2002 (8) TMI 584 - HC - Companies Law

High Court quashes property confiscation under forfeiture law, emphasizing need for direct link before forfeiture.

The High Court set aside the orders confiscating the petitioner's properties under the Smugglers and Foreign Exchange Manipulators (Forfeiture of ... Forfeiture of property in certain cases Issues:- Confiscation of property of a relative of a detenu under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Properties) Act, 1976 without establishing a nexus with illegally acquired properties and earnings from prohibited activities.Analysis:1. The writ petition questioned the confiscation of the petitioner's properties under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Properties) Act, 1976 without proving a connection between the properties and the detenu's illegal activities. The detenu's brother was detained under the Act, and the petitioner was treated as an 'affected person' under the Act. Notices were issued for forfeiture of properties, and after investigation and trial, the properties were forfeited by the competent authority. An appeal was partially allowed, leading to the present writ petition seeking various reliefs.2. The petitioner's counsel argued that the Act required establishing a link between the illegally acquired properties and the detenu's prohibited activities. The Act aimed to forfeit properties acquired unlawfully by smugglers and manipulators of foreign exchange. The definition of 'illegally acquired property' in the Act was crucial, and the burden of proof lay on the affected person to show that the property was not illegally acquired.3. The petitioner had disclosed the properties to the Income-tax Authorities, but the appellate authority erred in reviewing the Income-tax Authorities' decision. The appellate authority failed to apply the Act's provisions correctly, raising concerns about the forfeiture of relatives' properties without a nexus to the detenu's illegal activities.4. The Supreme Court's decision in Attorney General of India v. Amratlal Prajivandas clarified that a connecting link must exist between a property and the detenu/convict for forfeiture. The burden of proof shifts to the affected persons only after the department establishes this link. The competent and appellate authorities in this case did not properly consider this requirement, leading to a legal misdirection.5. The High Court, relying on the Supreme Court's decision and a previous division bench judgment, set aside the impugned orders and remitted the matter to the competent authority for fresh consideration. The Court emphasized the necessity of establishing a connection between the properties and the detenu's illegal activities before forfeiture. The writ petition was allowed without costs due to the legal misdirection in the authorities' decisions.