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REPORTABLE  

IN THE SUPREME COURT OF INDIA  

CRIMINAL APPELLATE JURISDICTION  

CRIMINAL APPEAL NO. 34 OF 2009  

DOMNIC ALEX FERNANDES (D) THROUGH LRS. & ORS.    …Appellants  

Versus  

UNION OF INDIA AND ORS.        …Respondents  

J U D G M E N T  

ADARSH KUMAR GOEL, J.  

1. This appeal has been preferred against Order dated 11th July,  

2007 of the High Court of Judicature at Bombay in Criminal Writ  

Petition No. 1088 of 1995.   

2. The question for consideration is whether tenancy of a  

property, ownership of which is acquired by a person to whom the  

Smugglers and Foreign Exchange Manipulators (Forfeiture of  

Property) Act, 1976 (SAFEMA) applies, will be treated as “illegally

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acquired property” within the meaning of Section 3(1)(c) of SAFEMA  

and can be subjected to forfeiture under the provisions thereof.  

3. Facts giving rise to the issue may be briefly stated.  Vide order  

dated 19th January, 1974 one Krishna Budha Gawde was detained  

under Section 3(1) of the Conservation of Foreign Exchange and  

Prevention of Smuggling Activities Act, 1974 (COFEPOSA) by the  

Government of Maharashtra.  As his detention was confirmed by the  

Advisory Board, he was covered by Section 2(b) of SAFEMA1 as the  

                                                           1     2. Application.—(1)  The provisions of this Act shall apply only to the persons specified in sub-section (2).   

                                    (2) The persons referred to in sub-section (1) are the following, namely:—   

XXX    XXX   XXX  

(b) every person in respect of whom an order of detention has been made under the  

Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52  

of 1974):   

XXX    XXX   XXX  

 (c)  every person who is a relative of a person referred to in clause (a) or clause (b);   

(d) every associate of a person referred to in clause (a) or clause (b);   

(e) any holder (hereafter in this clause referred to as the present holder) of any property  

which was at any time previously held by a person referred to in clause (a) or clause (b)  

unless the present holder or, as the case may be, anyone who held such property after  

such person and before the present holder, is or was a transferee in good faith for  

adequate consideration.   

XXX    XXX   XXX  

Explanation 2.—For the purposes of clause (c), “relative”, in relation to a person, means—   

(i) spouse of the person;   

(ii) brother or sister of the person;   

(iii) brother or sister of the spouse of the person;   

(iv) any lineal ascendant or descendant of the person;   

(v) any lineal ascendant or descendant of the spouse of the person;   

(vi) spouse of a person referred to in clause (ii), clause (iii) clause (iv) or clause (v);  

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person to whom the said Act applied. Once it was so, the property  

illegally acquired by him (as defined in Section 3(1)(c)2 of the Act  

(vii) any lineal descendant of a person referred to in clause (ii) or clause (iii).   

Explanation 3.—For the purposes of clause (d), “associate”, in relation to a person, means—   

(i) any individual who had been or is residing in the residential premises (including outhouses) of such  

person;   

(ii) any individual who had been or is managing the affairs or keeping the accounts of such person;   

(iii) any association of persons, body of individuals, partnership firm, or private company within the  

meaning of the Companies Act, 1956 (1 of 1956), of which such person had been or is a member, partner  

or director;   

(iv) any individual who had been or is a member, partner or director of an association of persons, body of  

individuals, partnership firm or private company referred to in clause (iii) at any time when such person  

had been or is a member, partner or director of such association, body, partnership firm or private  

company;  

(v) any person who had been or is managing the affairs, or keeping the accounts, of an association of  

persons, body of individuals, partnership firm or private company referred to in clause (iii);   

(vi) the trustee of any trust, where, —   

(a) the trust has been created by such person; or   

(b) the value of the assets contributed by such person (including the value of the assets, if any,  

contributed by him earlier) to the trust amounts, on the date on which the contribution is made,  

to not less than twenty per cent. of the value of the assets of the trust on that date;  

(vii) where the competent authority, for reasons to be recorded in writing, considers that any properties  

of such person are held on his behalf by any other person, such other person.   

Explanation 4.— For the avoidance of doubt, it is hereby provided that the question whether any person  

is a person to whom the provisions of this Act apply may be determined with reference to any facts,  

circumstances or events (including any conviction or detention) which occurred or took place before the  

commencement of this Act.  

 2      3. Definitions.—(1) In this Act, unless the context otherwise requires,—   

XXX    XXX   XXX  

(c) “illegally acquired property”, in relation to any person to whom this Act applies, means—   

(i) any property acquired by such person, whether before or after the commencement of this Act, wholly  

or partly out of or by means of any income, earnings or assets derived or obtained from or attributable to  

any activity prohibited by or under any law for the time being in force relating to any matter in respect of  

which Parliament has power to make laws; or   

(ii) any property acquired by such person, whether before or after the commencement of this Act, wholly  

or partly out of or by means of any income, earning or assets in respect of which any such law has been  

contravened; or   

(iii) any property acquired by such person, whether before or after the commencement of this Act, wholly  

or partly out of or by means of any income, earnings or assets the source of which cannot be proved and  

which cannot be shown to be attributable to any act or thing done in respect of any matter in relation to  

which Parliament has no power to make laws; or  

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was liable to be forfeited.   Accordingly, notice of forfeiture was  

issued under Section 6 of the Act in respect of several properties  

including the property which is subject matter of present proceeding  

viz. T-40, Juhu Koliwada, H.B. Gawde Road (also known as Azad  

Road), I Santacruz (West), Mumbai – 400 049.  Vide order dated 29th  

August, 1977, the competent authority passed an order under  

Section 7 of the Act holding the property in question to be liable to  

be forfeited.  This order was confirmed by the Appellate Tribunal for  

Forfeited Property on 2nd April, 1997 in respect of the said property.   

4. The appellants herein filed a Writ Petition under Articles 226/227  

of the Constitution seeking a direction that order of forfeiture passed  

against Krishna Budha Gawde could not operate against them as  

they are bona fide tenants.   Prior to 1965, the original owner of the  

property sold the property to Krishna Budha Gawde.  The new  

(iv) any property acquired by such person, whether before or after the commencement of this Act, for a  

consideration, or by any means, wholly or partly traceable to any property referred to in sub-clauses (i) to   

(iii) or the income or earnings from such property; and includes—   

(A) any property held by such person which would have been, in relation to any previous holder  

thereof, illegally acquired property under this clause if such previous holder had not ceased to hold it,  

unless such person or any other person who held the property at any time after such previous holder or,  

where there are two or more such previous holders, the last of such previous holders is or was a  

transferee in good faith for adequate consideration;   

(B) any property acquired by such person, whether before or after the commencement of this  

Act, for a consideration, or by any means, wholly or partly traceable to any property falling under  

item (A), or the income or earnings therefrom; … … …

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landlord – Gawde reconstructed the structure in the year 1972 and  

the appellants were put in possession thereof and were paying rent  

to the new owner under the Bombay Rent Act.  They were not  

aware of proceedings under SAFEMA and COFEPOSA against the  

landlord.  They informed the competent authority about this.  Since  

they apprehended coercive steps against them, they are entitled to  

be granted protection.   

5. The writ petition was contested by submitting that since the  

properties of Krishna Budha Gawde stood forfeited and vested in the  

Central Government free from all encumbrances, the alleged  

tenancy rights did not survive and the competent authority was  

entitled to take possession under Section 19 of SAFEMA.  

6. The High Court dismissed the writ petition holding that the  

tenancy did not survive in view of Section 7(3) of SAFEMA.   

7. We have heard learned counsel for the parties.   

8. The contention raised on behalf of the appellants is that  

forfeiture contemplated under Section 7 of the Act is only of illegally

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acquired property as defined under Section 3(1)(c) of SAFEMA i.e.  

property acquired by the person to whom the Act applies which is  

defined under Section 2(2) of SAFEMA.   The Act applied to a person  

against whom the order of detention has been passed or a person  

who is a relative or associate of such person or holder of the property  

which was previously held by such person as per the said provision,  

quoted earlier.  ‘Relative’ is defined in Explanation 2 and ‘associate’  

is defined in Explanation 3 of Section 2 of SAFEMA.   

9. It is submitted that the appellants could not, in any manner, be  

held to be relative or associate of the person against whom the  

order of detention had been passed, and, therefore they could not  

be visited with any adverse consequences for the wrongful action of  

Krishna Budha Gawde.  Reliance has been placed on judgments of  

this Court in C.B. Gautam versus Union of India and Ors.3; Attorney  

General for India and Ors. versus Amratlal Prajivandas and Ors.4;  

State of West Bengal and Ors. versus Vishnunarayan & Associates (P)  

Ltd. and Anr.5;  Fatima Mohd. Amin (Smt.) (Dead)  through LRs.  versus  

                                                           3  (1993) 1 SCC 78  

4  (1994) 5 SCC 54  

5  (2002) 4 SCC 134

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Union of India and Anr.6;  P.P. Abdulla and Anr.  versus   Competent  

Authority and ors.7;  Aslam Mohammad Merchant  versus   

Competent Authority and Ors.8; Vishal N. Kalsaria  versus  Bank of  

India and Ors.9 ; and judgment of Bombay High Court in Narayan  

Vittappa Kudva  versus  Union of India and Anr.10.  

10. Learned counsel for the respondents supported the view taken  

in the impugned judgment.  

11. On due consideration of the matter, we find merit in the  

contention of the appellants.  The answer to the question framed in  

earlier part of the judgment has to be in favour of the appellants  

and in the negative.  

12. In C.B. Gautam (supra) validity of Chapter XX-C inserted in the  

Income Tax, 1961 by the Finance Act of 1986 was considered.  The  

                                                           6  (2003) 7 SCC 436  

7  (2007) 2 SCC 510  

8  (2008) 14 SCC 186  

9  (2016) 3 SCC 762  

10  2002 (2) MhLJ 290

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scheme of the said provision was to confer power of compulsory  

purchase of immovable property by the Department if there was  

under-valuation for evasion of tax.  This Court upheld the provision by  

reading therein the requirement of giving opportunity of hearing and  

recording reasons.  However, as regards the bona fide rights of  

encumbrance holders such as a subsisting lease, it was observed  

that they could not be visited with adverse consequences as they  

were not involved in tax evasion.  This Court observed:  

“36.  … … …In the result the expression “free from all  

encumbrances” in sub-section (1) of Section 269-UE is struck  

down and sub-section (1) of Section 269-UE must be read  

without the expression “free from all encumbrances” with the  

result the property in question would vest in the Central  

Government subject to such encumbrances and leasehold  

interests as are subsisting thereon except for such of them as  

are agreed to be discharged by the vendor before the sale is  

completed. If under the relevant agreement to sell the  

property is agreed to be sold free of all encumbrances or  

certain encumbrances it would vest in the Central  

Government free of such encumbrances. Similarly, sub-section  

(2) of Section 269-UE will be read down so that if the holder of  

an encumbrance or a lessee is in possession of the property  

and under the agreement to sell the property it is not provided  

that the sale would be free of such encumbrances or  

leasehold interests, the encumbrance holder or the lessee who  

is in possession will not be obliged to deliver the possession of  

the property to the appropriate authority or any person  

authorised by it and the provisions of sub-section (3) also  

would not apply to such persons. If the provisions of Section  

269-UE are read down in the manner indicated above then, in

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our opinion, the provisions of sub-section (6) of that section do  

not present any difficulty because the vesting in the Central  

Government would be subject to such encumbrances and  

leasehold rights as stated earlier.”  

13. In Amratlal (supra) this Court considered the validity of the  

SAFEMA and the COFEPOSA and in that context one of the questions  

framed for consideration was whether the definition of “illegally  

acquired property” in clause (c) of Section 3(1) of SAFEMA was  

unconstitutional and whether application of the Act to the relatives  

and associates of a person illegally acquiring the property was valid.   

This Court observed:  

 “44. … … …The relatives and associates are brought in only for  

the purpose of ensuring that the illegally acquired properties of  

the convict or detenu, acquired or kept in their names, do not  

escape the net of the Act. It is a well-known fact that persons  

indulging in illegal activities screen the properties acquired  

from such illegal activity in the names of their relatives and  

associates. Sometimes they transfer such properties to them,  

may be, with an intent to transfer the ownership and title. In  

fact, it is immaterial how such relative or associate holds the  

properties of convict/detenu — whether as a benami or as a  

mere name-lender or as a bona fide transferee for value or in  

any other manner. He cannot claim those properties and must  

surrender them to the State under the Act. Since he is a  

relative or associate, as defined by the Act, he cannot put  

forward any defence once it is proved that that property was  

acquired by the detenu — whether in his own name or in the  

name of his relatives and associates. It is to counteract the  

several devices that are or may be adopted by persons

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mentioned in clauses (a) and (b) of Section 2(2) that their  

relatives and associates mentioned in clauses (c) and (d) of  

the said sub-section are also brought within the purview of the  

Act. The fact of their holding or possessing the properties of  

convict/detenu furnishes the link between the convict/detenu  

and his relatives and associates. Only the properties of the  

convict/detenu are sought to be forfeited, wherever they are.  

The idea is to reach his properties in whosoever’s name they  

are kept or by whosoever they are held. The independent  

properties of relatives and friends, which are not traceable to  

the convict/detenu, are not sought to be forfeited nor are  

they within the purview of SAFEMA**11. We may proceed to  

explain what we say. Clause (c) speaks of a relative of a  

person referred to in clause (a) or clause (b) (which speak of a  

convict or a detenu). Similarly, clause (d) speaks of associates  

of such convict or detenu. If we look to Explanation (3) which  

specifies who the associates referred to in clause (d) are, the  

matter becomes clearer.  ‘Associates’ means — (i) any  

individual who had been or is residing in the residential  

premises (including outhouses) of such person [‘such person’  

refers to the convict or detenu, as the case may be, referred  

to in clause (a) or clause (b)]; (ii) any individual who had been  

or is managing the affairs or keeping the accounts of such  

convict/detenu; (iii) any association of persons, body of  

individuals, partnership firm or private company of which such  

convict/detenu had been or is a member, partner or director;  

(iv) any individual who had been or is a member, partner or  

director of an association of persons, body of individuals,  

partnership firm or private company referred to in clause (iii) at  

any time when such person had been or is a member, partner  

or director of such association of persons, body of individuals,  

partnership firm or private company; (v) any person who had  

been or is managing the affairs or keeping the accounts of  

any association of persons, body of individuals, partnership firm  

or private company referred to in clause (iii); (vi) the trustee of  

                                                           11

** That this was the object of the Act is evident from para 4 of the preamble which states: “And whereas such  

persons have in many cases been holding the properties acquired by them through such gains in the names of their  

relatives associates and confidants.”  We are not saying that the preamble can be utilized for restricting the scope  

of the Act, we are only referring to it to ascertain the object of the enactment and to reassure ourselves that the  

construction placed by us accords with the said object.

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any trust where (a) the trust has been created by such  

convict/detenu; or (b) the value of the assets contributed by  

such convict/detenu to the trust amounts, on the date of  

contribution not less than 20% of the value of the assets of the  

trust on that date; and (vii) where the competent authority, for  

reasons to be recorded in writing, considers that any  

properties of such convict/detenu are held on his behalf by  

any other person, such other person. It would thus be clear  

that the connecting link or the nexus, as it may be called, is  

the holding of property or assets of the convict/detenu or  

traceable to such detenu/convict. Section 4 is equally  

relevant in this context. It declares that “as from the  

commencement of this Act, it shall not be lawful for any  

person to whom this Act applies to hold any illegally acquired  

property either by himself or through any other person on his  

behalf”. All such property is liable to be forfeited. The  

language of this section is indicative of the ambit of the Act.  

Clauses (c) and (d) in Section 2(2) and the Explanations (2)  

and (3) occurring therein shall have to be construed and  

understood in the light of the overall scheme and purpose of  

the enactment. The idea is to forfeit the illegally acquired  

properties of the convict/detenu irrespective of the fact that  

such properties are held by or kept in the name of or screened  

in the name of any relative or associate as defined in the said  

two Explanations. The idea is not to forfeit the independent  

properties of such relatives or associates which they may have  

acquired illegally but only to reach the properties of the  

convict/detenu or properties traceable to him, wherever they  

are, ignoring all the transactions with respect to those  

properties. By way of illustration, take a case where a  

convict/detenu purchases a property in the name of his  

relative or associate — it does not matter whether he intends  

such a person to be a mere name-lender or whether he really  

intends that such person shall be the real owner and/or  

possessor thereof — or gifts away or otherwise transfers his  

properties in favour of any of his relatives or associates, or  

purports to sell them to any of his relatives or associates — in all  

such cases, all the said transactions will be ignored and the  

properties forfeited unless the convict/detenu or his  

relative/associate, as the case may be, establishes that such

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property or properties are not “illegally acquired properties”  

within the meaning of Section 3(c). In this view of the matter,  

there is no basis for the apprehension that the independently  

acquired properties of such relatives and associates will also  

be forfeited even if they are in no way connected with the  

convict/detenu. So far as the holders (not being relatives and  

associates) mentioned in Section 2(2)(e) are concerned, they  

are dealt with on a separate footing. If such person proves  

that he is a transferee in good faith for consideration, his  

property — even though purchased from a convict/detenu —  

is not liable to be forfeited. It is equally necessary to reiterate  

that the burden of establishing that the properties mentioned  

in the show-cause notice issued under Section 6, and which  

are held on that date by a relative or an associate of the  

convict/detenu, are not the illegally acquired properties of the  

convict/detenu, lies upon such relative/associate. He must  

establish that the said property has not been acquired with  

the monies or assets provided by the detenu/convict or that  

they in fact did not or do not belong to such detenu/convict.  

We do not think that Parliament ever intended to say that the  

properties of all the relatives and associates, may be illegally  

acquired, will be forfeited just because they happen to be the  

relatives or associates of the convict/detenu. There ought to  

be the connecting link between those properties and the  

convict/detenu, the burden of disproving which, as  

mentioned above, is upon the relative/associate. In this view  

of the matter, the apprehension and contention of the  

petitioners in this behalf must be held to be based upon a  

mistaken premise. The bringing in of the relatives and  

associates or of the persons mentioned in clause (e) of Section  

2(2) is thus neither discriminatory nor incompetent apart from  

the protection of Article 31-B.”      

14. In Fatima (supra), applying the ratio of Amratlal (supra), this  

Court held that in absence of an averment that the property with an

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individual was benami, such individual could not be proceeded  

against in absence of any link or nexus of the property with the  

illegally acquired money.   

15. In Vishnunarayan (supra) it was held that Section 6-A of the  

W.B. Govt. Premises (Tenancy Regulation) Act, 1976 is not applicable  

to tenants in lawful occupation.   

16. In Abdulla (supra) following the judgment of this Court in Fatima  

(supra) it was held that Section 6(1) of the Act could apply only  

when there was a link or nexus of the property sought to be forfeited  

with the illegally acquired money of the person to whom the Act  

applied.  

17. In Vishal (supra), the question was whether protected tenant  

under the Maharashtra Rent Control Act, 1999 could be deprived of  

his rights under the provisions of the Securitisation and Reconstruction  

of Financial Assets and Enforcement of Security Interest Act, 2002  

(the SARFAESI Act).  Answering the question in the negative, it was

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held that such a situation was not contemplated as it will result in a  

central statute nullifying a State statute which was within the  

exclusive jurisdiction of the legislature and thereby affecting the  

concept Federalism.  

18. In Narayan Vittappa (supra) the Bombay High Court held that a  

person to whom the Act applied, his relative or associate did not  

include a bona fide tenant having no connection whatsoever to the  

person who was convicted or detained in the manner  

contemplated under Section 2 of the Act and if such a person  

claims to be having no nexus to the person to whom the Act  

applied, his rights will not stand vested in the Central Government,  

though he may be liable to be proceeded against the Public  

Premises Eviction Act12.  

19.  In Aslam (supra), following the judgments of this Court in  

Amratlal (supra) and Fatima (supra) it was held that for forfeiture of  

property under Chapter V-A of the Narcotic Drugs and Psychotropic  

                                                           12

Para 15 in Narayan Vittappa Kudva  v.  Union of India and Anr. [2002 (2) MhLJ290]

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Substances Act, 1985, a direct nexus/link was necessary between  

the properties sought to be forfeited and its illegal acquisition.   

20. In the present case, it is undisputed that only adjudication  

which has taken place by the competent authority is that the  

property was owned by the person to whom the Act applied i.e.  

against whom the order of detention had been confirmed.  The  

rights of the appellants, who claim to be bona fide tenants even  

prior to purchase of the property by the person to whom the Act  

applied, have not been adjudicated upon on the assumption that  

their rights will stand automatically terminated.  In view of law laid  

down by this Court, noticed above, we are of the view that rights of  

a bona fide tenant will not stand automatically terminated by  

forfeiture of property and vesting thereof in the Central Government.   

Such forfeiture will extinguish the rights of the person to whom the  

Act applies in the present case Krishna Budha Gawde, who was the  

owner of the property in question or his relative or associate having  

nexus with him in relation to the said property.  However, we do not  

express any opinion whether the appellants are the bona fide

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tenants and had no nexus with the acquisition of the property by the  

person to whom the Act applied as claimed by them.  This question  

needs to be determined independently by the competent authority  

as defined in Section 3(b) of the Act.  

21. Accordingly, we allow this appeal, set aside the order of the  

High Court and remit the matter to the competent authority for  

passing an appropriate order in accordance with law.  The parties  

are directed to appear before the competent authority for further  

proceedings on 9th October, 2017.  

…………………………………..J.  

(ADARSH KUMAR GOEL)  

…………………………………..J.  

(UDAY UMESH LALIT)  

NEW DELHI;  

17TH AUGUST, 2017.

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ITEM NO.1501               COURT NO.12               SECTION II-A    (For judgment)  

S U P R E M E  C O U R T  O F  I N D I A                                                 RECORD OF PROCEEDINGS  

Criminal Appeal  No(s).  34/2009  

DOMINIC ALEX FERNANDES(D) TR.LRS. & ORS.           Appellant(s)  

                               VERSUS  

UNION OF INDIA & ORS.                              Respondent(s)  

Date : 17-08-2017 This appeal was called on for pronouncement of  judgment today.  

For Appellant(s) Mr. Pratap Venugopal, Adv.          Ms. Surokha Raman, Adv.         Ms. Niharika, Adv.             Ms. Kanika Kaliyarasan, Adv.                       for K J John And Co, AOR                     

For Respondent(s)  Mr. Mahaling Pandareg, Adv.                      Mr. Nishant Ramakantrao Katneshwarkar, AOR    

Mr. B. V. Balaram Das, AOR                        Mr. Mukesh Kumar Maroria, AOR.   

 Hon'ble Mr. Justice Adarsh Kumar Goel pronounced the  judgment of the Bench comprising His Lordship and Hon'ble Mr. Justice  Uday Umesh Lalit.                                                   The appeal is allowed in terms of the signed reportable  judgment.  

 (SWETA DHYANI)                         (PARVEEN KUMARI PASRICHA)  SENIOR PERSONAL ASSISTANT     COURT MASTER  

(Signed reportable judgment is placed on the file)