Competent Authority & Administrator,
NDPS Act 1985 & SAFEM (FOP) Act 1976, New Delhi
 
 

 

   
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Forfeiture of Properties 
What is it  Whose Assets Which Asset By Whom Sequence of events Legal Sanction
 
What is it :
To ensure that criminals do not benefit financially from their illegal activities ,laws have been framed for forfeiting assets acquired through illicit gains by criminals indulging in such crimes which causes severe economic or social harm to society. Trafficking in drugs and smuggling are two such criminal activities which generate huge profits. The illegal income earned by drug traffickers and smugglers  are used to support other criminal activities and for acquiring assets. The traditional enforcement techniques aim to confiscate contraband and prosecute the criminal for awarding imprisonment. This however does not provide a strong deterrent as very often criminals perceive imprisonment as “Cost of Business”. If the proceeds of the crime are forfeited by the Government the  criminal  looses financial powers to further carry out criminal activities or acquire properties.   To make a significant dent in the organization of drug traffickers and smugglers  there is no strategy more effective than tracing the beneficiaries of the crime and then taking away their dirty profit. This strategy is being acclaimed internationally as one of the most effective way to curb drug trafficking. In our country provisions under chapter VA of the Narcotics Drugs & Psychotropic Substances Act 1985  and Smugglers and Foreign Exchange Manipulators ( Forfeiture of Properties) Act 1976 empowers central government to forfeit properties of drug traffickers and smugglers respectively.
Whose Asset  :

Action for forfeiture of property under Narcotics Drugs and Psychotropic Substances Act 1985 is to be taken against following category of persons under provisions of chapter VA of the Act (Subsection 2 of Section 68A   of the Act):

  1. A person who has been convicted of an offence punishable under the Act with imprisonment of ten years or more.
  2. A person who has been convicted of a similar offence by a competent court of criminal jurisdiction outside India.
  3. A person against whom an order for detention under PIT NDPSA 1988 or J&K PIT NDPSA 1988 has been made subject to conditions specified in the Act.
  4. A person who has been arrested or against whom a arrest warrant/authorization of arrest has been issued for an offence punishable with imprisonment of ten years or more  or against whom a arrest warrant/authorization of arrest has been issued for commission of similar offence under any corresponding law of any other country.
  5. The following relatives of the person in (a) to (cc) above:
  1. Spouse of the person
  2. Brother or sister of the person
  3. Brother or sister of the spouse of the person
  4. Any lineal ascendant or descendent of the person
  5. Any lineal ascendant or descendent of the spouse of the person
  6. Spouse of the persons referred in (b) to (e) above.
  7. Lineal descendent of persons in (b) and (c) above.
  1. The following associates of the person in (a) to  (cc) above
  1. Individual/s who had been or residing in the residential premises of the person.
  2. Individual/s who had been managing the affairs or keeping the account of the person.
  3. Any business entity** of which the person was or is a member, partner or director.
  4. Those persons who had been member, partner or director of the business entity during the time when the person was member, partner or director.
  5. Manager or accountant of the business entity referred in (j) above.
  6. Trustee/s of trust created by the person or where the person has contributed more than twenty percent in the assets of trust.
  7. The person/s who in the opinion of the competent authority for reasons recorded is holding benami property for the person.

**Business Entity means association of persons, body of individuals, partnership firms, or private company under The Company Act 1956.

       f. Holder of a property which was acquired from illegal earnings from drug trafficking unless the holder has purchased it in good faith for adequate consideration.

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Which Asset  :
The assets which are to be forfeited must have been acquired partly or wholly from the income of drug trafficking. The concept of tainted property is of significance.  Any property, which has been acquired either partly or fully through illegal income of drug trafficking becomes tainted and hence is liable to forfeiture. The Property irrespective of the activities of its owner is a tainted property if any part of its acquisition cost has been financed through tainted income( income earned from drug trafficking). A derivative of tainted property is also tainted and hence liable to forfeiture. For example a drug trafficker has a plot of land which he acquired from illegal income. After some time the value of the plot goes up and he sells it and acquires another plot and a car with sale proceeds. The car and the second plot are derivative of an illegally acquired property and hence are also liable to forfeiture.

There is a bar on forfeiture of illegally acquired property acquired six year prior to the date of arrest of the accused. However an illegally acquired property acquired six year prior to the date of arrest remains illegal and if it is giving any derivative within the six year period the derivative are liable to forfeiture.

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By Whom  :

The forfeiture order has to be passed by the jurisdictional Competent Authority. However the investigation for locating the properties  and determining their source of acquisition has to be done by the investigating officer. Thus the forfeiture of property is a joint operation conducted by the Competent Authority and the investigating agency. All the departments empowered to carry out investigation under NDPS Act 1985 are empowered to carry out the forfeiture proceedings.

Sequence of Event

A proceeding for asset forfeiture under the NDPS Act is invariably triggered on receipt of information by the investigation officer that a person to whom provisions of chapter VA applies holds illegally acquired property.  The proceeding starts with the process of tracing and identification of illegally acquired property. The officer responsible for tracing and identification of properties has to carry out an extensive financial investigation for collection of details about the illegal properties. The officer has also to see whether there are sufficient reasons to believe that the properties are illegally acquired properties.

The properties thereafter have to be seized/frozen and the seizing/freezing order has to be sent to jurisdictional Competent Authority for confirmation. It is only after the seizing/freezing order is confirmed under section 68 F (2) of the Act by the Competent Authority that it comes into force. The property although is finally forfeited only after the person is convicted by a court the possession of the seized/frozen properties have to be taken over for purpose of administration and management. This whole procedure has been depicted graphically in the flow chart shown on the next page.  In the whole sequence depicted in the flow chart, the two most crucial stages directly affecting the forfeiture proceedings can be seen to be financial investigation and administration & management of seized/frozen properties. The financial investigation determines the boundaries of the proceedings. The Competent Authority for action on his/her part is dependent mainly upon the inputs provided by the concerned enforcement agency. A seizing/freezing order is the base on which forfeiture proceedings evolve. A weak seizing/freezing order would invariably lead to failure of forfeiture proceedings at some stage or other. A good financial investigation is must for a good seizing/freezing order. Various nuances of financial investigation have been detailed in the next chapter.

The administration and management of seized/frozen properties is equally vital for a successful forfeiture proceeding. As there is a time gap between seizing/freezing of property and its final forfeiture it is essential that the properties be managed properly. Rules have been framed in this regard and this topic has been discussed in detail in the subsequent chapter.

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Legal Sanction :
Under the NDPS Act 1985  prohibition has been  imposed on possession of illegally acquired properties  vide section 8 A and Section 68 C of the Act. Section 8 A is applicable to every person whereas prohibition under section 68 C is applicable for persons specified under section 68 A 2 of the Act (these persons are either drug offender themselves or their relatives and associates) . The prohibition imposed under section 68  C 1 has to be enforced by forfeiting the properties by following procedure under chapter VA of the Act.
I. The Prohibition under The Act

Section 8A 

This section imposes prohibition on certain activities related with the properties derived from an offence under the NDPS Act. These prohibitions are applicable to all irrespective of his/her actual involvement in the activity of drug trafficking.

  1. Prohibition on conversion and transfer of property acquired illegally:  A person who knows that a property has been derived form an offence under the NDPS Act shall not convert or transfer it for
  2. i.        Disguising its illicit origin.

    ii.        Assisting any person in commission of an offence

    iii.        Evading legal consequences.

  3. Prohibition on concealment of nature source etc of property acquired illegally: A person who knows that a property has been derived from an offence under the NDPS Act shall not conceal or disguise its true nature, source, location or disposition.
  4. Prohibition on acquisition possession or use of property acquired illegally: A person who knows that a property has been derived from an offence under the NDPS Act shall not acquire, possess or use it.

Section 68C

This section prohibits any person covered under section 68 A 2 of  chapter VA of the Act to hold any illegally acquired property either directly or through any other person .If any illegally acquired property is held by such person this shall be liable for forfeiture to the central government. This section thus is the origin of forfeiture proceedings under the Act. 

II. The Persons to whom prohibitions under the Act apply

Action for forfeiture of property under Narcotics Drugs and Psychotropic Substances Act 1985 is to be taken against following category of persons under provisions of chapter VA of the Act (Subsection 2 of Section 68A   of the Act):

  1. A person who has been convicted of an offence punishable under the Act with imprisonment of ten years or more.
  2. A person who has been convicted of a similar offence by a competent court of criminal jurisdiction outside India.
  3. A person against whom an order for detention under PIT NDPSA 1988 or J&K PIT NDPSA 1988 has been made subject to conditions specified in the Act.
  4. A person who has been arrested or against whom a arrest warrant/authorization of arrest has been issued for an offence punishable with imprisonment of ten years or more  or against whom a arrest warrant/authorization of arrest has been issued for commission of similar offence under any corresponding law of any other country.
  5. The following relatives of the person in (a) to (cc) above:

        1.     Spouse of the person

        2.     Brother or sister of the person

        3.     Brother or sister of the spouse of the person

        4.     Any lineal ascendant or descendent of the person

        5.     Any lineal ascendant or descendent of the spouse of the person

        6.     Spouse of the persons referred in (b) to (e) above.

        7.     Lineal descendent of persons in (b) and (c) above.

  6.  

  7. The following associates of the person in (a) to  (cc) above

    1.  Individual/s who had been or residing in the residential premises of the person.

    2. Individual/s who had been managing the affairs or keeping the account of the person.

    3. Any business entity** of which the person was or is a member, partner or director.

    4.  Those persons who had been member, partner or director of the business entity during the time when the person was member, partner or director.

    5. Manager or accountant of the business entity referred in (j) above.

    6. Trustee/s of trust created by the person or where the person has contributed more than twenty percent in the assets of trust.

    7. The person/s who in the opinion of the competent authority for reasons recorded is holding benami property for the person.

    **Business Entity means association of persons, body of individuals, partnership firms, or private company under The Company Act 1956.

  8. Holder of a property which was acquired from illegal earnings from drug trafficking unless the holder has purchased it in good faith for adequate consideration.
III. The Identification and Freezing of Illegal Properties

Section 68E of the Act empowers officers to carry out investigations for identifying illegally acquired properties of persons covered under the Act

IV. The Search, Seizure & Arrest for Collection of Evidence Relating to Illegal Properties

The Act has given wide powers for search seizure or arrest in connection with collection of evidence related with any property, which may be liable to forfeiture under Chapter VA of the Act.

Section 41

This section grants powers to issue arrest warrant /search warrant in connection with collection of evidence for unearthing drugs or documents related with illegally acquire properties. The officers empowered are:

a)  A Metropolitan Magistrate or a Magistrate of first class or a Magistrate of second class duly empowered by State Government.

b)    Any Gazetted officer of department of

       i. Central Excise

      ii.  Narcotics

     iii.  Customs

     iv.  Revenue Intelligence

     v.   Any other officer duly empowered 

Section 42

This section grants powers of search seizure and arrest without warrant, during the sunrise and sunset if the officer gets an information and record such information in writing. During sunset and sunrise if the officer has grounds to believe that obtaining a search warrant would lead to concealment of evidence or escape of the offender, he may record the grounds and proceed with further action without a warrant. He however shall send the information recorded or the ground of belief within seventy-two hours to his immediate superior.

 The officers for purpose of this section are any officer (being superior in rank to a peon, sepoy and constable) of the departments of central excise, narcotics, customs revenue intelligence or any other central government department or para military forces or armed forces empowered by central government or any officer of state government duly empowered.

C.  THE FORFEITURE PROCEEDINGS AND AUTHORITY

(Part D and E of the chapter have been combined with this part)

  The Competent Authority

Section 68D of the Act provides for appointment of Competent Authority for forfeiture proceedings under chapter VA of the  Act.

Section 68F of the Act empowers officers to freeze the properties so identified and send the freezing order to Competent Authority for confirmation within forty eight hours of freezing. The freezing orders become effective after confirmation by the competent authority.

The Show Cause Notice

Section 68 H of the Act provides for issue of show cause notice by the Competent Authority.

The Forfeiture of Property

Section 68 I provides for forfeiture of properties by the competent authority.    

 The Burden of Proof

Section 8 puts the burden of proof on the person hit by the provisions of the Act

The Fine in Lieu of Forfeiture

Section 68 K   provides for imposition of fine in lieu of forfeiture in case where source of any part of of the illegally acquired property has been explained a fine in lieu of forfeiture equal to the market value of such part can be imposed.

The Transfer of Property

Section 68 M provides that transfer of any property in respect of which a show cause notice has been issued shall be ignored for proceedings under the Act and if the property is forfeited at a later date such transfer shall be treated as null and void.

The Appeal

Section 68 O provides for appeal before tribunal constituted under section 68 N of the Act.

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