Holding

Section 6(1) of the 1976 Act does not mandate serving a primary notice to the convict; notice is required only to the person who holds the property and is directly affected, and the absence of notice to the convict does not vitiate the proceedings.

Summary

The case concerned the interpretation of Section 6 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976. The Competent Authority had issued forfeiture notices under Section 6(1) to the relatives of a convicted smuggler, V.P. Selvarajan, but not to the convict himself, and the High Court held that this omission vitiated the proceedings. The Supreme Court examined the statutory scheme, the definition of "person" under Section 2(2), and the purpose of the notice provision, concluding that a primary notice need only be served on the person who holds the allegedly illegally acquired property and is directly affected, i.e., the relative, and that service to the convict is not mandatory. Consequently, the non‑service of notice to the convict does not invalidate the forfeiture action against the relatives. The Court set aside the Madras High Court judgment, restored the writ petitions for fresh consideration, and allowed the appeals.

Issues considered

The requirement under Section 6(1) of the 1976 Act to serve a primary notice to the convict/detenu when initiating forfeiture proceedings against a relative who holds the property.
Whether non‑service of a primary notice to the convict/detenu vitiates the forfeiture proceedings against the relative.
Whether the death of the convict before issuance of notice affects the notice requirement.

Legislation cited

Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976s. 18, s. 2(2), s. 3(1)(c), s. 4, s. 424, s. 6(1), s. 6(2), s. 735, s. 8, s. 828, s. 833

Subjects

Smugglers and Foreign Exchange Manipulators ActForfeiture of propertySection 6 noticePrimary noticeRelative of convictBurden of proofStatutory interpretationIllegally acquired property

Judgment

152 [2021]REPORTS
SUPREME COURT 12 S.C.R. 152 [2021] 12 S.C.R.

A THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM
& ANR.
v.
V. MOHAN & ANR.
B (Civil Appeal Nos. 8592-8593 of 2010)
DECEMBER 14, 2021
[A. M. KHANWILKAR AND SANJIV KHANNA, JJ.]
Smugglers and Foreign Exchange Manipulators (Forfeiture
of Property) Act, 1976: ss. 6(1), (2), 2(2) – Notice of forfeiture –
C
Illegally acquired property – Claim of the Competent Authority that
the property to be forfeited is that of the convict and ostensibly
held by the relatives of the convict – Issuance of primary notice u/
s. 6(1) upon such convict with copy thereof to his relatives u/s. 6(2)
– Requirement of – Held: Section 6(1) nowhere provides that it is
D mandatory to serve the convict or detenu with a primary notice
under that provision whilst initiating action against the relative of
the convict – Section 6(1)posits that notice must be given to the
person who is holding the tainted property and is likely to be affected
by the proposed forfeiture of the property – Person immediately
and directly to be affected is the person who is the recorded owner
E
of the property and in possession thereof himself or through some
other person on his behalf – Burden of proof u/s. 8 is not to be
discharged by the convict or detenu, but by the person who holds
the illegally acquired property either by himself or through any other
person on his behalf – Thus, it is not mandatory to serve a primary
F notice u/s. 6(1) upon such convict with copy thereof to his relatives
u/s. 6(2) – Non-service of such primary notice upon the convict
would not vitiate the entire proceedings initiated only against his
relatives – Order passed by the High Court that the action against
the respondents-relatives of the convict, initiated by the Competent
Authority was vitiated for lack of notice to the convict, set aside.
G
Allowing the appeals, the Court
HELD: 1.1 Pivot of The Smugglers and Foreign Exchange
Manipulators (Forfeiture of Property) Act, 1976 is to reach the
“illegally acquired properties” of the specified convict/detenu in
H
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THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 153
v. V. MOHAN

whosoever’s name they are kept or by whosoever they are held, A
whatever be the length of time. [Para 32][178-H; 179-A]
1.2 The dispensation under the 1976 Act applies only to
persons specified in Section 2(2) of the Act. Section 2(2)(a) refers
to the category of persons who are convicted under the specified
enactments. Whereas, Section 2(2)(b) refers to persons detained B
under the specified detention law. The expression “person” to
whom the 1976 Act applies, has been broadened by including
every person who is a relative of a person referred to in clause
(a) being convict under the specified laws or clause (b) being
detenu under the Conservation of Foreign Exchange and
Prevention of Smuggling Activities Act, 1974. The expression C
“relative” has been further elaborated in Explanation 2, of Section
2, so as to expand the scope of taking corrective measures for
reaching up to the illegally acquired properties of a convict or
detenu, as the case may be. Section 2(2)(d) further expands the
sweep so as to include associate of a convict or detenu, as the D
case may be; and Section 2(2)(e) takes within its ambit any holder
(the present holder) of any property, which was at any time
previously held by a person referred to in clause (a) or clause
(b), namely, convict or detenu, as the case may be. The objective
and purpose of the enactment is reinforced in the encircling
Explanation 4. The intent is to ensure that the convict/detenu E
cannot get away by adopting camouflage or screening, including
legal transfer of properties in the name of his relative, associate
or any other person covered under clause (e) to Section 2(2) of
the Act. This expanded ambit of clauses (c) to (e) is to be
interpreted in the context of the object and purpose of the Act, F
but the scope of the Act does not extend to include every property
held by a relative or an associate unless the link and the
connection with the illegal activities of the convict/detenu is
established. For, the Act is only directed to forfeiture of ‘illegally
acquired properties’ of a person falling under clause (a) or clause
(b) of Section 2(2) including their specified properties held by G
third party. Independent properties of the relatives and friends
which are not traceable to the illegal activities of the convict/
detenu are neither sought to be forfeited nor are they within the
purview of the Act. [Paras 33, 34, 37, 38][179-A-B; 180-A-C;
181-C-E; 182-A] H
154 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 1.3 On plain as well as contextual reading of Section 6, it is
crystal clear that the notice under Section 6(1) is required to be
issued to any person to whom the Act applies. As is evident from
Section 2(2) of the 1976 Act, the Act applies not only to convict
or detenu, but also to their relative, associate including holder of
any property being Section 2(2)(c), 2(2)(d) and 2(2)(e) respectively.
B
The purpose of issuing notice is to enable the person concerned
(noticee) to discharge the burden of proof as propounded in
Section 8 of the 1976 Act. It is then open to him to prove that the
property referred to in the notice is his legally acquired property.
[Para 47][186-B-C]
C 1.4 In a given case, however, if the property is held by a
person owing to merely being in legal possession thereof, but
the ownership of the property at the relevant time is that of the
convict or detenu or his/her relative, as the case may be, it would
become necessary for the Competent Authority to not only give
D notice to the person in possession of the property in question
but also to the person shown as owner thereof in the relevant
records. Similarly, in a case where the person shown as owner in
the relevant records had purchased the subject property from
the convict or detenu and is a subsequent purchaser, notice is
required to be issued to both - the present owner and the erstwhile
E owner (convict or detenu), as the case may be. However, if the
ownership of the property in the relevant records at the relevant
time is that of the person in possession (as in these cases), and
not being the convict or detenu, the question of issuing notice to
the latter would serve no purpose. The convict or detenu cannot
F be heard to claim any right in such property including proprietary
rights and for the same reason, he is not expected to discharge
the burden of proof under Section 8 of the 1976 Act as to whether
it is his legally acquired property nor can he be said to be the
person affected with the proposed action of forfeiture as such.
[Para 48][186-D-G]
G
1.5 The expression “held” in Section 6 has to be understood
to mean that the person is entitled to possession of property
being owner of the property in the relevant record or even because
he is in legal possession thereof. In other words, a person may

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THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 155
v. V. MOHAN

be holding the property also when he (at the relevant time) is in A
legal possession of the stated property, even if he is not a recorded
owner thereof. In either case, it would be a matter within the
ambit of expression “held” occurring in Section 6 of the 1976
Act. [Para 49][186-G; 187-A-B]
1.6 The third facet of Section 6(1) of the 1976 Act is the B
noticee may hold the property either by himself or through any
other person on his behalf. A primary notice under Section 6(1)
can be issued only against person to whom the Act applies. If the
relative of a convict or detenu has acquired property from the
illegal sources of income, earnings or assets of the convict or
detenu, such person would be a person to whom the Act applies C
vide Section 2(2)(c) read with Explanation 2. Such person may be
a recorded owner of the property-having acquired it wholly or
partly out of or by means of any income, earnings or assets derived
or obtained from or attributable to unlawful activity (whether
indulged into before or after the commencement of the 1976 Act) D
of the convict or detenu which is prohibited by or under any law
for the time being in force relating to any matter in respect of
which Parliament has power to make laws. [Para 50][187-B-D]
1.7 Going by the definition of “illegally acquired property”
in Section 3(1)(c) and of “person” in Section 2(2) to whom the E
Act applies, if the property is held in the name of the relative of
the convict or detenu before or after the commencement of the
Act, the notice under Section 6(1) needs to be issued to such
person (recorded owner as well as in possession), who alone can
and is expected to discharge the burden of proof in terms of
Section 8 of the 1976 Act-so as to dissuade the Competent F
Authority from proceeding further against such property. Indeed,
if the illegally acquired property is held in the name of the relative,
but the de facto possession thereof is with some other person,
who is not covered by the expression “person” as given in Section
2(2), in such a case primary notice under Section 6 is required to G
be issued to the relative of the convict or detenu and copy thereof
served upon “such other person” who is in de facto possession
thereof (albeit for and on behalf of the relative of the convict or
detenu). Even in this situation, notice to the convict or detenu

H
156 SUPREME COURT REPORTS [2021] 12 S.C.R.

A may not be necessary much less mandatory. For, the 1976 Act
applies even to the relative of the convict or detenu holding
illegally acquired property either by himself or through any other
person on his behalf. [Para 51][187-E-H]
1.8 Section 6(2) merely refers to the requirement of issuing
B notice to “such other person”. The expression “such person” is
found not only in Section 6(1), but in other provisions of the Act
including the definition clause i.e., Section 3(1)(c) of illegally
acquired property. The expression “such person” and “such other
person” occurring in Section 6(2) may have to be understood in
the context and the setting in which it has been employed in the
C concerned provision. A harmonious construction thereof is
imperative. [Paras 52, 53][188-A-C]
1.9 In the first part of Section 6(2), the expression used is
“any person”. That is a person to whom primary notice under
Section 6(1) is addressed. This person can be none other than
D person referred to in Section 2(2) of the 1976 Act. He can be a
convict or detenu, his relative or associate including the person
who is a holder of the property in question at the relevant time.
Section 6(2) then refers to the subject property in the notice and
the factum of the property being held by concerned person (such
E person)-either the primary noticee to whom the Act applies
himself or through “any other person” on his behalf. The latter
is described as “such other person”, in the concluding part of
that sub-Section [Section 6(2)]. That, “such other person”, is also
covered within the ambit of expression “any other person”
mentioned earlier and holding the property in question on behalf
F of the primary noticee. In other words, “such other person” will
be a person other than a person to whom the Act applies being
merely a holder of illegally acquired property on behalf of the
person to whom Act applies. Thus, he may be a person other
than a person referred to in Section 2(2) of the 1976 Act. The
G legislative intent is to cover “such other person” so as to reach
up to “illegally acquired property” of the convict/detenu and
unravel/lift the veil created by the person to whom the Act applies.
The legislative intent is to reach to all illegally acquired properties
in whosoever’s name they are kept or by whosoever they are

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THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 157
v. V. MOHAN

held irrespective of the time period of such acquisition. This is A
to ensure that the persons to whom the Act applies referred to in
Section 2(2), do not use mechanism to shield illegally acquired
properties from the proposed action of forfeiture. [Para 54]
[188-C-H]
Attorney General for India v. Amratlal Prajivandas B
(1994) 5 SCC 54 : AIR 1994 SC 2179 : [1994] (1)
Suppl. SCR 1 – followed.
1.10 The expression “such person” employed in Section
6(2) is referable to the primary noticee, who is a person to whom
the Act applies. If, however, the notice mentions that the C
properties referred to in the notice are held by the noticee through
any other person on his behalf, that may be a case of holding of
physical possession of the illegally acquired property by person
other than the person to whom the Act applies. In such a case,
sub-section (2) triggers in enabling the Competent Authority to
issue notice even to “such other person”-not covered by the D
definition of Section 2(2) of the Act. If that person is merely in
possession of the property and not its owner, he may not be able
to explain or prove the fact that the property is not illegally
acquired property of the primary noticee. Indeed, if “such other
person” is claiming ownership of the property through the relative E
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. Such a plea can be considered by the
Competent Authority on its own merits. [Para 55][189-A-D] F

1.11 Section 4 of the Act, which in sub-section (1) uses
similar expression- “any person to whom this Act applies to hold
any illegally acquired property either by himself or through any
other person on his behalf”-which is similar to the wordings/
expressions used in Section 6 of the Act, reinforces the above G
interpretation. [Para 56][189-D-E]
1.12 Notice under Section 6(1) cannot be issued in respect
of properties for which the Competent Authority has no evidence
or material to record “reasons to believe” that the properties
H
158 SUPREME COURT REPORTS [2021] 12 S.C.R.

A were acquired from the assets or money provided by the convict/
detenu. The expression ‘reasons to believe’ is a phrase used in
several enactments and interpreted by this court to mean not
‘mere subjective satisfaction’ based on surmise and conjecture,
but a belief that is ‘honest and based upon reasonable grounds’.
The satisfaction should be based upon objective material and not
B
mere feeling or inkling. The requirement is deliberately legislated
as a check against frivolous and rowing inquiries based upon mere
suspicion and pretence. The reasons to believe to be valid should
refer to facts that have a rational connection or relevant bearing
to the formation of belief and should not be extraneous or
C irrelevant for the purpose of initiation of inquiry under Section 6
of the Act. [Para 57][189-E-G; 190-A]
1.13 Recording of the reasons to believe and satisfaction
of the aforesaid conditions is an important condition precedent -
a sine qua non - and its violation would have legal consequences.
D It is a jurisdictional requirement, which, unlike a procedural
requirement, would affect the proceedings if not complied with.
Therefore, in such cases, the question of no prejudice is
unavailable as the provision for issue of notice and satisfaction of
the precondition for the issue of notice, i.e., “reasons to believe”,
is mandatory and not optional or directory. [Para 58][190-B]
E
1.14 Section 8 of the Act predicates that when proceedings
in respect of a property are initiated by way of notice under Section
6, the burden of proving that the property is not illegally acquired
shall be on the person affected. The enactment, therefore,
reverses the burden of proof but only after the notice under
F Section 6 has been validly issued. By virtue of Section 6, the
enactment requires the Competent Authority to form reasons to
believe, which must be rational and based upon some material
which would show that the conditions mentioned in Section 2(2)
as explained and expounded by this Court in Amratlal Prajivandas
G are satisfied. Section 8 does not apply at the initial stage or when
the Competent Authority decides whether or not notice under
Section 6 should be issued. The Competent Authority cannot,
simply by relying upon Section 8, reverse the burden of recording
of reasons to believe and mechanically issue notice under Section

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THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 159
v. V. MOHAN

6. For, Section 8 does not apply at the stage when the Competent A
Authority forms and records its reasons to issue notice.
[Para 61][190-G; 191-A-C]
1.15 The respondents are covered under the ambit of
relative-being son and wife of the brother of the convict, to whom
the 1976 Act applied. [Para 35][181-A] B
1.16 A priori, Section 6(1) of the 1976 Act nowhere provides
that it is “mandatory” to serve the convict or detenu with a primary
notice under that provision whilst initiating action against the
relative of the convict. Indubitably, if the illegally acquired
property is held by a person in his name and is also in possession C
thereof, being the relative of the convict and who is also a person
to whom the Act applies, there is no need to issue notice to the
convict or detenu much less primary notice as held by the High
Court in the impugned judgment. For, Section 6(1) posits that
notice must be given to the person who is holding the tainted
property and is likely to be affected by the proposed forfeiture of D
the property. The person immediately and directly to be affected
is the person who is the recorded owner of the property and in
possession thereof himself or through some other person on his
behalf. In the latter case, the burden of proof under Section 8 is
not to be discharged by the convict or detenu, but by the person E
who holds the illegally acquired property either by himself or
through any other person on his behalf. [Para 64][192-E-G]
1.17 The expression “such other person” in Section 6(2)
is, thus, referable to a person falling in class “through any other
person on his behalf”. That is the person to whom the Act applies, F
as noted in the opening part of Section 6(1) of the Act. In such a
case, the convict or detenu is not expected to nor can be called
upon to discharge the burden of proof under Section 8.
Accordingly, this Court may lean in favour of the view taken by
the High Court of Kerala and Calcutta High Court for independent
reasons delineated hitherto. [Para 65][193-A-B] G
Sajitha & Ors. vs. Competent Authority & Ors 2005
SCC OnLine Ker 101; The Competent Authority &
Administrator & Anr. vs. Manilal Jalal & Anr. 2013 SCC
OnLine Cal 12911 – approved.
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160 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 1.18 The impugned judgment is set aside and the parties
are relegated before the High Court for being heard afresh on all
other issues and contentions as may be available to both sides.
Further, this Court may not be understood to have expressed
any opinion either way on any other contention available to the
parties. It is said so because even the impugned judgment makes
B
it amply clear that the writ petitions filed by the respondents were
being allowed on the sole ground that the action against the
respondents sans primary notice to the convict is vitiated. That
view having been reversed, the matter needs to go back before
the High Court for consideration of all other aspects on its own
C merits. [Para 67][193-D-F]
1.19 During the course of the hearing, an issue arose
whether the convict-VP had expired before the issuance of notice
under Section 6 on 19th January 1994. The counsel, at the time
of argument, were not aware of the factual position. However, in
D the written submissions, the appellant and the respondents have
accepted that the convict V.P. had expired before impugned
notices under Section 6 dated 19th January 1994 were issued.
Be that as it may, in the instant case, the properties in question
and subject matter of notice under Section 6 are in the name of
and held by the two respondents. No entitlement or right has
E been claimed in these properties by the heirs of the deceased
convict VP. If the properties were in the name of the deceased
detenu or convict, then different considerations may have applied.
In the context of the instant case, as the convict VP had expired
before the issuance of notice under Section 6 on 19th January
F 1994, therefore, the need and requirement to serve notice on
him would not arise. [Paras 68, 69][193-G-H; 194-A-B]
Attorney General for India v. Amratlal Prajivandas
(1994) 5 SCC 54 : AIR 1994 SC 2179 : [1994] (1)
Suppl. SCR 1 – followed.
G Shobha Suresh Jumani vs. Appellate Tribunal, Forfeited
Property & Anr. (2001) 5 SCC 755 : [2001] 3 SCR
525; Fatima Mohd. Amin (Dead) through LRs. vs. Union
of India & Anr. (2003) 7 SCC 436; Aslam Mohammad

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THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 161
v. V. MOHAN

Merchant vs. Competent Authority & Ors. (2008) 14 A
SCC 186 : [2008] 10 SCR 332; Nazir Ahmad vs.
Emperor AIR 1936 PC 253; Chandra Kishore Jha vs.
Mahavir Prasad & Ors. (2008) 14 SCC 186 : [1999] 2
Suppl. SCR 754; Mannalal Khetan & Ors. vs. Kedar
Nath Khetan & Ors. (1977) 2 SCC 424 : [1977] (2)
B
SCR 190; Asha John Divianathan vs. Vikram Malhotra
& Ors. 2021 SCC OnLine SC 147; Tata Chemicals Ltd.
v. Commissioner of Customs (Preventive), Jamnagar
(2015) 11 SCC 628 : [2015] 7 SCR 132; Kewal Krishan
v. State of Punjab AIR 1967 SC 737 : [1962] Suppl.
SCR 613; Bar Council of Maharashtra v. M. V. C
Dabholkar & Ors. (1976) 2 SCC 291 : [1976] 2 SCR
48; S. Narayanappa & Ors. v. Commissioner of Income
tax, Bangalore AIR 1967 SC 523 : [1967] SCR 590 –
referred to.
P. Ramanatha Aiyar’s The Major Law Lexicon; G.P. D
Singh, in Principles of Statutory Interpretation, 14th
Edition, at page 430 – referred to.
Case Law Reference
[2001] 3 SCR 525 referred to Para 17
E
(2003) 7 SCC 436 referred to Para 20
[2008] 10 SCR 332 referred to Para 20
[1999] 2 Suppl. SCR 754 referred to Para 22
[1994] (1) Suppl. SCR 1 followed Para 28, 29,
F
61, 63
[1977] (2) SCR 190 referred to Para 43
[2015] 7 SCR 132 referred to Para 57
[1976] 2 SCR 48 referred to Para 57
G
[1962] Suppl. SCR 613 referred to Para 57
[1967] SCR 590 referred to Para 59

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162 SUPREME COURT REPORTS [2021] 12 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 8592-
8593 of 2010.
From the Judgment and Order dated 24.03.2008 of the High Court
of Judicature at Madras in Writ Petition Nos.1149-1150 of 2001.
Aman Lekhi, ASG, A. K. Srivastava, Sr. Adv., Rupesh Kumar, S.
B A. Haseeb, Adit Khorana, Advs. for the Appellants.
Atul Shankar Vinod, M. P. Vinod, Advs. for the Respondents.
The Judgment of the Court was delivered by
A. M. KHANWILKAR, J.
C
1. The conundrum in these appeals is: when the Competent
Authority1 claims that the subject property (to be forfeited) is that of the
convict (V.P. Selvarajan) and ostensibly held by the relatives of the convict
(respondents herein), whether it is mandatory to serve a primary notice
under Section 6(1) of the 1976 Act upon such convict with copy thereof
D to his relatives under Section 6(2) of the 1976 Act, and non-service of
such primary notice upon the convict would vitiate the entire proceedings
initiated only against his relatives?
2. The High Court of Judicature at Madras2 vide impugned
judgment3 held that Section 6 of the 1976 Act leaves no room for doubt
E that the primary notice must be served on the convict, wherein the convict
is required to indicate the sources of his income, earnings or assets, out
of which or by means of which he had acquired the properties sought to
be forfeited; and non-service of such notice upon the convict would
vitiate the action initiated against his relatives, even if the forfeited
properties are ostensibly held by or in the name of the relatives. The
F
High Court rejected the argument of the appellants herein (Competent
Authority) that only the person in whose name the property is held is
required to be called upon to offer explanation regarding the sources of
his income, earnings or assets, out of which or by means of which he
had acquired such property including the evidence on which he would
G rely and other relevant information and particulars. If the property in

1
under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property)
Act, 1976 (for short, “1976 Act”)
2
for short, “Madras High Court”
3
in Writ Petition Nos. 1149 & 1150 of 2001 decided on 24.3.2008 reported in 2008
H SCC OnLine Mad 244
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 163
v. V. MOHAN [A. M. KHANWILKAR, J.]

question is ostensibly held by the relatives in his name or through any A
other person on his behalf, the convict or detenu is not expected to nor
can offer any explanation in that regard. The High Court also rejected
the argument of the appellants herein that no prejudice is likely to be
caused to the noticees (respondents herein) being the relatives of the
convict, who had held the forfeited properties in their name. The High
B
Court opined that the action against the respondents initiated by the
Competent Authority was vitiated for lack of notice to the convict and it
was, thus, pleased to set aside the entire action initiated against the
respondents by the Competent Authority.
3. A contra view has been taken by at least two other High Courts.
The first is of the High Court of Kerala in Sajitha & Ors. vs. Competent C
Authority & Ors.4 wherein after analysing the relevant provisions, it
held as follows:
“11. Section 2(c) refers to every person who is a relative of a
person referred to in clause (a) or clause (b). Section 2(e) refers
to any holder of any property which was at any time previously D
held by a person referred to in clause (a) or clause (b). When we
read Section 6(1) and 6 (2) along with Section 2 (2)(e) it is
evident that notice contemplated under Section 6(2) is to
any other person if the property does not stand in the name
of the detenu. So far as this case is concerned, property E
stands in the name of wife and brothers. Admittedly notices
have been issued to them as contemplated under Section
6(1). We are of the view, non issue of notice to the detenu
will not vitiate the proceedings as against their relatives.
12. Petitioners also have raised a contention that more than six F
years have elapsed and the proceedings have not been initiated
within a reasonable period. No time limit has been prescribed
under the Act. The Apex Court in Attorney General for India
v. Amratlal Prajivandas5 has dealt with the scope and ambit of
the Act which requires no reiteration. However we may refer to
the recent decision of the apex court in Kesar Devi v. Union of G
India6. The apex court while dealing with Section 2(2)(c) of
the Act has categorically held that the burden of proving
4
2005 SCC OnLine Ker 101
5
(1994) 5 SCC 54 : AIR 1994 SC 2179
6
(2003) 7 SCC 427 H
164 SUPREME COURT REPORTS [2021] 12 S.C.R.

A that such property is not illegally acquired property will be
upon the person to whom notice has been issued. On facts
petitioners could not establish that the properties were legally
acquired. Competent authority and the Tribunal concurrently found
so and this court in writ jurisdiction will not be justified in a taking
a different view in the absence of any contra evidence. We
B
therefore find no infirmity in the orders passed by the competent
authority. The writ petition lacks merits and the same would stand
dismissed.”
(emphasis supplied)
C The second decision is of the Calcutta High Court in The
Competent Authority & Administrator & Anr. vs. Manilal Jalal &
Anr.7. Even in this case, notice was issued only to the wife of the detenu
and not to the detenu. The question was specifically dealt with by the
Calcutta High Court after analysing the relevant provisions in the following
words:
D
“…..
A bare perusal of Section 2 of the Act would show that the
Act not only applies to the detenu but also to the relations
and/or associates of such detenu. Nowhere the said
E provision of law mandates that a proceeding against a
relative of a detenu can be initiated only if such detenu is
proceeded against under SAFEMA. Such right to proceed
against the relative/associate is independent of any action
taken against the detenu under SAFEMA. It is wholly
fallacious to argue that the detenu must be proceeded
F against under SAFEMA as a condition precedent for any
action against a relative of such detenu. The properties and/
or assets which were sought to be forfeited were standing
in the name of Sarbani Devi Jalan herself and therefore
respondent authorities rightly issued a notice under Section
G 6 of the Act upon her as “person affected” for the purpose
of initiating a proceeding of forfeiture of such property. There
is nothing in the law that the property standing in the name
of a relation of a detenu which is sought to be proceeded
against must require a notice to be issued upon the detenu
7
H 2013 SCC OnLine Cal 12911
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 165
v. V. MOHAN [A. M. KHANWILKAR, J.]

also. To infer such a requirement when the same is not A
provided in law would amount to rewriting the statutory
provision which is unwarranted. This submission of the
appellants being unfounded must therefore fail.
…..”
(emphasis supplied) B
4. In view of the above, these appeals not only involve question
regarding interpretation of Section 6 read with other provisions of the
1976 Act, but also call upon us to expound the stated question
authoritatively and resolve the conflicting view taken by different High
Courts. C
5. Reverting to the facts of the present case, one V.P. Selvarajan
(convict) — brother-in-law of respondent No.2 and paternal uncle of
respondent No.1, was convicted for an offence punishable under the
Customs Act, 19628 on 23.11.1969. As a result of his conviction, he
came within the ambit of the expression “person” or “such person”
D
occurring in the 1976 Act — Section 2 in particular. Respondents being
the relatives of the convict in terms of Section 2(2) read with Explanation
2 also came within the ambit of expression “person” defined in the 1976
Act to whom the Act applies.
6. The 1976 Act came into force with effect from 5.11.1975,
pursuant to which the Competent Authority under the Act resorted to E
inquiry, investigation or survey under Section 18 of the Act and on the
basis of the information collated had reason to believe that certain
properties are illegally acquired properties having nexus to the unlawful
activities of the convict. As a result, a notice under Section 6(1) of the
1976 Act was issued to the convict on 2.2.1980. In the present appeals, F
we are not concerned with the said notice or for that matter illegally
acquired properties of the convict referred to therein.
7. The Competent Authority, however, on the basis of information
gathered had reason to believe that some of the properties were held by
the respondents herein by themselves, which were illegally acquired G
properties within the meaning of Section 3(1)(c) of the 1976 Act.
Accordingly, notice under Section 6(1) of the 1976 Act dated 19.1.1994
was issued to V. Mohan, respondent No.1 herein being nephew of the
convict, calling upon him to disclose the sources of his income, earnings
8
for short, “1962 Act” H
166 SUPREME COURT REPORTS [2021] 12 S.C.R.

A or assets, out of which or by means of which he had acquired the
properties referred to in the stated notice by himself. The description of
the properties had been given in the Schedule, which reads thus:

B

C

D

8. Similarly, a notice dated 28.2.1994 was issued to Smt. V.
Padmavathy, respondent No.2 herein being the relative of the convict in
respect of properties referred to in the said notice purportedly illegally
E
acquired properties. The Schedule reads thus:

F

G

H
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 167
v. V. MOHAN [A. M. KHANWILKAR, J.]

9. The Competent Authority after giving opportunity to the A
respondent(s) eventually passed separate forfeiture order(s) on 30.4.1998
against Smt. V. Padmavathy, respondent No.2 and on 28.5.1998 against
V. Mohan, respondent No.1 in exercise of powers under Section 7(1) of
the 1976 Act. It held that an order of forfeiture of the stated properties
had become inevitable as the respondent(s) had failed to produce any
B
credible evidence or explanation to discharge the burden of proving that
the properties referred to in the impugned notice were legally acquired
properties by them.
10. Being aggrieved, the respondents took the matter in appeal
bearing Nos. F.P.A.No.31/MDS/98 (of respondent No.2) and
F.P.A.No.32/MDS/98 (of respondent No.1) before the Appellate Tribunal C
for Forfeited Property, New Delhi-II, Camp: Bangalore9. These appeals
came to be dismissed by the Appellate Tribunal vide common order dated
15.11.2000. Resultantly, the order of forfeiture of subject properties passed
by the Competent Authority was upheld.
11. The respondents then carried the matter before the Madras D
High Court by way of Writ Petition No.1149 of 2001 (of respondent
No.1) and Writ Petition No.1150 of 2001 (of respondent No.2). Both
these writ petitions came to be allowed by common judgment and order
dated 24.3.2008 passed by the Division Bench of the Madras High Court
taking the view that the action initiated against the respondents had vitiated
owing to lack of notice to V.P. Selvarajan (convict), which in its view E
was mandatory requirement under Section 6 of the 1976 Act.
12. The appellants, being aggrieved by the said decision, have
approached this Court by way of present appeals. According to the
appellants, the view taken by the Madras High Court vide impugned
judgment on the interpretation of Section 6 of the 1976 Act is untenable. F
Whereas, the issue has been rightly concluded in favour of the appellants
by two other High Courts, namely, High Court of Kerala and Calcutta
High Court.
13. It is urged that notice under Section 6 of the Act is required to
be given to the person to whom the 1976 Act applies in respect of G
properties held by him, either by himself or through any other person on
his behalf, being illegally acquired property within the meaning of the
Act and proposed to be forfeited by the Central Government under the
Act. It does not require issuing notice to the convict or detenu, as the
9
for short, “Appellate Tribunal” H
168 SUPREME COURT REPORTS [2021] 12 S.C.R.

A case may be, if the properties are not held by him or in his name. Indeed,
if the properties in question are held in the name of any other person on
his behalf, the notice is required to be given to such person. To buttress
this submission, reliance has been placed on Section 2 of the Act providing
for application of the Act to the persons specified in Section 2(2). The
spouse of the brother of the convict as well as the son of the brother of
B
the convict are plainly covered within the expression “relative” as clarified
in Explanation 2 of Section 2 of the 1976 Act and for which reason, the
Act applies to the respondents as well. Emphasis is placed on the
expression “held” occurring in Section 6 of the 1976 Act in particular
which in terms of definition in P. Ramanatha Aiyar’s The Major Law
C Lexicon10 would cover (i) those entitled to possession of property; and
(ii) those in possession thereof.
14. It is urged that respondents were admittedly holding the
properties in their name and thus, they were entitled to possession of
such property and in fact they were in physical possession thereof.
D Therefore, they alone were expected to offer explanation and discharge
the burden of proving that the properties are their legally acquired
properties. They were, in fact, the persons directly affected by the
proposed action of forfeiture and, hence, notice under Section 6 was
required to be issued to the respondents alone. There is no mandate in
Section 6 that a primary notice be served on the convict to require him to
E indicate his sources of income as noted by the Madras High Court.
More so, the convict is not expected to offer explanation with regard to
the properties held by his relatives and not by him.
15. As regards the purport of Section 6(2) of the 1976 Act, it is
urged that the plain and literal interpretation does not mandate issuing
F notice to the convict even if the property proposed to be forfeited is not
held by him at the relevant time. It is a different matter that the convict
can also be issued notice, but it is not a mandatory requirement when the
properties proposed to be forfeited were held by the relatives of the
convict at the relevant time when the action is initiated.
G 16. The appellants have placed reliance on the decisions of the
High Court of Kerala and Calcutta High Court referred to earlier. In
addition, reliance has also been placed on the dictum of the Constitution
Bench of this Court in Amratlal Prajivandas11, which has decoded the
10
4 th Edition, Vol. 3 at pages 3050-51
H 11
Supra at Footnote No. 5
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 169
v. V. MOHAN [A. M. KHANWILKAR, J.]

intent of the legislation and all relevant provisions while rejecting the A
argument regarding constitutional validity of the enactment. It held that
the burden of establishing that the properties mentioned in Section 6
notice held on that date by a relative or an associate of the convict or
detenu are not illegally acquired properties, lies upon such relative or
associate. Further, the Act is intended to frustrate all attempts at screening
B
properties irrespective of how the relatives/associates hold the property
(whether benami or as name-lender or through transferee) and wherein
the said relative/associate cannot disclose that the properties have not
been acquired with the monies or assets belonging to a detenu/convict,
but the failure to discharge the burden would justify their forfeiture there
being a prohibition on any person to whom the Act applies from holding C
illegally acquired properties.
17. Reliance has also been placed on the dictum in Shobha Suresh
Jumani vs. Appellate Tribunal, Forfeited Property & Anr.12, wherein
a show-cause notice under Section 6 was issued to the detenu Suresh
Manoharlal Jumani and his wife Shobha Suresh Jumani. Right to file D
appeal by Shobha Suresh Jumani was questioned by the competent
authority. Nevertheless, this Court upheld the action initiated against the
relative (wife) of the detenu as the properties were held by her. It is
submitted that the impugned judgment be set aside and the contra view
taken by the High Court of Kerala and Calcutta High Court be affirmed.
E
18. Per contra, learned counsel for the respondents has supported
the view taken by the Madras High Court in the impugned judgment and
would urge that the appellants had all throughout proceeded against the
respondents on the assumption that the respondents are only ostensible
owners and the properties in question, in fact, belonged to the convict.
Further, the respondents were holding the subject properties on behalf F
of the convict. In that context, the Madras High Court examined the
purport of Section 6 and the interplay of two sub-sections therein to
conclude that primary notice to the convict was a mandatory requirement,
in such a fact situation. Now, in the present appeals, the appellants have
taken a completely different position, namely, that the respondents are, G
in fact, the recorded owners of the subject properties and, therefore, no
notice is required to be given to the convict.
19. The respondents have invited our attention to the definition of
“persons” and Explanation 2 in Section 2 of the 1976 Act. It is also
12
(2001) 5 SCC 755 H
170 SUPREME COURT REPORTS [2021] 12 S.C.R.

A urged that the properties referred to in the impugned notices issued to
the respondents were not made subject matter of notice under Section 6
issued to the convict on 2.2.1980. In other words, no notice had ever
been given to the convict in respect of properties referred to in the
impugned notices issued to the respondents as being his illegally acquired
properties held through other person on his behalf.
B
20. As a matter of fact, it is urged by the respondents that Section
6(1) posits that when a notice is issued to a relative, it is imperative upon
the Department to allege and establish a nexus between the properties
of the relative sought to be forfeited and the convict or detenu. In that,
the forfeited properties must be traceable to the illegal sources of income,
C earnings or assets of the convict or detenu. The personal properties of
relative or associate of the convict or detenu having no connection with
the convict or detenu, cannot be made subject matter of forfeiture under
the 1976 Act as held in Amratlal Prajivandas13; Kesar Devi14; Fatima
Mohd. Amin (Dead) through LRs. vs. Union of India & Anr.15; and
D Aslam Mohammad Merchant vs. Competent Authority & Ors. 16.
21. It is then urged that the subject properties cannot be forfeited
without substantiating the link or nexus between the properties of the
relatives with the activity of the convict or detenu and more so when the
relatives are not his immediate relatives such as parents or children or
E spouse. For lack of nexus between the properties sought to be forfeited
being that of the convict, the statutory presumption is not attracted; and
it must follow that Section 8 requiring burden of proof to be discharged
by the noticee being the relative of the convict, would not come into
play. Moreover, the notice contains a bald unreasoned averment — that
the properties in question were acquired during the time when the convict
F was engaged in gold smuggling, the only inescapable conclusion is that
the said properties were acquired by the funds of such convict. As a
matter of fact, the respondents had furnished copious materials before
the Authorities to establish that the properties in question are, in fact,
personal properties purchased by them out of their business earnings,
G gifts, etc. The plea so taken by the respondents has been completely
discarded.

13
supra at Footnote No. 5 (para 44)
14
supra at Footnote No. 6 (paras 11 and 12)
15
(2003) 7 SCC 436 (paras 7 to 9)
16
H (2008) 14 SCC 186 (para 45)
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 171
v. V. MOHAN [A. M. KHANWILKAR, J.]

22. It is urged that neither the Competent Authority nor the A
Appellate Tribunal took into account that no reasons have been recorded
on the basis of which it was believed that the properties of the
respondents were illegally acquired. Relying on the dictum in Nazir
Ahmad vs. Emperor17 and Chandra Kishore Jha vs. Mahavir Prasad
& Ors.18, it is urged that when a statute provides something to be done
B
in a particular manner it ought to be done in that manner alone and in no
other manner. Whereas, the Competent Authority failed to record proper
reasons to believe as stipulated in Section 6 of the 1976 Act.
23. It is then contended that on account of inordinate and undue
delay, the proceedings suffer from the vice of arbitrariness and
irrationality. In that, the convict was convicted on 23.11.1969 for an C
offence punishable under the 1962 Act. The properties in question
belonging to the respondents were acquired between 1959 till 1980.
Whereas, the impugned notices were issued on 19.1.1994 and 28.2.1994.
Further, as aforesaid, the stated properties have not been referred to in
the criminal proceedings against the convict nor in the notice issued to D
him on 2.2.1980. No explanation has been offered or forthcoming from
the Competent Authority about the delay in issuing notice after 25 years,
calling upon the respondents to explain and account for the sources of
funds from which the properties in question have been acquired by them.
This is not only unjustified, but also impractical and not meet the test of
a reasonable period of time. Now, further period of 25 years has lapsed. E
Thus, to reopen and re-adjudicate the entire proceedings afresh at this
distance of time would not only be iniquitous, but also result in serious
irreparable harm and injury to the respondents and persons claiming
through them.
24. It is urged that this Court may lean in favour of closure of the F
proceedings inasmuch as even the appellants succeed, the parties may
have to be relegated to the High Court for consideration of all other
aspects raised by the respondents in the writ petitions and not dealt with
by the High Court being of the view that initiation of the action against
the respondents without primary notice to the convict vitiated the entire G
proceedings. As a matter of fact, the High Court in paragraph 21 of the
impugned judgment had left it open to the Authorities to initiate fresh
proceedings in accordance with law, which the appellants have not chosen
17
AIR 1936 PC 253
18
(1999) 8 SCC 266 H
172 SUPREME COURT REPORTS [2021] 12 S.C.R.

A to initiate despite the fact that there was no interim stay given by this
Court in that regard.
25. We have heard Mr. Aman Lekhi, learned Additional Solicitor
General of India, Mr. A.K. Srivastava, learned senior counsel for the
appellants and Mr. Atul Shankar Vinod, learned counsel for the
B respondents.
26. Before we proceed to examine the different viewpoints in
reference to the provisions of the 1976 Act, it is essential to notice the
legislative intent for enacting the 1976 Act. That can be discerned from
the Preamble of the Act and also exhaustively dealt with by the nine-
C Judges Constitution Bench of this Court, in Amratlal Prajivandas19.
27. The Preamble of the 1976 Act reads thus:
“An Act to provide for the forfeiture of illegally acquired
properties of smugglers and foreign exchange manipulators and
for matters connected therewith or incidental thereto.
D
WHEREAS for the effective prevention of smuggling activities
and foreign exchange manipulations which are having a deleterious
effect on the national economy it is necessary to deprive persons
engaged in such activities and manipulations of their ill-gotten gains;
AND WHEREAS such persons have been augmenting such
E
gains by violations of wealth-tax, income-tax or other laws or by
other means and have thereby been increasing their resources
for operating in clandestine manner;
AND WHEREAS such persons have in many cases been
holding the properties acquired by them through such gains
F
in the names of their relatives, associates and confidants;”
(emphasis supplied)
28. This Court dealt with the legislative intent in extenso. It also
analysed the relevant provisions of the 1976 Act which would reinforce
G the legislative intent. While dealing with the definition of “illegally acquired
properties” (re: question No.4 in paragraph 43), it had noticed that the
stated expression is quite expansive. It not only takes within its ambit the
property acquired after the Act, but also the property acquired before
the Act, “whatever be the length of time”. Secondly, it takes in the property
19
H Supra at Footnote No. 5
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 173
v. V. MOHAN [A. M. KHANWILKAR, J.]

which may have been acquired partly from out of illegal activity — in A
which case, of course, the provision of Section 9 would be attracted.
Further, illegal activity is not confined to violation of the laws mentioned
in Section 2 of the 1976 Act but all laws which Parliament has power to
make, such as if a smuggler has acquired some properties by evading
tax laws or by committing theft, robbery, dacoity, misappropriation or
B
any other illegal activity prohibited by the Indian Penal Code or any
other law in force. All that would be liable to be forfeited.
29. The Constitution Bench negatived the challenge to the
expansive definition of expression “illegally acquired property” on the
grounds of unreasonableness, arbitrariness or for that matter on any of
the grounds relatable to Part III of the Constitution as not being available. C
The Constitution Bench then noted as follows:
“Question No.4
43. …..We can take note of the fact that persons engaged in
smuggling and foreign exchange manipulations do not keep regular D
and proper accounts with respect to such activity or its income or
of the assets acquired therefrom. 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, E
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 F
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 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 G
properties is placed upon the person concerned. May be
this is a case where a dangerous disease requires 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. Further, in view of clear and H
174 SUPREME COURT REPORTS [2021] 12 S.C.R.

A unambiguous language employed in clause (c) of Section 3, it is
not possible or permissible to resort to the device of reading down.
The said device is usually resorted to save a provision from being
declared unconstitutional, incompetent and ultra vires. We are,
therefore, of the opinion that neither the constitutional validity of
the said definition can be questioned nor is there any warrant for
B
reading down the clear and unambiguous words in the clause. So
far as justification of such a provision is concerned, there is enough
and more. After all, all these illegally acquired properties
are earned and acquired in ways illegal and corrupt — at
the cost of the people and the State. The State is deprived
C of its legitimate revenue to that extent. These properties
must justly go back where they belong — to the State. …..”
(emphasis supplied)
30. After having said that while dealing with the ambit of Section
2(2) of the Act, the Court observed thus:
D
“Question No. 5
44. It is contended by the counsel for the petitioners that extending
the provisions of SAFEMA to the relatives, associates and other
‘holders’ is again a case of overreaching or of over-breadth, as it
E may be called — a case of excessive regulation. It is submitted
that the relatives or associates of a person falling under clause
(a) or clause (b) of Section 2(2) of SAFEMA may have acquired
properties of their own, may be by illegal means but there is no
reason why those properties be forfeited under SAFEMA just
because they are related to or are associates of the detenu or
F convict, as the case may be. It is pointed out that the definition of
‘relative’ in Explanation (2) and of ‘associates’ in Explanation (3)
are so wide as to bring in a person even distantly related or
associated with the convict/detenu, within the net of SAFEMA,
and once he comes within the net, all his illegally acquired properties
G can be forfeited under the Act. In our opinion, the said
contention is based upon a misconception. SAFEMA is
directed towards forfeiture of “illegally acquired properties”
of a person falling under clause (a) or clause (b) of Section
2(2). The relatives and associates are brought in only for
the purpose of ensuring that the illegally acquired properties
H of the convict or detenu, acquired or kept in their names,
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 175
v. V. MOHAN [A. M. KHANWILKAR, J.]

do not escape the net of the Act. It is a well-known fact that A
persons indulging in illegal activities screen the properties
acquired from such illegal activity in the names of their
relatives and associates. Sometimes they transfer such
properties to them, may be, with an intent to transfer the
ownership and title. In fact, it is immaterial how such relative
B
or associate holds the properties of convict/detenu —
whether as a benami or as a mere name-lender or as a bona
fide transferee for value or in any other manner. He cannot
claim those properties and must surrender them to the State
under the Act. Since he is a relative or associate, as defined
by the Act, he cannot put forward any defence once it is C
proved that that property was acquired by the detenu —
whether in his own name or in the name of his relatives and
associates. It is to counteract the several devices that are
or may be adopted by persons mentioned in clauses (a) and
(b) of Section 2(2) that their relatives and associates
D
mentioned in clauses (c) and (d) of the said sub-section are
also brought within the purview of the Act. The fact of their
holding or possessing the properties of convict/detenu
furnishes the link between the convict/detenu and his
relatives and associates. Only the properties of the convict/
detenu are sought to be forfeited, wherever they are. The E
idea is to reach his properties in whosoever’s name they
are kept or by whosoever they are held. 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**. We may proceed
F
to explain what we say. Clause (c) speaks of a relative of a
person referred to in clause (a) or clause (b) (which speak
of a convict or a detenu). Similarly, clause (d) speaks of
associates of such convict or detenu. If we look to
**
That this was the object of the Act is evident from para 4 of the preamble which G
states: “And whereas such persons have in many cases been holding the properties
acquired by them through such gains in the names of their relatives, associates
and confidants.” We are not saying that the preamble can be utilised for
restricting the scope of the Act, we are only referring to it to ascertain the object
of the enactment and to reassure ourselves that the construction placed by us
accords with the said object.
(emphasis supplied) H
176 SUPREME COURT REPORTS [2021] 12 S.C.R.

A Explanation (3) which specifies who the associates referred
to in clause (d) are, the matter becomes clearer. ‘Associates’
means — (i) any individual who had been or is residing in the
residential premises (including outhouses) of such person [‘such
person’ refers to the convict or detenu, as the case may be,
referred to in clause (a) or clause (b)]; (ii) any individual who
B
had been or is managing the affairs or keeping the accounts of
such convict/detenu; (iii) any association of persons, body of
individuals, partnership firm or private company of which such
convict/detenu had been or is a member, partner or director; (iv)
any individual who had been or is a member, partner or director of
C an association of persons, body of individuals, partnership firm or
private company referred to in clause (iii) at any time when such
person had been or is a member, partner or director of such
association of persons, body of individuals, partnership firm or
private company; (v) any person who had been or is managing
the affairs or keeping the accounts of any association of persons,
D
body of individuals, partnership firm or private company referred
to in clause (iii); (vi) the trustee of any trust where (a) the trust
has been created by such convict/detenu; or (b) the value of the
assets contributed by such convict/detenu to the trust amounts,
on the date of contribution not less than 20% of the value of the
E assets of the trust on that date; and (vii) where the competent
authority, for reasons to be recorded in writing, considers that any
properties of such convict/detenu are held on his behalf by any
other person, such other person. It would thus be clear that the
connecting link or the nexus, as it may be called, is the holding of
property or assets of the convict/detenu or traceable to such detenu/
F
convict. Section 4 is equally relevant in this context. It
declares that “as from the commencement of this Act, it
shall not be lawful for any person to whom this Act applies
to hold any illegally acquired property either by himself or
through any other person on his behalf”. All such property
G is liable to be forfeited. The language of this section is
indicative of the ambit of the Act. Clauses (c) and (d) in
Section 2(2) and the Explanations (2) and (3) occurring
therein shall have to be construed and understood in the
light of the overall scheme and purpose of the enactment.
The idea is to forfeit the illegally acquired properties of the
H
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 177
v. V. MOHAN [A. M. KHANWILKAR, J.]

convict/detenu irrespective of the fact that such properties A
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
B
the convict/detenu or properties traceable to him, wherever
they are, ignoring all the transactions with respect to those
properties. By way of illustration, take a case where a
convict/detenu purchases a property in the name of his
relative or associate — it does not matter whether he
intends such a person to be a mere name-lender or whether C
he really intends that such person shall be the real owner
and/or possessor thereof — or gifts away or otherwise
transfers his properties in favour of any of his relatives or
associates, or purports to sell them to any of his relatives
or associates — in all such cases, all the said transactions
D
will be ignored and the properties forfeited unless the
convict/detenu or his relative/associate, as the case may
be, establishes that such property or properties are not
“illegally acquired properties” within the meaning of Section
3(c). In this view of the matter, there is no basis for the
apprehension that the independently acquired properties E
of such relatives and associates will also be forfeited even
if they are in no way connected with the convict/detenu. So
far as the holders (not being relatives and associates) mentioned
in Section 2(2)(e) are concerned, they are dealt with on a separate
footing. If such person proves that he is a transferee in good faith
F
for consideration, his property — even though purchased from a
convict/detenu — is not liable to be forfeited. It is equally
necessary to reiterate that the burden of establishing that
the properties mentioned in the show-cause notice issued
under Section 6, and which are held on that date by a relative
or an associate of the convict/detenu, are not the illegally G
acquired properties of the convict/detenu, lies upon such
relative/associate. He must establish that the said property
has not been acquired with the monies or assets provided
by the detenu/convict or that they in fact did not or do not
belong to such detenu/convict. We do not think that Parliament
H
178 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 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.
B
In this view of the matter, the apprehension and contention
of the petitioners in this behalf must be held to be based
upon a mistaken premise. The bringing in of the relatives and
associates or of the persons mentioned in clause (e) of Section
2(2) is thus neither discriminatory nor incompetent apart from the
C protection of Article 31-B.”
(emphasis supplied)
31. While examining the contention whether clauses (c) to (e) of
Section 2(2) is a case of overreach or overbreadth, it held that this
argument of excessive regulation was based on a misconception as the
D Act is only directed towards forfeiture of “illegally acquired properties
of the person falling under clause (a) or clause (b) of Section 2(2)”. The
relative and associates are brought in only to ensure that the ‘illegally
acquired properties’ of the convict or the detenu, acquired or kept in the
names of relatives or associates do not escape the net of the Act. There
E could be cases where the persons mentioned in clauses (a) and (b) could
transfer ‘illegally acquired properties’ to their relatives and associates
“and even further”, with the intent to transfer the ownership and title.
Therefore, it is immaterial how such relative or associate holds the illegally
acquired property of the convict/detenu – whether as a benami, or as a
mere name-lender or through transferee or in any other manner. The
F objective and purpose of the Act is to counteract devices that are or
may be adopted by persons mentioned in clauses (a) or (b) of Section
2(2), hence, their relatives or associates mentioned in clauses (c) or (d)
of the said sub-section are also brought within the purview of the Act.
The relatives or associates holding or possessing the illegally acquired
G property of the convict/detenu is the link between the convict/detenu.
The idea is to forfeit the properties of the convict/detenu wherever they
are, and to reach properties in whosoever’s name they are kept or held.
32. In the backdrop of the dictum of the Constitution Bench and
the subsequent decisions of this Court, we may hasten to add that pivot
H of the 1976 Act is to reach the “illegally acquired properties” of the
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 179
v. V. MOHAN [A. M. KHANWILKAR, J.]

specified convict/detenu in whosoever’s name they are kept or by A
whosoever they are held, whatever be the length of time.
33. Concededly, the dispensation under the 1976 Act applies only
to persons specified in Section 2(2)20.

20
2. Application.— (1) The provisions of this Act shall apply only to the persons B
specified in sub-section(2).
(2) The persons referred to in sub-section (1) are the following, namely:—
(a) every person—
(i) who has been convicted under the Sea Customs Act, 1878 (8 of 1878), or
the Customs Act, 1962 (52 of 1962), of an offence in relation to goods of a
value exceeding one lakh of rupees; or
(ii) who has been convicted under the Foreign Exchange Regulation Act, C
1947 (7 of 1947), or the Foreign Exchange Regulation Act, 1973 (46 of
1973), of an offence, the amount or value involved in which exceeds one
lakh of rupees; or
(iii) who having been convicted under the Sea Customs Act, 1878 (8 of
1878), or the Customs Act, 1962 (52 of 1962), has been convicted
subsequently under either of those Acts; or D
(iv) who having been convicted under the Foreign Exchange Regulation Act,
1947 (7 of 1947), or the Foreign Exchange Regulation Act, 1973 (46 of
1973), has been convicted subsequently under either of those Acts;
(b) every person in respect of whom an order of detention has been made under
the Conservation of Foreign Exchange and Prevention of Smuggling Activities
Act, 1974:
Provided that— E
(i) such order of detention, being an order to which the provisions of section
9 or section 12A of the said Act do not apply, has not been revoked on the
report of the Advisory Board under section 8 of the said Act or before the
receipt of the report of the Advisory Board or before making a reference to
the Advisory Board; or
(ii) such order of detention, being an order to which the provisions of
section 9 of the said Act apply, has not been revoked before the expiry of F
the time for, or on the basis of, the review under sub-section (3) of section
9, or on the report of the Advisory Board under section 8, read with sub-
section (2) of section 9, of the said Act; or
(iii) such order of detention, being an order to which the provisions of
section 12A of the said Act apply, has not been revoked before the expiry
of the time for, or on the basis of, the first review under sub-section (3) of
that section, or on the basis of the report of the Advisory Board under
G
section 8, read with sub-section (6) of section 12A, of that Act; or
(iv) such order of detention has not been set aside by a court of competent
jurisdiction;
(c) every person who is a relative of a person referred to in clause (a)or clause
(b);
(d) every associate of a person referred to in clause (a) or clause (b); H
180 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 34. Broadly stated, Section 2(2)(a) refers to the category of persons
who are convicted under the specified enactments. Whereas, Section
2(2)(b) refers to persons detained under the specified detention law.
The expression “person” to whom the 1976 Act applies, has been
broadened by including every person who is a relative of a person referred
to in clause (a) being convict under the specified laws or clause (b)
B
being detenu under the Conservation of Foreign Exchange and Prevention
of Smuggling Activities Act, 1974. The expression “relative” has been
further elaborated in Explanation 2, of Section 2, so as to expand the
scope of taking corrective measures for reaching up to the illegally
acquired properties of a convict or detenu, as the case may be.
C
(e) any holder (hereafter in this clause referred to as the present 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 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.
Explanation 1.— For the purposes of sub-clause (i) of clause (a), the value of any
D goods in relation to which a person has been convicted of an offence shall be the
wholesale price of the goods in the ordinary course of trade in India as on the date of the
commission of the offence.
Explanation 2.— For the purposes of clause (c), “relative” in relation to a person,
means—
(i) spouse of the person;
(ii) brother or sister of the person;
E (iii) brother or sister of the spouse of person;
(iv) any lineal ascendant or descendant of the person;
(v) any lineal ascendant or descendant of the spouse of the person;
(vi) spouse of a person referred to in clause (ii), clause (iii), clause (iv) or clause
(v);
(vii) any lineal descendant of a person referred to in clause (ii) or clause (iii).
F Explanation 3.—For the purposes of clause (d), “associate”, in relation to a person,
means—
(i) any individual who had been or is residing in the residential premises (including
out houses) of such person;
(ii) any individual who had been or is managing the affairs or keeping the
accounts of such person;
(iii) any association of persons, body of individuals, partnership firms, or
G private company within the meaning of the Companies Act, 1956, of which
such person had been or is a member, partner or director;
(iv) any individual who had been or is a member, partner or director of an
association of persons, body of individuals, partnership firm, or private
company referred to in clause (iii) at any time when such person had been or is
a member, partner or director of such association, body, partnership firm or
private company;
H
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 181
v. V. MOHAN [A. M. KHANWILKAR, J.]

35. As regards the respondents herein, it is obvious that they are A
covered under the ambit of relative — being son and wife of the brother
of the convict, to whom the 1976 Act applied.
36. Section 2(2)(d) further expands the sweep so as to include
associate of a convict or detenu, as the case may be; and Section 2(2)(e)
takes within its ambit any holder (the present holder) of any property, B
which was at any time previously held by a person referred to in clause
(a) or clause (b), namely, convict or detenu, as the case may be.
37. The objective and purpose of the enactment is reinforced in
the encircling Explanation 4 as reproduced hereinbefore. Obviously,
the intent is to ensure that the convict/detenu cannot get away by adopting C
camouflage or screening, including legal transfer of properties in the
name of his relative, associate or any other person covered under clause
(e) to Section 2(2) of the Act.
38. This expanded ambit of clauses (c) to (e) is to be interpreted
in the context of the object and purpose of the Act, but the scope of the D
Act does not extend to include every property held by a relative or an
associate unless the link and the connection with the illegal activities of
the convict/detenu is established. For, the Act is only directed to forfeiture
of ‘illegally acquired properties’ of a person falling under clause (a) or
clause (b) of Section 2(2) including their specified properties held by
third party. Independent properties of the relatives and friends which E

(v) any person who had been or is managing the affairs, or keeping the accounts,
of any association of persons, body of individuals, partnership firm or private
company referred to in clause (iii);.
(vi) the trustee of any trust, where,—
(a) the trust has been created by such person; or F
(b) the value of the assets contributed by such person (including the value
of the assets, if any, contributed by him earlier) to the trust amounts, on the
date on which the contribution is made, to not less than twenty per cent. of
the value of the assets of the trust on that date;
(vii) where the competent authority, for reasons to be recorded in writing
considers that any properties of such person are held on his behalf by any G
other person, such other person.
Explanation 4.— For the avoidance of doubt, it is hereby provided that the question
whether any person is a person to whom the provisions of this Act apply may be
determined with reference to any facts, circumstances or events (including any
conviction or detention) which occurred or took place before the commencement
of this Act.
(emphasis supplied) H
182 SUPREME COURT REPORTS [2021] 12 S.C.R.

A are not traceable to the illegal activities of the convict/detenu are neither
sought to be forfeited nor are they within the purview of the Act.
39. Section 3 is the definition clause. The expression “illegally
acquired property” has been expounded in clause (c) of sub-Section (1)
thereof21.
B The other relevant definition clause is expression “property” in
Section 3(1)(e)22.
40. As aforementioned, in Amratlal Prajivandas 23, whilst
interpreting the definition of “illegally acquired properties” in clause (c)
of Section 3(1) of the Act, it was held that the definition is very wide as
C
21
3. Definitions.— (1) In this Act, unless the context otherwise requires, (a) and
(b)….
c) “illegally acquired property”, in relation to any person to whom this Act applies,
means,—
(i) any property acquired by such person, whether before or after the commencement
D of this Act, wholly or partly out of or by means of any income, earnings or assets
derived or obtained from or attributable to any activity prohibited by or under any law
for the time being in force relating to any matter in respect of which Parliament has
power to make laws; or
(ii) any property acquired by such person, whether before or after the commencement
of this Act, wholly or partly out of or by means of any income, earnings or assets in
respect of which any such law has been contravened; or
E (iii) any property acquired by such person, whether before or after the commencement
of this Act, wholly or partly out of or by means of any income, earnings or assets the
source of which cannot be proved and which cannot be shown to be attributable to any
act or thing done in respect of any matter in relation to which Parliament has no power
to make laws; or
(iv) any property acquired by such person, whether before or after the commencement
of this Act, for a consideration, or by any means, wholly or partly traceable to any
F property referred to in sub-clauses (i) to (iii) or the income or earnings from such
property;
and includes—
(A) any property held by such person which would have been, in relation to any
previous holder thereof, illegally acquired property under this clause if such previous
holder had not ceased to hold it, unless such person or any other person who held the
property at any time after such previous holder or, where there are two or more such
G
previous holders, the last of such previous holders is or was a transferee in good faith
for adequate consideration;
(B) any property acquired by such person, whether before or after the commencement
of this Act, for a consideration, or by any means, wholly or partly traceable to any
property falling under item (A), or the income or earnings therefrom;
22
(e) “property” includes any interest in property, movable or immovable;
23
H Supra at Footnote No. 5
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 183
v. V. MOHAN [A. M. KHANWILKAR, J.]

to include not only the property acquired after the enactment of the Act A
but also property acquired before the Act, whatever be the length of
time, and further the illegal activity is not confined to the laws mentioned
in Section 2 of the Act but also other laws which the Parliament is
competent to make. At the same-time it is clarified that the definition of
‘illegally acquired properties’ does not include the properties of the
B
relatives or associates covered under clauses (c) and (d) of Section 2(2)
even if they have acquired the properties by illegal activities or in violation
of the laws made by the Parliament. For, the Act applies only to ‘illegally
acquired properties’ of the convict/detenu held by or in the name of the
relative or associate or holder.
C
41. While answering Question No.5, the Constitution Bench held:
“44...Section 4 is equally relevant in this context. It declares that
“as from the commencement of this Act, it shall not be lawful for
any person to whom this Act applies to hold any illegally acquired
property either by himself or through any other person on his
D
behalf”. All such property is liable to be forfeited. The language
of this section is indicative of the ambit of the Act. Clauses (c)
and (d) in Section 2(2) and the Explanations (2) and (3) occurring
therein shall have to be construed and understood in the light of
the overall scheme and purpose of the enactment. The idea is to
forfeit the illegally acquired properties of the convict/detenu E
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
F
of the convict/detenu or properties traceable to him, wherever
they are, ignoring all the transactions with respect to those
properties...”
On the issue of the applicability of the Act to holders mentioned in
Section 2(2)(e) of the Act, this Court held that they fall in a different
G
class from relatives and associates who are dealt with on a separate
footing. If a person covered under clause (e) to Section 2(2) proves that
he is a transferee in good faith without notice, for adequate consideration,
his property — even though purchased from a convict/detenu — is not
liable to be forfeited.
H
184 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 42. In the present judgment, it is not necessary for us to dilate on
the definition of “illegally acquired property” as the sole issue involved
is: whether it is mandatory to issue a primary notice under Section 6 of
the 1976 Act to the convict and not merely to the relatives of the convict
who hold the properties proposed to be forfeited? Nevertheless, it may
be useful to advert to Section 424 of the 1976 Act which prohibits holding
B
of illegally acquired property.
43. On the literal construction of this provision, it must follow that
it shall not be lawful for any person (as defined in Section 2(2) of the
1976 Act) to whom the Act applies to hold any illegally acquired property
(as defined in Section 3(1)(c) of the 1976 Act) either by himself or through
C any other person on his behalf. It is well settled that when penalty (such
as forfeiture of such property) is imposed by statute for the purpose of
preventing something from being done on some ground of public policy,
the thing prohibited, if done, will be treated as void, even though the
penalty if imposed is not enforceable. Such acts of commission and
D omission become void even without express declaration regarding its
voidness, because such penalty implies a prohibition25. Be it noted that
Section 4 of the Act posits a clear mandate that the person to whom the
Act applies shall not hold any illegally acquired property and there is a
corresponding duty on the Competent Authority to initiate process after
due inquiry under Section 18 of the 1976 Act for forfeiture of such
E property — whether acquired before the commencement of the Act or
thereafter.
44. That process has to be initiated by the Competent Authority
by issuing notice under Section 626 of the 1976 Act to such person who

F 24
4. Prohibition of holding illegally acquired property.— (1) As from the
commencement of this Act, it shall not be lawful for any person to whom this Act
applies to hold any illegally acquired property either by himself or through any other
person on his behalf.
(2) Where any person holds any illegally acquired property in contravention of the
provisions of sub-section (1), such property shall be liable to be forfeited to the
Central Government in accordance with the provisions of this Act.
G 25
see Mannalal Khetan & Ors. vs. Kedar Nath Khetan & Ors., (1977) 2 SCC 424
(paras 18 to 22) and Asha John Divianathan vs. Vikram Malhotra & Ors., 2021 SCC
OnLine SC 147
26
6. Notice of forfeiture.— (1) If, having regard to the value of the properties held by
any person to whom this Act applies, either by himself or through any other
person on his behalf, his known sources of income, earnings or assets, and any other
H information or material available to it as a result of action taken under section 18 or
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 185
v. V. MOHAN [A. M. KHANWILKAR, J.]

holds the properties proposed to be forfeited being illegally acquired A
properties. That person may hold the property either by himself or through
any other person on his behalf. If the property is held by person concerned,
the notice under Section 6(1) needs to be issued to such person to whom
the Act applies calling upon him to disclose the sources of his income,
earnings or assets out of which or by means of which he has acquired
B
such property, the evidence on which he relies and other relevant
information and particulars.
45. Before we proceed to analyse Section 6 of the 1976 Act, it
would be apposite to reproduce Section 1827 of the Act, which is referred
to in Section 6(1), being the preceding procedural steps to be taken by
the Competent Authority before issuing notice under Section 6(1), upon C
having reason to believe that the concerned properties are illegally acquired
properties held by the noticee, either by himself or through any other
person on his behalf.
otherwise, the competent authority has reason to believe (the reasons for such belief to
be recorded in writing) that all or any of such properties are illegally acquired properties, D
it may serve a notice upon such person (hereinafter referred to as the person
affected) calling upon him within such time as may be specified in the notice, which
shall not be ordinarily less than thirty days, to indicate the sources of his income,
earnings or assets, out of which or by means of which he has acquired such property,
the evidence on which he relies 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
E
under this Act.
(2) Where a notice under sub-section (1) to any person specifies any property as
being held on behalf of such person by any other person, a copy of the notice shall also
be served upon such other person.
(emphasis supplied)
27
18. Power of competent authority to require certain officers to exercise certain F
powers.— (1) For the purposes of any proceedings under this Act or the initiation of
any such proceedings, the competent authority shall have power to cause to be conducted
any inquiry, investigation or survey in respect of any person, place, property, assets,
documents, books of account or any other relevant matters.
(2) For the purposes referred to in sub-section (1), the competent authority may,
having regard to the nature of the inquiry, investigation or survey, require an officer of
the Income-tax Department to conduct or cause to be conducted such inquiry, G
investigation or survey.
(3) Any officer of the Income-tax Department who is conducting or is causing to be
conducted any inquiry, investigation or survey required to be conducted under sub-
section (2) may, for the purpose of such inquiry, investigation or survey, exercise any
power (including the power to authorise the exercise of any power) which may be
exercised by him for any purpose under the Income-tax Act, 1961 (43 of 1961), and the
provisions of the said Act shall, so far as may be, apply accordingly. H
186 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 46. At this stage, we may also refer to the other relevant provision
being Section 828 of the 1976 Act provisioning for burden of proving that
the property referred to in the notice is legally acquired property of the
noticee.
47. On plain as well as contextual reading of Section 6, it is crystal
B clear that the notice under Section 6(1) is required to be issued to any
person to whom the Act applies. As is evident from Section 2(2) of the
1976 Act, the Act applies not only to convict or detenu, but also to their
relative, associate including holder of any property being Section 2(2)(c),
2(2)(d) and 2(2)(e) respectively. The purpose of issuing notice is to enable
the person concerned (noticee) to discharge the burden of proof as
C propounded in Section 8 of the 1976 Act. It is then open to him to prove
that the property referred to in the notice is his legally acquired property.
48. In a given case, however, if the property is held by a person
owing to merely being in legal possession thereof, but the ownership of
the property at the relevant time is that of the convict or detenu or his/
D her relative, as the case may be, it would become necessary for the
Competent Authority to not only give notice to the person in possession
of the property in question but also to the person shown as owner thereof
in the relevant records. Similarly, in a case where the person shown as
owner in the relevant records had purchased the subject property from
E the convict or detenu and is a subsequent purchaser, notice is required to
be issued to both — the present owner and the erstwhile owner (convict
or detenu), as the case may be. However, if the ownership of the property
in the relevant records at the relevant time is that of the person in
possession (as in these cases), and not being the convict or detenu, the
question of issuing notice to the latter would serve no purpose. The
F convict or detenu cannot be heard to claim any right in such property
including proprietary rights and for the same reason, he is not expected
to discharge the burden of proof under Section 8 of the 1976 Act as to
whether it is his legally acquired property nor can he be said to be the
person affected with the proposed action of forfeiture as such.
G 49. The expression “held” in Section 6 has to be understood to
mean that the person is entitled to possession of property being owner of
the property in the relevant record or even because he is in legal possession
28
8. Burden of proof.— In any proceedings under this Act, the burden of proving that
any property specified in the notice served under section 6 is not illegally acquired
H property shall be on the person affected.
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 187
v. V. MOHAN [A. M. KHANWILKAR, J.]

thereof. In other words, a person may be holding the property also when A
he (at the relevant time) is in legal possession of the stated property,
even if he is not a recorded owner thereof. In either case, it would be a
matter within the ambit of expression “held” occurring in Section 6 of
the 1976 Act.
50. The third facet of Section 6(1) of the 1976 Act is the noticee B
may hold the property either by himself or through any other person on
his behalf. As noted earlier, a primary notice under Section 6(1) can be
issued only against person to whom the Act applies. If the relative of a
convict or detenu has acquired property from the illegal sources of
income, earnings or assets of the convict or detenu, such person would
be a person to whom the Act applies vide Section 2(2)(c) read with C
Explanation 2. Such person may be a recorded owner of the property
— having acquired it wholly or partly out of or by means of any income,
earnings or assets derived or obtained from or attributable to unlawful
activity (whether indulged into before or after the commencement of
the 1976 Act) of the convict or detenu which is prohibited by or under D
any law for the time being in force relating to any matter in respect of
which Parliament has power to make laws.
51. In other words, going by the definition of “illegally acquired
property” in Section 3(1)(c) and of “person” in Section 2(2) to whom
the Act applies, if the property is held in the name of the relative of the E
convict or detenu before or after the commencement of the Act, the
notice under Section 6(1) needs to be issued to such person (recorded
owner as well as in possession), who alone can and is expected to
discharge the burden of proof in terms of Section 8 of the 1976 Act —
so as to dissuade the Competent Authority from proceeding further
against such property. Indeed, if the illegally acquired property is held in F
the name of the relative, but the de facto possession thereof is with
some other person, who is not covered by the expression “person” as
given in Section 2(2), in such a case primary notice under Section 6 is
required to be issued to the relative of the convict or detenu and copy
thereof served upon “such other person” who is in de facto possession G
thereof (albeit for and on behalf of the relative of the convict or detenu).
Even in this situation, notice to the convict or detenu may not be necessary
much less mandatory. For, the 1976 Act applies even to the relative of
the convict or detenu holding illegally acquired property either by himself
or through any other person on his behalf.
H
188 SUPREME COURT REPORTS [2021] 12 S.C.R.

A 52. Learned counsel appearing for the parties had commended us
with the purport of Section 6(2) of the 1976 Act. Different interpretation
has been given by both sides to the expressions occurring therein. Section
6(2) merely refers to the requirement of issuing notice to “such other
person”.
B 53. The expression “such person” is found not only in Section
6(1), but in other provisions of the Act including the definition clause i.e.,
Section 3(1)(c) of illegally acquired property. The expression “such
person” and “such other person” occurring in Section 6(2) may have to
be understood in the context and the setting in which it has been employed
in the concerned provision. A harmonious construction thereof is
C imperative.
54. In the first part of Section 6(2), the expression used is “any
person”. That is a person to whom primary notice under Section 6(1) is
addressed. This person can be none other than person referred to in
Section 2(2) of the 1976 Act. He can be a convict or detenu, his relative
D or associate including the person who is a holder of the property in
question at the relevant time. Section 6(2) then refers to the subject
property in the notice and the factum of the property being held by
concerned person (such person) — either the primary noticee to whom
the Act applies himself or through “any other person” on his behalf. The
E latter is described as “such other person”, in the concluding part of that
sub-Section [Section 6(2)]. That, “such other person”, is also covered
within the ambit of expression “any other person” mentioned earlier and
holding the property in question on behalf of the primary noticee. In
other words, “such other person” will be a person other than a person to
whom the Act applies being merely a holder of illegally acquired property
F on behalf of the person to whom Act applies. Thus, he may be a person
other than a person referred to in Section 2(2) of the 1976 Act. The
legislative intent is to cover “such other person” so as to reach up to
“illegally acquired property” of the convict/detenu and unravel/lift the
veil created by the person to whom the Act applies. We may usefully
G recapitulate the enunciation of the Constitution Bench, wherein it is held
that the legislative intent is to reach to all illegally acquired properties in
whosoever’s name they are kept or by whosoever they are held
irrespective of the time period of such acquisition. This is to ensure that
the persons to whom the Act applies referred to in Section 2(2), do not
use mechanism to shield illegally acquired properties from the proposed
H action of forfeiture.
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 189
v. V. MOHAN [A. M. KHANWILKAR, J.]

55. Be it noted that the expression “such person” employed in A
Section 6(2) is referable to the primary noticee, who is a person to whom
the Act applies. If, however, the notice mentions that the properties
referred to in the notice are held by the noticee through any other person
on his behalf, that may be a case of holding of physical possession of the
illegally acquired property by person other than the person to whom the
B
Act applies. In such a case, sub-section (2) triggers in enabling the
Competent Authority to issue notice even to “such other person” — not
covered by the definition of Section 2(2) of the Act. If that person is
merely in possession of the property and not its owner, he may not be
able to explain or prove the fact that the property is not illegally acquired
property of the primary noticee. Indeed, if “such other person” is claiming C
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. Such a plea can be considered by
D
the Competent Authority on its own merits.
56. Section 4 of the Act, which in sub-section (1) uses similar
expression – “any person to whom this Act applies to hold any illegally
acquired property either by himself or through any other person on his
behalf” – which is similar to the wordings/expressions used in Section 6
of the Act, reinforces the above interpretation. E
57. Notice under Section 6(1) cannot be issued in respect of
properties for which the Competent Authority has no evidence or material
to record “reasons to believe” that the properties were acquired from
the assets or money provided by the convict/detenu. The expression
‘reasons to believe’ is a phrase used in several enactments and interpreted F
by this court to mean not ‘mere subjective satisfaction’ based on surmise
and conjecture, but a belief that is ‘honest and based upon reasonable
grounds’.29 The satisfaction should be based upon objective material
and not mere feeling or inkling.30 The requirement is deliberately legislated
as a check against frivolous and rowing inquiries based upon mere
suspicion and pretence.31 The reasons to believe to be valid should refer G
to facts that have a rational connection or relevant bearing to the formation
29
Tata Chemicals Ltd. v. Commissioner of Customs (Preventive), Jamnagar, (2015) 11
SCC 628
30
Kewal Krishan v. State of Punjab, AIR 1967 SC 737
31
Bar Council of Maharashtra v. M. V. Dabholkar & Ors., (1976) 2 SCC 291 H
190 SUPREME COURT REPORTS [2021] 12 S.C.R.

A of belief and should not be extraneous or irrelevant for the purpose32 of
initiation of inquiry under Section 6 of the Act.
58. Recording of the reasons to believe and satisfaction of the
aforesaid conditions is an important condition precedent – a sine qua
non – and its violation would have legal consequences. It is a jurisdictional
B requirement, which, unlike a procedural requirement, would affect the
proceedings if not complied with. Therefore, in such cases, the question
of no prejudice is unavailable as the provision for issue of notice and
satisfaction of the precondition for the issue of notice, i.e., “reasons to
believe”, is mandatory and not optional or directory.
59. G.P. Singh, in Principles of Statutory Interpretation, 14th
C Edition, at page 430, has laid down principles and rules for ascertaining
the mandatory or directory nature of provisions, and has noted that this
depends on the intent of the legislature and not necessarily on the language
that the intent is clothed in. The nature and design of the statute, the
effects which would follow from construing it one way or the other, and
D the severity or triviality of consequences that flow therefrom have to be
considered. At times, the courts examine whether the statute provides
for the contingency of non-compliance and whether non-compliance is
visited with some penalty etc., but this is not a necessary or sufficient
basis for determining whether the provision is mandatory or directory in
nature. Lastly, if a provision is mandatory, it must be obeyed and followed.
E This is especially so in case of jurisdictional requirements, i.e., pre-
conditions that have to be fulfilled before any action is taken.
60. In the context of the present enactment, it is unnecessary to
underscore that when a notice under Section 6 of the Act is issued, the
consequences entail forfeiture of property or fine in lieu of forfeiture as
F envisaged by Sections 7 and 9, respectively, of the Act. We have not
quoted Section 11, but the said provision postulates that transfer of
property referred to in a notice under Section 6 is null and void. Therefore,
transactions after issuance of notice under Section 6 or 10 (which applies
to the procedure in respect of certain trust properties) are void and are
to be ignored.
G 61. Section 833 of the Act predicates that when proceedings in
respect of a property are initiated by way of notice under Section 6, the
32
S. Narayanappa & Ors. v. Commissioner of Income-tax, Bangalore, AIR 1967 SC 523
33
8. Burden of proof. In any proceedings under this Act, the burden of proving that
any property specified in the notice served under section 6 is not illegally acquired
H property shall be on the person affected.
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 191
v. V. MOHAN [A. M. KHANWILKAR, J.]

burden of proving that the property is not illegally acquired shall be on A
the person affected. The enactment, therefore, reverses the burden of
proof but only after the notice under Section 6 has been validly issued.
By virtue of Section 6, the enactment requires the Competent Authority
to form reasons to believe, which must be rational and based upon some
material which would show that the conditions mentioned in Section
B
2(2) as explained and expounded by this Court in Amratlal Prajivandas34
are satisfied. Section 8 does not apply at the initial stage or when the
Competent Authority decides whether or not notice under Section 6 should
be issued. The Competent Authority cannot, simply by relying upon
Section 8, reverse the burden of recording of reasons to believe and
mechanically issue notice under Section 6. For, Section 8 does not apply C
at the stage when the Competent Authority forms and records its reasons
to issue notice.
62. Section 735 of the Act, which is titled ‘Forfeiture of property
in certain cases’, supports the above interpretation as it envisages that
the Competent Authority shall consider the explanation, if any, to the D
show-cause notice issued under Section 6 and the material before it.
After giving notice to the person affected, and in case the person affected
holds any property specified in the notice through any other person, then

34
Supra at Footnote No. 5 E
35
7. Forfeiture of property in certain cases. (1) The competent authority may, after
considering the explanation, if any, to the show- cause notice issued under section 6,
and the materials available before it and after giving to the person affected (and in a case
where the person affected holds any property specified in the notice through any other
person, to such other person also) a reasonable opportunity of being heard, by order,
record a finding whether all or any of the properties in question are illegally acquired
properties. F
(2) Where the competent authority is satisfied that some of the properties referred to
in the show-cause notice are illegally acquired properties but is not able to identify
specifically such properties then, it shall be lawful for the competent authority to
specify the properties which, to the best of its judgment, are illegally acquired properties
and record a finding accordingly under sub-section (1).
(3) 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,
G
subject to the provisions of this Act, stand forfeited to the Central Government free
from all encumbrances.
(4) where any shares in a company stand forfeited to the Central Government under
this Act, then, the company shall, notwithstanding anything contained in the Companies
Act, 1956 (1 of 1956), or the articles of association of the company, forthwith register
the Central Government as the transferee of such shares. H
192 SUPREME COURT REPORTS [2021] 12 S.C.R.

A to such other person, a reasonable opportunity of being heard would be
afforded to them. Thereafter, the Competent Authority may pass an
order, recording findings whether or not the listed properties are illegally
acquired properties.
63. In Kesar Devi36, this Court held that the language of Section
B 6(1) does not indicate any requirement of mentioning any link or nexus
between the convict or the detenu and the property ostensibly standing
in the name of the person covered under clauses (c), (d) and (e) to
Section 2(2) and also referred to Section 8 which incorporates reverse
burden of proof. However, the said observations must be read in light of
the Constitution Bench judgment in the case of Amratlal Prajivandas37,
C which is the authoritative and binding precedent. Indeed, Kesar Devi’s38
judgment observes that in some cases where the relationship is close
and direct, an inference can easily be drawn and no link or nexus has to
be indicated and may itself indicate some link or nexus, which can be
duly taken notice of and the reasons to believe can be recorded in writing.
D That, however, may depend on facts of the case and not be true in all
cases.
64. A priori, we are of the considered opinion that Section 6(1) of
the 1976 Act nowhere provides that it is “mandatory” to serve the convict
or detenu with a primary notice under that provision whilst initiating action
E against the relative of the convict. Indubitably, if the illegally acquired
property is held by a person in his name and is also in possession thereof,
being the relative of the convict and who is also a person to whom the
Act applies, there is no need to issue notice to the convict or detenu
much less primary notice as held by the High Court in the impugned
judgment. For, Section 6(1) posits that notice must be given to the person
F who is holding the tainted property and is likely to be affected by the
proposed forfeiture of the property. The person immediately and directly
to be affected is the person who is the recorded owner of the property
and in possession thereof himself or through some other person on his
behalf. In the latter case, the burden of proof under Section 8 is not to be
G discharged by the convict or detenu, but by the person who holds the
illegally acquired property either by himself or through any other person
on his behalf.

36
Supra at Footnote No. 6
37
Supra at Footnote No. 5
H 38
Supra at Footnote No. 6
THE INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM 193
v. V. MOHAN [A. M. KHANWILKAR, J.]

65. The expression “such other person” in Section 6(2) is, thus, A
referable to a person falling in class “through any other person on his
behalf”. That is the person to whom the Act applies, as noted in the
opening part of Section 6(1) of the Act. In such a case, the convict or
detenu is not expected to nor can be called upon to discharge the burden
of proof under Section 8. Accordingly, we may lean in favour of the
B
view taken by the High Court of Kerala and Calcutta High Court
reproduced above, for independent reasons delineated hitherto. The view
taken by the Madras High Court in the impugned judgment, therefore,
does not commend to us and is reversed.
66. The parties had invited our attention to other judgments of this
Court. However, those judgments have not dealt with the question that C
arise for consideration in the present appeals.
67. Having said this, we need to set aside the impugned judgment
and relegate the parties before the High Court by restoring the writ
petitions to the file to its original number for being heard afresh on all
other issues and contentions as may be available to both sides including D
the argument that there is an inordinate, undue and unexplained delay in
initiating the action against the respondents (writ petitioners) and as a
result of which it would be iniquitous to call upon the respondents to
offer explanation by reopening the adjudication of the entire proceedings.
We do not wish to dilate on any other plea in these appeals. Further, we E
may not be understood to have expressed any opinion either way on any
other contention available to the parties. We say so because even the
impugned judgment makes it amply clear that the writ petitions filed by
the respondents were being allowed on the sole ground that the action
against the respondents sans primary notice to the convict is vitiated.
That view having been reversed, the matter needs to go back before the F
High Court for consideration of all other aspects on its own merits.
68. During the course of the hearing, an issue arose whether the
convict, i.e., V.P. Selvarajan had expired before the issuance of notice
under Section 6 on 19th January 1994. The counsel, at the time of
argument, were not aware of the factual position. However, in the written G
submissions, the appellant and the respondents have accepted that the
convict V.P. Selvarajan had expired before impugned notices under
Section 6 dated 19th January 1994 were issued.
69. Be that as it may, in the present case, the properties in question
and subject matter of notice under Section 6 are in the name of and held H
194 SUPREME COURT REPORTS [2021] 12 S.C.R.

A by the two respondents. No entitlement or right has been claimed in
these properties by the heirs of the deceased convict V. P. Selvarajan. If
the properties were in the name of the deceased detenu or convict, then
different considerations may have applied. In the context of the present
case as the convict V.P. Selvarajan had expired before the issuance of
notice under Section 6 on 19th January 1994, therefore, the need and
B
requirement to serve notice on him would not arise.
70. Accordingly, these appeals succeed. The common impugned
judgment and order dated 24.3.2008 passed by the Madras High Court
in Writ Petition Nos.1149 and 1150 of 2001 is set aside. Instead, the writ
petitions are restored to the file to its original number for being considered
C afresh on its own merits in accordance with law on all other issues and
contentions available to both sides except the question answered in this
judgment. Thus, all other contentions available to both parties are left
open. We request the High Court to expeditiously dispose of the remanded
writ petitions. No order as to costs.
D Pending applications, if any, stand disposed of.

Nidhi Jain Appeals allowed.

E

F

G

H