Madras High Court
Smt.A.Swarnalatha vs The Competent Authority And ... on 22 April, 2022
W.P.Nos.5064, 5791 and 6458 of 2010
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 22.04.2022
CORAM
THE HONOURABLE MR.JUSTICE M.GOVINDARAJ
W.P.Nos.5064, 5791 and 6458 of 2010
Smt.A.Swarnalatha ... Petitioner in W.P.No.5064 of 2010
K.Muthulakshmi ... Petitioner in W.P.No.5791 of 2010
Abuhuraira ... Petitioner in W.P.No.6458 of 2010
Vs.
The Competent Authority and Administrator,
SAFEMA and NDPSA, Chennai
Government of India,
Ministry of Finance,
Department of Revenue,
“UTSAV”, No.64/1, G.N.Chetty Road,
T.Nagar, Madras-17 ... Respondent in all the writ petitions
Petitions filed under Article 226 of the Constitution of India to issue Writ
in the nature of writ of certiorari to call for the records on the file of the
respondent in C.No.OCA/MDS/209/76 dated 24.02.2010 and quash the same as
illegal, incompetent and without jurisdiction.
For Petitioners : Mr.V.Karthikeyan
For Respondent : Mr.R.Sankaranarayanan
Additional Solicitor General
assisted by
Mr.V.Rabu Manohar
SCGPC
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W.P.Nos.5064, 5791 and 6458 of 2010
COMMON ORDER
The Notice issued under Section 7(1) of Smugglers and Foreign Exchange
Manipulators (Forfeiture of Property) Act, 1976 to surrender and deliver vacant
possession to the competent authority is under challenge in these writ petitions.
2. The writ petitioner in WP No.5064 of 2010 purchased the property in
question on 24.01.2007 by virtue of document No.287/2007 registered at the
office of Sub Registrar, Palayankottai. The writ petitioner in WP No.5791 of 2010
purchased the property by a registered sale deed No.2688 of 1996 dated
02.09.1996. The writ petitioner in WP No.6458 of 2010 purchased the property by
a registered deed bearing document No.323 of 1994 dated 02.04.1994.
3. According to the petitioners, they purchased the properties by availing
loan from the financial institutions and the revenue records were also mutated in
their favour. Necessary planning permission was accorded by the competent
authority and they have put up constructions and the properties are being assessed
to tax and they are paying property tax and other dues regularly. Before purchase,
the petitioners have searched the registers in the Sub Registrar's office and verified
the encumbrance and no encumbrance was found with respect to the above
properties. Therefore, they invested their entire hard earned money and purchased
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W.P.Nos.5064, 5791 and 6458 of 2010
the properties, But, all of a sudden, they were issued with the impugned notice
dated 24.02.2010 on the ground that the properties were forfeited by the
respondent and a direction was issued to surrender possession. According to the
petitioners, they have purchased the properties out of hard earned money and for
the ineffective management of the respondent, their right shall not be impeached .
Before issuing the impugned notice, the petitioners were not informed with regard
to forfeiture of the properties and therefore, the impugned notice is illegal,
arbitrary and violative of principles of natural justice.
4. The learned Additional Solicitor General appearing on behalf of the
respondent would contend that the properties are illegally acquired properties from
and out of earning through smuggling by the original vendor. Pursuant to the
notice under Section 6(1) of the Smugglers and Foreign Exchange Manipulators
(Forfeiture of Property) Act, 1976 (herein after referred to as “Act”) issued on
31.08.1976, the order of forfeiture under Section 7(1) of the Act was passed on
29.11.1995. As per Section 11 of the Act, transfers made after the issuance of the
notice under Section 6 of the Act or under Section 10, shall be ignored if the
property is subsequently forfeited under Section 7 of the Act. Since the transfer in
the instance case has taken place on 02.09.1996, 24.01.2007 and 02.04.1994, they
are null and void and therefore, the notice issued is very much valid and legal.
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W.P.Nos.5064, 5791 and 6458 of 2010
5. Heard the submissions of both sides.
6. Admittedly, notice under Section 6(1) of the Act was issued as early as
31.08.1976. Notice of forfeiture under Section 6(1) is issued for calling upon the
person who acquired the property illegally or any person affected to indicate
sources of income, earnings or assets, out of which or by means of which they
have acquired such property, the evidence on which they rely upon 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. Once notice is
issued, the person, who has illegally acquired the property or any other person,
who is in possession of the property, shall file a reply to the same.
7. After receiving the reply to the notice issued under Section 6 of the Act,
the competent authority, after affording an opportunity to the person affected,
record a finding as to whether all or any of the properties, in question, are illegally
acquired properties. According to Sub Section (3) of Section 7 of the Act, 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
stand forfeited.
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W.P.Nos.5064, 5791 and 6458 of 2010
8. Any transaction made after the issuance of Sections 6 and 7, such
transaction shall be deemed to be null and void. After forfeiture of the property, if
the property is found to be in possession of any other person, the competent
authority can demand surrender.
9. The petitioners purchased the properties after issuance of notice of
forfeiture dated 31.08.1976 under Section 6(1) of the Act. It is noted that the
forfeiture of properties was made on 29.11.1995. Except the writ petitioner in WP
No.6458 of 2010, the other writ petitioners have purchased the properties after
issuance of notice under section 7(3) of the Act. In the case of the writ petitioner
in WP No.6458 of 2010, Section 11 of the Act will come into play and any
transfer made after issuance of Section 6(1) of the Act shall be deemed to be null
and void. As such, transfer of all these properties prior or after passing of Section
7 of the Act becomes null and void. Therefore, I do not find any illegality in the
action taken by the respondents.
10. However, it is required to be noted that the petitioners are claiming
themselves as transferees for adequate consideration. However, as per Section 2(e)
of the Act, even any 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
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W.P.Nos.5064, 5791 and 6458 of 2010
the case may be, 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 also,
the Act will apply.
11. The petitioners have made diligent search in the Sub Registrar's office
where encumbrance is entered. Normally the person who wants to purchase, has to
verify the encumbrance. In the instant case, at the time of purchase, no
encumbrance was found. It is imperative to note that all these purchasers have
purchased the properties by acquiring loan from the banking financial institutions
and they have repaid the loan and got title to the properties. The revenue records
were also transferred in their names. They obtained planning permission and
constructed buildings and the properties were assessed to tax and they continue to
be in peaceful and uninterrupted possession for more than a decade after paying
statutory dues. Therefore, the person, who has acquired the property through hard
earned money shall not be deprived of valuable asset without any opportunity of
hearing.
12. It is the look out of the respondent to recover the illegally acquired
property from the detenu or offender. It is not the intention of the Legislature to
punish the innocent person. According to Section 9 of the above Act, where the
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competent authority makes a declaration that any property stands forfeited to the
Central Government under Section 7 and it is a case where the source of income,
earnings or assets with which such property was acquired has not been proved to
the satisfaction of the competent authority, it shall make an order giving an option
to the person affected to pay in lieu of forfeiture.
13. As per Sub section (3) of Section 7 of the Act, 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.
14. In these cases, till date, the petitioners are in possession and they were
peacefully enjoying the properties and there is no encumbrance over the properties
except the change created by the statute. In such circumstances, the respondents
can very well consider invocation of Section 9 of the Act.
15.Learned counsel for the petitioner relied on the judgment of the Hon'ble
Supreme Court in the case of Income Tax Officer, Circle I(2), Kumbakonam and
another vs V.Mohan and another reported in 2021 SCC Online SC 124, wherein
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W.P.Nos.5064, 5791 and 6458 of 2010
it is held that “ 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 and such a plea can be considered by
the competent authority on its own merits.
16. Considering the bonafide purchase made by the petitioners and their
possession in the properties over thirteen years without any interruption and the
properties being their investment of hard earned money, this Court is of the
opinion that they should be given an opportunity to present their case before the
competent authority.
17. Hence, while upholding the action of the respondent, liberty is granted
to the petitioners to make a representation to the competent authority setting out
the subsequent developments and a direction is issued to the respondent to
consider the case of the petitioners in the light of the judgment of the Hon'ble
Supreme Court in the case of Income Tax Officer, Circle I(2), Kumbakonam and
another vs V.Mohan and another reported in 2021 SCC Online SC 124 dated
14.12.2021 and to take a decision and pass orders on merits and in accordance
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with law after affording opportunity of personal hearing to the parties.
18. With the above direction, the writ petitions are disposed of. No costs.
Consequently, connected miscellaneous petitions are closed.
21.04.2022
sr
Index:yes/no
speaking/non-speaking order
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W.P.Nos.5064, 5791 and 6458 of 2010
M.GOVINDARAJ,J.,
sr
To
The Competent Authority and Administrator,
SAFEMA and NDPSA, Chennai
Government of India,
Ministry of Finance,
Department of Revenue,
“UTSAV”, No.64/1, G.N.Chetty Road,
T.Nagar, Madras-17
W.P.Nos.5064, 5791 and 6458 of 2010
22.04.2022
https://www.mhc.tn.gov.in/judis
