2021 INSC 0845
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 8592­8593 OF 2010
THE INCOME TAX OFFICER, CIRCLE I (2),
KUMBAKONAM & ANR.   …APPELLANTS
VERSUS
V. MOHAN & ANR.  …RESPONDENTS
J U D G M E N T
A.M. KHANWILKAR, J.
1. The   conundrum   in   these   appeals   is:   when   the   Competent
Authority 
 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
  under   the   Smugglers   and   Foreign   Exchange   Manipulators   (Forfeiture   of
Property) Act, 1976 (for short, “1976 Act”)

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1976 Act,   and non­service of such primary notice upon the convict
would   vitiate   the   entire   proceedings   initiated   only   against   his
relatives?
2. The   High   Court   of   Judicature   at   Madras 
  vide   impugned
judgment 
  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 non­service
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
 f or short, “Madras High Court”
  i n Writ Petition Nos. 1149 & 1150 of 2001 decided on 24.3.2008 reported in
2008 SCC OnLine Mad 244

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would   rely   and   other   relevant   information   and   particulars.     If   the
property in 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. 
  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
  2005 SCC OnLine Ker 101

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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
Prajivandas 
  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   India 
.   The   apex   court   while   dealing   with
Section 2(2)(c) of the Act has categorically held that
the   burden   of   proving   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)
  (1994) 5 SCC 54 : AIR 1994 SC 2179
 ( 2003) 7 SCC 427

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The   second   decision   is   of   the   Calcutta   High   Court   in   The
Competent   Authority   &   Administrator   &   Anr.   vs.   Manilal
Jalal & Anr. 
.  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
  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) — brother­in­law of respondent No.2 and paternal uncle of
respondent   No.1,   was   convicted   for   an   offence   punishable   under
the   Customs   Act,   1962 
  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
 f or short, “1962 Act”

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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

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him  to   disclose  the  sources  of  his  income, earnings  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:
“ SCHEDULE
S. No. Description of the Property Name   of   the
present   holder
of property
1 2 3
1. Investment in the firm M/s V.P.V.
Jewellery Mart, Kumbakonam
2. Investment   in   the   Proprietary   Concern
M/s V.P.V. Gold Palace Kumbakonam
3. Residential   Property   in   the   form   of
house   ­   being   land   and   building   at
No.113,   Sarangapani   East   Street,
Kumbakonam
4. Agricultural Lands ­ 1 Acre & 8 cents at
south   pattam,   Paganasam   Taluk
1   Acre   &   75   Cents   at   Thepperumal
­nallur village.”
 
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:
“ SCHEDULE
S. No. Description of the Property Name   of   the

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present   holder
of property
1 2 3
1. Residential   house   which   includes   land
and   building   at   No.123.   Big   Street,
Kumbakonam. V. Padmavathy
2. Agricultural   lands   at   Thepprumalnallur
Village   at   Kumbakonam   as   specified
below.  ­do­
3. Investment   in   the   firm   of   M/s   V.P.V.
Prema Jewellery, Kumbakonam.  ­do­
4. Jewellery   disclosed   under   Voluntary
Disclosure Scheme (i.e.) 518 gms of gold
and 28 ets. of diamond.” ­do­
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.

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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   Delhi­II,   Camp:   Bangalore 
.
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.
 f or short, “Appellate Tribunal”

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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 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

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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   Lexicon 
  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
  4 th
 Edition, Vol. 3 at pages 3050­51

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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 Prajivandas 
,   which
has decoded the intent of the legislation and all relevant provisions
while rejecting the argument regarding constitutional validity of the
 S upra at Footnote No. 5 

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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   name­lender   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. 
, wherein   a  show­cause  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
  (2001) 5 SCC 755

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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 sub­sections 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

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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
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.  In other words,
no notice had ever been given to the convict in respect of properties
referred   to   in   the   impugned   notices   issued   to   the   respondents   as
being his illegally acquired properties held through other person on
his behalf.
20. As a matter of fact, it is urged by the respondents that Section
6(1) posits that when a notice is issued to a relative, it is imperative
upon the Department to allege and establish a nexus between the
properties   of   the   relative   sought   to   be   forfeited   and   the   convict   or
detenu.     In   that,   the   forfeited   properties   must   be   traceable   to   the
illegal   sources   of   income,   earnings   or   assets   of   the   convict   or
detenu.     The   personal   properties   of   relative   or   associate   of   the

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convict or detenu having no connection with the convict or detenu,
cannot be made subject matter of forfeiture under the 1976 Act as
held in   Amratlal Prajivandas 
; Kesar Devi 
; Fatima Mohd. Amin
(Dead)   through   LRs.   vs.   Union   of   India   &   Anr. 
;   and   Aslam
Mohammad Merchant vs. Competent Authority & Ors. 
. 
21. It is then urged that the subject properties cannot be forfeited
without substantiating the link or nexus between the properties of
the relatives with the activity of the convict or detenu and more so
when the relatives are not his immediate relatives such as parents
or   children   or   spouse.     For   lack   of   nexus   between   the   properties
sought   to   be   forfeited   being   that   of   the   convict,   the   statutory
presumption   is   not   attracted;   and   it   must   follow   that   Section   8
requiring burden of proof to be discharged by the noticee being the
relative   of   the   convict,   would   not   come   into   play.     Moreover,   the
notice contains a bald unreasoned averment — that the properties
in   question   were   acquired   during   the   time   when   the   convict   was
 supra at Footnote No. 5 (para 44)
 supra at Footnote No. 6 (paras 11 and 12)
 (2003) 7 SCC 436 (paras 7 to 9)
 (2008) 14 SCC 186 (para 45)

18
engaged in gold smuggling, the only inescapable conclusion is that
the said properties were acquired by the funds of such convict.  As
a matter  of fact, the  respondents  had furnished  copious materials
before   the   Authorities   to   establish   that   the   properties   in   question
are,   in   fact,   personal   properties   purchased   by   them   out   of   their
business earnings, gifts, etc.  The plea so taken by the respondents
has been completely discarded.  
22. It   is   urged   that   neither   the   Competent   Authority   nor   the
Appellate   Tribunal   took   into   account   that   no   reasons   have   been
recorded on the basis of which it was believed that the properties of
the   respondents   were   illegally   acquired.     Relying   on   the   dictum   in
Nazir   Ahmad   vs.   Emperor 
  and   Chandra   Kishore   Jha   vs.
Mahavir Prasad & Ors. 
,   it is urged that when a statute provides
something to be done in a particular manner it ought to be done in
that   manner   alone   and   in   no   other   manner.     Whereas,   the
Competent   Authority   failed   to   record   proper   reasons   to   believe   as
stipulated in Section 6 of the 1976 Act.
  AIR 1936 PC 253
  (1999) 8 SCC 266

19
23. It is then contended that on account of inordinate and undue
delay,   the   proceedings   suffer   from   the   vice   of   arbitrariness   and
irrationality.   In that, the convict was convicted on 23.11.1969 for
an   offence   punishable   under   the   1962   Act.     The   properties   in
question belonging to the respondents were acquired between 1959
till   1980.     Whereas,   the   impugned   notices   were   issued   on
19.1.1994   and   28.2.1994.     Further,   as   aforesaid,   the   stated
properties   have   not   been   referred   to   in   the   criminal   proceedings
against the convict nor in the notice issued to him on 2.2.1980.  No
explanation   has   been   offered   or   forthcoming   from   the   Competent
Authority   about   the   delay   in   issuing   notice   after   25   years,   calling
upon   the   respondents   to   explain   and   account   for   the   sources   of
funds from which the properties in question have been acquired by
them.     This   is   not   only   unjustified,   but   also   impractical   and   not
meet the test of a reasonable period of time.  Now, further period of
25 years has lapsed.   Thus, to reopen and re­adjudicate the entire
proceedings   afresh   at   this   distance   of   time   would   not   only   be
iniquitous,   but   also   result   in   serious   irreparable   harm   and   injury
to the respondents and persons claiming through them.

20
24. It is urged that this Court may lean in favour of closure of the
proceedings inasmuch as even the appellants succeed, the parties
may have to be relegated to the High Court for consideration of all
other   aspects   raised   by   the   respondents   in   the   writ   petitions   and
not dealt with by the High Court being of the view that initiation of
the   action   against   the   respondents   without   primary   notice   to   the
convict   vitiated   the   entire   proceedings.     As   a   matter   of   fact,   the
High  Court  in  paragraph  21  of  the  impugned  judgment   had  left  it
open to the Authorities to initiate fresh proceedings in accordance
with  law,  which   the  appellants  have  not   chosen  to   initiate  despite
the fact that there was no interim stay given by this Court in that
regard.
25. We   have   heard   Mr.   Aman   Lekhi,   learned   Additional   Solicitor
General   of   India,   Mr.   A.K.   Srivastava,   learned   senior   counsel   for
the appellants and Mr. Atul Shankar Vinod, learned counsel for the
respondents. 
26. Before   we   proceed   to   examine   the   different   viewpoints   in
reference to the provisions of the 1976 Act, it is essential to notice

21
the   legislative   intent   for   enacting   the   1976   Act.     That   can   be
discerned from the Preamble of the Act and also exhaustively dealt
with   by   the   nine­Judges   Constitution   Bench   of   this   Court,   in
Amratlal Prajivandas 
.
27. The Preamble of the 1976 Act reads thus:
“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.
WHEREAS   for   the   effective   prevention   of   smuggling
activities and foreign exchange manipulations which are
having a deleterious effect on the national economy it is
necessary   to  deprive  persons  engaged   in  such  activities
and manipulations of their ill­gotten gains;
AND WHEREAS such persons have been augmenting
such   gains   by   violations   of   wealth­tax,   income­tax   or
other   laws   or   by   other   means   and   have   thereby   been
increasing   their   resources   for   operating   in   clandestine
manner;
AND  WHEREAS  such  persons  have  in  many  cases
been   holding   the   properties   acquired   by   them
through   such   gains   in   the   names   of   their   relatives,
associates and confidants ;”
(emphasis supplied)
28. This Court dealt with the legislative intent in   extenso .   It also
analysed   the   relevant   provisions   of   the   1976   Act   which   would
 Supra at Footnote No. 5

22
reinforce the legislative intent.   While dealing with the definition of
“illegally acquired properties” (re: question No.4 in paragraph 43), it
had   noticed   that   the   stated   expression   is   quite   expansive.     It   not
only takes within its ambit the property acquired after the Act, but
also  the property  acquired before the Act, “whatever  be the length
of  time”.   Secondly, it  takes  in  the   property  which  may  have  been
acquired   partly   from   out   of   illegal   activity   —   in   which   case,   of
course,   the   provision   of   Section   9   would   be   attracted.     Further,
illegal activity is not confined to violation of the laws mentioned in
Section 2 of the 1976 Act but all laws which Parliament has power
to   make,   such   as   if   a   smuggler   has   acquired   some   properties   by
evading   tax   laws   or   by   committing   theft,   robbery,   dacoity,
misappropriation   or   any   other   illegal   activity   prohibited   by   the
Indian   Penal   Code   or   any   other   law   in   force.     All   that   would   be
liable to be forfeited.
29. The   Constitution   Bench   negatived   the   challenge   to   the
expansive   definition   of   expression   “illegally   acquired   property”   on
the   grounds   of   unreasonableness,   arbitrariness   or   for   that   matter

23
on any of the grounds relatable to Part III of the Constitution as not
being available.  The Constitution Bench then noted as follows:
“Question No.4
43 .   …..We   can   take   note   of   the   fact   that   persons
engaged   in   smuggling   and   foreign   exchange
manipulations do not keep regular and proper accounts
with   respect   to   such   activity   or   its   income   or   of   the
assets   acquired   therefrom.   If   such   person   indulges   in
other  illegal activity,  the position  would be no different.
The violation of foreign exchange laws and laws relating
to export and import necessarily involves violation of tax
laws.   Indeed,   it   is   a   well­known   fact   that   over   the
last   few   decades,   smuggling,   foreign   exchange
violations, tax evasion, drugs and crime have all got
mixed­up.   Evasion   of   taxes   is   integral   to   such
activity.   It   would   be   difficult   for   any   authority   to
say, in the absence of any accounts or other relevant
material   that   among   the   properties   acquired   by   a
smuggler,   which   of   them   or   which   portions   of   them
are   attributable   to   smuggling   and   foreign   exchange
violations   and   which   properties   or   which   portions
thereof   are   attributable   to   violation   of   other   laws
(which   Parliament   has   the   power   to   make).   It   is
probably   for   this   reason   that   the   burden   of   proving
that   the   properties   specified   in   the   show­cause
notice are not illegally acquired properties is placed
upon   the   person   concerned.   May   be   this   is   a   case
where   a   dangerous   disease   requires   a   radical
treatment.   Bitter   medicine   is   not   bad   medicine .   In
law   it   is   not   possible   to   say   that   the   definition   is
arbitrary   or   is   couched   in   unreasonably   wide   terms.
Further,   in   view   of   clear   and   unambiguous   language
employed in clause ( c ) of Section 3, it is not possible or
permissible to resort to the device of reading down. The
said   device   is   usually   resorted   to  save   a   provision   from
being   declared   unconstitutional,   incompetent   and   ultra
vires.   We   are,   therefore,   of   the   opinion   that   neither   the
constitutional   validity   of   the   said   definition   can   be

24
questioned   nor   is   there   any   warrant   for   reading   down
the clear  and  unambiguous  words in the clause. So far
as justification of such a provision is concerned, there is
enough   and   more.   After   all,   all   these   illegally
acquired properties are earned and acquired in ways
illegal   and   corrupt   —   at   the   cost   of   the   people   and
the   State.   The   State   is   deprived   of   its   legitimate
revenue to that extent. These properties must justly
go back where they belong — to the State . …..”
(emphasis supplied)
30. After having said that while dealing with the ambit of Section
2(2) of the Act, the Court observed thus:
“Question No. 5
44.   It   is   contended   by   the   counsel   for   the   petitioners
that   extending   the   provisions   of   SAFEMA   to   the
relatives,   associates   and   other   ‘holders’   is   again   a   case
of overreaching or of over­breadth, as it may be called —
a   case   of   excessive   regulation.   It   is   submitted   that   the
relatives   or   associates   of   a   person   falling   under   clause
( a )   or   clause   ( b )   of   Section   2(2)   of   SAFEMA   may   have
acquired   properties   of   their   own,   may   be   by   illegal
means   but   there   is   no   reason   why   those   properties   be
forfeited under SAFEMA just because they are related to
or   are   associates   of   the   detenu   or   convict,   as   the   case
may   be.   It   is   pointed   out   that   the   definition   of   ‘relative’
in  Explanation   (2)  and  of  ‘associates’  in  Explanation  (3)
are so wide as to bring in a person even distantly related
or associated with the convict/detenu, within the net of
SAFEMA,   and   once   he   comes   within   the   net,   all   his
illegally   acquired   properties   can   be   forfeited   under   the
Act.   In   our   opinion,   the   said   contention   is   based
upon   a   misconception.   SAFEMA   is   directed   towards
forfeiture   of   “illegally   acquired   properties”   of   a
person   falling   under   clause   ( a )   or   clause   ( b )   of
Section   2(2).   The   relatives   and   associates   are
brought in only for the purpose of ensuring that the
illegally   acquired   properties   of   the   convict   or

25
detenu,   acquired   or   kept   in   their   names,   do   not
escape   the   net   of   the   Act.   It   is   a   well­known   fact
that persons indulging in illegal activities screen the
properties   acquired   from  such   illegal   activity   in   the
names   of   their   relatives   and   associates.   Sometimes
they transfer such properties to them, may be, with
an intent to transfer the ownership and title. In fact,
it is immaterial how such relative or associate holds
the   properties   of   convict/detenu   —   whether   as   a
benami   or   as   a   mere   name­lender   or   as   a   bona   fide
transferee   for   value   or   in   any   other   manner.   He
cannot   claim   those   properties   and   must   surrender
them   to   the   State   under   the   Act.   Since   he   is   a
relative   or   associate,   as   defined   by   the   Act,   he
cannot   put   forward   any   defence   once   it   is   proved
that   that   property   was   acquired   by   the   detenu   —
whether   in   his   own   name   or   in   the   name   of   his
relatives   and   associates.   It   is   to   counteract   the
several   devices   that   are   or   may   be   adopted   by
persons   mentioned   in   clauses   ( a )   and   ( b )   of   Section
2(2) that their relatives and associates mentioned in
clauses   ( c )   and   ( d )   of   the   said   sub­section   are   also
brought   within   the   purview   of   the   Act.   The   fact   of
their   holding   or   possessing   the   properties   of
convict/detenu   furnishes   the   link   between   the
convict/detenu   and   his   relatives   and   associates.
Only   the   properties   of   the   convict/detenu   are
sought to be forfeited, wherever they are. The idea is
to reach his properties in whosoever's name they are
kept   or   by   whosoever   they   are   held.   The
independent   properties   of   relatives   and   friends,
which   are   not   traceable   to   the   convict/detenu,   are
not   sought   to   be   forfeited   nor   are   they   within   the
purview   of   SAFEMA 
.   We   may   proceed   to   explain

  That   this   was   the   object   of   the   Act   is   evident   from   para   4   of   the
preamble   which   states:   “And   whereas   such   persons   have   in   many   cases
been  holding  the  properties acquired by  them  through  such  gains in  the
names   of   their   relatives,   associates   and   confidants.”   We   are   not   saying
that the preamble can be utilised for restricting the scope of the Act, we
are   only   referring   to   it   to   ascertain   the   object   of   the   enactment   and   to
reassure   ourselves   that   the   construction   placed   by   us   accords   with   the

26
what   we   say.   Clause   ( c )   speaks   of   a   relative   of   a
person   referred   to   in   clause   ( a )   or   clause   ( b )   (which
speak of a convict or a detenu). Similarly, clause ( d )
speaks of associates of such convict or detenu. If we
look   to   Explanation   (3)   which   specifies   who   the
associates   referred   to   in   clause   ( d )   are,   the   matter
becomes   clearer .   ‘Associates’   means   —   ( i )   any
individual who had been or is residing in the residential
premises   (including   outhouses)   of   such   person   [‘such
person’ refers to the convict or detenu, as the case may
be,   referred   to   in   clause   ( a )   or   clause   ( b )];   ( ii )   any
individual   who   had   been   or   is   managing   the   affairs   or
keeping   the   accounts   of   such   convict/detenu;   ( iii )   any
association   of   persons,   body   of   individuals,   partnership
firm   or   private   company   of   which   such   convict/detenu
had   been   or   is   a   member,   partner   or   director;   ( iv )   any
individual   who   had   been   or   is   a   member,   partner   or
director   of   an   association   of   persons,   body   of
individuals,   partnership   firm   or   private   company
referred   to  in   clause   ( iii )  at   any   time   when   such   person
had   been   or   is   a   member,   partner   or   director   of   such
association   of   persons,   body   of   individuals,   partnership
firm or private company; ( v ) any person who had been or
is   managing   the   affairs   or   keeping   the   accounts   of   any
association   of   persons,   body   of   individuals,   partnership
firm or private company referred to in clause ( iii ); ( vi ) the
trustee of any trust where ( a ) the trust has been created
by   such   convict/detenu;   or   ( b )   the   value   of   the   assets
contributed   by   such   convict/detenu   to   the   trust
amounts, on the date of contribution not less than 20%
of the value of the assets of the trust on that date; and
( vii )   where   the   competent   authority,   for   reasons   to   be
recorded   in   writing,   considers   that   any   properties   of
such convict/detenu are held on his behalf by any other
person,   such   other   person.   It   would   thus   be   clear   that
the connecting link or the nexus, as it may be called, is
the   holding   of   property   or   assets   of   the   convict/detenu
or   traceable   to   such   detenu/convict.   Section   4   is
equally relevant in this context. It declares that “as
from the commencement of  this Act,  it shall  not be
lawful   for   any   person   to   whom   this   Act   applies   to
said object.
(emphasis supplied)

27
hold   any   illegally   acquired   property   either   by
himself   or   through   any  other   person   on   his   behalf”.
All   such   property   is   liable   to   be   forfeited.   The
language of this section is indicative of the ambit of
the   Act.   Clauses   ( c )   and   ( d )   in   Section   2(2)   and   the
Explanations (2) and (3) occurring therein shall have
to   be   construed   and   understood   in   the   light   of   the
overall   scheme   and   purpose   of   the   enactment.   The
idea   is   to   forfeit   the   illegally   acquired   properties   of
the convict/detenu irrespective of the fact that such
properties   are   held   by   or   kept   in   the   name   of   or
screened in the name of any relative or associate as
defined in the said two Explanations. The idea is not
to   forfeit   the   independent   properties   of   such
relatives   or   associates   which   they   may   have
acquired illegally but only to reach the properties of
the   convict/detenu   or   properties   traceable   to   him,
wherever they are, ignoring all the transactions with
respect   to   those   properties.   By   way   of   illustration,
take   a   case   where   a   convict/detenu   purchases   a
property in the name of his relative or associate — it
does not matter whether he intends such a person to
be  a  mere   name­lender  or  whether  he  really  intends
that   such   person   shall   be   the   real   owner   and/or
possessor   thereof   —   or   gifts   away   or   otherwise
transfers   his   properties   in   favour   of   any   of   his
relatives   or   associates,   or   purports   to   sell   them   to
any of his relatives or associates — in all such cases,
all   the   said   transactions   will   be   ignored   and   the
properties forfeited unless the convict/detenu or his
relative/associate,   as   the   case   may   be,   establishes
that   such   property   or   properties   are   not   “illegally
acquired   properties”   within   the   meaning   of   Section
3( c ). In this view of the matter, there is no basis for
the   apprehension   that   the   independently   acquired
properties   of   such   relatives   and   associates   will   also
be   forfeited   even   if   they   are   in   no   way   connected
with   the   convict/detenu .   So   far   as   the   holders   (not
being relatives and associates) mentioned in Section 2(2)
( e )   are   concerned,   they   are   dealt   with   on   a   separate
footing. If such person proves that he is a transferee in

28
good faith for consideration, his property — even though
purchased   from   a   convict/detenu   —   is   not   liable   to   be
forfeited.   It is equally necessary to reiterate that the
burden of establishing that the properties mentioned
in   the   show­cause   notice   issued   under   Section   6,
and   which   are   held   on   that   date   by   a   relative   or   an
associate of the convict/detenu, are not the illegally
acquired properties of the convict/detenu, lies upon
such   relative/associate.   He   must   establish   that   the
said property has not been acquired with the monies
or   assets   provided   by   the   detenu/convict   or   that
they   in   fact   did   not   or   do   not   belong   to   such
detenu/convict .   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.
In   this   view   of   the   matter,   the   apprehension   and
contention   of   the   petitioners  in   this   behalf   must  be
held   to   be   based   upon   a   mistaken   premise .   The
bringing   in   of   the   relatives   and   associates   or   of   the
persons   mentioned   in   clause   ( e )   of   Section   2(2)   is   thus
neither   discriminatory   nor   incompetent   apart   from   the
protection of Article 31­B.”
(emphasis supplied)
31. While   examining   the   contention   whether   clauses   (c)   to   (e)   of
Section 2(2) is a case of overreach or overbreadth, it held that this
argument of excessive regulation was based on a misconception as
the   Act   is   only   directed   towards   forfeiture   of   “illegally   acquired
properties   of   the   person   falling   under   clause   (a)   or   clause   (b)   of
Section   2(2)”.   The   relative   and   associates   are   brought   in   only   to

29
ensure   that   the   ‘illegally   acquired   properties’   of   the   convict   or   the
detenu, acquired or kept in the names of relatives or associates do
not   escape   the   net   of   the   Act.   There   could   be   cases   where   the
persons   mentioned   in   clauses   (a)   and   (b)   could   transfer   ‘illegally
acquired   properties’   to   their   relatives   and   associates   “and   even
further”,   with   the   intent   to   transfer   the   ownership   and   title.
Therefore, it is immaterial how such relative or associate holds the
illegally   acquired   property   of   the   convict/detenu   –   whether   as   a
benami, or as a mere name­lender or through transferee or in any
other manner. The objective and purpose of the Act is to counteract
devices   that   are   or   may   be   adopted   by   persons   mentioned   in
clauses (a) or (b) of Section 2(2), hence, their relatives or associates
mentioned   in   clauses   (c)   or   (d)   of   the   said   sub­section   are   also
brought   within   the   purview   of   the   Act.   The   relatives   or   associates
holding   or   possessing   the   illegally   acquired   property   of   the
convict/detenu is the link between the convict/detenu. The idea is
to   forfeit   the   properties   of   the   convict/detenu   wherever   they   are,
and to reach properties in whosoever’s name they are kept or held.

30
32. In the backdrop of the   dictum   of the Constitution Bench and
the subsequent decisions of this Court, we may hasten to add that
pivot of the 1976 Act is to reach the “illegally  acquired properties”
of the specified convict/detenu in whosoever’s name they are kept
or by whosoever they are held, whatever be the length of time.
33. Concededly, the dispensation under the 1976 Act applies only
to persons specified in Section 2(2) 
.
  2.     Application.—   (1)   The   provisions   of   this   Act   shall   apply   only   to   the
persons specified in sub­section   (2).
(2) The persons referred to in sub­section   (1)   are the following, namely:—
(a) every person—
(i) who has been convicted under the Sea Customs
Act,   1878   (8   of   1878),   or   the   Customs   Act,   1962   (52   of
1962),   of   an   offence   in   relation   to   goods   of   a   value
exceeding one lakh of rupees; or
(ii)   who   has   been   convicted   under   the   Foreign
Exchange   Regulation   Act,   1947   (7   of   1947),   or   the
Foreign Exchange Regulation Act, 1973 (46 of 1973), of
an   offence,   the   amount   or   value   involved   in   which
exceeds one lakh of rupees; or
(iii)   who   having   been   convicted   under   the   Sea
Customs   Act,   1878   (8   of   1878),   or   the   Customs   Act,
1962   (52   of   1962),   has   been   convicted   subsequently
under either of those Acts; or
(iv)   who  having   been   convicted   under   the   Foreign
Exchange   Regulation   Act,   1947   (7   of   1947),   or   the
Foreign   Exchange   Regulation   Act,   1973   (46   of   1973),
has   been   convicted   subsequently   under   either   of   those
Acts;
(b)   every   person   in   respect   of   whom   an   order   of
detention   has   been   made   under   the   Conservation   of   Foreign
Exchange and Prevention of Smuggling Activities Act, 1974:

31
34. Broadly   stated,   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
Provided that—
(i)   such   order   of   detention,   being   an   order   to
which   the   provisions   of   section   9   or   section   12A   of   the
said   Act   do   not   apply,   has   not   been   revoked   on   the
report of the Advisory Board under section 8 of the said
Act   or   before   the   receipt   of   the   report   of   the   Advisory
Board   or   before   making   a   reference   to   the   Advisory
Board; or
(ii)   such   order   of   detention,   being   an   order   to
which   the   provisions   of   section   9  of  the   said   Act   apply,
has not been revoked before the expiry of the time for, or
on   the   basis   of,   the   review   under   sub­section   (3)   of
section 9, or  on the report  of the Advisory Board under
section   8,   read   with   sub­section   (2)   of   section   9,   of   the
said Act; or
(iii)   such   order   of   detention,   being   an   order   to
which   the   provisions   of   section   12A   of   the   said   Act
apply,   has   not   been   revoked   before   the   expiry   of   the
time   for,   or   on   the   basis   of,   the   first  review   under   sub­
section   (3)   of   that   section,   or   on   the   basis   of   the   report
of   the   Advisory   Board   under   section   8,   read   with   sub­
section   (6)   of section 12A, of that Act; or
(iv) such order of detention has not been set aside
by a court of competent jurisdiction;
(c) every person who is a relative of a person referred to
in clause   (a)   or clause   (b);
(d) every associate of a person referred to in clause   (a)   or
clause   (b);
(e) any holder (hereafter in this clause referred to as the
present   holder)   of   any   property   which   was   at   any   time
previously   held   by   a   person   referred   to   in   clause   (a)   or
clause   (b)   unless   the   present   holder   or,   as   the   case   may   be,

32
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,
any one who held such property after such person and before
the   present   holder,   is   or   was   a   transferee   in   good   faith   for
adequate consideration.
Explanation   1 .—   For   the   purposes   of   sub­clause   (i)   of   clause   (a),   the
value   of   any   goods   in   relation   to   which   a   person   has   been   convicted   of   an
offence   shall   be   the   wholesale   price   of   the   goods   in   the   ordinary   course   of
trade in India as on the date of the commission of the offence.
Explanation 2 .— For the purposes of clause   (c), "relative" in relation to a
person, means—
(i) spouse of the person;
(ii) brother or sister of the person;
(iii) brother or sister of the spouse of person;
(iv) any lineal ascendant or descendant of the person;
(v)  any  lineal  ascendant   or  descendant   of  the  spouse  of
the person;
(vi)   spouse   of   a   person   referred   to   in   clause   (ii),
clause   (iii),   clause   (iv)   or clause   (v);
(vii)   any   lineal   descendant   of   a   person   referred   to   in
clause   (ii)   or clause   (iii).
Explanation 3 .—For the purposes of clause   (d), "associate", in relation to
a person, means—
(i)   any   individual   who   had   been   or   is   residing   in   the
residential premises (including out houses) of such person;
(ii)   any   individual   who   had   been   or   is   managing   the
affairs or keeping the accounts of such person;
(iii)   any   association   of   persons,   body   of   individuals,
partnership   firms,   or   private   company   within   the   meaning   of
the Companies Act, 1956, of which such person had been or is
a member, partner or director;

33
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.
(iv)   any   individual   who   had   been   or   is   a   member,
partner   or   director   of   an   association   of   persons,   body   of
individuals,   partnership   firm,   or   private   company   referred   to
in   clause   (iii)   at   any   time   when   such   person   had  been   or   is   a
member,   partner   or   director   of   such   association,   body,
partnership firm or private company;
(v) any person who had been or is managing the affairs,
or keeping the accounts, of  any  association of persons, body of
individuals, partnership firm or private company referred to in
clause   (iii);
(vi) the trustee of any trust, where,—
(a) the trust has been created by such person; or
(b)   the   value   of   the   assets   contributed   by   such
person   (including   the   value   of   the   assets,   if   any,
contributed by him earlier) to the trust amounts, on the
date on which the contribution is made, to not less than
twenty per cent. of the value of the assets of the trust on
that date;
(vii)   where   the   competent   authority,   for   reasons   to   be
recorded   in   writing   considers   that   any   properties   of   such
person are held on his behalf by any other person, such other
person.
Explanation 4.—   For the  avoidance of  doubt,  it is hereby  provided
that the question whether any person is a person to whom the provisions
of   this   Act   apply   may   be   determined   with   reference   to   any   facts,
circumstances   or   events   (including   any   conviction   or   detention)   which
occurred or took place before the commencement of this Act.
(emphasis supplied)

34
35. As regards the respondents herein, it is obvious that they are
covered   under   the   ambit   of   relative   —   being   son   and   wife   of   the
brother of the convict, to whom the 1976 Act applied.
36. 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.
37. The   objective   and   purpose   of   the   enactment   is   reinforced   in
the   encircling   Explanation   4   as   reproduced   hereinbefore.
Obviously,   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.
38. 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

35
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.
39. Section   3   is   the   definition   clause.     The   expression   “illegally
acquired property” has been expounded in clause (c) of sub­Section
(1) thereof 
.
  3. Definitions.—  (1) In this Act, unless the context otherwise requires,
(a) and (b)….
(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

36
The other relevant definition clause is expression “property” in
Section 3(1)(e) 
.
40. As   aforementioned,   in   Amratlal   Prajivandas 
,   whilst
interpreting the definition of “illegally acquired properties” in clause
(c) of Section 3(1) of the Act, it was held that the definition is very
wide   as   to   include   not   only   the   property   acquired   after   the
(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
(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 sub­clauses   (i)   to   (iii)   or the income
or earnings from such property;
and includes—
(A) any property held by such person which would have
been,   in   relation   to   any   previous   holder   thereof,   illegally
acquired   property   under   this   clause   if   such   previous   holder
had   not   ceased   to   hold   it,   unless   such   person   or   any   other
person who held the property at any time after such previous
holder or, where there are two or more such previous holders,
the last of such previous holders is or was a transferee in good
faith for adequate consideration;
(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;
  (e) "property" includes any interest in property, movable or immovable;
  Supra at Footnote No. 5

37
enactment   of   the   Act   but   also   property   acquired   before   the   Act,
whatever be the length of time, and further the illegal activity is not
confined   to   the   laws   mentioned   in   Section   2   of   the   Act   but   also
other   laws   which   the   Parliament   is   competent   to   make.   At   the
same­time   it   is   clarified   that   the   definition   of   ‘illegally   acquired
properties’   does   not   include   the   properties   of   the   relatives   or
associates covered under clauses (c) and (d) of Section 2(2) even if
they have acquired the properties by illegal activities or in violation
of  the  laws made by  the  Parliament.     For, the Act applies only  to
‘illegally   acquired   properties’   of   the   convict/detenu   held   by   or   in
the name of the relative or associate or holder.
41. While answering Question No.5, the Constitution Bench held:
“44... Section   4   is   equally   relevant   in   this   context.   It
declares that “as from the commencement of this Act, it
shall   not   be   lawful   for   any   person   to   whom   this   Act
applies  to  hold   any   illegally   acquired   property   either   by
himself   or   through  any   other   person   on  his   behalf”.   All
such   property   is   liable   to   be   forfeited.   The   language   of
this section is indicative of the ambit of the Act. Clauses
( c ) and  ( d )  in Section  2(2)  and the  Explanations  (2)  and
(3)   occurring   therein   shall   have   to   be   construed   and
understood   in   the   light   of   the   overall   scheme   and
purpose   of   the   enactment.   The   idea   is   to   forfeit   the
illegally   acquired   properties   of   the   convict/detenu
irrespective  of  the fact   that  such  properties  are held  by
or   kept   in   the   name   of   or   screened   in   the   name   of   any

38
relative   or   associate   as   defined   in   the   said   two
Explanations. The idea  is  not  to forfeit  the independent
properties   of   such   relatives   or   associates   which   they
may   have   acquired   illegally   but   only   to   reach   the
properties   of   the   convict/detenu   or   properties   traceable
to  him,  wherever   they   are,  ignoring   all  the  transactions
with respect to those properties...”
On the issue of the applicability of the Act to holders mentioned in
Section 2(2)(e) of the Act, this Court held that they fall in a different
class from relatives and associates who are dealt with on a separate
footing.   If   a   person   covered   under  clause   (e)   to   Section   2(2)   proves
that   he   is   a   transferee   in   good   faith   without   notice,   for   adequate
consideration,   his   property   —   even   though   purchased   from   a
convict/detenu — is not liable to be forfeited .
42. In the present judgment, it is not necessary for us to dilate on
the   definition   of   “illegally   acquired   property”   as   the   sole   issue
involved   is:   whether   it   is   mandatory   to   issue   a   primary   notice
under   Section   6   of   the   1976   Act   to   the   convict   and   not   merely   to
the relatives of the convict who hold the properties proposed to be

39
forfeited?    Nevertheless,  it  may  be  useful  to  advert  to   Section  4 
  of
the 1976 Act which prohibits holding of illegally acquired property.
43. On   the   literal   construction   of   this   provision,   it   must   follow
that it shall not be lawful for any person (as defined in Section 2(2)
of   the   1976   Act)   to   whom   the   Act   applies   to   hold   any   illegally
acquired   property   (as   defined   in   Section   3(1)(c)   of   the   1976   Act)
either  by himself or  through any other  person on his behalf.   It is
well settled that when penalty (such as forfeiture of such property)
is imposed by statute for the purpose of preventing something from
being done on some ground of public policy, the thing prohibited, if
done, will be treated as void, even though the penalty if imposed is
not   enforceable.     Such   acts   of   commission   and   omission   become
void   even   without   express   declaration   regarding   its   voidness,
because   such   penalty   implies   a   prohibition 
.     Be   it   noted   that
  4.       Prohibition   of   holding   illegally   acquired   property.—   (1)   As   from   the
commencement of this Act, it shall not be lawful for  any person to whom this
Act applies to hold any illegally acquired property either by himself or through
any other person on his behalf.
(2)   Where   any   person   holds   any   illegally   acquired   property   in
contravention of the provisions of sub­section   (1), such property shall be liable
to be forfeited to the Central Government in accordance with the provisions of
this Act.
 see Mannalal Khetan & Ors. vs. Kedar Nath Khetan & Ors., (1977) 2 SCC 424
(paras   18   to   22)   and   Asha   John   Divianathan   vs.   Vikram   Malhotra   &   Ors.,

40
Section   4   of   the   Act   posits   a   clear   mandate   that   the   person   to
whom the Act applies shall not hold any illegally acquired property
and   there   is   a   corresponding   duty   on   the   Competent   Authority   to
initiate process after due inquiry under Section 18 of the 1976 Act
for   forfeiture   of   such   property   —   whether   acquired   before   the
commencement of the Act or thereafter.
44. That   process   has   to   be   initiated   by   the   Competent   Authority
by   issuing   notice  under  Section   6 
  of  the   1976   Act  to   such   person
who   holds   the   properties   proposed   to   be   forfeited   being   illegally
2021 SCC OnLine SC 147
  6.   Notice   of   forfeiture.—   (1)  If,  having   regard  to the  value  of  the  properties
held by any person to whom this Act applies , either by  himself or through
any   other   person   on   his   behalf ,   his   known   sources   of   income,   earnings   or
assets,   and   any   other   information   or   material   available   to   it   as   a   result   of
action   taken   under   section   18   or   otherwise,   the   competent   authority   has
reason to believe (the reasons for such belief to be recorded in writing) that all
or any of such properties are illegally acquired properties, it may serve a notice
upon   such   person   (hereinafter   referred   to   as   the   person   affected)   calling
upon him within such time as may be specified in the notice, which shall not
be   ordinarily   less   than   thirty   days,   to   indicate   the   sources   of   his   income,
earnings  or   assets,  out  of  which  or  by   means  of  which  he  has  acquired  such
property,  the  evidence  on  which  he  relies  and  other  relevant  information  and
particulars, and to show cause why all or any of such properties, as the case
may be, should not be declared to be illegally acquired properties and forfeited
to the Central Government under this Act.
(2)   Where   a   notice   under   sub­section   (1)   to   any   person   specifies   any
property as being held on behalf of   such person   by any other person, a copy
of the notice shall also be served upon  such other person .
(emphasis supplied)

41
acquired properties.   That  person may  hold the property  either  by
himself or through any other person on his behalf.   If the property
is held by person concerned, the notice under Section 6(1) needs to
be issued to such person to whom the Act applies calling upon him
to   disclose   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.
45. Before   we   proceed   to   analyse   Section   6   of   the   1976   Act,   it
would   be   apposite   to   reproduce   Section   18 
  of   the   Act,   which   is
referred to in Section 6(1), being the preceding procedural steps to
  18.     Power of competent authority to require certain officers to exercise
certain   powers.—   (1)   For   the   purposes   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   in   sub­section   (1),   the   competent
authority   may,   having   regard   to   the   nature   of   the   inquiry,   investigation   or
survey, require an officer of the Income­tax Department to conduct or cause to
be conducted such inquiry, investigation or survey.
(3)   Any   officer   of   the   Income­tax   Department   who   is   conducting   or   is
causing   to   be   conducted   any   inquiry,   investigation   or   survey   required   to   be
conducted   under   sub­section   (2)   may,   for   the   purpose   of   such   inquiry,
investigation   or   survey,   exercise   any   power   (including   the   power   to   authorise
the   exercise   of   any   power)   which   may   be   exercised   by   him   for   any   purpose
under the Income­tax Act, 1961 (43 of 1961), and the provisions of the said Act
shall, so far as may be, apply accordingly.

42
be   taken   by   the   Competent   Authority   before   issuing   notice   under
Section   6(1),   upon   having   reason   to   believe   that   the   concerned
properties   are   illegally   acquired   properties   held   by   the   noticee,
either by himself or through any other person on his behalf.
46. At this stage, we may also refer to the other relevant provision
being Section 8 
  of the 1976 Act provisioning for burden of proving
that   the   property   referred   to   in   the   notice   is   legally   acquired
property of the noticee.
47.   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.   Burden   of   proof.—   In   any   proceedings   under   this   Act,   the   burden   of
proving that any property specified in the notice served under section 6 is not
illegally acquired property shall be on the person affected.

43
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.
48. 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

44
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.
49. 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   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.
50. 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.     As   noted   earlier,   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

45
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.
51. In   other   words,   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

46
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   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.
52. Learned counsel appearing for the parties had commended us
with   the   purport   of   Section   6(2)   of   the   1976   Act.     Different
interpretation   has   been   given   by   both   sides   to   the   expressions
occurring therein.   Section 6(2) merely refers to the requirement of
issuing notice to “such other person”.  
53. 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

47
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.
54. 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 sub­Section
[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

48
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.     We   may   usefully   recapitulate   the
enunciation of  the  Constitution  Bench,  wherein  it is held  that  the
legislative   intent   is   to   reach   to   all   illegally   acquired   properties   in
whosoever’s   name   they   are   kept   or   by   whosoever   they   are   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.
55. Be   it   noted   that   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

49
physical   possession   of   the   illegally   acquired   property   by   person
other   than   the   person   to   whom   the   Act   applies.     In   such   a   case,
sub­section   (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.
56. Section   4   of   the   Act,   which   in   sub­section   (1)   uses   similar
expression   –   “any   person   to   whom   this   Act   applies   to   hold   any

50
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.
57. 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   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
  Tata   Chemicals   Ltd.   v.   Commissioner   of   Customs   (Preventive),   Jamnagar ,
(2015) 11 SCC 628
  Kewal Krishan v. State of Punjab, AIR 1967 SC 737
  Bar Council of Maharashtra v. M. V. Dabholkar & Ors., (1976) 2 SCC 291

51
the   formation   of   belief  and   should   not   be  extraneous  or   irrelevant
for the purpose 
  of initiation of inquiry under Section 6 of the Act.
58. 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.
59. G.P.   Singh,   in   Principles   of   Statutory   Interpretation ,   14 th
Edition,   at   page   430,   has   laid   down   principles   and   rules   for
ascertaining   the   mandatory   or   directory   nature   of   provisions,   and
has noted that this depends on the intent of the legislature and not
necessarily   on   the   language   that   the   intent   is   clothed   in.   The
nature   and   design   of   the   statute,   the   effects   which   would   follow
  S. Narayanappa & Ors. v. Commissioner of Income­tax, Bangalore, AIR 1967
SC 523

52
from   construing   it   one   way   or   the   other,   and   the   severity   or
triviality   of   consequences   that   flow   therefrom   have   to   be
considered.   At   times,   the   courts   examine   whether   the   statute
provides   for   the   contingency   of   non­compliance   and   whether   non­
compliance   is   visited   with   some   penalty   etc.,   but   this   is   not   a
necessary or sufficient basis for determining whether the provision
is   mandatory   or   directory   in   nature.   Lastly,   if   a   provision   is
mandatory, it must be obeyed and followed. This is especially so in
case of jurisdictional requirements, i.e., pre­conditions that have to
be fulfilled before any action is taken.
60. In the  context  of  the present enactment, it is unnecessary  to
underscore that when a notice under Section 6 of the Act is issued,
the   consequences   entail   forfeiture   of   property   or   fine   in   lieu   of
forfeiture as envisaged by Sections 7 and 9, respectively, of the Act.
We   have   not   quoted   Section   11,   but   the   said   provision   postulates
that transfer  of  property  referred to in  a  notice under  Section  6 is
null   and   void.   Therefore,   transactions   after   issuance   of   notice
under Section 6 or 10 (which applies to the procedure in respect of
certain trust properties) are void and are to be ignored. 

53
61. 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 6.  For, Section 8 does not
apply   at   the   stage   when   the   Competent   Authority   forms   and
records its reasons to issue notice.
  8. Burden of proof.  In any proceedings under this Act, the burden of proving
that any property specified in the notice served under section 6 is not illegally
acquired property shall be on the person affected.
  Supra at Footnote No. 5

54
62. Section   7 
  of   the   Act,   which   is   titled   ‘ Forfeiture   of   property   in
certain   cases ’,   supports   the   above   interpretation   as   it   envisages
that   the   Competent   Authority   shall   consider   the   explanation,   if
any,   to   the   show­cause   notice   issued   under   Section   6   and   the
material before it. After giving notice to the person affected, and in
case the person affected holds any property specified in the notice
through any other person, then to such other person, a reasonable
opportunity   of   being   heard  would   be  afforded   to  them.   Thereafter,
the   Competent   Authority   may   pass   an   order,   recording   findings
  7. Forfeiture of property in certain cases . (1) The competent authority may,
after   considering   the   explanation,   if   any,   to   the   show­   cause   notice   issued
under   section   6,   and   the   materials   available   before   it   and   after   giving   to   the
person   affected   (and   in   a   case   where   the   person   affected   holds   any   property
specified in the notice through any other person, to such other person also) a
reasonable  opportunity   of  being  heard,  by  order,  record  a  finding  whether  all
or any of the properties in question are illegally acquired properties. 
(2)   Where   the   competent   authority   is   satisfied   that   some   of   the
properties referred to in the show­cause notice are illegally acquired properties
but   is   not  able   to  identify   specifically   such   properties   then,   it   shall   be   lawful
for  the  competent  authority   to specify  the  properties  which,  to the  best  of  its
judgment,   are   illegally   acquired   properties   and   record   a   finding   accordingly
under sub­section (1). 
(3)   Where   the   competent   authority   records   a   finding   under   this
section   to   the   effect   that   any   property   is   illegally   acquired   property,   it   shall
declare   that   such   property   shall,   subject   to   the   provisions   of   this   Act,   stand
forfeited to the Central Government free from all encumbrances. 
(4)  where  any  shares  in  a  company   stand  forfeited  to the  Central
Government   under   this   Act,   then,   the   company   shall,   notwithstanding
anything  contained in the Companies Act, 1956 (1 of 1956), or the articles of
association of the company, forthwith register the Central Government as the
transferee of such shares.

55
whether   or   not   the   listed   properties   are   illegally   acquired
properties.
63. In   Kesar   Devi 
,   this   Court   held   that   the   language   of   Section
6(1)   does   not   indicate   any   requirement   of   mentioning   any   link   or
nexus   between   the   convict   or   the   detenu   and   the   property
ostensibly   standing   in   the   name   of   the   person   covered   under
clauses (c), (d) and (e) to Section 2(2) and also referred to Section 8
which   incorporates   reverse   burden   of   proof.   However,   the   said
observations   must   be   read   in   light   of   the   Constitution   Bench
judgment   in   the   case   of   Amratlal   Prajivandas 
,   which   is   the
authoritative   and   binding   precedent.     Indeed,   Kesar   Devi’s
judgment   observes   that   in   some   cases   where   the   relationship   is
close   and   direct,   an   inference   can   easily   be   drawn   and   no   link   or
nexus   has   to   be   indicated   and   may   itself   indicate   some   link   or
nexus, which can be duly taken notice of and the reasons to believe
can be recorded in writing.  That, however, may depend on facts of
the case and not be true in all cases. 
  Supra at Footnote No. 6
  Supra at Footnote No. 5
  Supra at Footnote No. 6

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64. A   priori,   we are of the considered opinion that 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.  

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65. 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,   we
may   lean   in   favour   of   the   view   taken   by   the   High   Court   of   Kerala
and   Calcutta   High   Court   reproduced   above,   for   independent
reasons   delineated   hitherto.     The   view   taken   by   the   Madras   High
Court in the impugned judgment, therefore, does not commend to
us and is reversed.
66. The   parties   had   invited   our   attention   to   other   judgments   of
this   Court.     However,   those   judgments   have   not   dealt   with   the
question that arise for consideration in the present appeals.
67. Having said this, we need to set aside the impugned judgment
and relegate the parties before the High Court by restoring the writ
petitions to the file to its original number for being heard afresh on
all other issues and contentions as may be available to both sides

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including   the   argument   that   there   is   an   inordinate,   undue   and
unexplained   delay   in   initiating   the   action  against   the   respondents
(writ petitioners) and as a result of which it would be iniquitous to
call   upon   the   respondents   to   offer   explanation   by   reopening   the
adjudication of the entire proceedings.  We do not wish to dilate on
any   other   plea   in   these   appeals.     Further,   we   may   not   be
understood to have expressed any opinion either way on any other
contention   available   to   the   parties.     We   say   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.
68. During the course of the hearing, an issue arose whether the
convict,   i.e.,   V.P.   Selvarajan   had   expired   before   the   issuance   of
notice under  Section  6 on  19 th
  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

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have   accepted   that   the   convict   V.P.   Selvarajan   had   expired   before
impugned   notices   under   Section   6   dated   19 th
  January   1994   were
issued.
69. Be   that   as   it   may,   in   the   present   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   V.  P.  Selvarajan.  If the   properties  were  in  the  name  of  the
deceased detenu or convict, then different considerations may have
applied.     In   the   context   of   the   present   case   as   the   convict   V.P.
Selvarajan had expired before the issuance of notice under Section
6   on   19 th
  January   1994,   therefore,   the   need   and   requirement   to
serve notice on him would not arise. 
70. Accordingly,   these   appeals   succeed.     The   common   impugned
judgment   and   order   dated   24.3.2008   passed   by   the   Madras   High
Court   in   Writ   Petition   Nos.1149   and   1150   of   2001   is   set   aside.
Instead,   the   writ   petitions   are   restored   to   the   file   to   its   original
number   for   being   considered   afresh   on   its   own   merits   in

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accordance   with   law  on  all   other   issues   and  contentions   available
to   both   sides   except   the   question   answered   in   this   judgment.
Thus,  all  other  contentions  available  to  both  parties are  left  open.
We   request   the   High   Court   to   expeditiously   dispose   of   the
remanded writ petitions.  No order as to costs.
Pending applications, if any, stand disposed of.
..……………………………J.
       (A.M. Khanwilkar)
………………………………J.
       (Sanjiv Khanna)
New Delhi;
December 14, 2021.