accounts. Only after clarification was issued by the Income-tax

Authorities regarding applicability of Income Tax Act to the liberated areas of Goa, Daman and Diu, Petitioner had filed his returns.

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17. Though the burden of establishing that the property

specified in notice served under section 6 is not illegally acquired is on the person affected in view of section 8, before that burden is cast on him the competent authority

has to arrive at a conclusion by stating the reasons which he has to believe that the property is illegally acquired and that too the said reasons should be in writing. Perusal of the said

show-cause notice discloses that no such material was

available or was placed before the competent authority before issuance of notice and, for the first time, in the order

which was passed under section 7 of the SAFEMA dated 22/03/1978, a passing reference has been made that the Petitioner was an old associate of Shri Sukar Naran Bhakhia.

The said reference in the order under section 7 reads as

under:-

".....Intelligence reports indicated that he is an old associate of Shri Sukar Naran Bhakhia."

The said material or intelligence report did not find place either in show cause notice or in the material which was placed before the competent authority before issuing the

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said show cause notice and, as such, the show cause notice itself has been issued without any application of mind and

without there being any material on record to show that the

property was illegally acquired property. The appellate tribunal, therefore, has obviously committed an error of law in confirming the order of confiscation under section 7

passed by the competent authority since the entire proceedings were vitiated on account of failure on the part of the competent authority to show any nexus or link with the

income, assets etc. derived by way of contravention of any

provisions of any Act passed by the Parliament. It has been consistently held by various judgments of the Supreme Court

and High Courts that this is a condition precedent before issuance of show cause notice and if this condition precedent is not followed, the entire proceedings are vitiated and

burden of proof under section 8 would fall on the affected

person/detenu only after it is established that this condition precedent has been fulfilled by the competent authority. We

are afraid that, in this case, this condition has not been followed by the authorities below.

18. It would be relevant at this stage to take into

consideration the reasons recorded by the competent authority under section 6(1) of the SAFEMA. In para 2, properties owned by the Petitioner have been described which are as under:-

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"2 He owns the following properties.

Sr. No. Description of properties Present value

IMMOVABLE PROPERTIES.

(a) One residential house building situated at Parkotasheri, Nani

Daman and also furniture lying at this property (as indicated in the statement of wealth re-

filed for the A.Y. 1975 value at :

(Subject to valuation)

(b) One residential property at wealth filed for the A.Y.75-76 Rs. 40,000/-

(Subject to valuation)

(c) Agricultural land admeasuring 28 acres and bearing Survey

Nos. 464, 465, 466, 467, and 469 situated at Vill. Balda, Tal. Pardi, Dist.

Bulsar (value disclosed in the statement of wealth for A.Y.75-76 Rs, 80,000/-

(subject to valuation) MOVABLE PROPERTIES

(a) Loan to Shri Mansingh Dipsing Nani Daman, (as indicated in the balance sheet filed for the year ended on 31.3.1975) Rs. 1,00,000/-

(b) Loan to Shri Ranchhodbhai Gopibhai Bulsar (as indicated in the balance sheet filed for the year ended 31.3.1975). Rs 25,000/-

-----------------------------------------------------------------------------------------"

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In para 3 of the said order of the competent authority it is stated that the Petitioner was not assessed to income-tax

prior to 4/1/1969 and, in the meantime, returns were filed for

the Assessment Year 1964-65 to 1968-69 disclosing therein income of Rs 15,000/- to Rs 16,000/- for each of these assessment years. In para 4, a Chart is reproduced showing

the Assessment Year, Income returned, Income assessed, Sources of Income and Additions made. Thereafter, the competent authority has proceeded to consider each of the

immovable properties and, thereafter, loan given to Shri

Mansingh Dipsingh and Shri Ranchhodbhai Gopibhai is taken note of. So far as the residential house property situated at

Parkotasheri, Nani Daman and also furniture lying in this property is concerned, it is stated that income of Rs 15000/- to Rs 16,000/- had been disclosed for the Assessment Years

1964-65 to 1968-69 and no evidence in support of having

carried out any such business was adduced before the ITO. The observation of the ITO at the time of completing the

assessment was that the books of accounts were written at a stretch and also a reference was made to cash of Rs 54,000/- for Assessment Year 1964-65 in Tijori Account and, therefore, ITO added this amount as income from

undisclosed sources. In view of the observations made by the ITO, the competent authority observed as under:-

"........ As stated above, he has neither explained

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the sources of each nor disclosed the source of income shown in the returns, therefore, the

investment made in this property out of such

cash is an illegally acquired properties."

Then, a reference is made to residential property at Taluka

Pardi, District Bulsar. It is stated that this property was acquired in 1975-76 for a total cost of Rs 40,751/- and funds invested in this property were out of his home-chest A/c. i.e

Tijori A/c. and the exact source of home-chest account was

not disclosed in the returns of income. The competent authority, therefore, has observed that since the income

which was credited to his home-chest A/c was from undisclosed sources, investment in this property out of such income and home chest-chest A/c is an illegally acquired

property. Similarly, in respect of agricultural land

admeasuring 28 acres situated at Village Balda, Taluka Paradi, District Bulsar, also similar reasons have been given

and it is noted that out of 28 acres of land, 7 acres of land was purchased in the year 1957-58. Since according to the competent authority the exact source had not been proved, he came to the conclusion that he has reason to believe that

this property also is an illegally acquired property. The same reason has been given in respect of loan to Shri Mansingh Dipsingh and Shri Ranchhodbhai Gopibhai. So far as loan to Mansingh Dipsingh is concerned, it is observed that a loan of Rs 50,000/- was advanced to Naranbahi

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Bhagwanbhai in the year 1961-62. He was not assessed to income-tax at that time. He did not have any ostensible

source of income and, therefore, it was observed that the

loan advanced to Shri Naranbhai Bhagwanbhai is an illegally acquired property and for the same reason the competent authority came to the conclusion that the loan advanced to

Mansingh Dipsingh was partly out of amount received from Shri Naranbhai Bhagwanbhai and, therefore, it was an illegally acquired property. The same reason has been given

in respect of the loan to Shri Ranchhodbhai Gopibhai. The

said loan was given in the year 1961-62. It is stated that since the Petitioner did not have any source of income in

1961-62 and since no returns were filed, it was held that he had reason to believe that this property also was an illegally acquired property.

19. The said show cause notice, therefore, clearly reveals that no inquiry has been made by the competent authority

on his own as envisaged under section 6(1) or under section 18 of the SAFEMA. No nexus or link has been established. The explanation was given by the Petitioner that prior to 1962, question of filing income-tax returns did not arise since

Goa, Daman and Diu were liberated in 1962 and that income-tax returns were filed for the Assessment Year 1968- 69 and for the earlier years also. This fact ought to have been taken into consideration and if some inquiry had been made then this fact would have been revealed to the

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competent authority. This itself shows the complete non- application of mind and also indicates that no material was

available with the competent authority and the show-cause

notice had been issued under section 6(1) without making any inquiry whatsoever. The 7 acres of land was, in fact, acquired before liberation of Goa, Daman and Diu and,

therefore, the tribunal excluded this 7 acres also. The contents of the said notice even if taken at their face value do not disclose any reason warranting action against the

Petitioner. No allegation whatsoever has been made to the

effect that there exists any link or nexus between the property sought to be forfeited and illegally acquired money

of the detenu

20. It is a well settled position in law that though validity of

provision has received constitutional protection, yet, when

stringent laws become applicable, scrupulous compliance with the statutory requirement becomes mandatory and

necessary since by virtue of the said provision some person is to be deprived of his/her right in property which, though, no longer, is his/her fundamental right, it still is a constitutional right. In our view, ratio of the judgments on

which reliance has been placed by the learned Counsel appearing for the Petitioner squarely applies to the facts of the present case including the judgment in Aslam Mohd. Merchant1 (supra). Though the said judgment has been

1 (2008) 14 SCC 186

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delivered in a case arising under the NDPS Act, the Apex Court has considered the procedure which has to be followed

in the case of forfeiture of property and while dealing with

the said issue, the Court has also taken into consideration the provisions of the SAFEMA and has also taken into consideration the judgments of the Apex Court in Fatima

Mohd. Amin1(supra) and in Kesar Devi vs. Union of India 2, both of which were the judgments delivered regarding forfeiture of property under the SAFEMA. Moreover, the

Apex Court has also observed that provisions of NDPS Act

and SAFEMA are in pari materia. It is observed in para 23 of the said judgment in Aslam Mohd. Merchant3 (supra) as

under:-

"23. The relevant provisions of the

Smugglers and Foreign Exchange

Manipulators (Forfeiture of Property) Act, 1976 (for short "SAFEMA") and the Narcotic

Drugs and Psychotropic Substances Act, 1985 (NDPS) are in pari materia."

It would also be relevant to see the observations made by

the Apex Court in the said case in paragraphs 34, 40 and 41 which read as under:-

1 (2003) 7 SCC 436 2 (2003) 7 SCC 427 : 2003 SC (Cri) 1661 3 (2008) 14 SCC 186

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"34. Analysis of the aforementioned

provisions clearly establish that a link must

be found between the property sought to be forfeited and the income or assets or properties which were illegally acquired by

the person concerned."

"40. Both the statutory elements, namely

"reason to ig believe" and "recording of reasons" must be premised on the materials produced before him. Such materials must

have been gathered during the investigation carried out in terms of Section 68-E or otherwise. Indisputably, therefore, he must

have some materials before him. If no such

material had been placed before him, he cannot initiate a proceeding. He cannot

issue a show-cause notice on his own ipse- dixit. A roving enquiry is not contemplated under the said Act as properties sought to be forfeited must have a direct nexus with

the properties illegally acquired."

"41. It is now a trite law that whenever a statute provides for "reason to believe", either the reasons should appear on the

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face of the notice or they must be available on the materials which had been placed

before him."

The Apex Court in Smt. Fatima Mohd. Amin vs. Union of India1 has observed in para 8 and 9 of its judgment as under:-

"8. The contents of the said notices, even if taken at their face value do not disclose

any reason warranting action against the

appellant. No allegation whatsoever has been made to this effect that there exists

any link or nexus between the property sought to be forfeited and the illegally acquired money of the detenu(s)."

"9. As the condition precedent for initiation of the proceedings under SAFEMA did not

exist, the impugned orders of forfeiture cannot be sustained. In that view of the matter, the appeals deserve to be allowed. The order under challenge is set aside."

The Apex Court in P.P. Abdulla and another vs. Competent Authority and Others2 has observed in paras 7 and 8 of its 1 (2003) 7 SCC 436 : 2003 SCC (Cri) 1661 2 (2007) 2 SCC 510 : (2007) 1 SCC (Cri) 603

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judgment as under:-

"7. Learned counsel submitted that it has

been expressly stated in Section 6(1) that the reason to believe of the competent authority must be recorded in writing. In

the counter-affidavit it has also been stated in para 8 that the reasons in the notice under Section 6(1) were recorded in

writing. In ig our opinion, this is not sufficient. Whenever the statute requires reasons to be recorded in writing, then in

our opinion it is incumbent on the respondents to produce the said reasons before the court so that the same can be

scrutinised in order to verify whether they

are relevant and germane or not. This can be done either by annexing the copy of the

reasons along with the counter-affidavit or by quoting the reasons somewhere in the counter-affidavit. Alternatively, if the notice itself contains the reason of belief,

that notice can be annexed to the counter- affidavit or quoted in it. However, all that has not been done in this case."

"8. It must be stated that an order of

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confiscation is very stringent order and hence provision for confiscation has to be

construed strictly, and the statute must be

strictly complied with, otherwise the order becomes illegal. (emphasis in original) It was also observed: (SCC p.512, para 10)

"10. In the present case, in the notice dated 15-3-1988 issued to the appellant under section 6(1) of the Act (copy of

which is annexed as Annexure P-1 to this

appeal), it has not been alleged therein that there is any such link or nexus

between the property sought to be forfeited and the alleged illegally acquired money of the appellant."

The ratio of the said judgments, therefore, in our view, would squarely apply to the facts of the present case. This

Court also in several judgments has relied upon the said judgments in (i) Aslam Mohd. Merchant1 (supra) (ii) Union of India vs. Shri Rajnikant Raghunath Belekar in Writ Petition No.837 of 2007 which judgment was approved by the

Supreme Court and SLP filed was dismissed (iii) Bhawarlal Devichand Shah & Ors vs. Union of India and others in Writ Petition No.3 of 1995 decided on 1/8/2001, (iv) Champabai D. Shah. vs. Union of India and Ors in Writ Petition No.2485

1 (2008) 14 SCC 186

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of 1994 decided on 19/3/2009, (vi) Attorney General vs. Amrit Lal1 which judgment also has been followed by Delhi

High Court in Sahntidevi vs. Union of India & ors 2 which

judgment was upheld by the Apex Court and the SLP filed by the competent authority was dismissed by the Apex Court on 14/7/1999 (vii) Baij Nath Agarwalla vs. Union of India &

Others3 and the judgment in (viii) Makanbhai Govanbhai Tandel & Anr. vs. Union of India & Others in W.P. (C) 2317/1998 decided on 3/11/2008 Similar view has been

taken by Calcutta High Court in Smt Sujit Kaur vs. Union of

India and others4 and by the Kerala High Court in its judgment in W.A. Nos. 1645, 1658 and 1659 of 2007. In its

said judgment, the Kerala High Court, after placing reliance on the judgment of the Apex Court in Fatima Mohd. Amin5(supra) and P.P. Abdulla and another6 has observed in

para 7 as under:-

"7. In the light of the above mentioned

decisions, in the absence of any allegation in the show cause notice, which is quoted in the earlier part of the judgment regarding the link or nexus between the property sought to be

forfeited and the illegally acquired money of the detenu under the Act, we are of the view 1 AIR 1994 SC 2179 2 73 (1993) Delhi Law Times 477 (DB) 3 99 (2002) Delhi Law Times 684 (DB) 4 1997 CRI.L.J. 3863 5 (2003) 7 SCC 436 6 (2007) 2 SCC 510

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that proceedings taken against PA 2 and PA 3 is not maintainable and hence W.A. No.1658/07

and 1659/07 are allowed. The impugned

judgment as well as Exts. P1 and P2 (proceedings of the competent authority and appellate authority) are set aside."

21. Writ Petition is, therefore, allowed in terms of prayer

clause (a) which reads as under:-

"(a) For a writ of certiorari or a writ in the nature

of certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India, calling for the records relating to (i) the

order passed by the Competent Authority dated

22.3.1978 ordering forfeiture of the Petitioner's property and (ii) the order passed by the Appellate

Tribunal for Forfeited Property in FPA No.26/AHB/78-79 dated 28th February 2000 and after considering the legality and validity of the impugned orders at Annexures 'C and D' hereto

to quash and set aside the same."

22. Rule is made absolute accordingly.

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23. At this stage, the learned Counsel appearing for Respondent Nos. 1 to 3 seeks stay of this order passed by

this Court for a period of 8 weeks in order to enable the

Respondents to challenge it in the Apex Court. The order, therefore, is stayed for a period of eight weeks.

(P.D. KODE, J.) (V.M. KANADE, J.)

B.D. Pandit

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