Madras High Court
R. Sivarajan And Ors. vs Deputy Director, Enforcement ... on 24 December, 1986
Equivalent citations: 1987(12)ECC256
Author: V. Ramaswami
Bench: V. Ramaswami
JUDGMENT Ramswami, J.
1. These three writ petitions have been filed for the issue of the writ of mandamus directing the respondents to return the money seized from them by the officers of the respondents.
2. The point raised in all these cases is that the proceedings under section 51 of the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as "the Act"), had not been initiated within a period of one year from the date of seizure, that, therefore, the Revenue have no authority to retain the money and that they have to return the same and drop all further proceedings. In W. P. No. 11605 of 1985, the date of seizure of the currency was on October 14, 1985, is said to have been despatched on October 7, 1985, by registered post acknowledgment due, but the same was actually received by the petitioner only on October 19, 1985. In W. P. No. 11605 of 1985, the seizure of the currency was on October 12, 1984. The notice dated October 4, 1985, is said to have been sent by registered post on October 7, 1985, but the same was received by the petitioner on October 17, 1985. In W. P. No 11606 of 1985, the seizure of the currency was on October 12, 1984. The notice dated October 4, 1985, was sent on October 7, 1985, which was received by the petitioner on October 18, 1985.
3. Section 41, 50, and 51 of the Act, which are the relevant provisions for consideration of the point raised in these cases, run as follows :
"41. Custody of documents, etc. - Wherein pursuance of an order made under sub-section (2) of section 33 or of the provisions of section 34 or section 36 or section 37 or of a requisition or summons under section 39 or section 40, any document is furnished or seized and any officer of enforcement has reason to believe that the said document would be evidence of the contravention of any of the provision of this Act or of any rule, direction or order made thereunder, and that it would be necessary to retain the document in his custody, he may so retain the said document for a period not exceeding one year or if, before the expiry of the said period of one year, any proceedings -
(i) under section 51 have been commenced, until the disposal of those proceedings, including the proceedings, if any, before the appellate board and the High Court, or
(ii) under section 56 have been commenced before a court, until the document has been filed in the court.
Explanation. - In computing the period of one year during which a document (hereafter in this Explanation referred to as the said document) may be retained under this section, in any case where by reason of an injunction or order of any court (whether such injunction or order is in relation to the said document or is in relation to any other document reference to which would be necessary for examining or using the said document), -
(a) the said document could not be examined fully for the purpose of determining whether it would be evidence of the contravention of any of the provisions of this Act or of any rule, direction or order made thereunder, or
(b) the said document could not be used for commencing any proceeding under section 51 or section 56, or
(c) the proceedings under section 51 or section 56 could not be commenced, the time of the continuance of the injunction or order, the day on which it was issued or made and the day on which it was withdrawn, shall be excluded."
"50. Penalty. - If any person contravenes any of the provisions of this Act [other section 13, clause (a) of sub-section (1) of section 18 and clause (a) of sub-section (1) of section 19] or of any rule, direction or order made thereunder, he shall be liable to such penalty not exceeding five times the amount or value involved in any such contravention or five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement or any other officer of enforcement not below the rank of an Assistant Director of Enforcement specially empowered in this behalf by order of the Central Government (in either case hereinafter referred to as the adjudicating officer)".
"51. Power to adjudicate. - For the purpose of adjudging under section 50 whether any person has committed a contravention of any of the provisions of this Act (other than those referred to in that section) or of any rule, direction or order made thereunder, the adjudicating officer shall hold an inquiry in the prescribed manner after giving that person a reasonable opportunity for making a representation in the matter and if, on such inquiry, he is satisfied that the person has committed the contravention, he may impose such penalty as he thinks fit in accordance with the provisions of that section".
4. There is no dispute that the terms "documents" in section 41 includes currency notes. As may be seen from section 41, where the enforcement officer has reason to believe that the currency would be evidence of contravention of any of the provisions of the Act or any of the rules, directions or order made thereunder, it would be necessary to retain the same in his custody and he may so retain the said currency for a period not exceeding one year from the date of such seizure. Section 41 further date of states that if before the expiry of the said period of one year from the date of seizure any proceedings under section 51 have been commenced, he can retain the same until the disposal of those proceedings. Section 51 provides the necessity for holding an inquiry and coming to a finding that the person has committed a contravention of the provision of the Act or the rules made thereunder. Section 50 provides the penalty when such adjudicating officer is satisfied that the person has committed the contravention. Section 41, in the circumstances, provides that if the adjudicating officer had commenced an enquiry in the prescribed manner under section 51, then he can hold the currency until the disposal of those proceedings under section 51, then he can hold the currency until the disposal of those proceedings under section 51, including the proceedings, if any, before the appellate board or the High Court. Rule 3 of the Adjudication Proceedings and Appeals Rules, 1974, prescribes the procedure for an adjudication under section 51 and that reads as follows :
"3. Adjudication proceedings. - (1) In holding an inquiry under section 51 for the purpose of adjudging under section 50 whether any person has committed contravention as specified in section 50, the adjudicating officer shall, in the first instance, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of service thereof) why adjudication proceedings should not be held against him.
(2) Every notice under sub-rule (1) to any such person shall indicate the nature of offence alleged to have been committed by him.
(3) If after considering the clause, if any, shown by such person, the adjudicating officer is of the opinion that adjudication proceedings should held, he shall issue a notice fixing a date for the appearance of that person either personally or through his lawyer or other authorised representative.
(4) On the date fixed, the adjudicating officer shall explain to the person proceeded against or his lawyer or authorised representative the offence alleged to have been committed by such person indicating the provisions of the Act or of the rules, directions or orders made thereunder in respect of which contravention is alleged to have taken place.
(5) The adjudicating officer shall then give an opportunity to such person to produce such document or evidence as he may consider relevant to the inquiry and if necessary, the hearing may be adjourned to a future date; and in taking such evidence, the adjudicating officer shall not be bound to observe the provisions of the Indian Evidence Act, 1872 (1 of 1872).
(6) If any person fails, neglects or refuses to appear as required by sub-rule (3) before the adjudicating officer may proceed with the inquiry in the absence of such person after recording the reasons for doing so.
(7) If, upon consideration of the evidence produced before the adjudicating officer, the adjudicating officer is satisfied that the person has committed the contravention, he may, be order in writing, impose such penalty as he thinks fit in accordance with the provisions of section 50 :
Provides that the notice referred to in sub-rule (1) and the personal hearing referred to in sub-rules (3), (4) and (5) may, at the request of the person concerned, be waived."
5. Rule (2)b of the Rules defines "adjudicating officer" as meaning the Director of Enforcement or any other officer of enforcement empowered to adjudicate cases under section 50. Sub-rule (1) of rule 3 requires that the adjudicating officer shall, in the first instance, issue a notice to the person requiring him to show cause within such period as may be specified in the notice why adjudication proceedings should not be held against him and only if the adjudicating officer, after consideration of the reply sent by the person in response to the notice under sub-rule (1), is of the opinion that the adjudication proceedings under section 51 should be held, he shall issue a notice fixing a date for the appearance of that person either personally or through his lawyer or other authorised representative. That is clear from the very provision in sub-rule (3) of rule 3. It is not impossible to think that there may be instance when the adjudicating officer, after considering the cause shown, may be satisfied that no enquiry under section 51 is called for and drop the entire proceedings. Therefore, the notice under sub-rule (1) of rule 3 is something like an office memo issued before the disciplinary proceedings are initiated in ordinary civil cases in regard to Government servants. The notice issued under sub-rule (1) of rule 3 cannot, therefore, be considered to be one issued under section 51, commencing the enquiry under that provision. The notices issued in these cases are produced before us. They require the petitioners to show cause in writing within thirty days of the receipt of the memorandum why adjudication proceedings as contemplated under section 51 of the Act "should not be held against them".
6. Learned counsel for the petitioners had placed before use the notice which was issued under sub-rule (3) of rule 3 in similar cases, the authenticity of which is not disputed by the respondents. The form of that notice showed that when the adjudicating officer is of the opinion that adjudication proceedings as contemplated under section 51 of the Act should be held against the petitioners, the adjudicating officer issues notice to the person from whom the document is seized informing his that after a consideration of the cause shown by him, the Enforcement Officer is of opinion that adjudication proceedings, as contemplated under section 51, should be held against him and has accordingly fixed the case for personal hearing on a particular date. he is also specifically fixed the case for personal hearing on a particular dae. He is also specifically required to state whether he waives the personal hearing as provided in the proviso to rule 3. Sub-rules (3), (4), (5), (6) and (7) relate to the procedure to be followed in an enquiry held under section 51. In respect of the enquiry held under section 51, therefore, the commencement of the enquiry is with the notice issued under rule 3 of that provision. Learned counsel for the respondents, however, contended that in sub-rule (1) of rule 3, the opening words "in holding an enquiry under section 51 and it is to be treated as the commencement of the adjudication proceedings. I am unable to accept this contention of the learned counsel. We should kee in mind that in all cases where such documents or currencies are seized, they are not necessarily evidence of contravention of any of the provisions of the Act or the Rules framed thereunder. It may be that sub-rule (1) of rule 3 provides a safeguard to exclude those innocent persons from the humiliation of the proceedings for adjudication under section 51, and, therefore, before adjudication proceedings are initiated, a notice was required to be issued to him so that he can explain that there was no contravention of the provisions of the Act or the Rules framed thereunder. If even after that, the adjudicating officer was of opinion that an enquiry under section 51 of the Act is called for, then he decides to held the enquiry and then only it could be said that a regular legal proceeding for holding the enquiry had commenced. I am unable to extend the commencement of the enquiry t the earlier stage of issuing notice under sub-rule (1). I have to keep in mind that the adjudication and penalty under section 51 and 50 are criminal in nature. As already stated, if the adjudicating officer was satisfied that there was no need for an enquiry under section 51 after consideration of the reply to the notice issued under sub- rule (1), he could drop the entire proceedings, in which case it could not be stated that there was any enquiry held under section 51 at all. The provisions of rule 3 and sub-rule (4), (5), (6) and (7) are a code by themselves and they set out the complete procedure for holding an enquiry under section 51. Therefore, the enquiry under section 51, which as already stated is criminal in nature, could be stated to have commenced only with the issue of notice under sub-rule (3) of rul 3. If that was not the case, there was absolutely no reason why sub-rule (3) should provide for a second notice and why sub-rule (4) should provide that the adjudicating officer should explain to the person concerned the offence committed by the person indicating the provisions of the Act or of the Rules and give an opportunity to such person to produce oral and documentary evidence as he may consider relevant to the enquiry and upon consideration of the evidence produce, come to a conclusion whether the person has committed the contravention or not. Section 51 also specifically states that the adjudicating officer shall hold an enquiry in the prescribed manner after giving the person a reasonable opportunity of making a representation in the matter and that enquiry was for the purpose of adjudging under section 50 whether such a person has committed contravention of the provisions of the Act or of the Rules framed thereunder and if on such enquiry he is satisfied that the person has committed a contravention, he may impose such penalty as he thinks fit in accordance with the provisions of section 50. The opinion reached at the enquiry held in pursuance of the notice under sub-rule (3) is the "satisfaction" that is referred to in section 51. At the stage of sub-rule (1) no proceedings under section 51 could be said to have been initiated.
7. Learned counsel for the respondents also relied on the judgment of a Division Bench of this court in W. A. No. 65 of 1976 (Deputy Director of Enforcement v. K. A. Abdul Khadar) in support of his contention that the commencement of the proceedings under section 51 is with the notice under sub-rule (1) of rule 3. In that case arising under the Foreign Exchange Regulation Act, 1947, which contained analogous provisions, a certain sum of money was seized from the party therein on May 12, 1973. There was also a provision similar to rule 3 in the 1957 Rules framed under the Act of 1947. The notice under sub-rule (1) was issued on April 10, 1974, but that was returned unserved. In the meantime, the respondent therein issued a notice on July 16, 1974, for the return of the money as the period of one year had expired. The Department sent a reply to this letter on July 20, 1974, stating that they had already sent a notice on April 10, 1974, which had been returned unserved. On these facts, the question, as posed by the Division bench, was whether the department was entitled to retain the documents, i.e., currency notes, pending the proceedings. It was contended on behalf of the writ petitioner therein that mere issue of a notice is not enough and the one- year period will have to be determined with reference to the dated on which the notice was served. Repelling this contention, the Bench held that normally when a notice is posted, it is expected to be served on the addressee and that the service shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document. The Bench did not accept the contention that sending of the notice means service of the notice. The point, as raised in this case, that the notice under sub-rule (1) is not a notice of the commencement of the enquiry for adjudication under section 51, was not raised nor decided. I may also state that learned counsel for the petitioners contended that in the light of a number of decisions of the Supreme Court as also of the other High Courts rendered under the provisions of the Income-tax Act, this decision also requires reconsideration. But suffice it for the present to state that that the precise point was not considered in that judgment. In the circumstances, we are of the opinion that the enquiry under section 51 could not be stated to have commenced on the date of issue of notice under sub-rule (1) of rule 3.
8. Learned counsel for the respondents contended that this point was not specifically raised in the affidavit filed in support of the writ petitions and that, therefore, the petitioner should not be permitted to raise the same. For one thing, I am unable to agree with the learned counsel that this point was not specifically raised. In the affidavits filed in support of the writ petitions, it is stated that if the show-cause notice is not served within one year, the respondents have no jurisdiction or power or authority to take any further proceedings and, therefore, they are bound to return the money to the petitioners and drop all further proceedings against them. Why this could not be taken as a point raised is not understandable. Further, this is a legal question, not depending upon facts. It is not deputed that there was no notice issued subsequent to the one under sub-rule (1) of rule 3. Whether that notice will enable the officers to retain the documents or currency notes in these cases, is the question. All aspects of law could be advanced. In fact, though these petitions were taken up for hearing on December 19, 1986, inasmuch as learned counsel for the respondents contended that as this point was not specifically raised, he could not be of full assistance to this Court, the matter was adjourned and it was taken up yesterday (December 23, 1986) and continued today. The learned counsel for the respondents had, therefore, enough time to answer this contention of learned counsel for the respondents that the petitioners are not entitled to raise this point.
9. The learned counsel for the petitioners, as already stated, further argued that in any case the date of service of the notice is the relevant date for the purpose of determining the commencement of the adjudication proceedings under section 51 and the mere issuance of the notice or posting of it will not be enough. In this connection, four dates are relevant : (1) dated of the notice, (2) date on which it was posted (3) the date on which it was normally expected to be delivered by the postal authorities, and (4) the date on which it was actually delivered. However, I am not going into the question as to what is the relevant date in these cases since in my view this notice is not relevant and the notice as per rule 3(3) is the notice that commences the adjudication proceedings under section 51 as such.
10. In support of his argument, learned counsel for the petitioners also cited a decision of a learned single judge of this court reported in K. M. Amir Abdul Kader v. Deputy Director [1985] 5 ECC 277 (Mad). In that case the currency notes were seized under a mahazar on June 5, 1983. On December 3, 1984, a notice under rule 3(1) was issued. The Revenue wanted to contend that the adjudication proceedings have commenced and, therefore, they are entitled to retain the currency. The learned judge repelled this contention on two grounds. Relying on the decision of the Supreme Court in S. O. Arjunan Chettiar v. Enforcement officer [1977] 2 MLJ 5 (SC), the learned judge held that unless adjudication proceedings under section 51 had commenced within a period of one year, the Revenue is not entitled to retain the money. Secondly, the proceedings under section 51 also had not been commenced within the said period. In so holding, the learned Judge observed (at page 282 of [1985] 5 ECC] :
"In this case, apart from issuing a show-cause notice on December 3, 1984, under section 9(1) of the Act, nothing further has been done in the sense that no proceedings under section 51 or section 56 of the Act have been commenced before June 2, 1984, i.e., the expiry of one year from the date of seizure, viz., June 2, 1983. Plainly, therefore, the Officers of the Enforcement Directorate are not entitled to retain the document (Indian currency seized in this case) under section 41 of the Act."
11. The use of the words "apart from issuing a show-cause notice on December 3, 1984, under section 9(1)(b) of the Act, nothing further has been done in the sense that no proceedings under section 51 or section 56 of the Act have been commenced" according to learned counsel for the petitioner is suggestive of and imply that the learned that the learned Judge was also of the view that the notice under rule 3(3) is the one which commences the enquiry under section 51.
12. In view of the foregoing circumstances, the petitioners are entitled for the return of the currency. I am also to quote a passage which is apt in this regard from the decision of the Supreme Court in Arjunan Chettiar v. Enforcement Officer [1977] 2 MLJ 5 (SC), wherein the learned Judges have observed (at page 6):
"..... we must express our disapproval of the action of the department in retaining the document beyond the period of one year specified in section 41 of the Foreign Exchange Regulation Act, 1973. When the statutory provision requires that the documents seized from a person should not be retained for a period exceeding one year unless before the expiration of the said period, adjudication proceedings are commenced under section 51, the department must obey the law and return the documents unless in the meantime it has commenced adjudication proceedings under section 51. If it is found by the department that the period of one year, which is specified in section 41, is not adequate, it would be for the Legislature to amend the section in order to provide for extension of time, but so long as the section stands as it is, it must be complied with by the department."
13. On the facts and in the circumstances of the cases, therefore, the retention of the currency seized from the petitioners by the officers of the respondents cannot be justified. Accordingly , I allow the writ petitions and direct the respondents to return the currency seized from the petitioners on or before January 20, 1987. There will be no order as to costs.