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

What this law does

The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, Act No. 13 of 1976, is a central law made to forfeit illegally acquired properties of smugglers and foreign exchange manipulators. The law says that a person to whom it applies cannot lawfully hold illegally acquired property, either directly or through another person, and such property can be forfeited to the Central Government.

Who can be covered

The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 applies only to specified persons, including:

• persons convicted under the Sea Customs Act, 1878 or the Customs Act, 1962, in relation to goods of a value exceeding one lakh of rupees
• persons convicted under the Foreign Exchange Regulation Act, 1947 or the Foreign Exchange Regulation Act, 1973, where the amount or value involved exceeds one lakh of rupees
• persons with subsequent convictions under those customs or foreign exchange laws
• persons against whom a detention order has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, subject to the conditions stated in the Act
• relatives of such persons
• associates of such persons
• present holders of property previously held by such persons, unless the present holder, or an intermediate holder, was a transferee in good faith for adequate consideration

The Act defines relatives broadly, including spouse, siblings, certain ascendants and descendants, and some spouses of those relatives. It also defines associates broadly, including people living with the person, managing affairs or accounts, connected partnership or company members, and some trustees.

What counts as illegally acquired property

The Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 treats property as illegally acquired if it was obtained wholly or partly from income, earnings or assets derived from prohibited activity, from contravention of law, from sources that cannot be proved, or from property traceable to such property. Property includes movable and immovable property, and any interest in property.

How forfeiture starts

A competent authority authorised by the Central Government can act under the law. If the competent authority has reason to believe that properties are illegally acquired, and records those reasons in writing, it may issue a notice asking the affected person to explain the source of income, earnings or assets used to acquire the property, provide evidence, and show cause why the property should not be declared illegally acquired and forfeited.

Key points from the notice process include:

• the notice period must be as specified in the notice
• the period should not ordinarily be less than thirty days
• the authority can rely on available information or material, including action taken under section 18 or otherwise