Madras High Court
K.T.M.S.Mahmood (Died) vs The Competent Authority on 30 January, 2025
Author: S.M.Subramaniam
Bench: S.M.Subramaniam
W.P.Nos.18925 & 18926 of 2000
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 22.01.2025
PRONOUNCED ON : 30.01.2025
CORAM
THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM
AND
THE HONOURABLE MR. JUSTICE M.JOTHIRAMAN
W.P.Nos.18925 & 18926 of 2000
and WMP.Nos.27420 & 27421 of 2000 and 33404 of 2001
W.P.No.18925 of 2000
1.K.T.M.S.Mahmood (Died)
2.T.M.J.Khadijath Nooriya
3.M.Anwar Hussain (Deceased)
4.M.Aishath Munaware
5.M.Aishtha Najiya
6.M.Aishth Razeena
7.M.Authad
8.M.Aishth Lubaina
(P2 to P8 substituted as LRs in the place
of Deceased petitioner as per order dated
14.03.2014 in W.P.M.P.No.261/2013)
9.Malika Nawar Husain
10.Nooriya Thahseen
11.Shahnaz Aisha
12.Ahmed Jawad Mahmood Anwar
(P9 to P12 are substituted as LRs of deceased
P3, as per order dated 02.04.2024 in
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W.P.Nos.18925 & 18926 of 2000
W.M.P.No.6887/2022 in W.P.No.18925/2000)
... Petitioners
Vs.
1.The Competent Authority,
Smugglers & Foreign Exchange Manipulators,
(Forfeiture of Properties)Act, 1976,
UTSAV, No:1, 64/1, G.N.Chetty Road,
Chennai – 600 017.
2.The Appellate Tribunal for Forfeited Property,
4th Floor, Lok Nayak Bhavan, Khan Market,
New Delhi – 100 002. ... Respondents
PRAYER: Petition filed under Article 226 of the Constitution of India to issue a
Writ of Certiorari, calling for the records of the Second respondent in its order
dated 05.09.2000 made in FPA No:29/MDS/96.
For Petitioners
(For P1 to P3) : Died (Steps Taken)
(For P4 to P6, P8) : Mr.M.M.K.Alifudeen and
Mr.M.Harri viswanath
(For P7, P9 to P12) : Mr.T.SundarRajan
For Respondents : Mr.AR.L.Sundaresan
Additional Solicitor General of India
Assisted by
Mr.B.Rabumanohar
Senior Central Government Panel Counsel
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W.P.Nos.18925 & 18926 of 2000
(For R1 & R2)
W.P.No.18926 of 2000
1.TMJ.Kadijath Nooriya (Deceased)
2.Ms.M.Aishath Munuwara
3.M.Aishath Najiya
4.M.Aishath Razeena
5.M.Authad @ Mahmood Authad
6.M.Aishat Lubaina
7.Malika Anwar Husain
8.Nooriya Thahseen
9.Shahnaz Aisha
10.Ahmed Jawad Mahmood Anwar
(P2 to P10 substituted as LRs of deceased
sole petitioner vide order dated 03.11.2022 made
in W.M.P.No.28842/2021 in W.P.No.18926/2000)
... Petitioners
Vs.
1.The Competent Authority,
Smugglers & Foreign Exchange Manipulators,
(Forfeiture of Property Act), UTSAV,
No.64/1, G.N.Chetty Road,
T.Nagar, Chennai – 600 017.
2.The Appellate Tribunal for Forfeited Property,
SAFEM (FOP), 4th Floor,
Lok Nayak Bhavan, Khan Market,
New Delhi – 110 003.
3.The District Collector,
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W.P.Nos.18925 & 18926 of 2000
Ramnad District.
... Respondents
PRAYER: Petition filed under Article 226 of the Constitution of India to issue a
Writ of Certiorari, calling for the records of the Second respondent in its order
dated 04.09.2000 made in FPA No:25/MDS/96.
For Petitioners
(For P1) : Died (Steps Taken)
(For P2 to P4, P6) : Mr.M.M.K.Alifudeen and
Mr.M.Harri viswanath
(For P5, P7 to P10) : Mr.T.SundarRajan
For Respondents : Mr.AR.L.Sundaresan
Additional Solicitor General of India
Assisted by
Mr.B.Rabumanohar
Senior Central Government Panel Counsel
(For R1 & R2)
COMMON ORDER
(Order of the Court was made by M.JOTHIRAMAN , J.)
Since the issues involved in the present writ petitions are one and the same
and hence both the writ petitions were heard together and disposed of by this
common order.
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W.P.Nos.18925 & 18926 of 2000
2. The writ petition in W.P.No.18925 of 2000 has been filed to quash the
order dated 05.09.2000 passed by the Appellate Tribunal made in FPA
No:29/MDS/96 and the writ petition in W.P.No.18926 of 2000 has been filed to
quash the order dated 04.09.2000 made in FPA No:25/MDS/96 dated 05.09.2000
passed by the Appellate Tribunal.
3. The writ petition in W.P.No.18925 of 2000 was filed by
Mr.K.T.M.S.Mahmood and the writ petition in W.P.No.18926 of 2000 was filed by
Smt.Kadijath Nooriya, wife of the petitioner in W.P.No.18925 of 2000. During the
pendency of the writ petitions, both the writ petitioners were died. Thereafter, both
the petitioner’s legal representatives were substituted.
The case of the petitioner in W.P.No.18925 of 2000
4. Thiru.K.T.M.S.Mahmood was detained under the provisions of
Conservation of Foreign Exchange and Prevention of Smuggling Activities Act,
1974 (COFEPOSA) has filed an appeal against the order of the Competent
Authority, Madras dated 29.12.1995 passed under Section 7 (1) of the Smugglers
and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976
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W.P.Nos.18925 & 18926 of 2000
(SAFEMA), whereby the house property No.1/5, Whannels Road, Egmore,
Madras and amounts due from three Life Insurance Policies namely (a) Policy
No.41844043 (b) Policy No.43196746 and (c) Policy No.43196747 were ordered
to be forfeited.
5. Smt.T.M.J.Khadijath Nooria, wife of K.T.M.S.Mohamood, has filed an
appeal against the order of the Competent Authority, Madras, dated 22.01.1996
passed under Section 7 (1) of the SAFEMA, whereby the three properties namely
No.25, Subba Rao Avenue, Madras, share of interest and title in M/s.Broadway
Textiles, Madras, along with the balance of Rs.55,191/- as on 31.03.1975 and
1480 gms of jewellery were forfeited.
6. The Competent Authority had initiated proceedings by issuance of
Section 6 notice, why the property bearing No.1/5, Wallers Road, Egmore,
Chennal should not be forfeited. The petitioner was detained during Emergency
time in 1975. During Emergency time, as the fundamental rights have been
suspended, there was no opportunity to the petitioner to question the detention
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order.
7. The SAFEMA Act itself was challenged before the Hon’ble Supreme
Court of India, but the validity was upheld subject to certain observations in the
year 1994. The petitioner had given explanation including tax assessment records.
The property at Waller’s Road was purchased on 20.02.1959. Section 6(1) notice
was issued on 13.07.1976. The proceedings were commenced only in the year
1995 i.e., from the date of first notice, the property has been acquired 17 years
earlier and from the date of effective commencement of the proceedings i.e., 36
years earlier. In the interregnum period, the Constitutional validity of the Act was
pending. The prejudice to the persons affected by reason of this extraordinary
delay is not difficult to visualise. It will not be possible for him to preserve the
primary as well as supporting evidence to show lawful acquisition. It will not be
possible to preserve the primary as well as supporting evidence to show lawful
acquisition. The assessment order of 1959/60 shows that the petitioner had
explained the source for acquisition of the property. The same had been accepted
and assessment order has been made. An affidavit from erstwhile partner of
Nandanlal & Co. is produced, who affirmed the loan transaction. The other loan
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transactions, which were of the year 1959 or earlier, but reflected in the books
accounts of the petitioner could not be established, as the lender died. The
respondents have committed a serious error in thinking that the petitioner must
explain the source for a sum of Rs.89,869/-. Sale deed dated 20.2.1959 recites that
the consideration paid for only Rs.50,000/-, rest was taking over of the then
existing mortgage debt. The petitioner had placed documentary evidence of
assessment orders. They are supported by unimpeachable documentary evidence
may even assessment orders, which have all became final. Briefly stated they are
as under:
Income from sale of rings : Rs.4,450.00
(This is accepted by the Respondent)
Loan from Khadijath Nooriya : Rs.1,500.00
(This is accepted by the respondent)
Loan from K.T.M.S.Hameed : Rs.24,000.00
(brother of the detenue) in 1958
8. It is unfortunate that both the respondents have overlooked several vital
aspects. The petitioner had availed from K.T.M.S.Hammed a loan totalling to
Rs.69,000/- of which the petitioner had transferred Rs.45,000/- to his wife
Smt.Kadijath Nooriya to enable her to purchase a property at 45 and 46, Bundar
Street, Madras. While dealing with the case of Smt.Kadijath Nooriya, particularly
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the acquisition of 45 and 46, Bundar Street, the Competent Authority and on
appeal by Appellate Authority, both have come to the conclusion that this
transaction to be valid and transfer of Rs.45,000/- by the petitioner was duly
explained. When Income Tax authorities have accepted by scrutiny assessment
made in the year 1959/60, the respondents after 37 years cannot doubt its validity
without any material at all. The 4th source for the acquisition of properties is the
loan of Rs.25,000/- from Nandalal & Co. The loan from Nandalal & Co., i..e,
Rs.22,614/06 (Gross loan of Rs.25.000 – Interest of Rs.2,358/94) is fully
explained. The loan from Mohammed Mustaffa Marikayar of a sum of Rs.5,000/-
as well as Rs.25,000/- from Khupchand Vasumal have also been reflected in the
account books, which were all duly audited and seen by Income tax authorities and
subject matter of assessment. Thus, not only 50% of whole of the consideration
has been fully explained and the order of confiscation of the property is patently
unjustified.
9. The valuation of the cost of construction of Rs.42,525/- was made after
detailed scrutiny. It has been accepted by the Wealth Tax authorities and
assessment made on that basis. After 11 years during Emergency time, there was
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an attempt to reopen the valuation, without any notice or enquiry, a revaluation
have been done, fixing the cost of construction at Rs.94,000/- and the authorities
erred in confiscating the LIC policies, since the payments have been made from
and out of the income earned by the petitioner from his income from the business
at Srilanka. When the income is realised from outside India, the receipt of the
income having been accepted by the Income Tax Authorities contemporaneously
in 1958 and subsequent years, the same ought to be accepted by the respondents.
The case of the petitioner in W.P.No.18926 of 2000
10. The petitioner is not a detenue. She is not a convict for any offence
under the Customs Act or FERA. She was sought to be proceeded against on the
basis that she is a relative of K.T.M.S.Mohammed (the petitioner’s husband who
was detained under COFEPOSA). K.T.M.S.Mohammed (the petitioner’s husband
who was detained under COFEPOSA). Therefore, any property in the name of the
petitioner as in this case, could not be dealt with or confiscated under this act even
if they are illegally acquired. The Competent Authority before issuance of notice
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under Section 6 must have materials and he must be so satisfied, which
satisfaction must be recorded in writing, before issuance of a notice under Section
6. If he so records, then the notice could only be issued to K.T.M.S.Mohammed,
but the person in whose name the property stands like the petitioner must be sent a
notice under Section 6(2) of the Act. Thus qua a relative, there could never be a
notice under Section 6(1) but only a notice under Section 6(2). In such case,
proceeding inevitably and as a rule, the detenu viz. K.T.M.S.Mohammed must also
be a party. Admittedly, no notice under Section 6(2) has been issued to the
petitioner herein. The property at Mu.Ka.Nallamuthu Street was acquired in 1965.
The petitioner states that the property Mu.Ka.Nallamuthu Street was acquired in
1965 i.e. 11 years before the issuance of Section 6(1) notice and 30 years earlier to
proceedings became active before Competent Authority. It will be impossible to
except any person to keep accounts and documents in support of the accounts for
as long as 30 years and prove by evidence and affidavits. All aspects of the
transactions after such a long number of years. The detenue was detained in 1975,
the property have been acquired 16 years earlier by then. It is not proximate to the
alleged illegal activity and detention order. Originally, a vacant plot of land was
acquired in August 1966. The cost of acquisition was Rs.30,060/-. On this
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construction was made to the value of Rs.1,12,687/52. If the cost of acquisition of
plot is fully explained from lawful source, then it cannot be forfeited. It is not
illegally acquired property. The total investment including the site is
Rs.1,12,687.52 + 30,060.00 = 1,45,747.52. The source for Rs.59,621/52 was
accepted by both the authorities and the balance to be explained is Rs.86,126/-.
Source is part of the amount of Rs.50,000 received under National Defence
Remittance Scheme, Rs.20,100/- received from selling the import entitlement
certificate, Rs.14,701/- rental income from House at 46, Bundar Street, Madras,
Rs.10,000/- as agricultural income from K.T.M.S.Hameed and others, who are the
collecting agents for agricultural income and Rs.1634/79 being the bank interest.
11. The petitioner had explained the source and also identified the person,
who had sent the money from outside India. The authorities under the Act have no
jurisdiction to enquire how and what source the person who had sent the money at
outside India. The assessments under the Income Tax Act for 1966/67 has been
made under scrutiny assessment under Section 143(3) of the Act. Hence, the Board
is bound to accept the amount received from NDRS Scheme as from a lawful
source. Even if the income from NDRS Scheme and income from borrowal, it is
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not accepted, still the consideration is fully explained to an extent of more than
50%, such that Section 9 (1) of the Act becomes applicable to the property cannot
be totally forfeited but the option to pay 1.1/5th time of the consideration should be
given to the petitioner. Even income from Bundar Street alone is more than 50% of
the consideration. Thus, there is no method by which the property could be
confiscated without giving an option under Section 9 of the Act. The petitioner
along with other wives of petitioner’s brother (he had three brothers) had with
them 22.92 acres of coconut thoppu in Keelakarai. They are properly maintained,
order shown to I.T. authorities and accepted by them. The Ledger folios have also
been produced. The Purchase of site alone was a sum of Rs.33,060/-. The amounts
drawn from Magestic Motors, who are the Rent Collecting Agent for Bhandar
Street from time to time were putting the amount into the account of
K.T.M.S.Mohammed after accumulation Rs.25,000 withdrawn from
K.T.M.S.Mohammed and deposited with IOB in the name of Nooriya, deposited
on 15.02.1996. The property purchased on 25.08.1966. As regards the amounts
realised by jewellery, the petitioner has clearly explained their source.
K.T.M.S.Mohamood had pledged his wife’s jewells on 12.07.1947 and obtained a
loan of Rs.9,000/- from Indo Commercial Bank, Ramnad.
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12. The learned counsel appearing on behalf of the petitioner in
W.P.No.18925 of 2000 would submit that the forfeiture notice, which is a
stereotype notice and no reasons have been recorded in writing as mandatorily
prescribed under Section 6 of the Act. The Competent Authority has not any
enquiry under Section 18 of the Act or even otherwise has not recorded any
reasons in writing to believe that the properties have been acquired from illegal
source. The petitioner has been declaring all such incomes and has assessed the
same to Income Tax from the year 1947. No such reasons have been recorded in
the Forfeiture notice. The Competent Authority cannot simply put the burden on
the Person affected to prove all his income sources after 39 years. Therefore, the
Forfeiture notice itself is bad in law and the entire proceedings pursuant to the 6(1)
notice are vitiated and liable to be quashed.
13. The learned counsel appearing on behalf of the petitioners, to strengthen
his contentions, has relied upon the following judgments:
(a) In the case of Fatima Mohd Amin (dead) through LR’s Vs Union of
India and another reported in (2003) 7 Supreme Court Cases 436, the Hon’ble
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W.P.Nos.18925 & 18926 of 2000Supreme Court has held that when the notices under Section 6(1) does not disclose
existence of any link or nexus between the property sought to be forfeited and the
illegally acquired money of the detenu under COFEPOSA Act, the impugned
orders of forfeiture cannot be sustained.
(b) In the case of Aslam Mohammad Merchant Vs. Competent Authority
and others reported in (2008) 14 Supreme Court Cases 186, the Hon’ble Supreme
Court has held that for forfeiture of property in terms of NDPS Act, a direct
nexus/link is necessary between the property sought to be forfeited and the
properties illegally acquired, income etc., derived by way of contravention of the
act and also that before actual order of forfeiture is passed, issuance of a show
cause notice is essential so as to fulfil the requirements of natural justice.
14. The learned counsel for the petitioner would submit that the House
property of Petitioner at 1/5, Whannels Road was purchased by way of a registered
Sale Deed dated 20.2.1959, for a total Sale consideration Rs. 82,000/-, Stamp Duty
and other Expenses Rs.6,939/-. The source of income for purchase is
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W.P.Nos.18925 & 18926 of 2000
Sale of Rings : Rs. 4,450.00
Loan from Nandlal & Co-25,000/-
less interest 2385.94 : Rs. 22,614.06
Amount received from
K.T.M.S.Hamid : Rs. 24,000.00
Amount received from
T.M.J.Khadijth Nooria : Rs. 1,500.00
Total : Rs. 52,564.06
15. Remaining Rs.38,000/- Vendor’s loan with the Bank of Mysore agreed to
be repaid by the 1st Petitioner/Person Affected. The 1st Petitioner/Person Affected
gave a detailed explanation about the loans availed. He would further submit that
after purchase of the said property, the 1st Petitioner/Person Affected was running a
lodge in the name of Peoples Lodge and generated income from the same from
November 1959. In the year 1963 to 1965, by incurring Rs.42,525/-, renovated the
building. A loan of Rs.40,000/- availed by the 1st Petitioner from the Egmore
Benefit Society on 6.7.1964 for additional construction. Therefore, Construction
cost loan was repaid from the income generated from the lodge and other
immovable properties. The Competent Authority relied on a Valuation Report of
the I.T Department dated 15.3.1977 and calculated the construction cost as
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Rs.94,000/-. The petitioner gave a detailed reply dated 14.11.1995. The report was
not accepted and the cost of construction is only Rs.42,525/-. which was accepted
by the income Tax and Wealth Tax authorities. Though the Appellate Tribunal
admitted certain amounts as legal source, overall rejected the claim of the
petitioner.
16. The 1st Respondent simply rejected all the sources of income by its order
dated 29.12.1995 and forfeited the properties against which an Appeal was
preferred before the 2nd Respondent who, after admitting certain amounts as legal
source, overall rejected the claim of the Petitioner by the impugned order dated
5.9.2000.
17. The learned counsel for the petitioner further would submit that the
petitioner in his I.T. Returns also declared that he borrowed Rs.69,000/- from his
brother Mr.K.T.M.S.Hamid on several dates and also declared purchase of the
subject property at 1/5 Whannels Road subject to mortgage. Also declared that
Rs.45,000/- given as Mehr gift to wife Mrs.Khadijath Nooria. The liability of
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Rs.38,000/- to the Bank of Mysore, at Madras was also declared.
18. The findings of the 2nd respondent is illegal and perverse. The
respondents failed to see that the petitioner was a businessman and it is general
practice to avail short term hand loans and to repay the same and go for loans with
lesser interest. An order passed by the Income Tax Appellate Tribunal in ITA
No.2418/MDS/74-75 for the AY 1972-73, the sum of Rs.55,000/- has been
accepted by the Appellant Tribunal as the income from the partnership firm
business at Ceylon. In such circumstances, the Respondent ought to have held the
premia paid for the Insurance Policies as legal.
19. The learned counsel for the petitioner would submit that the
Respondents have not given a valid notice under Section 6(1) of the Act, with
reasons recorded in writing. Therefore, there is no burden over the Person affected
to prove the source of income under Section 8. The petitioner had given all the
necessary proof and details substantiating the income along with the statements
and IT returns and discharged his burden. The burden of proof to prove the
contrary. Therefore, shifted to the Respondents who failed to discharge the same.
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20. To strengthen his contentions, he has relied upon the judgment of this
Hon’ble Court in the case of The Competent Authority, SAFEM Vs
T.Krishnaveni and others in W.A.No.2320 of 2019, held that the deceased
Seshammal produced receipt for possession of gold jewellery. When such receipt
is produced, the burden of proof shifted on the Competent Authority to disprove
the same, which was not done either before the Tribunal or before the Writ Court.
21. The petitioner has sufficiently placed all the materials to establish the
sources of income for the subject property and the burden therefore shifted to the
Respondents who failed to disprove the same. Therefore, the writ petition is to be
allowed.
22. Mr.AR.L.Sundaresan, learned Additional Solicitor General of India
would submit that it was found that the petitioner was in possession of certain
movable and immovable and immovable properties purchased out of illegal
sources, the petitioner was a detenue under COFEPOSA and hence, the
foundational facts for invoking SAFEMA was very much available. There was no
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evidences placed by the petitioner to prove licit sources of income. He would
submit that the house property in Egmore was acquired in 1959 for Rs.88,939/-,
subsequently Rs.42,525/- of further construction in 1963-64 and 1964-65. Thus,
the total investment comes to Rs.1,31,464/-. Assistant evaluation officer evaluated
if the construction is to be newly built, it will cost around Rs.94,000/- as against
Rs.42,000/- claimed by the petitioner and the petitioner has not provided any
information to justify that contention. The additional construction was done by
procuring loan of Rs.40,000/- from Egmore benefit society. The petitioner claims
that it was repaid out of the rental income from that very same house property,
which he has constructed. Therefore, the Tribunal found that the Competent
Authority has prima facie case, where the rental income from an illegally acquired
property cannot be held to be from a legal source. He would submit that sufficient
and full opportunity was provided and availed by the person against whom the
proceedings were initiated. There was absolutely no explanation for any lawful
source of income for the investment that has been made. The petitioner took 19
years to show income, therefore the person affected cannot take a shelter under the
procedural means. Burden of proof lies on person affected, who has been issued
notice. He would submit that is a person is unable to discharge the burden of proof
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placed upon him. If, pima facie, the link between the ill gotten wealth and the
property, which is proceeded against is established then as per paragraph 44 of the
judgment of Attorney General of India case, the burden will shift on the notice to
establish the fact that the property has been acquired through lawful sources and
provide satisfactory explanation for the same. Once the above events have taken
place and have become final, forfeiture of property is a consequence if the link
between the ill-gotten wealth and the property is established. The Competent
Authority and the Appellate Tribunal have carefully scrutinised all the materials
that were placed before them and have passed the order of forfeiture. Therefore,
the present writ petitions are devoid of merits and deserves to be dismissed.
23. We have considered the submissions made on either side and perused the
materials available on record.
24. It is seen from the records that one Mr.K.T.M.S.Mahmood was detained
under COFEPOSA. Invoking Section 2(2) (B) of SAFEMA, 1976 as the detenu
was found to be in possession of certain movable and immovable properties
acquired through illegal means. Therefore, a notice under section 6 (1) of
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SAFEMA was issued to the person affected on 13.07.1976. With regard to (i) The
property bearing No.1/5, Whannels Road, Egmore, Madras acquired in 20.02.1959
and (ii) 3 Life insurance policies bearing policy numbers 41844043, 43196746,
43196747 were attached. In the meantime, the writ petition filed by the one
Tmt.Khadijath Nooria, the wife of the petitioner herein filed a Writ petition in
W.P.No.3445 of 1977 against the proceedings and the proceedings were stayed.
The writ petition was dismissed on 18.07.1994 and therefore, the proceedings
continued. Thereafter, adjudication was conducted and an order was passed under
Section 7 (1) of the Act by the Competent Authority vide order dated 29.12.1995
to forfeit the above properties, finding that there were nothing to substantiate the
investments were made through legal sources. The petitioner herein filed an appeal
against the order passed in 29.12.1995 and the Appellate Tribunal confirmed the
order of the Competent Authority. Challenging the above said orders of the
Competent Authority and the Appellate Tribunal, the present writ petitions have
been filed.
25. The claim of the petitioner that the property was purchased before
initiation of proceedings by issuing notice under Section 6(1) of the Act is
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unreasonable. During the course of arguments, a copy of the the reasons for the
issuance of notice under Section 6 of the SAFEMA Act was also placed and the
same is extracted hereunder:
“Shri K.T.M.S.Mohamed is a detenu under COFEPOSA. He
has been assessed to Income tax since the assessment year 1943-44.
Yet he has not properly explained the source for the purchase of the
property bearing door No.1/5, Whannels Road, Egmore, on
20.02.59 from B.V.Narayana Gupta and D.Vanganna Gupta for
Rs.82,000/- according to the sale deed. The property stood
mortgaged to one Shri Hazarimul Roopchand for Rs.42,000/- and
to the Bank of Mysore for Rs.38,000/-. He therefore paid only
Rs.2,000/- to the vendors. The property fetched a net annual income
of Rs.9,495/-. Even at 15 times the annual net income, the value of
the property works to about Rs.1,42,000/-. Apart from this, the
mortgagees would not have advanced the full value of the property
to the mortgager. At best, they would have given a loan to the extent
of 50% to 60 of the value of the property. So a substantial amount of
Rs.50,000/- to Rs.60,000/- has been understated. In other words,
this amount should have been paid to the vendors in black. Be that
as it may, even the admitted value of the consideration was met
from withdrawals from K.T.M.S.Hameed, hi brother, sale of rings to
the tune of Rs.4450/-, sale of jewels to the tune of Rs.9590/- and
hundi loan of Rs.25000/- from Nandalal & Company, HundiPage 23 of 39
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W.P.Nos.18925 & 18926 of 2000Bankers, Bombay. The rings were said to have been brought from
Ceylon and sold in Bombay. There is no evidence for having
brought the rings from Ceylon. The alleged sale of jewels to the
tune of Rs.9590/- was added to the income returned by the Income
Tax Officer, but, however, it was deleted by the A.A.C. The amount
due to Bank of Mysore was discharged in the subsequent year. Also,
the amount borrowed from K.T.S.Hameed was also discharged in
the subsequent year. These loans were discharged with alleged
hundi borrowals made in the subsequent year. But later, all the
hundi loans were admitted to be bogus and the assessee offered
those hundi loans as income from undisclosed sources.
During the account years 63-64 and 64-65 some additions
were made to the property. The total area was 5973 sq.ft., out of
which 2390 sq.ft. was covered with A.C. roofing. The cost of
improvement was said to be only Rs.42,525/-. This works out to
about Rs.7/- per sq.ft. on the average which is very much on the low
side. The cost of R.C.C. construction of 2583 sq.ft. works to about
Rs.89575/- at Rs.25/- per sq.ft. and the cost of A.C. roofing works to
about Rs.35850/- at Rs.15/-sq.ft. So the total cost comes to about
Rs.1,25,000/-, as against which he has accounted for only
Rs.42,525/-. So about Rs.80,000/- has been spent outside the
accounts on addition to the property. Even the admitted cost was
met from the borrowals made from Egmore Benefit Society and
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W.P.Nos.18925 & 18926 of 2000
other borrowals which were later discharged out of the income from
the very same property.
For purchasing the property, he initially borrowed a sum of
Rs.25,000/- from the bankers Nandalal & Co., Bombay. Later, he
offered these loans as income from undisclosed sources.
Subsequently, he brought into account some hundi loans and
discharged the liabilities incurred for purchasing his property. The
subsequent hundi loans were also offered in the later years as
income from undisclosed sources. So the property was purchased
with income from undisclosed sources and therefore, the property
should be held as an illegally acquired property. The liability
incurred for improvement made to the building was ultimately
discharged for improvement made to the building was ultimately
discharged with income from the very same property. So the
addition made to the building should also be treated as an illegally
acquired property.
In the circumstances, the entire property bearing door
No.1/5, Whannels Road, Egmore, should be treated as an illegally
acquired property and so it is liable to be confiscated under Section
6(1) of the Act. He has stated in his letter dated 27.10.1971 filed
with I.T. that he had brought a sum of Rs.55,000/- from Ceylon
when he rated from that country. There was no corroborative
evidence for this. This amount should also be treated as an illegally
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W.P.Nos.18925 & 18926 of 2000
acquired property.
He has contributed a sum of Rs.81,310/- in all by 31.3.75
towards L.I.C. Premium. This may be related to the amount said to
have been brought from Ceylon. This is liable for confiscation u/s
6(1) of the Act. Issue notice accordingly.”
26. It is seen from the reason for issuance of notice under Section 6(1) of
SAFEMA that the petitioner was in possession of certain movable and immovable
and immovable properties purchased out of illegal sources, the petitioner was a
detenue under COFEPOSA and hence, the foundational facts for invoking
SAFEMA was very much available. Therefore, the contentions of the petitioner in
the entire proceedings is bad in law and is not acceptable. It is made clear that a
notice under Section 6 was issued as a result of investigation made under Section
18 of the Act.
27. With regard to the house property, the Appellate Tribunal made a finding
as follows:
:7. The house property No.1/5, Whannels Road, Egmore,
Madras, was acquired in 1959 for Rs.88,939/-. Subsequently,
the appellant claims to have spent Rs.42,525/- on furtherPage 26 of 39
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W.P.Nos.18925 & 18926 of 2000construction in 1963-64 and 1964-65. Thus, the total investment
comes to Rs.1,31,464/-. The appellant had claimed before the
Competent Authority that he had mobilised Rs.90,564/- for the
initial purchase and Rs.60,000.00 for subsequent construction.
8. According to the information furnished by the appellant
to the Competent Authority, the sources of Rs.1,50,564.06 were
as follows:
(i) Sale of Rings : Rs.4,450.00
(ii) Loan from firm, Nandlal
& Co- Bombay
(Net of interest-Rs.22,614.06) :Rs.25,000.00
(iii) Loan from K.T.M.S.Hamid,
brother :Rs.24,000.00
(iv) Loan from T.M.J.Khadijth Nooria : Rs. 1,500.00
(v) Loan from Mysore Bank :Rs.38,000.00
(vi) Loan from Egmore Benefit
Society :Rs.40,000.00
(vii) Property rent collection :Rs.15,000.00
28. The Appellate Tribunal also discussed about the source of payment in
Paragraph 12, 19, 20 and 21 of its order and the same is extracted hereunder:
“12. Before adverting to the contentions of the appellant and
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W.P.Nos.18925 & 18926 of 2000the submissions of the respondent, we would like to make it clear that
the sources of repayment of loans as well as the sources of repayment
of loans are very relevant for determining the legality or otherwise of
the acquisition of the property. Otherwise, the smugglers and foreign
exchange manipulators may raise the loans from perfectly legal
sources in the first instance and get away by returning the loan from
their illegal earnings.
19. We agree with the Competent Authority that the loan of
Rs.1,500/- from the wife on 26.11.1958 cannot be accepted as genuine
in considering the claims that the appellant had gifted Rs.45,000/- to
her on 26.12.1958 and the house property No.1/5, Whannels Road,
was purchased in February 1959. The introduction of wife’s name as
lender seems to be an attempt to account for the amount invested by
the appellant out of his own illegal sources.
20. Thus Rs.80,500/- (being the loans of Rs.25,000/- from
Nandlal & Co Rs.24,000/- from K.T.M.S. Hamid, Rs.1,500/- from
wife, Rs.5,000/- from Md.Mustafa Marakyar and Rs.25,000/- from
Khubchand Vasumal) for repayment to the Bank of Mysore) which is
more than 50 per cent of investment in the original property is clearly
held to be from illegal sources. Even the story of sale of ring for
Rs.4,450/- is full of inconsistencies and is not possible to accept.
Since more than fifty percent of the investment in the original house
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W.P.Nos.18925 & 18926 of 2000
property No.1/5, Whannels Road, is found to be from illegal sources,
the rental income from the same property is also held to be illegal.
Therefore, rental income from the same house for additional
construction or for repayment of loan of Rs.40,000/- claimed to have
been taken from the Egmore Benefit Society for the additional
construction during 1963-64 and 1964-65 out of that rental income is
also held to be from the illegal sources.
21. The Competent Authority was, therefore, justified in
ordering the forfeiture of the house property No.1/5, Whales Road,
Egmore, Madras.”
29. The learned counsel for the writ petitioner in W.P.No.18926 of 2000
would submit that the petitioner is a relative of the person affected, was served
with the Notice dated 27.05.1976 under Section 6(1) of the Act. The husband of
the petitioner Mr.K.T.M.S.Mahmood is a businessman and an Income Tax
Assessee and having income in India and from Ceylon and also from various
Immovable properties and joint family properties, which have been duly assessed
to tax periodically from 1947. There are no reasons specified in the Notices issued
under Section 6(1) to believe that the subject properties in the notices are acquired
from tainted monies or that the said K.T.M.S. Mahmood was involved in any
violations of FERA or any other law. There is no nexus or link specified in the
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W.P.Nos.18925 & 18926 of 2000
Notice between subject properties sought to be forfeited. It is seen from records
that the Forfeiture Notice dated 27.5.1976 under Section 6(1) of the SAFEMA Act
has been issued with respect to the following three items:
a) Immovable Property in the name of the 1st Petitioner at No.25, Subba
Rao Avenue, Madras.
b) Share of interest and title including capital and current account balance
in M/s. Broadway Textiles, Madras value Rs.1,78,407/-
c) Jewellery value Rs.68,938/-
Total Rs.3,02,536/-
30. The learned counsel appearing for the petitioner would submit that the
vacant land in respect of the property in question measuring 4198 Sq.ft was
purchased by the 1st Petitioner by way of a registered Sale Deed dated 25.8.1966
for a consideration of Rs.30,000/-. The investment for purchase of vacant land was
Rs.33,060/- including the stamp charges. The construction cost was
Rs.1,12,687.52. Constructions commenced from 30.11.1966 to 10.9.1969. The
total investment in the Subba Rao property was Rs.1,45,747.52/-. The said
property has also been assessed to Wealth Tax by way of the Assessment Order of
the Wealth Tax Officer for the Assessment year 1968-69. There is not even a single
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W.P.Nos.18925 & 18926 of 2000
allegation in the 6(1) notice that establishes a link or nexus between this property
and the alleged illegal income of Late K.T.M.S.Mahmood, who was a detenue. In
fact, the Petitioner brought to the notice of the Competent Authority that they have
not been made aware about the material available and the information on which
notice has been issued.
31. It is seen from the records that the source of investment for the purchase
of the property at Subba Rao Avenue has been declared by the 1st Petitioner as
follows:
a. Amount received under National Defence
Remittance Scheme : Rs. 50,000.00b. Amount received from selling Import
Entitlement Certificate : Rs. 20,100.00c. Amount drawn out of rental income
from No. 45-46, Bunder Street, Madras : Rs. 74,322.00d. Amount of loan received back from
Jamal Mohd Lent out of past income : Rs. 13,000.00e. Amount received from K.T.M.S.Hamid
& Bros Out of agricultural income
of Khadijath : Rs. 10,000.00f. Amount received as Bank Interest : Rs. 1,634.00
———————–
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W.P.Nos.18925 & 18926 of 2000
Total : Rs. 1,69,057.00
-----------------------
32. The learned counsel appearing on behalf of the petitioner would submit
that the Bunder Street properties are not subject matters of 6(1) notice, the
respondents gone to the extent of examining the source for those properties, which
is without jurisdiction. The Competent Authority has observed that the total the
total cost of acquisition of Rs.1,45,747.32/- only an amount of Rs.59,621.52/- is
through source acceptable as legal. Therefore, this amount is less than 50% of the
total cost and thus, the entire property at Door No. 25, Subba Rao Avenue, is to be
treated as having unexplained sources and to be forfeited. If the rental income of
Rs.74,322.52/- from the Bunder Street properties are accepted as genuine, this will
be more than 50% of the value of the Subba Rao Avenue property and Section 9 of
the SAFEMA will become applicable.
33. The contention of the petitioner is that a notice under Section 6(1)
cannot be issued to a relative. This contention is not tenable. According to Section
6(1) of the Act, the notice can be issued to any person, to whom, the SAFEMA
applies. The petitioner is being wife and therefore, relative of the detenue, the
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W.P.Nos.18925 & 18926 of 2000petitioner is a person affected in terms of Section 2(2)(c) of the SAFEMA Act.
Therefore, the Competent Authority was fully justified in issuing notice under
Section 6(1) to the petitioner. Further, Section 8 of the SAFEMA Act clearly lays
down that the burden of proving that any property specified in the notice served
under Section 6 is not illegally acquired property shall be on the person affected.
Therefore, the petitioner cannot take shelter behind the provisions of Section 18 of
the Act or the reasons recorded. She had over 19 long years to prove the source of
investment before the Competent Authority. The Appellate Tribunal elaborately
discussed the factual findings of the Competent Authority in F.P.A.No.25/MDS/96
dated 04.09.2000 and the same reads as under:
“21. Thus, the appellant failed to prove that more than 50 per
cent of investment in the house property No.25, Subba Rao Avenue,
Madras came from her own sources. The natural presumption is that
her husband provided the fund. Under the circumstances, we see no
reason to differ with the Competent Authority that the house property
is illegally acquired and has to be forfeited under the SAFEMA.
22. The next property ordered to be forfeited is the share of
interest and title including capital and current account in
M/s.Broadway Textiles, Madras. The appellant claims to have
invested Rs.35,000/- in M/s.Broadway Textiles in December 1966.
Prior to that, on 31.8.1966, she claims to have invested Rs.20,000/- in
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W.P.Nos.18925 & 18926 of 2000
another firm, M/s Decent Cycle Co. The appellant claims that she
withdrew this amount in December 1966 to invest in M/s.Broadway
Textiles. About the sources of Rs 20,000/- initially invested on
31.8.1966 and that of additional Rs.15,000/- to mobilise Rs 35,000/-
invested in December, 1966, she claimed before the Competent
Authority that she had received Rs.17,000/- from K.T.M.S. Hamid and
Brothers on account of agricultural income and the balance, which is
naturally Rs.18,000/-, came from the receipt of Rs.50,000/- from
Meera Leebai Marikar under the NDR Scheme.
23.We have already rejected the story of agricultural income
and the genuineness of gift of Rs 50,000/- from Meera Leebai
Marikar. The Competent Authority was therefore justified in treating
the sources of investment of Rs.35,000/- in M/s Broadway Textiles as
illegal. We see no reason on to interfere with the order of the
Competent Authority forfeiting the interest and title including the
balance in the capital and current account in M/s.Broadway Textiles,
Madras.”
34. In the concluding paragraph, the Competent Authority has stated that the
affected person has no evidence to support her claims made before the Appellate
Tribunal regarding forfeited property.
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W.P.Nos.18925 & 18926 of 2000
35. The Tribunal, while confirming the order of the Competent Authority,
adjudicated the facts independently with reference to the documents available on
record. The facts has been elaborately adjudicated by the Tribunal along with the
assessment order passed by the Competent Authority. The findings of the Tribunal
in F.P.A.No.29/MDS/96 dated 05.09.2000 are as follows:
“21. The Competent Authority was, therefore, justified in
ordering the forfeiture of the house property No.1/5, Whales Road,
Egmore, Madras.
22. The other property ordered to be forfeited by the Competent
Authority is the amount due from three Life Insurance Policies. The
appellant paid premia of Rs.89,869/- from all the three policies during
the period 09.11.1964 to 20.01.1976.
23.Regarding the legality of the sources of Rs.89,869/-, the appellant’s
contentions are that (a) he had disclosed the sources to the Income
Tax Department and portion of the same had come from Sri Lanka
and (b) the Income Tax Department had issued a circular that the
funds received from Sri Lanka have to be accepted in the Income Tax
assessment even though the particular mode of remittance may not be
proved or may be illegal.”
36. The Tribunal concluded by stating that the nexus between the forfeited
properties and the detenue are clearly established and consequently, confirmed the
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W.P.Nos.18925 & 18926 of 2000
orders passed by the Competent Authority.
37. We are of the considered opinion that the procedures as contemplated
under Section 6(1) of the SAFEMA Act are complied with by the authorities.
Under Section 8 of the SAFEMA Act, the burden of proof lies on the person
affected.
38. In the present cases, neither the affected person nor their legal heirs
including the petitioners failed to discharge the burden, which resulted in
forfeiture of the properties under the provisions of SAFEMA Act. A complete
analysis of the facts recorded by the Competent Authority and the Appellate
Tribunal would be sufficient to form an irresistible conclusion that there is no
further reason to interfere with the orders impugned. The petitioners have also
failed to prove that more than 50% of the sources of income is a legal source and
therefore, they are not entitled to seek any relief under Section 9 of SAFEMA Act.
39. The power of judicial review under Article 226 of the Constitution of
India is to ensure the processes, through which, a decision has been taken by the
Competent Authority in consonance with the Statutes and Rules in force, but not
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W.P.Nos.18925 & 18926 of 2000
the decision itself.
40. However, in the present cases, we have considered the factual findings
of the Competent Authority and Appellate Authority as well as the grounds raised
between the parties. We do not find any infirmity in respect of the orders
impugned.
41. Consequently, the impugned orders are confirmed and both the writ
petitions are dismissed. No costs. Connected miscellaneous petitions are closed.
[S.M.S., J.] [M.J.R., J.]
30.01.2025
Index : Yes/No
Speaking Order : Yes/No
Neutral Citation : Yes/No
kak
To
1.The Competent Authority,
Smugglers & Foreign Exchange Manipulators,
(Forfeiture of Properties)Act, 1976,
UTSAV, No:1, 64/1, G.N.Chetty Road, Chennai – 600 017.
2.The Appellate Tribunal for Forfeited Property,
4th Floor, Lok Nayak Bhavan, Khan Market,
New Delhi – 100 002.
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W.P.Nos.18925 & 18926 of 2000
S.M.SUBRAMANIAM, J.
AND
M.JOTHIRAMAN, J.
kak
W.P.Nos.18925 & 18926 of 2000
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W.P.Nos.18925 & 18926 of 2000
30.01.2025
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