1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 8592 8593 OF 2010 INCOME TAX OFFICER, CIRCLE I (2), KUMBAKONAM & ANR. APPELLANTS VERSUS V. MOHAN & ANR. RESPONDENTS JUDGMENT A.M. KHANWILKAR, J. 1. conundrum in these appeals is: when Competent Authority claims that subject property (to be forfeited) is that of convict (V.P. Selvarajan) and ostensibly held by relatives of convict (respondents herein), whether it is mandatory to serve primary notice under Section 6(1) of 1976 Act upon such convict with copy thereof to his relatives under Section 6(2) of Signature Not Verified Digitally signed by NEETU KHAJURIA Date: 2021.12.14 14:34:06 IST Reason: under Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (for short, 1976 Act ) 2 1976 Act, and non service of such primary notice upon convict would vitiate entire proceedings initiated only against his relatives? 2. High Court of Judicature at Madras vide impugned judgment held that Section 6 of 1976 Act leaves no room for doubt that primary notice must be served on convict, wherein convict is required to indicate sources of his income, earnings or assets, out of which or by means of which he had acquired properties sought to be forfeited; and non service of such notice upon convict would vitiate action initiated against his relatives, even if forfeited properties are ostensibly held by or in name of relatives. High Court rejected argument of appellants herein (Competent Authority) that only person in whose name property is held is required to be called upon to offer explanation regarding sources of his income, earnings or assets, out of which or by means of which he had acquired such property including evidence on which he for short, Madras High Court in Writ Petition Nos. 1149 & 1150 of 2001 decided on 24.3.2008 reported in 2008 SCC OnLine Mad 244 3 would rely and other relevant information and particulars. If property in question is ostensibly held by relatives in his name or through any other person on his behalf, convict or detenu is not expected to nor can offer any explanation in that regard. High Court also rejected argument of appellants herein that no prejudice is likely to be caused to noticees (respondents herein) being relatives of convict, who had held forfeited properties in their name. High Court opined that action against respondents initiated by Competent Authority was vitiated for lack of notice to convict and it was, thus, pleased to set aside entire action initiated against respondents by Competent Authority. 3. contra view has been taken by at least two other High Courts. first is of High Court of Kerala in Sajitha & Ors. vs. Competent Authority & Ors. wherein after analysing relevant provisions, it held as follows: 11. Section 2(c) refers to every person who is relative of person referred to in clause (a) or clause (b). Section 2(e) refers to any holder of any property which was at 2005 SCC OnLine Ker 101 4 any time previously held by 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 property does not stand in name of detenu. So far as this case is concerned, property stands in name of wife and brothers. Admittedly notices have been issued to them as contemplated under Section 6(1). We are of view, non issue of notice to detenu will not vitiate proceedings as against their relatives. 12. Petitioners also have raised contention that more than six years have elapsed and proceedings have not been initiated within reasonable period. No time limit has been prescribed under Act. Apex Court in Attorney General for India v. Amratlal Prajivandas has dealt with scope and ambit of Act which requires no reiteration. However we may refer to recent decision of apex court in Kesar Devi v. Union of India . apex court while dealing with Section 2(2)(c) of Act has categorically held that burden of proving that such property is not illegally acquired property will be upon person to whom notice has been issued. On facts petitioners could not establish that properties were legally acquired. Competent authority and Tribunal concurrently found so and this court in writ jurisdiction will not be justified in taking different view in absence of any contra evidence. We therefore find no infirmity in orders passed by competent authority. writ petition lacks merits and same would stand dismissed. (emphasis supplied) (1994) 5 SCC 54 : AIR 1994 SC 2179 (2003) 7 SCC 427 5 second decision is of Calcutta High Court in Competent Authority & Administrator & Anr. vs. Manilal Jalal & Anr. . Even in this case, notice was issued only to wife of detenu and not to detenu. question was specifically dealt with by Calcutta High Court after analysing relevant provisions in following words: .. bare perusal of Section 2 of Act would show that Act not only applies to detenu but also to relations and/or associates of such detenu. Nowhere said provision of law mandates that proceeding against relative of detenu can be initiated only if such detenu is proceeded against under SAFEMA. Such right to proceed against relative/associate is independent of any action taken against detenu under SAFEMA. It is wholly fallacious to argue that detenu must be proceeded against under SAFEMA as condition precedent for any action against relative of such detenu. properties and/or assets which were sought to be forfeited were standing in name of Sarbani Devi Jalan herself and therefore respondent authorities rightly issued notice under Section 6 of Act upon her as person affected for purpose of initiating proceeding of forfeiture of such property. There is nothing in law that property standing in name of relation of detenu which is sought to be proceeded against must require notice to be issued upon detenu 2013 SCC OnLine Cal 12911 6 also. To infer such requirement when same is not provided in law would amount to rewriting statutory provision which is unwarranted. This submission of appellants being unfounded must therefore fail. .. (emphasis supplied) 4. In view of above, these appeals not only involve question regarding interpretation of Section 6 read with other provisions of 1976 Act, but also call upon us to expound stated question authoritatively and resolve conflicting view taken by different High Courts. 5. Reverting to facts of present case, one V.P. Selvarajan (convict) brother in law of respondent No.2 and paternal uncle of respondent No.1, was convicted for offence punishable under Customs Act, 1962 on 23.11.1969. As result of his conviction, he came within ambit of expression person or such person occurring in 1976 Act Section 2 in particular. Respondents being relatives of convict in terms of Section 2(2) read with Explanation 2 also came within ambit of for short, 1962 Act 7 expression person defined in 1976 Act to whom Act applies. 6. 1976 Act came into force with effect from 5.11.1975, pursuant to which Competent Authority under Act resorted to inquiry, investigation or survey under Section 18 of Act and on basis of information collated had reason to believe that certain properties are illegally acquired properties having nexus to unlawful activities of convict. As result, notice under Section 6(1) of 1976 Act was issued to convict on 2.2.1980. In present appeals, we are not concerned with said notice or for that matter illegally acquired properties of convict referred to therein. 7. Competent Authority, however, on basis of information gathered had reason to believe that some of properties were held by respondents herein by themselves, which were illegally acquired properties within meaning of Section 3(1)(c) of 1976 Act. Accordingly, notice under Section 6(1) of 1976 Act dated 19.1.1994 was issued to V. Mohan, respondent No.1 herein being nephew of convict, calling upon 8 him to disclose sources of his income, earnings or assets, out of which or by means of which he had acquired properties referred to in stated notice by himself. description of properties had been given in Schedule, which reads thus: SCHEDULE S. No. Description of Property Name of present holder of property 1 2 3 1. Investment in firm M/s V.P.V. Jewellery Mart, Kumbakonam 2. Investment in Proprietary Concern M/s V.P.V. Gold Palace Kumbakonam 3. Residential Property in form of house being land and building at No.113, Sarangapani East Street, Kumbakonam 4. Agricultural Lands 1 Acre & 8 cents at south pattam, Paganasam Taluk 1 Acre & 75 Cents at Thepperumal nallur village. 8. Similarly, notice dated 28.2.1994 was issued to Smt. V. Padmavathy, respondent No.2 herein being relative of convict in respect of properties referred to in said notice purportedly illegally acquired properties. Schedule reads thus: SCHEDULE S. No. Description of Property Name of 9 present holder of property 1 2 3 1. Residential house which includes land V. Padmavathy and building at No.123. Big Street, Kumbakonam. 2. Agricultural lands at Thepprumalnallur do Village at Kumbakonam as specified below. 3. Investment in firm of M/s V.P.V. do Prema Jewellery, Kumbakonam. 4. Jewellery disclosed under Voluntary do Disclosure Scheme (i.e.) 518 gms of gold and 28 ets. of diamond. 9. Competent Authority after giving opportunity to 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 1976 Act. It held that order of forfeiture of stated properties had become inevitable as respondent(s) had failed to produce any credible evidence or explanation to discharge burden of proving that properties referred to in impugned notice were legally acquired properties by them. 10 10. Being aggrieved, respondents took 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 Appellate Tribunal for Forfeited Property, New Delhi II, Camp: Bangalore . These appeals came to be dismissed by Appellate Tribunal vide common order dated 15.11.2000. Resultantly, order of forfeiture of subject properties passed by Competent Authority was upheld. 11. respondents then carried matter before Madras 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 Division Bench of Madras High Court taking view that action initiated against respondents had vitiated owing to lack of notice to V.P. Selvarajan (convict), which in its view was mandatory requirement under Section 6 of 1976 Act. for short, Appellate Tribunal 11 12. appellants, being aggrieved by said decision, have approached this Court by way of present appeals. According to appellants, view taken by Madras High Court vide impugned judgment on interpretation of Section 6 of 1976 Act is untenable. Whereas, issue has been rightly concluded in favour of 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 Act is required to be given to person to whom 1976 Act applies in respect of properties held by him, either by himself or through any other person on his behalf, being illegally acquired property within meaning of Act and proposed to be forfeited by Central Government under Act. It does not require issuing notice to convict or detenu, as case may be, if properties are not held by him or in his name. Indeed, if properties in question are held in name of any other person on his behalf, notice is required to be given to such person. To buttress this submission, reliance has been placed on Section 2 of Act providing for application of Act to persons specified in 12 Section 2(2). spouse of brother of convict as well as son of brother of convict are plainly covered within expression relative as clarified in Explanation 2 of Section 2 of 1976 Act and for which reason, Act applies to respondents as well. Emphasis is placed on expression held occurring in Section 6 of 1976 Act in particular which in terms of definition in P. Ramanatha Aiyar s Major Law Lexicon would cover (i) those entitled to possession of property; and (ii) those in possession thereof. 14. It is urged that respondents were admittedly holding properties in their name and thus, they were entitled to possession of such property and in fact they were in physical possession thereof. Therefore, they alone were expected to offer explanation and discharge burden of proving that properties are their legally acquired properties. They were, in fact, persons directly affected by proposed action of forfeiture and, hence, notice under Section 6 was required to be issued to respondents alone. There is no mandate in Section 6 that primary notice be 4th Edition, Vol. 3 at pages 3050 51 13 served on convict to require him to indicate his sources of income as noted by Madras High Court. More so, convict is not expected to offer explanation with regard to properties held by his relatives and not by him. 15. As regards purport of Section 6(2) of 1976 Act, it is urged that plain and literal interpretation does not mandate issuing notice to convict even if property proposed to be forfeited is not held by him at relevant time. It is different matter that convict can also be issued notice, but it is not mandatory requirement when properties proposed to be forfeited were held by relatives of convict at relevant time when action is initiated. 16. appellants have placed reliance on decisions of High Court of Kerala and Calcutta High Court referred to earlier. In addition, reliance has also been placed on dictum of Constitution Bench of this Court in Amratlal Prajivandas , which has decoded intent of legislation and all relevant provisions while rejecting argument regarding constitutional validity of Supra at Footnote No. 5 14 enactment. It held that burden of establishing that properties mentioned in Section 6 notice held on that date by relative or associate of convict or detenu are not illegally acquired properties, lies upon such relative or associate. Further, Act is intended to frustrate all attempts at screening properties irrespective of how relatives/associates hold property (whether benami or as name lender or through transferee) and wherein said relative/associate cannot disclose that properties have not been acquired with monies or assets belonging to detenu/convict, but failure to discharge burden would justify their forfeiture there being prohibition on any person to whom Act applies from holding illegally acquired properties. 17. Reliance has also been placed on dictum in Shobha Suresh Jumani vs. Appellate Tribunal, Forfeited Property & Anr. , wherein show cause notice under Section 6 was issued to detenu Suresh Manoharlal Jumani and his wife Shobha Suresh Jumani. Right to file appeal by Shobha Suresh Jumani (2001) 5 SCC 755 15 was questioned by competent authority. Nevertheless, this Court upheld action initiated against relative (wife) of detenu as properties were held by her. It is submitted that impugned judgment be set aside and contra view taken by High Court of Kerala and Calcutta High Court be affirmed. 18. Per contra, learned counsel for respondents has supported view taken by Madras High Court in impugned judgment and would urge that appellants had all throughout proceeded against respondents on assumption that respondents are only ostensible owners and properties in question, in fact, belonged to convict. Further, respondents were holding subject properties on behalf of convict. In that context, Madras High Court examined purport of Section 6 and interplay of two sub sections therein to conclude that primary notice to convict was mandatory requirement, in such fact situation. Now, in present appeals, appellants have taken completely different position, namely, that respondents are, in fact, recorded owners of 16 subject properties and, therefore, no notice is required to be given to convict. 19. respondents have invited our attention to definition of persons and Explanation 2 in Section 2 of 1976 Act. It is also urged that properties referred to in impugned notices issued to respondents were not made subject matter of notice under Section 6 issued to convict on 2.2.1980. In other words, no notice had ever been given to convict in respect of properties referred to in impugned notices issued to respondents as being his illegally acquired properties held through other person on his behalf. 20. As matter of fact, it is urged by respondents that Section 6(1) posits that when notice is issued to relative, it is imperative upon Department to allege and establish nexus between properties of relative sought to be forfeited and convict or detenu. In that, forfeited properties must be traceable to illegal sources of income, earnings or assets of convict or detenu. personal properties of relative or associate of 17 convict or detenu having no connection with convict or detenu, cannot be made subject matter of forfeiture under 1976 Act as held in Amratlal Prajivandas ; Kesar Devi ; Fatima Mohd. Amin (Dead) through LRs. vs. Union of India & Anr. ; and Aslam Mohammad Merchant vs. Competent Authority & Ors. . 21. It is then urged that subject properties cannot be forfeited without substantiating link or nexus between properties of relatives with activity of convict or detenu and more so when relatives are not his immediate relatives such as parents or children or spouse. For lack of nexus between properties sought to be forfeited being that of convict, statutory presumption is not attracted; and it must follow that Section 8 requiring burden of proof to be discharged by noticee being relative of convict, would not come into play. Moreover, notice contains bald unreasoned averment that properties in question were acquired during time when convict was supra at Footnote No. 5 (para 44) supra at Footnote No. 6 (paras 11 and 12) (2003) 7 SCC 436 (paras 7 to 9) (2008) 14 SCC 186 (para 45) 18 engaged in gold smuggling, only inescapable conclusion is that said properties were acquired by funds of such convict. As matter of fact, respondents had furnished copious materials before Authorities to establish that properties in question are, in fact, personal properties purchased by them out of their business earnings, gifts, etc. plea so taken by respondents has been completely discarded. 22. It is urged that neither Competent Authority nor Appellate Tribunal took into account that no reasons have been recorded on basis of which it was believed that properties of respondents were illegally acquired. Relying on dictum in Nazir Ahmad vs. Emperor and Chandra Kishore Jha vs. Mahavir Prasad & Ors. , it is urged that when statute provides something to be done in particular manner it ought to be done in that manner alone and in no other manner. Whereas, Competent Authority failed to record proper reasons to believe as stipulated in Section 6 of 1976 Act. AIR 1936 PC 253 (1999) 8 SCC 266 19 23. It is then contended that on account of inordinate and undue delay, proceedings suffer from vice of arbitrariness and irrationality. In that, convict was convicted on 23.11.1969 for offence punishable under 1962 Act. properties in question belonging to respondents were acquired between 1959 till 1980. Whereas, impugned notices were issued on 19.1.1994 and 28.2.1994. Further, as aforesaid, stated properties have not been referred to in criminal proceedings against convict nor in notice issued to him on 2.2.1980. No explanation has been offered or forthcoming from Competent Authority about delay in issuing notice after 25 years, calling upon respondents to explain and account for sources of funds from which properties in question have been acquired by them. This is not only unjustified, but also impractical and not meet test of reasonable period of time. Now, further period of 25 years has lapsed. Thus, to reopen and re adjudicate entire proceedings afresh at this distance of time would not only be iniquitous, but also result in serious irreparable harm and injury to respondents and persons claiming through them. 20 24. It is urged that this Court may lean in favour of closure of proceedings inasmuch as even appellants succeed, parties may have to be relegated to High Court for consideration of all other aspects raised by respondents in writ petitions and not dealt with by High Court being of view that initiation of action against respondents without primary notice to convict vitiated entire proceedings. As matter of fact, High Court in paragraph 21 of impugned judgment had left it open to Authorities to initiate fresh proceedings in accordance with law, which appellants have not chosen to initiate despite 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 appellants and Mr. Atul Shankar Vinod, learned counsel for respondents. 26. Before we proceed to examine different viewpoints in reference to provisions of 1976 Act, it is essential to notice 21 legislative intent for enacting 1976 Act. That can be discerned from Preamble of Act and also exhaustively dealt with by nine Judges Constitution Bench of this Court, in Amratlal Prajivandas . 27. Preamble of 1976 Act reads thus: Act to provide for forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto. WHEREAS for effective prevention of smuggling activities and foreign exchange manipulations which are having deleterious effect on 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 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 properties acquired by them through such gains in names of their relatives, associates and confidants; (emphasis supplied) 28. This Court dealt with legislative intent in extenso. It also analysed relevant provisions of 1976 Act which would Supra at Footnote No. 5 22 reinforce legislative intent. While dealing with definition of illegally acquired properties (re: question No.4 in paragraph 43), it had noticed that stated expression is quite expansive. It not only takes within its ambit property acquired after Act, but also property acquired before Act, whatever be length of time . Secondly, it takes in property which may have been acquired partly from out of illegal activity in which case, of course, provision of Section 9 would be attracted. Further, illegal activity is not confined to violation of laws mentioned in Section 2 of 1976 Act but all laws which Parliament has power to make, such as if smuggler has acquired some properties by evading tax laws or by committing theft, robbery, dacoity, misappropriation or any other illegal activity prohibited by Indian Penal Code or any other law in force. All that would be liable to be forfeited. 29. Constitution Bench negatived challenge to expansive definition of expression illegally acquired property on grounds of unreasonableness, arbitrariness or for that matter 23 on any of grounds relatable to Part III of Constitution as not being available. Constitution Bench then noted as follows: Question No.4 43. ..We can take note of fact that persons engaged in smuggling and foreign exchange manipulations do not keep regular and proper accounts with respect to such activity or its income or of assets acquired therefrom. If such person indulges in other illegal activity, position would be no different. violation of foreign exchange laws and laws relating to export and import necessarily involves violation of tax laws. Indeed, it is well known fact that over last few decades, smuggling, foreign exchange violations, tax evasion, drugs and crime have all got mixed up. Evasion of taxes is integral to such activity. It would be difficult for any authority to say, in absence of any accounts or other relevant material that among properties acquired by smuggler, which of them or which portions of them are attributable to smuggling and foreign exchange violations and which properties or which portions thereof are attributable to violation of other laws (which Parliament has power to make). It is probably for this reason that burden of proving that properties specified in show cause notice are not illegally acquired properties is placed upon person concerned. May be this is case where dangerous disease requires radical treatment. Bitter medicine is not bad medicine. In law it is not possible to say that definition is arbitrary or is couched in unreasonably wide terms. Further, in view of clear and unambiguous language employed in clause (c) of Section 3, it is not possible or permissible to resort to device of reading down. said device is usually resorted to save provision from being declared unconstitutional, incompetent and ultra vires. We are, therefore, of opinion that neither constitutional validity of said definition can be 24 questioned nor is there any warrant for reading down clear and unambiguous words in clause. So far as justification of such 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 cost of people and State. State is deprived of its legitimate revenue to that extent. These properties must justly go back where they belong to State. .. (emphasis supplied) 30. After having said that while dealing with ambit of Section 2(2) of Act, Court observed thus: Question No. 5 44. It is contended by counsel for petitioners that extending provisions of SAFEMA to relatives, associates and other holders is again case of overreaching or of over breadth, as it may be called case of excessive regulation. It is submitted that relatives or associates of 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 detenu or convict, as case may be. It is pointed out that definition of relative in Explanation (2) and of associates in Explanation (3) are so wide as to bring in person even distantly related or associated with convict/detenu, within net of SAFEMA, and once he comes within net, all his illegally acquired properties can be forfeited under Act. In our opinion, said contention is based upon misconception. SAFEMA is directed towards forfeiture of illegally acquired properties of person falling under clause (a) or clause (b) of Section 2(2). relatives and associates are brought in only for purpose of ensuring that illegally acquired properties of convict or 25 detenu, acquired or kept in their names, do not escape net of Act. It is well known fact that persons indulging in illegal activities screen properties acquired from such illegal activity in names of their relatives and associates. Sometimes they transfer such properties to them, may be, with intent to transfer ownership and title. In fact, it is immaterial how such relative or associate holds properties of convict/detenu whether as benami or as mere name lender or as bona fide transferee for value or in any other manner. He cannot claim those properties and must surrender them to State under Act. Since he is relative or associate, as defined by Act, he cannot put forward any defence once it is proved that that property was acquired by detenu whether in his own name or in name of his relatives and associates. It is to counteract 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 mentioned in clauses (c) and (d) of said sub section are also brought within purview of Act. fact of their holding or possessing properties of convict/detenu furnishes link between convict/detenu and his relatives and associates. Only properties of convict/detenu are sought to be forfeited, wherever they are. idea is to reach his properties in whosoever's name they are kept or by whosoever they are held. independent properties of relatives and friends, which are not traceable to convict/detenu, are not sought to be forfeited nor are they within purview of SAFEMA . We may proceed to explain That this was object of Act is evident from para 4 of preamble which states: And whereas such persons have in many cases been holding properties acquired by them through such gains in names of their relatives, associates and confidants. We are not saying that preamble can be utilised for restricting scope of Act, we are only referring to it to ascertain object of enactment and to reassure ourselves that construction placed by us accords with 26 what we say. Clause (c) speaks of relative of person referred to in clause (a) or clause (b) (which speak of convict or detenu). Similarly, clause (d) speaks of associates of such convict or detenu. If we look to Explanation (3) which specifies who associates referred to in clause (d) are, matter becomes clearer. Associates means (i) any individual who had been or is residing in residential premises (including outhouses) of such person [ such person refers to convict or detenu, as case may be, referred to in clause (a) or clause (b)]; (ii) any individual who had been or is managing affairs or keeping 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 member, partner or director; (iv) any individual who had been or is member, partner or director of 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 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 affairs or keeping accounts of any association of persons, body of individuals, partnership firm or private company referred to in clause (iii); (vi) trustee of any trust where (a) trust has been created by such convict/detenu; or (b) value of assets contributed by such convict/detenu to trust amounts, on date of contribution not less than 20% of value of assets of trust on that date; and (vii) where 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 connecting link or nexus, as it may be called, is holding of property or assets of convict/detenu or traceable to such detenu/convict. Section 4 is equally relevant in this context. It declares that as from commencement of this Act, it shall not be lawful for any person to whom this Act applies to said object. (emphasis supplied) 27 hold any illegally acquired property either by himself or through any other person on his behalf . All such property is liable to be forfeited. language of this section is indicative of ambit of Act. Clauses (c) and (d) in Section 2(2) and Explanations (2) and (3) occurring therein shall have to be construed and understood in light of overall scheme and purpose of enactment. idea is to forfeit illegally acquired properties of convict/detenu irrespective of fact that such properties are held by or kept in name of or screened in name of any relative or associate as defined in said two Explanations. idea is not to forfeit independent properties of such relatives or associates which they may have acquired illegally but only to reach properties of convict/detenu or properties traceable to him, wherever they are, ignoring all transactions with respect to those properties. By way of illustration, take case where convict/detenu purchases property in name of his relative or associate it does not matter whether he intends such person to be mere name lender or whether he really intends that such person shall be 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 said transactions will be ignored and properties forfeited unless convict/detenu or his relative/associate, as case may be, establishes that such property or properties are not illegally acquired properties within meaning of Section 3(c). In this view of matter, there is no basis for apprehension that independently acquired properties of such relatives and associates will also be forfeited even if they are in no way connected with convict/detenu. So far as holders (not being relatives and associates) mentioned in Section 2(2) (e) are concerned, they are dealt with on separate footing. If such person proves that he is transferee in 28 good faith for consideration, his property even though purchased from convict/detenu is not liable to be forfeited. It is equally necessary to reiterate that burden of establishing that properties mentioned in show cause notice issued under Section 6, and which are held on that date by relative or associate of convict/detenu, are not illegally acquired properties of convict/detenu, lies upon such relative/associate. He must establish that said property has not been acquired with monies or assets provided by detenu/convict or that they in fact did not or do not belong to such detenu/convict. We do not think that Parliament ever intended to say that properties of all relatives and associates, may be illegally acquired, will be forfeited just because they happen to be relatives or associates of convict/detenu. There ought to be connecting link between those properties and convict/detenu, burden of disproving which, as mentioned above, is upon relative/associate. In this view of matter, apprehension and contention of petitioners in this behalf must be held to be based upon mistaken premise. bringing in of relatives and associates or of persons mentioned in clause (e) of Section 2(2) is thus neither discriminatory nor incompetent apart from protection of Article 31 B. (emphasis supplied) 31. While examining contention whether clauses (c) to (e) of Section 2(2) is case of overreach or overbreadth, it held that this argument of excessive regulation was based on misconception as Act is only directed towards forfeiture of illegally acquired properties of person falling under clause (a) or clause (b) of Section 2(2) . relative and associates are brought in only to 29 ensure that illegally acquired properties of convict or detenu, acquired or kept in names of relatives or associates do not escape net of Act. There could be cases where persons mentioned in clauses (a) and (b) could transfer illegally acquired properties to their relatives and associates and even further , with intent to transfer ownership and title. Therefore, it is immaterial how such relative or associate holds illegally acquired property of convict/detenu whether as benami, or as mere name lender or through transferee or in any other manner. objective and purpose of 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 said sub section are also brought within purview of Act. relatives or associates holding or possessing illegally acquired property of convict/detenu is link between convict/detenu. idea is to forfeit properties of convict/detenu wherever they are, and to reach properties in whosoever s name they are kept or held. 30 32. In backdrop of dictum of Constitution Bench and subsequent decisions of this Court, we may hasten to add that pivot of 1976 Act is to reach illegally acquired properties of specified convict/detenu in whosoever s name they are kept or by whosoever they are held, whatever be length of time. 33. Concededly, dispensation under 1976 Act applies only to persons specified in Section 2(2) . 2. Application. (1) provisions of this Act shall apply only to persons specified in sub section (2). (2) persons referred to in sub section (1) are following, namely: (a) every person (i) who has been convicted under Sea Customs Act, 1878 (8 of 1878), or Customs Act, 1962 (52 of 1962), of offence in relation to goods of value exceeding one lakh of rupees; or (ii) who has been convicted under Foreign Exchange Regulation Act, 1947 (7 of 1947), or Foreign Exchange Regulation Act, 1973 (46 of 1973), of offence, amount or value involved in which exceeds one lakh of rupees; or (iii) who having been convicted under Sea Customs Act, 1878 (8 of 1878), or Customs Act, 1962 (52 of 1962), has been convicted subsequently under either of those Acts; or (iv) who having been convicted under Foreign Exchange Regulation Act, 1947 (7 of 1947), or Foreign Exchange Regulation Act, 1973 (46 of 1973), has been convicted subsequently under either of those Acts; (b) every person in respect of whom order of detention has been made under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974: 31 34. Broadly stated, Section 2(2)(a) refers to category of persons who are convicted under specified enactments. Whereas, Section 2(2)(b) refers to persons detained under specified detention law. expression person to whom 1976 Provided that (i) such order of detention, being order to which provisions of section 9 or section 12A of said Act do not apply, has not been revoked on report of Advisory Board under section 8 of said Act or before receipt of report of Advisory Board or before making reference to Advisory Board; or (ii) such order of detention, being order to which provisions of section 9 of said Act apply, has not been revoked before expiry of time for, or on basis of, review under sub section (3) of section 9, or on report of Advisory Board under section 8, read with sub section (2) of section 9, of said Act; or (iii) such order of detention, being order to which provisions of section 12A of said Act apply, has not been revoked before expiry of time for, or on basis of, first review under sub section (3) of that section, or on basis of report of Advisory Board under 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 court of competent jurisdiction; (c) every person who is relative of person referred to in clause (a) or clause (b); (d) every associate of person referred to in clause (a) or clause (b); (e) any holder (hereafter in this clause referred to as present holder) of any property which was at any time previously held by person referred to in clause (a) or clause (b) unless present holder or, as case may be, 32 Act applies, has been broadened by including every person who is relative of person referred to in clause (a) being convict under specified laws or clause (b) being detenu under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, any one who held such property after such person and before present holder, is or was transferee in good faith for adequate consideration. Explanation 1. For purposes of sub clause (i) of clause (a), value of any goods in relation to which person has been convicted of offence shall be wholesale price of goods in ordinary course of trade in India as on date of commission of offence. Explanation 2. For purposes of clause (c), "relative" in relation to person, means (i) spouse of person; (ii) brother or sister of person; (iii) brother or sister of spouse of person; (iv) any lineal ascendant or descendant of person; (v) any lineal ascendant or descendant of spouse of person; (vi) spouse of person referred to in clause (ii), clause (iii), clause (iv) or clause (v); (vii) any lineal descendant of person referred to in clause (ii) or clause (iii). Explanation 3. For purposes of clause (d), "associate", in relation to person, means (i) any individual who had been or is residing in residential premises (including out houses) of such person; (ii) any individual who had been or is managing affairs or keeping accounts of such person; (iii) any association of persons, body of individuals, partnership firms, or private company within meaning of Companies Act, 1956, of which such person had been or is member, partner or director; 33 1974. expression relative has been further elaborated in Explanation 2, of Section 2, so as to expand scope of taking corrective measures for reaching up to illegally acquired properties of convict or detenu, as case may be. (iv) any individual who had been or is member, partner or director of 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 member, partner or director of such association, body, partnership firm or private company; (v) any person who had been or is managing affairs, or keeping accounts, of any association of persons, body of individuals, partnership firm or private company referred to in clause (iii); (vi) trustee of any trust, where, (a) trust has been created by such person; or (b) value of assets contributed by such person (including value of assets, if any, contributed by him earlier) to trust amounts, on date on which contribution is made, to not less than twenty per cent. of value of assets of trust on that date; (vii) where competent authority, for reasons to be recorded in writing considers that any properties of such person are held on his behalf by any other person, such other person. Explanation 4. For avoidance of doubt, it is hereby provided that question whether any person is person to whom 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 commencement of this Act. (emphasis supplied) 34 35. As regards respondents herein, it is obvious that they are covered under ambit of relative being son and wife of brother of convict, to whom 1976 Act applied. 36. Section 2(2)(d) further expands sweep so as to include associate of convict or detenu, as 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 person referred to in clause (a) or clause (b), namely, convict or detenu, as case may be. 37. objective and purpose of enactment is reinforced in encircling Explanation 4 as reproduced hereinbefore. Obviously, intent is to ensure that convict/detenu cannot get away by adopting camouflage or screening, including legal transfer of properties in name of his relative, associate or any other person covered under clause (e) to Section 2(2) of Act. 38. This expanded ambit of clauses (c) to (e) is to be interpreted in context of object and purpose of Act, but scope of Act does not extend to include every property held by relative 35 or associate unless link and connection with illegal activities of convict/detenu is established. For, Act is only directed to forfeiture of illegally acquired properties of person falling under clause (a) or clause (b) of Section 2(2) including their specified properties held by third party. Independent properties of relatives and friends which are not traceable to illegal activities of convict/detenu are neither sought to be forfeited nor are they within purview of Act. 39. Section 3 is definition clause. expression illegally acquired property has been expounded in clause (c) of sub Section (1) thereof . 3. Definitions. (1) In this Act, unless 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 commencement 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 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 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 36 other relevant definition clause is expression property in Section 3(1)(e) . 40. As aforementioned, in Amratlal Prajivandas , whilst interpreting definition of illegally acquired properties in clause (c) of Section 3(1) of Act, it was held that definition is very wide as to include not only property acquired after (iii) any property acquired by such person, whether before or after commencement of this Act, wholly or partly out of or by means of any income, earnings or assets 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 commencement of this Act, for consideration, or by any means, wholly or partly traceable to any property referred to in sub clauses (i) to (iii) or 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 property at any time after such previous holder or, where there are two or more such previous holders, last of such previous holders is or was transferee in good faith for adequate consideration; (B) any property acquired by such person, whether before or after commencement of this Act, for consideration, or by any means, wholly or partly traceable to any property falling under item (A), or income or earnings therefrom; (e) "property" includes any interest in property, movable or immovable; Supra at Footnote No. 5 37 enactment of Act but also property acquired before Act, whatever be length of time, and further illegal activity is not confined to laws mentioned in Section 2 of Act but also other laws which Parliament is competent to make. At same time it is clarified that definition of illegally acquired properties does not include properties of relatives or associates covered under clauses (c) and (d) of Section 2(2) even if they have acquired properties by illegal activities or in violation of laws made by Parliament. For, Act applies only to illegally acquired properties of convict/detenu held by or in name of relative or associate or holder. 41. While answering Question No.5, Constitution Bench held: 44...Section 4 is equally relevant in this context. It declares that as from 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 is liable to be forfeited. language of this section is indicative of ambit of Act. Clauses (c) and (d) in Section 2(2) and Explanations (2) and (3) occurring therein shall have to be construed and understood in light of overall scheme and purpose of enactment. idea is to forfeit illegally acquired properties of convict/detenu irrespective of fact that such properties are held by or kept in name of or screened in name of any 38 relative or associate as defined in said two Explanations. idea is not to forfeit independent properties of such relatives or associates which they may have acquired illegally but only to reach properties of convict/detenu or properties traceable to him, wherever they are, ignoring all transactions with respect to those properties... On issue of applicability of Act to holders mentioned in Section 2(2)(e) of Act, this Court held that they fall in different class from relatives and associates who are dealt with on separate footing. If person covered under clause (e) to Section 2(2) proves that he is transferee in good faith without notice, for adequate consideration, his property even though purchased from convict/detenu is not liable to be forfeited. 42. In present judgment, it is not necessary for us to dilate on definition of illegally acquired property as sole issue involved is: whether it is mandatory to issue primary notice under Section 6 of 1976 Act to convict and not merely to relatives of convict who hold properties proposed to be 39 forfeited? Nevertheless, it may be useful to advert to Section 4 of 1976 Act which prohibits holding of illegally acquired property. 43. On literal construction of this provision, it must follow that it shall not be lawful for any person (as defined in Section 2(2) of 1976 Act) to whom Act applies to hold any illegally acquired property (as defined in Section 3(1)(c) of 1976 Act) either by himself or through any other person on his behalf. It is well settled that when penalty (such as forfeiture of such property) is imposed by statute for purpose of preventing something from being done on some ground of public policy, thing prohibited, if done, will be treated as void, even though penalty if imposed is not enforceable. Such acts of commission and omission become void even without express declaration regarding its voidness, because such penalty implies prohibition . Be it noted that 4. Prohibition of holding illegally acquired property. (1) As from 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 provisions of sub section (1), such property shall be liable to be forfeited to Central Government in accordance with provisions of this Act. 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., 40 Section 4 of Act posits clear mandate that person to whom Act applies shall not hold any illegally acquired property and there is corresponding duty on Competent Authority to initiate process after due inquiry under Section 18 of 1976 Act for forfeiture of such property whether acquired before commencement of Act or thereafter. 44. That process has to be initiated by Competent Authority by issuing notice under Section 6 of 1976 Act to such person who holds properties proposed to be forfeited being illegally 2021 SCC OnLine SC 147 6. Notice of forfeiture. (1) If, having regard to value of 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 information or material available to it as result of action taken under section 18 or otherwise, 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, it may serve notice upon such person (hereinafter referred to as person affected) calling upon him within such time as may be specified in notice, which shall not be ordinarily less than thirty days, to indicate sources of his income, earnings or assets, out of which or by means of which he has acquired such property, evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties, as case may be, should not be declared to be illegally acquired properties and forfeited to Central Government under this Act. (2) Where notice under sub section (1) to any person specifies any property as being held on behalf of such person by any other person, copy of notice shall also be served upon such other person. (emphasis supplied) 41 acquired properties. That person may hold property either by himself or through any other person on his behalf. If property is held by person concerned, notice under Section 6(1) needs to be issued to such person to whom Act applies calling upon him to disclose sources of his income, earnings or assets out of which or by means of which he has acquired such property, evidence on which he relies and other relevant information and particulars. 45. Before we proceed to analyse Section 6 of 1976 Act, it would be apposite to reproduce Section 18 of Act, which is referred to in Section 6(1), being preceding procedural steps to 18. Power of competent authority to require certain officers to exercise certain powers. (1) For purposes of any proceedings under this Act or initiation of any such proceedings, 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 purposes referred to in sub section (1), competent authority may, having regard to nature of inquiry, investigation or survey, require officer of Income tax Department to conduct or cause to be conducted such inquiry, investigation or survey. (3) Any officer of 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 purpose of such inquiry, investigation or survey, exercise any power (including power to authorise exercise of any power) which may be exercised by him for any purpose under Income tax Act, 1961 (43 of 1961), and provisions of said Act shall, so far as may be, apply accordingly. 42 be taken by Competent Authority before issuing notice under Section 6(1), upon having reason to believe that concerned properties are illegally acquired properties held by noticee, either by himself or through any other person on his behalf. 46. At this stage, we may also refer to other relevant provision being Section 8 of 1976 Act provisioning for burden of proving that property referred to in notice is legally acquired property of noticee. 47. On plain as well as contextual reading of Section 6, it is crystal clear that notice under Section 6(1) is required to be issued to any person to whom Act applies. As is evident from Section 2(2) of 1976 Act, 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. purpose of issuing notice is to enable person concerned (noticee) to discharge burden of proof as propounded in Section 8. Burden of proof. In any proceedings under this Act, burden of proving that any property specified in notice served under section 6 is not illegally acquired property shall be on person affected. 43 8 of 1976 Act. It is then open to him to prove that property referred to in notice is his legally acquired property. 48. In given case, however, if property is held by person owing to merely being in legal possession thereof, but ownership of property at relevant time is that of convict or detenu or his/her relative, as case may be, it would become necessary for Competent Authority to not only give notice to person in possession of property in question but also to person shown as owner thereof in relevant records. Similarly, in case where person shown as owner in relevant records had purchased subject property from convict or detenu and is subsequent purchaser, notice is required to be issued to both present owner and erstwhile owner (convict or detenu), as case may be. However, if ownership of property in relevant records at relevant time is that of person in possession (as in these cases), and not being convict or detenu, question of issuing notice to latter would serve no purpose. convict or detenu cannot be heard to claim any right in such property including proprietary rights and for same reason, he is 44 not expected to discharge burden of proof under Section 8 of 1976 Act as to whether it is his legally acquired property nor can he be said to be person affected with proposed action of forfeiture as such. 49. expression held in Section 6 has to be understood to mean that person is entitled to possession of property being owner of property in relevant record or even because he is in legal possession thereof. In other words, person may be holding property also when he (at relevant time) is in legal possession of stated property, even if he is not recorded owner thereof. In either case, it would be matter within ambit of expression held occurring in Section 6 of 1976 Act. 50. third facet of Section 6(1) of 1976 Act is noticee may hold property either by himself or through any other person on his behalf. As noted earlier, primary notice under Section 6(1) can be issued only against person to whom Act applies. If relative of convict or detenu has acquired property from illegal sources of income, earnings or assets of convict 45 or detenu, such person would be person to whom Act applies vide Section 2(2)(c) read with Explanation 2. Such person may be recorded owner of 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 commencement of 1976 Act) of convict or detenu which is prohibited by or under any law for time being in force relating to any matter in respect of which Parliament has power to make laws. 51. In other words, going by definition of illegally acquired property in Section 3(1)(c) and of person in Section 2(2) to whom Act applies, if property is held in name of relative of convict or detenu before or after commencement of Act, 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 burden of proof in terms of Section 8 of 1976 Act so as to dissuade Competent Authority from proceeding further against such property. Indeed, if illegally acquired property is held in name of relative, but de 46 facto possession thereof is with some other person, who is not covered by expression person as given in Section 2(2), in such case primary notice under Section 6 is required to be issued to relative of convict or detenu and copy thereof served upon such other person who is in de facto possession thereof (albeit for and on behalf of relative of convict or detenu). Even in this situation, notice to convict or detenu may not be necessary much less mandatory. For, 1976 Act applies even to relative of convict or detenu holding illegally acquired property either by himself or through any other person on his behalf. 52. Learned counsel appearing for parties had commended us with purport of Section 6(2) of 1976 Act. Different interpretation has been given by both sides to expressions occurring therein. Section 6(2) merely refers to requirement of issuing notice to such other person . 53. expression such person is found not only in Section 6(1), but in other provisions of Act including definition clause i.e., Section 3(1)(c) of illegally acquired property. 47 expression such person and such other person occurring in Section 6(2) may have to be understood in context and setting in which it has been employed in concerned provision. harmonious construction thereof is imperative. 54. In first part of Section 6(2), expression used is any person . That is 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 1976 Act. He can be convict or detenu, his relative or associate including person who is holder of property in question at relevant time. Section 6(2) then refers to subject property in notice and factum of property being held by concerned person (such person) either primary noticee to whom Act applies himself or through any other person on his behalf. latter is described as such other person , in concluding part of that sub Section [Section 6(2)]. That, such other person , is also covered within ambit of expression any other person mentioned earlier and holding property in question on behalf of primary noticee. In other words, such other person will be person other than 48 person to whom Act applies being merely holder of illegally acquired property on behalf of person to whom Act applies. Thus, he may be person other than person referred to in Section 2(2) of 1976 Act. legislative intent is to cover such other person so as to reach up to illegally acquired property of convict/detenu and unravel/lift veil created by person to whom Act applies. We may usefully recapitulate enunciation of Constitution Bench, wherein it is held that 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 time period of such acquisition. This is to ensure that persons to whom Act applies referred to in Section 2(2), do not use mechanism to shield illegally acquired properties from proposed action of forfeiture. 55. Be it noted that expression such person employed in Section 6(2) is referable to primary noticee, who is person to whom Act applies. If, however, notice mentions that properties referred to in notice are held by noticee through any other person on his behalf, that may be case of holding of 49 physical possession of illegally acquired property by person other than person to whom Act applies. In such case, sub section (2) triggers in enabling Competent Authority to issue notice even to such other person not covered by definition of Section 2(2) of Act. If that person is merely in possession of property and not its owner, he may not be able to explain or prove fact that property is not illegally acquired property of primary noticee. Indeed, if such other person is claiming ownership of property through relative of 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 Competent Authority that he is purchaser in good faith for adequate consideration of stated property. Such plea can be considered by Competent Authority on its own merits. 56. Section 4 of Act, which in sub section (1) uses similar expression any person to whom this Act applies to hold any 50 illegally acquired property either by himself or through any other person on his behalf which is similar to wordings/expressions used in Section 6 of Act, reinforces above interpretation. 57. Notice under Section 6(1) cannot be issued in respect of properties for which Competent Authority has no evidence or material to record reasons to believe that properties were acquired from assets or money provided by convict/detenu. expression reasons to believe is phrase used in several enactments and interpreted by this court to mean not mere subjective satisfaction based on surmise and conjecture, but belief that is honest and based upon reasonable grounds . satisfaction should be based upon objective material and not mere feeling or inkling. requirement is deliberately legislated as check against frivolous and rowing inquiries based upon mere suspicion and pretence. reasons to believe to be valid should refer to facts that have rational connection or relevant bearing to Tata Chemicals Ltd. v. Commissioner of Customs (Preventive), Jamnagar, (2015) 11 SCC 628 Kewal Krishan v. State of Punjab, AIR 1967 SC 737 Bar Council of Maharashtra v. M. V. Dabholkar & Ors., (1976) 2 SCC 291 51 formation of belief and should not be extraneous or irrelevant for purpose of initiation of inquiry under Section 6 of Act. 58. Recording of reasons to believe and satisfaction of aforesaid conditions is important condition precedent sine qua non and its violation would have legal consequences. It is jurisdictional requirement, which, unlike procedural requirement, would affect proceedings if not complied with. Therefore, in such cases, question of no prejudice is unavailable as provision for issue of notice and satisfaction of precondition for 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 Edition, at page 430, has laid down principles and rules for ascertaining mandatory or directory nature of provisions, and has noted that this depends on intent of legislature and not necessarily on language that intent is clothed in. nature and design of statute, effects which would follow S. Narayanappa & Ors. v. Commissioner of Income tax, Bangalore, AIR 1967 SC 523 52 from construing it one way or other, and severity or triviality of consequences that flow therefrom have to be considered. At times, courts examine whether statute provides for contingency of non compliance and whether non compliance is visited with some penalty etc., but this is not necessary or sufficient basis for determining whether provision is mandatory or directory in nature. Lastly, if provision is mandatory, it must be obeyed and followed. 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 context of present enactment, it is unnecessary to underscore that when notice under Section 6 of Act is issued, consequences entail forfeiture of property or fine in lieu of forfeiture as envisaged by Sections 7 and 9, respectively, of Act. We have not quoted Section 11, but said provision postulates that transfer of property referred to in notice under Section 6 is null and void. Therefore, transactions after issuance of notice under Section 6 or 10 (which applies to procedure in respect of certain trust properties) are void and are to be ignored. 53 61. Section 8 of Act predicates that when proceedings in respect of property are initiated by way of notice under Section 6, burden of proving that property is not illegally acquired shall be on person affected. enactment, therefore, reverses burden of proof but only after notice under Section 6 has been validly issued. By virtue of Section 6, enactment requires Competent Authority to form reasons to believe, which must be rational and based upon some material which would show that conditions mentioned in Section 2(2) as explained and expounded by this Court in Amratlal Prajivandas are satisfied. Section 8 does not apply at initial stage or when Competent Authority decides whether or not notice under Section 6 should be issued. Competent Authority cannot, simply by relying upon Section 8, reverse burden of recording of reasons to believe and mechanically issue notice under Section 6. For, Section 8 does not apply at stage when Competent Authority forms and records its reasons to issue notice. 8. Burden of proof. In any proceedings under this Act, burden of proving that any property specified in notice served under section 6 is not illegally acquired property shall be on person affected. Supra at Footnote No. 5 54 62. Section 7 of Act, which is titled Forfeiture of property in certain cases , supports above interpretation as it envisages that Competent Authority shall consider explanation, if any, to show cause notice issued under Section 6 and material before it. After giving notice to person affected, and in case person affected holds any property specified in notice through any other person, then to such other person, reasonable opportunity of being heard would be afforded to them. Thereafter, Competent Authority may pass order, recording findings 7. Forfeiture of property in certain cases. (1) competent authority may, after considering explanation, if any, to show cause notice issued under section 6, and materials available before it and after giving to person affected (and in case where person affected holds any property specified in notice through any other person, to such other person also) reasonable opportunity of being heard, by order, record finding whether all or any of properties in question are illegally acquired properties. (2) Where competent authority is satisfied that some of properties referred to in show cause notice are illegally acquired properties but is not able to identify specifically such properties then, it shall be lawful for competent authority to specify properties which, to best of its judgment, are illegally acquired properties and record finding accordingly under sub section (1). (3) Where competent authority records finding under this section to effect that any property is illegally acquired property, it shall declare that such property shall, subject to provisions of this Act, stand forfeited to Central Government free from all encumbrances. (4) where any shares in company stand forfeited to Central Government under this Act, then, company shall, notwithstanding anything contained in Companies Act, 1956 (1 of 1956), or articles of association of company, forthwith register Central Government as transferee of such shares. 55 whether or not listed properties are illegally acquired properties. 63. In Kesar Devi , this Court held that language of Section 6(1) does not indicate any requirement of mentioning any link or nexus between convict or detenu and property ostensibly standing in name of 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, said observations must be read in light of Constitution Bench judgment in case of Amratlal Prajivandas , which is authoritative and binding precedent. Indeed, Kesar Devi s judgment observes that in some cases where relationship is close and direct, 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 reasons to believe can be recorded in writing. That, however, may depend on facts of case and not be true in all cases. Supra at Footnote No. 6 Supra at Footnote No. 5 Supra at Footnote No. 6 56 64. priori, we are of considered opinion that Section 6(1) of 1976 Act nowhere provides that it is mandatory to serve convict or detenu with primary notice under that provision whilst initiating action against relative of convict. Indubitably, if illegally acquired property is held by person in his name and is also in possession thereof, being relative of convict and who is also person to whom Act applies, there is no need to issue notice to convict or detenu much less primary notice as held by High Court in impugned judgment. For, Section 6(1) posits that notice must be given to person who is holding tainted property and is likely to be affected by proposed forfeiture of property. person immediately and directly to be affected is person who is recorded owner of property and in possession thereof himself or through some other person on his behalf. In latter case, burden of proof under Section 8 is not to be discharged by convict or detenu, but by person who holds illegally acquired property either by himself or through any other person on his behalf. 57 65. expression such other person in Section 6(2) is, thus, referable to person falling in class through any other person on his behalf . That is person to whom Act applies, as noted in opening part of Section 6(1) of Act. In such case, convict or detenu is not expected to nor can be called upon to discharge burden of proof under Section 8. Accordingly, we may lean in favour of view taken by High Court of Kerala and Calcutta High Court reproduced above, for independent reasons delineated hitherto. view taken by Madras High Court in impugned judgment, therefore, does not commend to us and is reversed. 66. parties had invited our attention to other judgments of this Court. However, those judgments have not dealt with question that arise for consideration in present appeals. 67. Having said this, we need to set aside impugned judgment and relegate parties before High Court by restoring writ petitions to file to its original number for being heard afresh on all other issues and contentions as may be available to both sides 58 including argument that there is inordinate, undue and unexplained delay in initiating action against respondents (writ petitioners) and as result of which it would be iniquitous to call upon respondents to offer explanation by reopening adjudication of entire proceedings. We do not wish to dilate on any other plea in these appeals. Further, we may not be understood to have expressed any opinion either way on any other contention available to parties. We say so because even impugned judgment makes it amply clear that writ petitions filed by respondents were being allowed on sole ground that action against respondents sans primary notice to convict is vitiated. That view having been reversed, matter needs to go back before High Court for consideration of all other aspects on its own merits. 68. During course of hearing, issue arose whether convict, i.e., V.P. Selvarajan had expired before issuance of notice under Section 6 on 19 th January 1994. counsel, at time of argument, were not aware of factual position. However, in written submissions, appellant and respondents 59 have accepted that convict V.P. Selvarajan had expired before impugned notices under Section 6 dated 19 th January 1994 were issued. 69. Be that as it may, in present case, properties in question and subject matter of notice under Section 6 are in name of and held by two respondents. No entitlement or right has been claimed in these properties by heirs of deceased convict V. P. Selvarajan. If properties were in name of deceased detenu or convict, then different considerations may have applied. In context of present case as convict V.P. Selvarajan had expired before issuance of notice under Section 6 on 19th January 1994, therefore, need and requirement to serve notice on him would not arise. 70. Accordingly, these appeals succeed. common impugned judgment and order dated 24.3.2008 passed by Madras High Court in Writ Petition Nos.1149 and 1150 of 2001 is set aside. Instead, writ petitions are restored to file to its original number for being considered afresh on its own merits in 60 accordance with law on all other issues and contentions available to both sides except question answered in this judgment. Thus, all other contentions available to both parties are left open. We request High Court to expeditiously dispose of remanded writ petitions. No order as to costs. Pending applications, if any, stand disposed of. .. J. (A.M. Khanwilkar) J. (Sanjiv Khanna) New Delhi; December 14, 2021. Income-tax Officer, Circle I(2), Kumbakonam & Anr. v. V. Mohan & Anr