Service Of Primary Notice To Convict Or Detenu Not Mandated U/s. 6(1) Of Smugglers & Foreign Exchange Manipulators Act: Supreme Court

Mr. Aman Lekhi, Additional Solicitor General of India and Mr. A.K. Srivastava, Senior Advocate appeared on behalf of the appellants while Mr. Atul Shankar Vinod, Advocate appeared on behalf of the respondents.

The Court was dealing with the issue that when the Competent Authority claims that the subject property (which is to be forfeited) is of the convict and ostensibly held by the relatives of the convict, is it mandatory to serve a primary notice under Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 upon the convict with a copy to the relatives under Section 6(2) and whether non-service of such a notice on the convict would vitiate the entire proceedings initiating only against his relatives?

The Madras High Court, in the instant case, held that the provision in question leaves no room for doubt that primary notice ought to be served and non-service would vitiate the action initiated against his relatives. The High Court held that the action initiated by the Competent Authority [the appellants before the Apex Court] was vitiated due to lack of notice to the notice and hence, the High Court set aside the entire action initiated against the respondents.

The Apex Court, at the outset, noted that a contra view had been taken on the subject matter, by two other High Courts; Kerala High Court in Sajitha & Ors.vs. Competent Authority & Ors and Calcutta High Court in Competent Authority & Administrator & Anr. vs. Manilal Jalal & Anr.

The Apex Court was, thus, called upon to resolve the conflicting views taken by different High Courts and settle the position of law authoritatively.

The Court proceeded to note the legislative intent for enacting the 1976 Act. The Court took into account the preamble of the Act which was dealt with in extenso by a 9-Judge Constitution Bench of the Apex Court in Attorney General for India vs Amratlal Prajivandas, 1994 SCC (5) 54. In the said case, the Constitution Bench had negatived the challenge to the expansive definition of the expression "illegally acquired property" on the ground that it was unreasonable, arbitrary or for that matter on any ground under Part III not being available.

The Apex Court noted that the pivot of the 1976 Act is to reach the "illegally acquired properties" of the convict/detenu in whosoever's name they are kept/held irrespective of the length of time. The Court noted that this dispensation under the 1976 Act applies only to persons as provided under Section 2(2) of the 1976 Act.

The Court, while interpreting Section 4 of the 1976 Act, on a literal construction, observed that the provision states that it shall not be lawful for a person defined under Section 2(2) of the 1976 Act, to hold any illegally acquired property either by himself or through any other person on his behalf.

The Court noted that it was well settled that penalty is imposed by the statute for the purpose of preventing something from being done on public policy grounds, and if the prohibited act is done, it will be treated as void, even though the penalty is not enforceable. Such acts, according to the Court, become void without declaration expressly.

The Court noted that the notice under Section 6(1) is required to be issued to any person to whom the Act applies. The Court noted that the purpose of issuing the notice is to enable the notice to discharge the burden of proof as propounded in Section 8 of the 1976 Act and then it was open to the notice to prove that the property mentioned in the notice was legally acquired by him.

The Court noted that if the property is held by a person owing to being in legal possession, but the ownership lies in the hands of the convict of his relative, the Competent Authority ought to give notice not only to the person in possession but also to the owner thereof.

However, the Court noted, if the ownership of the property is that of the person in possession, [not being the convict or detenu], then, the question of issuing notice to the convict or detenu would serve no purpose. The Court held that the convict or detenu cannot claim any right in such property and hence, he is not expected to discharge the burden of the proof under Section 8 as to whether the property is legally acquired by him.

The Court placed reliance on G.P. Singh, in Principles of Statutory Interpretation, 14^thEdition, at page 430 to observe that the mandatory or directory nature of provisions depends on the intent of the legislature and not necessarily on the language given to the said provision. The Court noted that if a notice under Section 6 is issued, what follows is forfeiture of property or fine, and hence, any transactions, after the notice is issued under Section 6 or 10 will be void in the eyes of the law.

The Court came to the conclusion that Section 6(1) of the 1976 Act does not provide that it is "mandatory" to serve the convict or detenu with a primary notice while initiating action against the relative of the convict or detenu. The Court held that if the illegally acquired property is held by a person in his name while also holding the possession of the said property (being relative of the convict), there is no need for a notice to be issued to the convict or detenu, much less primary notice, as was wrongly held by the High Court in the instant case. The Court made the following critical observations:

"For, Section6(1) posits that notice must be given to the person who is holdingthe tainted property and is likely to be affected by the proposedforfeiture of the property. The person immediately and directly tobe affected is the person who is the recorded owner of the propertyand in possession thereof himself or through some other person onhis behalf. In the latter case, the burden of proof under Section 8is not to be discharged by the convict or detenu, but by the personwho holds the illegally acquired property either by himself orthrough any other person on his behalf."

The Court held that it found favour with the view taken by the Kerala High Court and Calcutta High Court and hence, the view taken by the Madras High Court, via the impugned judgement, was not sustainable. The impugned judgement was, thus, set aside and parties were relegated back to the writ Court. The writ was directed to be heard afresh keeping all issues and contentions open.

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