Ajit Singh (Dead) Through His ... vs Union Of India (Uoi), Through The ...
2002 Latest Caselaw 428 Del

JUDGMENT

Madan B. Lokur, J.

1. The Petitioner (since deceased) through his legal representatives has challenged the constitutional validity of sub-section (6-A) of Section 12 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (for short SAFEMA) in this petition under Article 226 of the Constitution. The Petitioner has also prayed for an appropriate writ directing that a Bench of the Appellate Tribunal for Forfeited Property constituted under Section 12 (6-A) of SAFEMA should be headed by a member having judicial experience which was not so in his case. In addition to these two prayers, the Petitioner has also challenged, on merits, the correctness of the order dated 30th October, 1996 passed by the Appellate Tribunal for Forfeited Property (hereinafter referred to as the Tribunal).

2. The Petitioner was preventively detained in 1974 under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (for short COFEPOSA) but his detention was revoked by the appropriate authority. Two sons of the Petitioner, namely, Satbir Singh and Paramjit Singh were also preventively detained under the provisions of COFEPOSA but they served out the period of detention. The Petitioner was, therefore, a person affected within the meaning of Section 2(2)(c) of SAFEMA.

3. On these basic facts, the Competent Authority under SAFEMA issued a notice to the Petitioner under the provisions of Section 6(1) of SAFEMA in which it was mentioned that the Petitioner had acquired the following assets:

(i) Kothi No.66, Taylor Road, Amritsar.

(ii) Plot No.1, Taylor Road, Amritsar.

(iii) Plot No.3, Taylor Road, Amritsar.

(iv) Agricultural land consisting of

(a) 1/3rd share in agricultural land in Village Burj, Tehsil Taran Taran, Amritsar.

(b) Land in Village Fatehpur, District Amritsar.

(v) Shares in Azad Transport Cooperative Society Ltd.

4. According to the Competent Authority, the Petitioner had some concealed income which he disclosed to the income-tax authorities in 1968 with a request for spreading the income over various years. The concealed income was assessed at Rs.1,36,000/- and was spread over the assessment years 1958-59 to 1963-64 and penalty was suitably imposed on him. The Petitioner's income for the subsequent assessment years, that is, 1964-65 to 1969-70 was a total of about Rs.37,000/- and for the assessment years 1970-71 to 1973-74, no return of income had been filed. The Competent Authority was of the view that the income-tax records of the Petitioner were silent with regard to the source of income for making such large investments in property and that the majority of the investments mentioned above were made in the period after 1964-65. He was of the view that the Petitioner's income was too meagre even for household expenses let alone for making investments in real estate. Consequently, it appeared to the Competent Authority that the investments made by the Petitioner were out of income generated from sources other than his known sources of income and were illegally acquired. A notice was, therefore, given to him to show cause why the properties mentioned above be not acquired and forfeited to the Central Government without any encumbrances.

5. After taking some adjournments, the Petitioner filed a reply dated 31st January, 1978 contending that the provisions of SAFEMA were not applicable to him and that he had done nothing wrong in acquiring the properties inasmuch as he was assessed to income-tax and wealth-tax and had acquired the properties from income lawfully generated by him.

6. The Competent Authority sent a reply dated 9th February, 1978 to the Petitioner to the effect that the provisions of SAFEMA were applicable to him. He also required the Petitioner to furnish yearwise details of his income and other documents in evidence for considering the case of the Petitioner. This letter was replied to by the Petitioner on 23rd October, 1978 along with certain documents.

7. For quite some time thereafter, the proceedings against the Petitioner did not proceed because he and some others challenged the constitutional validity of SAFEMA in the Supreme Court some time in 1979. The Supreme Court gave its decision in 1994 and the same is reported as Attorney General for India etc. etc. v. Amritlal Prajivandas & Ors. etc. etc., . Needless to say, the constitutional validity of SAFEMA was upheld by the Supreme Court.

8. After the decision of the Supreme Court in Amritlal, the Competent Authority sent a notice to the Petitioner on 9th June, 1994 under the provisions of Section 7(1) of SAFEMA proposing to hear the Petitioner and giving him an opportunity to produce evidence/documents in support of his contentions.

9. For one reason or another, the hearing in the show cause notice could not take place for a considerable period of time. Eventually, the show cause notice was adjudicated upon by the Competent Authority who passed a detailed order dated 28th February, 1996 holding that the properties mentioned in the show cause notice dated 26th October, 1977 had been illegally acquired by the Petitioner. The Competent Authority forfeited these properties to the Central Government free from all encumbrances.

10. The Petitioner preferred an appeal against the forfeiture and by the impugned order dated 30th October, 1996, the Tribunal partly allowed the appeal of the Petitioner. It was held by the Tribunal that the properties on Taylor Road, Amritsar were rightly forfeited. With regard to two parcels of land in Village Burj, the Tribunal remanded the matter to the Competent Authority to re-examine the evidence subsequently adduced by the Petitioner. Two parcels of land in Village Fatehpur were excluded from forfeiture while the forfeiture of the shares in Azad Transport Cooperative Society Ltd. was confirmed.

11. It is necessary to mention a few more facts which have a material bearing on the case. During the pendency of the petition in the Supreme Court, sub-section (6-A) of Section 12 of SAFEMA was enacted in 1981. Sections 12(1), 12(6) and 12(6-A) of SAFEMA are material for the present purposes and they read as follows:-

12. Constitution of Appellate Tribunal - (1) The Central Government may, by notification in the Official Gazette, constitute an Appellate Tribunal to be called the Appellate Tribunal for Forfeited Property consisting of a Chairman and such number of other members (being officers of the Central Government not below the rank of a Joint Secretary to the Government) as the Central Government thinks fit, to be appointed by the Government for hearing appeals against the orders made under section 7, sub-section (1) of section 9 or section

(2) to (5) xxx xxx xxx

(6) The powers and functions of the Appellate Tribunal may be exercised and discharged by Benches consisting of three members and constituted by the Chairman of the Appellate Tribunal.

(6-A) Notwithstanding anything contained in sub-section (6), where the Chairman considers it necessary so to do for the expeditious disposal of appeals under this section, he may constitute a Bench of two members and a Bench so constituted may exercise and discharge the powers and functions of the Appellate Tribunal: Provided that if the members of a Bench so constituted differ on any point or points, they shall state the point or points on which they differ and refer the same to a third member (to be specified by the Chairman) for hearing on such point or points and such point or points shall be decided according to the opinion of that member.

(7) & (8) xxx xxx xxx"

12. On 26th April, 1996, the Chairman of the Tribunal issued an Order under Section 12(6-A) of SAFEMA constituting "...a Bench consisting of Smt. K. Shukla, Member and Shri B.K. Agarwal, Member, to exercise and discharge the powers and functions of the Appellate Tribunal for Forfeited Property, from 2nd May 1996 till new Chairman assumes charge."

13. It was this Bench which passed the impugned order dated 30th October, 1996 which is under challenge in this case.

14. Learned counsel for the parties made their submissions on 4th, 21st and 28th February, 2002 when judgment was reserved.

15. Even though the Petitioner challenged the constitutional validity of Section 12(6-A) of SAFEMA, but during the oral submissions made by learned counsel, nothing substantial was said to assail the constitutional validity of this provision. What was in fact argued by learned counsel was that soon after the Order dated 26th April, 1996, the Chairman of the Tribunal demitted office and a new Chairman was appointed much later. He submitted that during the interregnum, there was no validly constituted Tribunal to hear the Petitioner's appeal. According to learned counsel, the Tribunal has to consist of a Chairman and some members and in the absence of a Chairman, the members alone could not constitute the Tribunal. Consequently, it was contended that the appeal filed by the Petitioner could not have been heard until a new Chairman was appointed.

16. It was further submitted by learned counsel for the Petitioner that none of the members of the Tribunal who heard the case of the Petitioner were "judicial members". As such, the Petitioner was not given a judicious hearing in the matter and on this ground also, the impugned order of the Tribunal dated 30th October, 1996 deserves to be set aside.

17. On merits, learned counsel for the Petitioner contended that there was no link established between the properties of the Petitioner and the detenus and, therefore, no order of forfeiture could have been passed against the Petitioner. It was further contended that the property sought to be forfeited had been legally acquired by the Petitioner through known sources of income and, therefore, the forfeiture order was bad in law.

18. The first contention urged by learned counsel for the Petitioner is liable to be rejected. There is no challenge to the Order dated 26th April, 1996 and, therefore, we have to proceed on the basis that the Bench consisting of Smt. Shukla and Shri Agarwal was validly constituted. Learned counsel, however, goes a step further by saying that even if this is so, the Petitioner's appeal could not have been heard in the absence of a Chairman.

19. The decisions relied on in this regard by either of the learned counsel are not at all helpful. In Kama Umi Isa Ammal v. Rama Kudumban & Ors., , the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948 provided (in Section 8 thereof) for a Tribunal consisting of three members. The Rules framed under the said Act provided that "Not less than two members shall be necessary to constitute a sitting of a Tribunal." The validity of such a rule was challenged and it was held to be ultra vires the provisions of the said Act. Consequently, it was held that since the said Act provided for a three member Tribunal, a two member Tribunal could not sit and decide cases.

20. In Bengal Potteries Ltd. & Anr. v. M.R.T.P.

Commission & Ors., (1975) 45 Comp.Cas. 697, the Monopolies and Restrictive Trade Practices Act, 1969 provided (in Section 5(1) thereof) for the constitution of a Commission consisting of "a Chairman and not less than two and not more than eight other members......" The question before the Calcutta High Court was whether the Chairman and a member could proceed with the hearing of a case as the Commission, in the absence of any other member. This question was answered in the affirmative by relying upon Section 6(4) of the said Act which provides that "No act or proceeding of the Commission shall be invalid by reason only of the existence of any vacancy among its members or any defect in the constitution thereof." Reliance was also placed by the Calcutta High Court on Section 16(2) of the said Act which provides that "The powers or functions of the Commission may be exercised or discharged by Benches formed by the Chairman of the Commission from among the members." It was held that this provision entitled the Chairman to form a Bench consisting of himself and another member only.

21. The United Commercial Bank Ltd. v. Their Workmen, dealt with the provisions of the Industrial Disputes Act, 1947. A three member Industrial Tribunal was constituted by the Central Government. One member ceased to be available and in his stead another member was appointed. The newly appointed third member was not available for about three months. During this period, the two remaining members made certain awards. One of the questions before the Supreme Court was whether these awards were legally valid. Answering the question in the negative, the Supreme Court considered the various provisions of the said Act and held that "......in the absence of one or more members the rest are not competent to act as a Tribunal at all......It appears under the circumstances proper to hold that in respect of a Tribunal when the services of a member have ceased to be available the rest by themselves have no right to act as the Tribunal." (paragraph 8 of the Report). The provisions of SAFEMA are not at all similar to the provisions of the Industrial Disputes Act, 1947 (and indeed this was nobody's case before us).

22. The scheme of Section 12 of SAFEMA suggests that the Tribunal is to consist of a Chairman and such number of other members as the Central Government thinks fit. Sub-section (6) of Section 12 of SAFEMA lays down that a Bench of the Tribunal shall consist of the Chairman and two other members. In other words, a three member Bench should ordinarily hear appeals under SAFEMA. Sub-section (6-A), however, carves out an exception. This sub-section provides that notwithstanding what is contained in sub-section (6), the Chairman may constitute a Bench consisting of two members. There is no requirement that one of the members should be the Chairman and, therefore, it is postulated by sub-section (6-A) that both the members may well be persons other than the Chairman of the Tribunal. In fact, this is what was done by the Chairman while issuing the order dated 26th April, 1996. Since SAFEMA permits this, the constitution of a two member Bench of the Tribunal, consisting of members other than the Chairman, is permissible and valid in terms of the provisions of SAFEMA. As stated above, the Petitioner has not challenged the order dated 26th April, 1996 passed by the Chairman of the Tribunal.

23. However, what learned counsel for the Petitioner further contends is that in the absence of the Chairman being a member of the Bench, his client was deprived of a judicial review in the case and that this is violative of the basic structure of the Constitution.

24. There is no doubt that judicial review under Articles 32 and 226 of the Constitution forms a basic structure of the Constitution and the power vested in High Courts to exercise judicial superintendence over the decisions of all Courts and Tribunals within their jurisdiction is also a part of the basic structure of the Constitution. (L.Chandra Kumar v. Union of India & Ors., .

This is quite different from saying that judicial review by a Tribunal of a decision rendered by a statutory authority is also a part of the basic structure of the Constitution. So far as we are aware, this has not been held by any Court and we, therefore, disagree with learned counsel for the Petitioner when he says that the law denies to his client judicial review of the decision rendered by the Competent Authority. The Petitioner has a right to have his appeal against the order of the Competent Authority decided by a duly constituted Bench of the Tribunal and that has been done in the present case. The decision of the Tribunal is subject to judicial review under Article 226/227 of the Constitution. This right has not been taken away by the provisions of SAFEMA. Learned counsel for the Petitioner is, therefore, not correct in suggesting that his client has been deprived of a right of judicial review.

25. The insistence of learned counsel for the Petitioner that one of the members of a two member Bench of the Tribunal should be a "judicial member" is not warranted by the provisions of SAFEMA, which only recognizes a "member" of the Tribunal. It is true that some other statutes do provide for an administrative member and a judicial member, such as the Income Tax Act, 1961 and the Administrative Tribunals Act, 1985. On the other hand, there are Tribunals (covered by the meaning of this word in Article 136 of the Constitution) which do not provide for a "judicial member". Such instances are the Central Board of Revenue and the Central Government (exercising appellate and revisional jurisdiction respectively) under the Sea Customs Act, 1878 or the Central Government exercising revisional jurisdiction under the Mineral Concession Rules, 1960. SAFEMA does not create any distinction between members of the Tribunal, being administrative or judicial and we see no reason why we should create a distinction where none exists.

26. In this context, learned counsel for the Petitioner did not explain what he meant by a "judicial member". Would a "judicial member" be a person who is qualified to be a Judge of the Supreme Court or of a High Court or would it mean a member who is qualified to be a District Judge? It is also not clear whether learned counsel would, expansively, include within the meaning of the expression "judicial member" a person who is merely a graduate in law or a person who has had a few years experience in the legal profession or a person who may not have been a practicing advocate but has experience in the law such as a member of the Indian Legal Service. In the absence of anything specific in this regard, it is not possible for us to read in the provisions of Section 12 of SAFEMA the requirement of a "judicial member" and thereafter to lay down the minimum qualifications for the appointment of such a "judicial member".

27. At any rate, in the present case there is no dispute that the Petitioner's appeal was heard by two members of the Tribunal. The qualifications of these two members have not been indicated by learned counsel for the Petitioner. It is quite possible that these members may be trained in the law or may be otherwise competent to perform judicial functions of a nature which would entitle them to be described as what he vaguely calls "judicial members". Learned counsel for the Petitioner wants us to grope in the dark and conclude that the members of the Tribunal who heard the appeal of the Petitioner were not trained in the law to do so. In the absence of any substantive material, it is not possible for us to come to any such conclusion. We have to presume that the members of the Tribunal were competent to hear and decide the appeal of the Petitioner.

28. In any event, it is not as if the Petitioner is left without any remedy of judicial review. He can always approach the High Court under Articles 226/227 of the Constitution, as has been done in this case. Moreover, it is not that the Chairman of the Tribunal (who is or has been or is qualified to be a Judge of the Supreme Court or of a High Court) has unbridled powers to constitute a two member Bench. The power is circumscribed under Section 12(6-A) of SAFEMA by the necessity of expeditious disposal of appeals.

29. On the material before us, it appears that the Chairman was due to demit office soon and the appointment of another Chairman was not immediately foreseen. It was in these circumstances that the Chairman constituted a two member Bench under the provisions of Section 12(6-A) of SAFEMA so that the pending appeals can be disposed of, rather than have the work of the Tribunal come to a complete standstill. There is no challenge to the power of the Chairman to issue an order under Section 12(6-A) of SAFEMA. Consequently, the submission of learned counsel for the Petitioner in this regard has to be rejected.

30. We do, however, feel that those responsible for administering SAFEMA need to have a re-look at Section 12(6-A) of SAFEMA. For one, a forfeiture order involves valuable property rights, of relatives and associates of a detenu or convicted person. Such a relative or associate may have nothing to do with the detenu or convicted person but if the Competent Authority has reason to believe that he does and is able to shift the burden of proof on such a relative or associate, then the consequences on such a relative or associate can be far-reaching. It would certainly instil a lot of confidence in the person affected if he knows that when his appeal is heard by a two member Bench, then at least the presiding member is one who is trained in the law.

31. Before adverting to the merits of the controversy, it is necessary to appreciate the finding of the Supreme Court in Amritlal. This is necessary because a literal reading of Section 3(1)(c) of SAFEMA suggests that any property of any person affected is illegally acquired, merely because the person affected is related to or is an associate of the detenu/convict. Such a literal interpretation was, however, rejected by the Supreme Court.

32. Issue No.4 which arose before the Supreme Court was:

"(4) Whether the definition of "illegally acquired property" in clause (c) of S.3(1) of SAFEMA is violative of the fundamental rights of the petitioners guaranteed by Arts. 14, 19 and 21 and whether the inclusion of SAFEMA in the IXth Schedule to the Constitution cures such violation, if any?"

33. The first part of this question was answered in the negative and, therefore, the second part of the question did not really arise. The effect of this is that property acquired from any illegal activity, not confined to violation of the laws mentioned in Section 2 of SAFEMA, but all laws which Parliament has power to make, would fall within the definition of "illegally acquired property."

Issue No.5 was framed by the Supreme Court as follows:-

"(5) Whether the application of SAFEMA to the relatives and associates of detenus is violative of Articles 14, 19 and 21? Whether the inclusion of the said Act in the IXth Schedule cures such violation, if any?"

34. One of the contentions raised on behalf of the Petitioners in the Supreme Court was that a relative or associate of a detenu/convicted person (that is, the person affected) may have acquired properties of his own, even by illegal means, but the mere fact that he is a relative (or associate) of the detenu or the convicted person is not sufficient reason to forfeit his property. While dealing with this contention, it was held in paragraph 43 of the Report that:-

"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."

Explaining this, the Supreme Court said (in paragraph 43 of the Report):-

"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...... 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...... We do not think that the 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."

35.

Two things, therefore, stand out. Not only must the holder of the illegally acquired property be a person affected, but there must be some connecting link between the property and the detenu/convict. The strength of that link has not been elucidated by the Supreme Court and perhaps, it cannot be plainly stated since it would depend on the tensile strength of each such link. But, it is only after the link is established that the burden under Section 8 of SAFEMA would shift on the person affected to show that the property was not illegally acquired.

36. In the present case, the notice to the Petitioner under Section 6(1) of SAFEMA states that the Petitioner is the father of the detenus Satbir Singh and Paramjit Singh. It further states that the income tax records of the Petitioner do not show the source of the large investments made by the Petitioner. His only other known source of income is a share in ancestral land which also is insufficient for the investments made. On this basis, the Competent Authority had reason to believe that the property in the name of the Petitioner was illegally acquired.

37. The belief of the Competent Authority, as expressed in his notice, may well be justified but we refrain from making any comment in this regard. The fact that the Petitioner is the father of the detenus only brings him within the category of a person affected - nothing more and nothing less. As the Supreme Court says, there has to be something more than this, and that something more is the connexion between the property of the Petitioner and the detenu. A mere relationship between the detenu and the person affected is not the be all and end all of the matter.

38. Unfortunately, the Competent Authority has not touched the second postulate and has proceeded on the basis that the factum of a relationship between the Petitioner and the detenus is enough to subject the entire property of the Petitioner to forfeiture - regardless of whether it has any link with the detenus or not. It is precisely such an interpretation which the Supreme Court intended to avoid. The adjudication order of the Competent Authority and the impugned order dated 30th October, 1996 of the Tribunal have erroneously proceeded on this solitary basis.

39.

Learned counsel for the Respondents brought two Division Bench decisions of this Court to our notice. He suggested that the first decision, that is, Shanti Devi v. Union of India & Ors., does not lay down good law, while the second decision, that is, Ashok Kumar v. Competent Authority, does.

40. In Shanti Devi, the Court found no nexus between the property acquired by the Petitioner therein and the illegal activities of her husband and, therefore, concluded that the forfeiture was bad in law. In Ashok Kumar, the Court found such a nexus and, therefore, upheld the order of forfeiture. In one case the person affected was able to successfully discharge the burden of proof, but not in the other. We fail to see any inconsistency in these two decisions.

41. The Supreme Court actually lays down even a broader

principle of law than dealt with in Shanti Devi and Ashok Kumar. We understand Amritlal as saying that the Competent Authority is only required to have a reasonable belief that there is a nexus between the detenu/convict and the property of the person affected. The Competent Authority is not required to show the nexus between the activities of the detenu/convict and the property of the person affected. This is a subtle but important distinction which is effectively brought out by the Supreme Court in paragraph 42 of the Report, while dealing with Issue No.4 in the following words:-

"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 there from. 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 well-known fact that over the last few decades, smuggling, foreign exchange violations, tax evasion, drugs and crime have all got mixed-up. 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 the Parliament has the power to make). It is probably for this reason that the burden of proving that the properties specified in the show cause notice are not illegally acquired properties is placed upon the person concerned. May be this is a case where a dangerous disease required 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."

42.

Consequently, if there is a reasonable belief of a link between the property of the person affected and the detenu/convict, it is immaterial what the source of income for the purchase of the property may be - whether illegitimate or legitimate. Under Section 8 of SAFEMA, the burden shifts on the person affected to show that the property acquired by him is not illegally acquired.

43. For the reasons given above, we issue a writ of certiorari as prayed for. We set aside the orders of the Competent Authority and the Tribunal and remand the case to the Competent Authority to have a fresh look into the matter in accordance with law. The parties will appear before the Competent Authority on 29th April, 2002 at 11.00 am either in person or through a duly authorized advocate.

44. The writ petition is allowed but with no order as to costs.