K.H. Saleem v. Competent Authority (SAFEMA)

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **MONDAY, THE 24TH DAY OF JULY 2017/2ND SRAVANA, 1939** ## **WP(C).No. 7752 of 2005 (W)** ## **---------------------------** ## **PETITIONER :** **---------------------** **K.H. SALEEM, PALLICKAL, THALANGARA, KASARAGOD DISTRICT.** **BY SRI.M.RAMESH CHANDER,SENIOR ADVOCATE SRI.E.K.NANDAKUMAR,SENIOR ADVOCATE ADV.SMT.PRIYA MAHESH** ## **RESPONDENT(S):** **---------------------------** ## **1. THE COMPETENT AUTHORITY,** - **OFFICE OF THE COMPETENT AUTHORITY (SAFEMA), UTSAV.NO.64/1, G.N. CHETTY ROAD,** - **T. NAGAR, CHENNAI-600 017.** **2. THE APPELLATE TRIBUNAL FOR FORFEITED PROPERTY, 4TH FLOOR, LOK NAYAK BHAWAN, KHAN MARKET, NEW DELHI-110 003,, REPRESENTED BY ITS REGISTRAR.** **3. UNION OF INDIA, REPRESENTED BY ITS SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, NEW DELHI-110 001.** ## **4. THE DISTRICT COLLECTOR, KASARAGOD.** **R1 TO R3 BY SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL SRI.JOHN VARGHESE, ASSISTANT SG R4 BY GOVERNMENT PLEADER SRI.RON BASTIAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 24-07-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **sts** ## **WP(C).No. 7752 of 2005 (W)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **P1 COPY OF THE NOTICE DATED 7/5/76 ISSUED BY THE COMPETENT AUTHORITY UNDER SECTION 6(1) OF THE ACT, ALONG WITH THE SCHEDULE THERETO.** - **P2 COPY OF THE LETTER DATED 07/07/76 ISSUED IN REPLY TO EXT.P1** - **P3 COPY OF THE NOTICE DATED 07/10/76 ISSUED BY THE 1ST RESPONDENT ALONG WITH ITS SCHEDULE** - **P4 COPY OF THE REPLY DATED 8/11/1976 ISSUED TO THE 1ST RESPONDENT** - **P5 COPY OF THE REPLY DATED 11/1/1977 FILED ON BEHALF OF PETITIONER BEFORE 2ND RESPONDENT COMPETENT AUTHORITY.** - **P6 COPY OF THE WRITTEN SUBMISSION FILED BEFORE THE 1ST RESPONDENT ON 26/10/1977** - **P7 COPY OF THE NOTICE DATED 8/11/1977 ISSUED BY THE 1ST RESPONDENT** - **P8 COPY OF THE LETTER DATED 03/12/1977 FROM THE PETITIONER TO THE 1ST RESPONDENT AUTHORITY** - **P9 COPY OF THE PETITIONER'S LETTER DATED 09/12/1996 TO THE 1ST RESPONDENT AUTHORITY** - **P10 COPY OF THE LETTER DATED 02/07/1997 WITHOUT ITS ANNEXURES, FROM THE PETITIONER TO THE 1ST RESPONDENT COMPETENT AUTHORITY** - **P11 COPY OF THE PETITIONER'S LETTER DATED 26/01/1998 TO THE 1ST RESPONDENT COMPETENT AUTHORITY** - **P12 COPY OF THE ORDER DATED 25/02/1998 OF THE 1ST RESPONDENT COMPETENT AUTHORITY** - **P13 COPY OF THE APPEAL DATED NIL, F.P.A. NO.8/MDS/1998 BEFORE THE 2ND RESPONDENT** - **P14 COPY OF THE ORDER OF 2ND RESPONDENT IN F.P.A.NO.8/MDS/98 DATED 22/12/2004 ALONG WITH ITS COVERING LETTER DATED 30/10/2004** - **P15 COPY OF THE PROCEEDINGS OF THE 1ST RESPONDENT DATED 24/1/05 NO.OCA/MDS/269/76/205** - **P16 COPY OF THE PROCEEDINGS OF THE 1ST RESPONDENT DATED 24/1/05 NO.OCA/MDS/269/76/203.** **2/-** **-2-** ## **WP(C).No. 7752 of 2005 (W)** ## **RESPONDENT'S EXHIBITS AND ANNEXURES:** - **ANNEXURE 1 COPY OF THE DETENTION ORDER NO.31642/881/76/HOME DATED 27/05/1976 ISSUED BY SPECIAL SECRETARY TO GOVERNMENT OF KERALA.** - **ANNEXURE II COPY OF DECLARATION NO.31642/881/76/HOME DATED 27/05/1976 ISSUED BY SPECIAL SECRETARY TO GOVERNMENT OF KERALA** **/TRUE COPY/** ## **P.S.TO JUDGE** **sts** **A.MUHAMED MUSTAQUE, J.** ========================= **W.P.(C).No.7752/2005** ~~~~~~~~~~~~~~~~~~~~~~~~~ Dated this the 24[th] day of July, 2017 ## **J U D G M E N T** The petitioner was proceeded under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (“SAFEMA”, for short), consequent upon his detention under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (“COFEPOSA”, for short) in the year 1984. He challenges the orders passed by the statutory authorities and the tribunal under the above Act. The order passed by the competent authority has been confirmed in appeal by the Appellate Tribunal for Forfeited Property, New Delhi. After elaborate arguments raised at the Bar by the learned Senior Counsel for the petitioner and the learned Assistant Solicitor General of India, two questions arise for consideration in this writ petition. Firstly, whether the proceedings initiated against the petitioner is bad for want of particulars in the notice issued under Section 6(1) of the SAFEMA disclosing the reasons to initiate action against the petitioner and secondly, whether the materials on record are ``` WPC 7752/2005 ``` ## **-:2:-** sufficient to hold that the property referred in the notice were illegally acquired property. 2. The learned Senior Counsel relying upon the judgments of the Hon'ble Supreme Court in **Abdulla v. Competent Authority [2007 (1) KLT 956],** an unreported judgment of Division Bench of this court in W.A.No.1654 of 2007 and connected cases dated 24.2.2009 and also the judgment of the learned Single Judge in O.P.No.2337 of 2000 dated 27.5.2010, the Division Bench decision of the Delhi High Court in **Shanti Devi v. Union of India (UOI) and Ors. [MANU/DE/1317/1998]** and also of the same High Court by the learned single judge in **Kamal Kumar v. Union of India and Ors. [MANU/DE/6647/2011]** and also a couple of other judgments of the Delhi High Court, argued in _extenso._ The very foundation of the argument is flowing from the proposition of law as laid down in the judgment in **Abdulla's** case **[2007 (1) KLT 956]** and **Shanti Devi's** case ( _supra_ ) that there was no link or nexus shown to have existed between forfeited property and the illegal activities of the petitioner. In the absence of any reasons disclosing such connections in the notice, no proceedings should have been initiated against him. It is also argued by the ``` WPC 7752/2005 ``` ## **-:3:-** learned Senior Counsel that the properties acquired by him are prior to the enactment of SAFEMA and he has acquired the property from the income derived from the business. The income tax return in this regard is a relevant factor to sustain his claim of legal source of acquisition of property. It is submitted that by no stretch of imagination he could have filed return before the enactment of SAFEMA to evidence a legal source. It is pointed out that the authorities rejected the legal source as reflected in the income tax without any basis. The learned Senior Counsel submitted that the income was particularly shown from the business in which he was engaged. Now, finding that there was no proof to show existence of business, the authority ignored the fact that the Act came only subsequently and there was no point in creating evidence on behalf of the petitioner much before the enactment came into force. 3. The learned Assistant Solicitor General defending the case relying upon the finding of the tribunal, particularly, with reference to giving up the right over certain movable properties sought to be forfeited argued that the petitioner having accepted coverage of the provisions of the SAFEMA in appeal challenging the same order, he cannot take up the same ``` WPC 7752/2005 ``` ## **-:4:-** issue again. It is submitted that the tribunal recorded that the petitioner is not interested in certain movable properties referred in the notice and therefore, the petitioner himself submitted to the authority under SAFEMA. It is also submitted that there was no challenge before the tribunal with regard to the defficiency of notice and therefore the petitioner cannot first time raise such contention in a challenge made under Article 226 of the Constitution. The learned Assistant Solicitor General particularly drew my attention to a judgment of the Hon'ble Supreme Court in **Appeal (Civil) 2455 of 1997 [Kesar Devi v. Union of India and Ors]** wherein it was held that there was no requirement to establish a link or nexus to be shown for the belief that the properties were illegally acquired. The dictum shows that it is only when the properties were shown in the name of a person, who was not related to the detenue or convict, such disclosure of reasons are necessary. In view of the fact that the properties admittedly belong to the detenue under COFEPOSA, it has to be assumed that the properties were illegally acquired and the authority need not demonstrate the same by reasons in the notice issued under Section 6 of SAFEMA. It is further submitted that the proposition of law as laid down in **Kesar Devi's** case ``` WPC 7752/2005 ``` ## **-:5:-** ( _supra_ ) was not noted in the subsequent judgment of the Apex Court and therefore, the subsequent judgment has to be considered as rendered in _per curiam._ 4. The petitioner was proceeded under Section 6 of the SAFEMA in respect of the following properties: |**_Sl._**<br>**_No._**|**_Description of the property_**| |---|---| |i.|House property in R.S.No.61/2, Kasargod with 35-1/2 Cents of site.| |ii.|Agricultural lands in Kudulu Villge purchased vide deed No.182/72 dted 16.2.1972<br>asper details below:-| ||R.S.No. S.D.No. Extent| ||(a)388 1B1 1A-14 Cents| ||(b)388 1A2A 0.75 Cents| ||(c)388 1A3 0.25 Cents| |iii|200 Shares of Rs.100/- each in SIMPCO Pvt Ltd. -Rs.20,000/-| |iv.|Share in Islamia Tile Company property- Rs.15,375/-| |v.|Advance to Islamia Tile Company- Rs.16,000/-| |vi.|Cash on hand - Rs.2,315/-| |vii.|Cash on hand - Rs.2,000/-| |viii|Balance in Vijaya Bank account - Rs.1,993/-| 5. Admittedly, the petitioner gave up his claim over the movable properties mentioned therein. The petitioner confined his challenge before the tribunal only in respect of the immovable properties. It is to be noted that the tribunal in paragraph 4 of Ext.P14 order recorded that there was no ``` WPC 7752/2005 ``` ## **-:6:-** challenge to the _factum_ that the appellant was covered by the provisions of SAFEMA. It is not known under what circumstances the tribunal assumed that the petitioner admitted coverage of the provisions of SAFEMA. Merely because the petitioner gave up his claim over certain items of movable properties, that will not indicate that the petitioner admitted coverage. The proceedings under SAFEMA is initiated against the properties. Therefore, each of the item of properties must shown to have acquired by illegal means. The petitioner for the reasons known to him expressed his interest in not pursing the challenge against some of the items. The learned Senior Counsel submits that the petitioner gave up interest on some of the movable properties as those were shares of some defunct companies. Therefore, in the absence of clear admissions on the part of the petitioner, the tribunal could not have entered on the finding that the petitioner did not dispute the coverage of some provisions of SAFEMA. The premise on which such a finding is entered is absolutely unwarranted. 6. The foremost question that arises for consideration is whether the competent authority is bound to disclose the reasons for proceeding against the petitioner under SAFEMA in the notice issued under Section 6 ``` WPC 7752/2005 ``` ## **-:7:-** of the SAFEMA. It is appropriate to refer Section 6 of the SAFEMA which reads as follows: “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, earníngs or assets, out of which or by means of which he has acquired such property, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties, as the case may be, should not be declared to be illegally acquired properties and forfeited to the Central Government under this Act. (2) Where a notice under sub-section (1) to any person specifies any property as being held on behalf of such person by any other person, a copy of the notice shall also be served ``` WPC 7752/2005 ``` ## **-:8:-** upon such other person.” 7. The very jurisdiction of the authority to proceed against a person under SAFEMA is when the authority enters satisfaction that the property was illegally acquired, that satisfaction is bound to exist prior to initiating notice under Section 6. It is only when such a satisfaction is arrived at, the competent authority can proceed further in the matter. It is not necessary, it should reflect in the notice itself. Notice is something calling upon a person to answer to the proposed action against him. If the respondent to such notice disputes competency of the authority to proceed against him, it is incumbent on the part of the competent authority to demonstrate the reasons for taking action against him. The first of the objection to the notice was given by the brother of the petitioner while the petitioner was undergoing detention under COFEPOSA. It is to be noted that the petitioner, particularly, in the memorandum of appeal before the tribunal, produced before this court as Ext.P13, had raised a contention regarding the competency of the authority to proceed under the Act. The ground No.3 in appeal memorandum is reproduced herewith: “3. The learned Competent Authority has exceeded his jurisdiction in issuing the notice under section 6 of the ``` WPC 7752/2005 ``` ## **-:9:-** SAFEMA without bringing any material on record to form a valid 'belief' that the properties detailed in the order were "ilegally acquired properties within the meaning of section 3(1) (c) of the SAFEMA.” 8. In such circumstances, the tribunal could not have entered into a finding that the petitioner had admitted coverage of the provisions of SAFEMA. If particulars were absent, the tribunal ought to have verified from records whether any such reasons were recorded by the authority in any of the proceedings. If there were no reasons recorded by the competent authority before initiating proceedings, certainly, it is to be considered that the notice issued under Section 6 of SAFEMA is bad in law in as much as there was no occasion for the competent authority to believe that the properties were illegally acquired properties. This, in fact, was a fundamental issue having a bearing on the outcome of the proceedings. In view of the fact that the tribunal had no occasion to consider this issue, it is beyond the scope of judicial review now to review the order without the same being reconsidered by the tribunal. In such circumstances, this Court is of the view that an opportunity should be given to both parties by the tribunal to consider the validity of notice issued under Section 6 of ``` WPC 7752/2005 ``` ## **-:10:-** SAFEMA. In view of the above, the second question regarding whether the materials on record are sufficient to prove that the properties are legally acquired or not will have to be reconsidered by the tribunal. In the light of the finding on the validity of the notice issued under Section 6, the impugned order of the tribunal is set aside. The matter is directed to be reconsidered afresh after adverting to the validity of the notice issued under Section 6. A fresh order in this regard shall be passed by the tribunal within six months. The petitioner in the meanwhile is restrained from alienating the property. The writ petition is disposed of as above. **==> picture [25 x 11] intentionally omitted <==** ## **A.MUHAMED MUSTAQUE, JUDGE** ms