2011 (4) TMI 1300 - HC - FEMA

Court Scrutiny of SAFEMA Forfeiture Orders: Compliance, Notice Defects, & Legal Standards

R. Ramakrishnan Versus The Appellate Tribunal for Forfeited Property & Others

The court analyzed issues regarding the interpretation and application of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, ... - Issues Involved:1. Interpretation and application of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA).2. Validity of orders of forfeiture passed under SAFEMA in respect of properties standing in the names of relatives of the detenue/convict.3. Compliance with legal requirements and principles of natural justice in the issuance of notices under Section 6(1) of SAFEMA.4. Requirement of establishing a link or nexus between the property sought to be forfeited and the illegally acquired assets of the convict/detenue.5. Validity of proceedings and orders of forfeiture based on defective notices under Section 6(1) of SAFEMA.Detailed Analysis:1. Interpretation and Application of SAFEMA:SAFEMA was enacted to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators. The Act applies to relatives of detenues/convicts and aims to prevent smuggling and clandestine operations by depriving such persons of their illegally acquired properties. The relevant provisions include definitions, prohibition of holding illegally acquired property, notice of forfeiture, burden of proof, and powers of the competent authority and Appellate Tribunal.2. Validity of Orders of Forfeiture:The constitutional validity of SAFEMA and its application to relatives and associates of detenues/convicts was upheld by the Supreme Court in Attorney General of India vs. Amratlal Prajivandas. The Court held that the Act's purpose is to reach properties of the detenue/convict, wherever they are held, and not to forfeit independent properties of relatives/associates unless they are linked to the convict's illegal activities.3. Compliance with Legal Requirements and Principles of Natural Justice:The issuance of notices under Section 6(1) of SAFEMA must satisfy three conditions: the value of the property, the known sources of income or assets of the person concerned, and any other relevant information. The reasons for issuing the notice must be recorded in writing and should establish a link between the property and the convict's illegal activities. Failure to meet these requirements renders the notice and subsequent proceedings invalid.4. Requirement of Establishing a Link or Nexus:The competent authority must establish a link or nexus between the property sought to be forfeited and the illegally acquired assets of the convict/detenue. The burden of proof lies on the relative/associate to disprove the allegation once the link is established. A roving enquiry is not permitted under the Act, and the reasons for belief must be based on materials gathered during the investigation.5. Validity of Proceedings and Orders Based on Defective Notices:In the cases examined, the notices issued under Section 6(1) were found to be defective due to non-application of mind, failure to establish the required link or nexus, and lack of specific details about the value of the property and sources of income. The use of printed formats without striking off irrelevant portions indicated non-application of mind. Consequently, the orders of forfeiture based on such defective notices were set aside.Case Analysis:W.P.No.26466 of 2001:The petitioner, a relative of the convict, challenged the forfeiture of properties. The notice under Section 6(1) was a printed format with irrelevant portions not struck off, indicating non-application of mind. The reasons recorded did not establish a link between the properties and the convict's illegal activities. The Court held that the notice did not satisfy the legal requirements and set aside the forfeiture order, allowing the respondents to initiate fresh proceedings if advised.W.P.No.7609 of 2001:The petitioner, the wife of the detenue, challenged the forfeiture of properties. The notice under Section 6(1) was found to be defective as it did not establish the required link or nexus. The reasons recorded were insufficient, and the proceedings were held to be vitiated. The Court set aside the forfeiture order, emphasizing the need for scrupulous compliance with statutory requirements.Conclusion:The judgments underscore the importance of adhering to legal requirements and principles of natural justice in forfeiture proceedings under SAFEMA. The competent authority must establish a clear link between the properties and the convict's illegal activities, and any defect in the notice under Section 6(1) invalidates subsequent proceedings. The orders of forfeiture were set aside, with liberty to initiate fresh proceedings if done in accordance with the law.