SAFEMA- Smugglers And Foreign Exchange Manipulators Act

                                                                [Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976]

                                                                                                              [SAFEMA, 1976]

1. Competent Authority Under SAFEMA, 1976- The powers and competence of the Competent Authority under the SAFEMA, 1976; Where such order is challenged and what are the potential grounds of challenge: A detailed legal analysis in the light of the bare legal provisions as contained in the Act, particularly S-5 of the SAFEMA, 1976, and the Judgments of the Supreme Court of India and the Judgments of High Courts of the Indian States.

Governing Legislations

Bare Legal Provisions, As Contained In The SAFEMA, 1976

1. S-5- Competent Authority-

Competent Authority

S-5- Competent Authority

The Smugglers And Foreign Exchange Manipulators ( Forfeiture Of Property) Act, 1976 came into force on 25th January ,1976. This act is promulgated by the Parliament of India to provide provisions .regarding the forfeiture of illegally acquired property of strugglers . This act is formulated for the prevention of smuggling activities along with the foreign exchange manipulation which have a adverse effect on our national economy of our country.

                                                                                                COMPETENT AUTHORITY UNDER SAFEMA

Under the Smugglers and Foreign Exchange Manupulators Act, 1976, in Section 3(1)(b) the term Competent Authority is defined as, "competent authority" means an officer of the Central Government authorised by it under sub- section (1) of section 5 to perform the functions of a competent authority under this Act.

Under Section 5 it is provided as,

Competent authority.

(1) The Central Government may, by order published in the Official Gazette, authorise as many officers of the Central Government (not below the rank of a Joint Secretary to the Government), as it thinks fit, to Perform the functions of the competent authority under this Act.

(2) The competent authorities shall perform their functions in respect of such persons or classes of persons as the Central Government may, by order, direct.

In others word competent authority is the officer of the central government appointed by the central government to perform the function of competent authority under this act and it should be published in the official Gazette.

                                                                                              Power and Function of Competent Authority

These are the following powers which can be derived under this act:-

1. Section 15 (Competent authority and Appellate Tribunal to have powers of civilcourt)

The competent authority and the Appellate Tribunal shall have all the powers of a civil court while trying a suit under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely:-

(a) summoning and enforcing the attendance of any person an examining him on oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits;

(d) requisitioning any public record or copy thereof from any court or office;

(e) issuing commissions for examination of witnesses or documents;

(f) any other matter which may be prescribed.

2. Sectioin 18:-

Power of competent authority to require certain officers to exercisecertain 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, 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.

3. Section 19

Power to take possession.

(1) Where any property has been declared to be forfeited to the Central Government under this Act, or where the person affected has failed to pay the fine due under sub- section (1) of section 9 within the time allowed therefor under sub- section (3) of that section, the competent authority may order the person affected as well as any other person who may be in possession of the property to surrender or deliver possession thereof to the competent authority or to any person duly authorised by it in this behalf within thirty days of the service of the order.

(2) If any person refuses or fails to comply with an order made under sub-section (1), the competent authority may take possession of the property and may for that purpose use such force as may be necessary.

(3) Notwithstanding anything contained in sub-section (2), the competent authority may, for the purpose of taking possession of any property referred to in sub-section (1), requisition the service of any police officer to assist the competent authority and it shall be the duty of such officer to comply with such requisition.

                                                                                                WHERE SUCH ORDER IS CHALLENGED

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.

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 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 a clandestine manner;

AND WHEREAS such persons have in many cases been holding the pro- perties acquired by them through such gains in the names of their relatives, associates and confidants.

                                                                                                                          CASE LAWS

Madras High Court

R.Ramakrishnan vs The Appellate Tribunal For ... on 8 April, 2011

In these writ petitions the interpretation and the application of the provisions of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act 1976 (SAFEMA; the Act) and the effect of the orders passed under the Act are in question. The writ petitioners are the relatives of the detenue/convict and the challenge is to the orders of forfeiture passed under SAFEMA in respect of properties standing in the name of the petitioners.

SAFEMA was enacted to provide for the forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators and for matters connected therewith or incidental thereto. In the statement of objects and reasons of the Act it has been stated that in many cases persons engaged in smuggling activities and foreign exchange manipulation have been holding properties acquired through ill-gotten wealth in the name of their relatives, associates and confidants and as these activities posed a serious threat to economy and as one of the steps taken by the Government for cleansing the social fabric and resuscitating the national economy it became necessary to assume powers to deprive such persons of their illegally acquired properties so as to effectively prevent the smuggling and other clandestine operations. For the purpose of the present cases the following provisions of the Act would be relevant.

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.

(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 judgement, are illegally acquired properties and record a finding accordingly under sub-section.

(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, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances.

Power of competent authority to require certain officers to exercise certain powers.

(1) For the purposes of any proceeding 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, 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.

24. Act to have overriding effect.The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

5. In terms of Section 2(2), the provisions of the SAFEMA applies to every person who is a relative of a person referred to in clause a or clause b of Section 2(2) and the explanation No.2 has been widely couched to bring in all persons closely related to the detenue/convict within the ambit of relativeas mentioned in clause (c) of Section 2(2). Section 3(1)(c) exhaustively defines the term illegally acquired property. In terms of the Section 4, it shall not be lawful for any person to whom the act applies to hold any illegally acquired properties either by himself or through any other person on his behalf and if he holds any illegally acquired propertyin contravention of Section 4 such property shall be liable to be forfeited to the Central Government in accordance with the provisions of the Act. Section 6 deals with the notice of forfeiture, which is the subject matter of interpretation in these writ petitions and in the latter part of the judgment the same will be elaborately dealt with. The burden of proving that any property specified in the notice served under Section 6 is not illegally acquired propertyshall be on the person affected in terms of Section 8. In terms of Section 11 any property referred to in the notice under Section 6 or under Section 10 (Trust properties), if transferred after issue of notice, such transfers shall be deemed to be null and void. The competent authority as defined under Section 3(1)(b) of the Act means an officer of the Central Government authorised under Section 5 (1) to perform the functions of a competent authority under the Act. In terms of Section 3(1)(a) the Appellate Tribunal shall mean the Tribunal constituted under Section 12. In terms of Section 15 both the competent authority and the Appellate Tribunal shall have all powers of Civil Court while trying a suit under the Code of Civil Procedure (CPC). By virtue of the power conferred under Section 16, the competent authority can require any officer or authority of the Central or a State Government or a local authority to furnish information and Section 17 gives the list of officers who are required to assist the competent authority and the Appellate Tribunal. Section 18 gives power to the competent authority for conducting enquiry, investigation, survey etc., among other things. In terms of Section 24, the provisions of SAFEMA shall have an overriding effect notwithstanding anything inconsistent therewith contained in any other law.

It is held that the show cause notice issued to the writ petitioner order Section 6(1) is illegal and invalid. Once the show cause notice is found to be illegal, the same would vitiate all the subsequent proceedings. In this view, the writ petition is allowed and the order of forfeiture passed against the writ petitioner Late Mrs.Mohammed Thaha Umma is set aside.

Union Of India & Ors vs Manoharlal Narang on 2 March, 1987

Equivalent citations: 1987 AIR 1472, 1987 SCR (2) 454

Bench: Khalid, V. (J)

The learned counsel for the respondent contended that the respondent could challenge the order of detention against his brother, to get the notice issued against him under SAFEMA quashed on all the grounds available to him, though they were raised by his brother or not. He was not seeking to get the order of detention against his brother quashed for his brother's benefit nor was he doing it on his behalf, but he was invoking the jurisdiction of the Court only for his own benefit. While doing so he is not lettered by what happened to his brother's petition or to the grounds raised by him. Nothing held against his brother would, according to the learned counsel, operate as res judicata against the respondent. The provisions of SAFEMA were being pressed into service because a relative answering the de- scription given in Explanation 2 to Sub-section (2) of Section 2 of the Act was available. He cannot be prevented from urging all the grounds available to him to get out of the mischief of the notice issued to him under Section 6 of the SAFEMA. We find that this submission is well founded. We hold that in such cases, the person against whom action is taken by invoking the Explanation to Sub-section (2) re- ferred to above, is at liberty to raise all grounds avail- able to him though such grounds were raised and found against in a proceedings initiated by the relative. The ground that found favour with the Bombay High Court in this case is that the detaining authority did not apply its mind to the order passed by this Court on 1st May, 1975, in the special leave petition against the decision of the Delhi High Court which quashed the detention of Ramlal. The appellants before us sought a stay of the order passed by the Delhi High Court. This Court declined the request but passed the following order:

It is not disputed that the detenu Ramlal was reporting to the officer-in-charge of the Bandra Police station, Bombay regularly, in due compliance with the above order passed by the Supreme Court.

We have already adverted to the fact that proceedings against the respondent taken under SAFEMA were abandoned after the order of this Court on 4th November, 1980. It is nearly 3 years later, on 29th October, 1983, that the pro- ceedings, from which this appeal arises, were initiated under Section 6 of SAFEMA on the basis of the detention order dated 1st July, 1975, issued against Ramlal. It is necessary to bear in mind that on 1st July, 1975, when the order of detention against Ramlal was passed, the authori- ties had before them the order of this Court, extracted above, dated 1st May, 1975. By this order Ramlal was permit- ted to be at large on condition that he will report to the Police Station as mentioned therein. It cannot be disputed that this order of the Supreme Court is a relevant material for the detaining authority to consider when the detention order was passed. From the records it is not seen that the Union of India had specifically put forward a case at any time that this order was not a relevant material or that this order was considered by the detaining authority. The first respondent had specifically raised this contention in paragraph 'Q' of the grounds of the Writ Petition, by an amendment which was allowed by the order of the Division Bench of the Bombay High Court on 29th April, 1986. The specific contention raised in ground 'Q' was "that vital and material facts which would have weighed the mind of the detaining authority one way or the other, have been sup- pressed from him, thus vitiating the order of detention dated 1st July, 1975, and consequent declaration made under Section 12(a) of the COFEPOSA". After that, reference was made to the order of this Court extracted above, accompanied by an assertion that Ramlal was complying meticulously with the orders of the Supreme Court. This specific assertion is met by the appellants in paragraph 53 of the Counter Affida- vit filed by Under secretary. Ministry of Finance ' which reads as follows:

In view of the above conclusions we do not think it necessary to consider the question whether the authorities acted rightly in not considering the representation made by the respondent. It cannot be disputed that provisions of SAFEMA cannot be invoked in cases where there is no valid order of detention. We agree with the High Court that the order of detention is bad on the ground discussed above. Consequently we hold that the High Court was justified in quashing the notice issued under Section 6 and the proceeding initiated under Section 7 of the SAFEMA. We accordingly dismiss the appeal.

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