Madras High Court
Vijayaraj Jain And Another vs Union Of India And Others on 6 November, 1995
Equivalent citations: [1998]91COMPCAS757(MAD), 1995(52)ECC18
Author: M. Srinivasan
Bench: M. Srinivasan
JUDGMENT S.S. Subramani, J.
1. Writ Petition No. 9380 of 1994 is filed by Bhabootimal Jain and his household servant Vagharam Choudhary. The said writ petition was filed on May 16, 1994, on the following allegations.
2. It is alleged in the affidavit filed in support of the petition that the petitioners are law abiding citizens, and the first petitioner has retired from active business activities since the past three years. The first petitioner has stated in the affidavit that his three sons are engaged in stainless steel business, dealing only in indigenous goods. It is said that the first petitioner's eldest son, Vijayaraj, is the proprietor of a firm "Vijaya Steel Center" at No. 11/C-1, Ekambareshwarar Agraharam, Madras-3. According to the first petitioners, after visiting a nearby Jain temple in the morning, he generally used to sit in the shop for some time, for the past more than three years. Petitioner No. 1 states in his affidavit that the petitioners have been constrained to take exception to the misuse of provisions of the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as "the FERA"), by a number of overenthusiastic Enforcement Officers under the sway of the fickle mistress that absolute power happens to be, against some luckless victims, like the petitioners. It is stated that the petitioners have fallen into the bad books of the Enforcement Officers. There was a raid on October 1, 1993, in the shop belonging to the elder son, Vijayaraj Jain. Nothing incriminating could be recovered, though a mahazar was prepared on that day. It is averred that after a lapse of more than seven months, the respondents, with a number of other Enforcement Officers, repeated the same exercise without any reasonable or probable cause, simultaneously at the residents of the first petitioner and the shop of his eldest son at Ekambareshwarar Agraharam on May 10, 1994. At that time, the first petitioner was not present in the house. His second son, Khimraj Jain, was present throughout. It is said that the second respondent and a couple of other Enforcement Officers ransacked the whole house. They commenced the raid at about 1.30 p.m. and continued the search till about 3 p.m. on May 10, 1994. They did not find any incriminating material whatsoever. Still, the Enforcement Officers arrested the first petitioner's second son, Khimraj Jain, from the house, to falsely implicate him in a white collar offence to be foisted on him through his involuntary statement recorded during the late hours of May 10, 1994, night, in Shastri Bhavan. It is said that while the respondents were kind enough to give a copy of the mahazar drawn at the house on May 10, 1994, they refused to give a copy of the statement dictated by them and written by the first petitioner's son, Khimraj Jain, for reasons best known to them. It is further said that Khimraj will separately agitate about his illegal arrest and detention by the Enforcement Officers. The first petitioner has further stated in the affidavit that respondents Nos. 2 and 3, with a number of other Enforcement Officers, conducted a raid at the shop of Vijayaraj Jain, at a time when he was absent. It is stated that the petitioners were present during the fateful time of raid on May 10, 1994, which had commenced around 11.45 a.m. The Enforcement Officers did not find any incriminating material in the shop. However, from the office situated in the first floor, they seized a sum of Rs. 3,21,800 in Indian currency. According to the first petitioner, the said office room was locked by his son, Vijayaraj, but the officers broke open the lock and sized the currency, which was the legitimate trade balance of the shop premises, which was under the management of his son, Vijayaraj. It is said that the Enforcement Officers commenced the search around 11.30 a.m. and continued the same till about 4 p.m. on May 10, 1994. During the course of the raid, they have seized the sum of Rs. 3,21,800 with some telephone books and some other insignificant papers of no commercial value. They also prepared a mahazar and gave a copy to the first petitioner (copy of which is filed along with the writ petition). It is said that after conducting the search and seizure of the shop in the manner mentioned above, respondents Nos. 2 and 3 and other Enforcement Officers took the petitioners to their illegal custody without there being any reason to believe that the petitioners are guilty of any offence punishable under any of the provisions of the FERA. They did not inform the petitioners about the grounds of their arrest from the shop on May 10, 1994. It is said that the petitioners were served with summons only under section 40 of the FERA, 1973, but actually the petitioners were arrested by respondents Nos. 3 and 4 at about 4 p.m. on May 10, 1994, and lodged in the Enforcement Directorate Office at Shastri Bhavan. The petitioners have stated that at dead of night, the third respondent dictated an inculpatory prolix statement to each of the petitioners separately to be written in their own handwriting, wherein they have freely used the words like "Singapore", "Deen", whereby they could attribute an offence of violation of the provisions of the FERA against the petitioners. Copy of the statement of the petitioners so recorded by the Enforcement Officers was not given to any of them, for reasons best known to the Enforcement Officers. The petitioners would say that the statements in question are not their voluntary statements and they do not reflect the true state of affairs. Copies of the summons issued under section 40 of the FERA, 1973, by the third respondent against the petitioners have been produced along with the writ petition. It is stated that the family members of the petitioners made frantic efforts to know the whereabouts of the petitioners, but they could not succeed. On the morning of May 11, 1994, family members of the petitioners approached Mr. C. R. Raghavan, advocate, and instructed him to find the whereabouts of the petitioners. The wife of the second son of the first petitioner gave a telegram to the Chief Justice, who was then at Kodaikanal, for the release of all the detenus. It is said that the advocate, Mr. C. R. Raghavan, also visited the office of the Enforcement Directorate on May 11, 1994, around 8.45 a.m. but he could not find any officer present in the office, and he was not permitted to meet any of the petitioners in the office. Thereafter, the first petitioner's family members contacted their present counsel to take suitable steps for release of the detenus, whereupon he made enquiries with the concerned vacation officer to bring the matter before an appropriate Bench. But, before they moved the vacation court, the petitioners themselves were released at 9.30 p.m. on May 11, 1994. The petitioners were directed by the third respondent orally to attend the Enforcement Directorate office on May 12, 1994, at 1 a.m. In the meanwhile, the petitioners addressed a telegram to the third respondent, retracting their involuntary statements recorded by him and have also stated therein that they would appear before the appropriate officer only on receipt of summons by the concerned officer. Copy of the telegram sent by the petitioners is also produced along with the writ petition. It is stated that even though the petitioners have been released from illegal detention, yet, the petitioners apprehend that their personal liberty lies at the hands of the overzealous Enforcement Officers, who may arrest them, on the basis of the involuntary and inculpatory statements given by them while they were under duress on May 10, 1994. Various grounds are mentioned in the writ petition by the petitioners as to why they have invoked the extraordinary original jurisdiction of this court.
3. It is stated that the Enforcement Officers have played a fraud on the statute by resorting to illegal detention in the guise of summoning the detenus to the Enforcement Officers either to give evidence or produce a document. It is stated that the detention of the petitioners was, therefore mala fide, contrary to law and extra-statutory. It is said that section 35 of the FERA empowers an Enforcement Officer to arrest persons suspected of being guilty of any offence punishable under the FERA. Again, arrests are to be generally resorted to where the detected offence is of a serious nature, or there is evidence of personal culpability and a strong prima facie case and the likelihood of the person tampering with the evidence or by remaining absconding. It is said that there is no such allegation so far as the petitioners are concerned. It is also said that procedural fairness is among the key purposes of the Constitution of India. According to the petitioners, their arrest is in direct violation of article 21 of the Constitution. The petitioners would say that there is a tendency on the part of the enforcement authority to bolster up a false case for its own subjective satisfaction or for statistical purposes. It is said that the powers conferred on the Enforcement Officers under sections 35 and 37 of the FERA, though very wide, are not plenary. It is further said that the powers under the statute to conduct a search, seizure and arrest of suspected persons can be exercised by competent officers, but that power is hedged in with a condition that the same could be exercised only if the officers had reason to believe, which expression is not synonymous with "subjective satisfaction" of the officers, and it is incumbent upon this court to examine ex debito justitiae, whether the reason for the belief had a rational connection or a relevant bearing to the formation of such belief and were not extraneous or irrelevant to the purpose of the sections. It is stated that the recovery of Indian currency to the tune of Rs. 3,21,800 from the shop of the first petitioner's son cannot connect the petitioners with the alleged violation of any of the provisions of the FERA. It is also said that an offence cannot be presumed, and that the respondents are bent upon creating something out of nothing, by manufacturing tons of evidence in the form of confessional statements obtained from the petitioners by resorting to tactics which the court would never countenance. It is said that the procedural requirements of section 35 of the FERA read with article 22 of the Constitution are all mandatory. In the instant case, the petitioners were arrested by the Enforcement Officers at 4 p.m. on May 10, 1994, and were kept in their illegal custody till 9.30 p.m. on May 11, 1994. This apart, during the custody, each petitioner was induced under threat of bodily injury, to give inculpatory statements in their own handwriting, copies of which have not been given to the petitioner. It is stated that the arrest and detention of the petitioners by the Enforcement Officers for more than 30 hours and voluntarily causing hurt to extort confessional statement from the petitioners renders the entire investigation process illegal, ultra vires and unconstitutional being violative of the Constitution of India read with section 58 of the FERA, 1973. It makes the judicial process an object of aberration and abuse, which ought to be prevented to secure the ends of justice.
4. For the above reasons, the petitioners wanted this court to issue an appropriate writ, order or direction, declaring the search and seizure of Rs. 3,21,800 and arrest of the petitioners herein by the respondents on May 10, 1994, from the premises bearing Door No. 11-C/1, Ekambareshwarar Agraharam, Park Town, Madras-3, to be unconstitutional, ultra vires, illegal and prohibiting the respondents from continuing the investigation relating to petitioners, and also for other reliefs which this court may deem fit and proper in the circumstances of the case.
5. Along with the writ petition, the petitioners filed W.M.P. No. 14267 of 1994, praying for an order staying all further proceedings as incorporated in Summons No. T3/130/S2/C/94, dated May 10, 1994, pending disposal of the writ petition.
6. The writ petition came up for admission on May 18, 1994. This court ordered notice in W.M.P. No. 14267 of 1994, while admitting the writ petition.
7. For the writ petition, a counter affidavit was filed by the respondents, stating that the officers of the Enforcement Directorate, while conducting investigations under the FERA, have been acting strictly in accordance with the procedure laid down by law. The allegation that the petitioners were in the bad books of the Enforcement Officers is denied. It is stated that the Directorate of Enforcement conducts investigation when there is sufficient material in their hands which necessitates an investigation. It is admitted that on October 1, 1993, there was a search carried out by the officials of the Enforcement Directorate at Shop No. 11-C/1, Ekambareshwarar Agraharam. It is stated by the respondents that even though nothing had been recovered, no adverse inference can be inferred against the respondents. It is further stated by the respondents that the allegation in the affidavit that nothing incriminating was found at the time of search of May 10, 1994, is not correct, as a sum of Rs. 3,21,800 was seized from the shop, and, according to the first petitioner in the voluntary statement given by him to the officers of the Directorate of Enforcement, a sum of Rs. 3,20,000 had been paid by an unknown person by order of one Deen of Singapore having telephone No. 2944422 and the balance of Rs. 1,800 belonged to the shop. It is stated that copy of the voluntary statement given by the first petitioner will be given to him as and when any adjudication proceedings under the Foreign Exchange Regulation Act are initiated. It is also averred that the first petitioner's sons, Vijayaraj and Khimraj, filed W.P. No. 9539 of 1994, challenging section 40 of the FERA as unconstitutional, unenforceable, and also for the issue of a writ of mandamus, directing the return of the sum of Rs. 3,21,800 and other documents lawfully seized under the mahazar dated May 10, 1994. It is stated that the respondents have filed detailed counter-affidavit in W.P. No. 9539 of 1994. It is further stated that a reading of the mahazar dated May 10, 1994, will disprove the statement that the respondents had broken open locks and seized the sum of Rs. 3,21,800. It is also denied that the said amount was the legitimate trade balance of the shop. The first petitioner himself, in his voluntary statement, has stated that there are no account books. In view of this, the claim of the petitioners that the search of the shop of Vijayaraj Jain at Ekambareshwarar Agraharam on May 10, 1994, was without reasonable or probable cause, is not correct. It is further contended in paragraph 8 of the counter that the petitioners were not taken into custody at any time as alleged, and that summons was issued to the petitioners to appear in the office of the Enforcement Directorate, Madras. Accordingly, the petitioners appeared before the officials of the Enforcement Directorate and gave voluntary statements, in their own handwriting, in which they have used the words "Singapore" and "Deen". It is further contended that a show-cause notice dated October 20, 1994, for contravention of section 9(1)(b) of the FERA, to the extent of Rs. 3,20,000 has been issued to the first petitioner. The said show-cause notice has been returned undelivered with the remarks "Not found, not claimed and later served in person on January 11, 1995". In the said show-cause notice, the petitioners were also informed that if they want they can also inspect the originals of the documents which the department wants to rely on.
8. In the later portions of the counter-affidavit, the respondents have also stated that the petitioners were never arrested nor detained, as alleged in the affidavit, and that there was no violation of article 21 of the Constitution of India. It is further stated that the department had enough material in its possession, leading the officers to believe that the facts and circumstances of the case necessitated a search and seizure. It is further stated that the seizure of currency of Rs. 3,21,800 was made by the officers concerned, as the first petitioner was not able to give any satisfactory explanation regarding the said amount. The statement given any satisfactory explanation regarding the said amount. The statement given by the first petitioner was voluntary and he was not induced or coerced to give any statement. It is further stated that the concerned Enforcement Officers were satisfied on the basis of information in their possession that a search was necessary, and the seizure of the sum of Rs. 3,21,800 in Indian currency was warranted as no satisfactory explanation had been given by the first petitioner. The respondents wanted dismissal of the writ petition.
9. After the counter-affidavit was filed, the petitioners in W.P. No. 9380 of 1994 filed W.M.P. No. 4841 of 1995 to amend that writ petition. We have, by a separate order, allowed the said petition for amendment.
10. Without waiting for a formal order in the amendment petition, namely, W.M.P. No. 4841 of 1995, the petitioners, on February 27, 1995, filed an amended writ petition and affidavit, incorporating the proposed amendments, and also a typed set of papers containing the statement given by the first petitioner before the Enforcement authorities which is in vernacular language, English translation of the same, and also the show-cause notice received by him on January 11, 1995.
11. The presentation of an amended petition and affidavit is not the proper procedure. Normally, after the petition is allowed, the amendments will be carried out in the writ petition. In the instant case, the parties know the legal consequences of the proposed amendments and, therefore, we do not stand on technicalities since we have heard arguments on the entire matter.
12. Now, let us see as to what is the relief that is sought for in the amended writ petition. The petitioners pray for the issue of an appropriate writ, order or direction in the nature of certiorari, calling for the records in the case of T4/77/S2/C/94, on the file of the first respondent (Mr. A. K. Banerjee, Deputy Director, Enforcement Directorate), and to quash the memorandum of show-cause notice ante-dated as October 20, 1994 (actually served on petitioner No. 1 on January 11, 1995). The other reliefs sought for in the amended writ petition are the same that were prayed for before amendment. So, the additional prayer that is sought to quash the show-cause notice.
13. The relief of quashing the show-cause notice is sought for on the basis that the proceedings have not been initiated within six months from the date of seizure of the amount from the business premises. It is said that though the search and seizure were on May 10, 1994, proceedings have been initiated only on January 11, 1995, when the first petitioner received the show-cause notice which, according to the petitioners, is beyond six months, and hence invalid. It is also stated that since it is beyond six months, the respondents are not entitled to retain the amount seized and the same is liable to be returned. It is also stated that before initiation of proceedings, there was no reason to believe that the petitioners have violated any of the provisions of the FERA, and the respondents are only fishing on suspicion, and the entire procedure adopted by the respondents is illegal.
14. Since the respondents have already filed a counter-affidavit in the amendment petition, meeting all the contentions made therein, a further counter-affidavit was not filed by the respondents to the amended writ petition.
15. Writ Petition No. 9539 of 1994 :
This writ petition is filed by the two sons of the first petitioner in W.P. No. 9380 of 1994.
16. In the affidavit filed in support of the said writ petition, which is sworn to by the first petitioner therein, it is stated that they are law abiding citizens earning their livelihood by legitimate means. The first petitioner is a wholesale dealer in stainless steel utensils, running a proprietary firm in the name and style of "Vijay Steel Centre" at No. 11-C/1, Ekambareshwarar Agraharam, Park Town, Madras-3, duly registered under the Tamil Nadu General Sales Tax Act as well as the Central Sales Tax Act. The second petitioner is running a factory at No. 3 T. R. Mudali Street, Madras-79, engaged in manufacturing stainless steel Dip-Dabbas on job works. Both the petitioners are assessees under the Income-tax Act. The petitioners are residing with their parents in a rented house at No. 63, Nethaji Subhash Chandra Bose Road, Madras-600 079. It is said that on October 1, 1993, an army of officers from the Enforcement Directorate, without any credible information or reasonable or probable cause, gatecrashed into the shop of the first petitioner and ransacked the entire shop premises. The first petitioner was not present at the relevant time, but the second petitioner was present. The raid continued for more than an hour, but nothing incriminating was found. A mahazar was also prepared. It is said that the drama did not end there, and that after seven months, respondents Nos. 3 and 4, with an army of several other Enforcement Officers, repeated the same exercise, and this was on May 10, 1994. The officers simultaneously raided the shop as well as the residence. During this period, the second petitioner alone was present in the house premises, and the petitioner's father, Bhabootimal, and their servant, Vagharam, were present in the shop premises. It is said that at the commencement of the raid in both the places, the Enforcement Officers reportedly showed two cyclostyled parchment of papers purporting to be search warrants, reportedly signed by the second respondent. The officers took the signature of the second petitioner in one of the so-called search warrants and that of the petitioners' father and their servant, Vagharam, on the other one. It is said that nothing incriminating was found in the house premises. But, however, from the shop premises belonging to the first petitioner, the officers seized a sum of Rs. 3,21,800 in Indian currency and also other documents which included a Directory of Metal Merchants Association, Telephone Index (2 numbers) and one note book with 23 written pages. It is further said that the amount represented the trade balance of the shop premises, a proper account of which is maintained by the first petitioner. Neither the petitioner's father nor their servant was concerned or connected with the Indian currency in question. The same was disclosed by the father to the Enforcement Officers. A mahazar was prepared on May 10, 1994, both at the residential premises and the shop premises. Copies of the same have been filed along with the writ petition. It is said that the second petitioner was arrested from the residence, and the petitioners' father and their servant were arrested from the shop premises by about 4 p.m. on May 10, 1994. They were not informed about the ground of arrest. They were lodged in the hall of the Enforcement Directorate at the III Block in the III Floor of the Shastri Bhawan Building for two days without being produced before any Magistrate and without permitting them to contact any of their family members or any advocate. It is said that on May 10, 1994, night, the fourth respondent directed the detenus to give a statement in their own hand-writing, as dictated by the officers. The detenus were warned of serious bodily injury if they refused to co-operate. Thus the statements were obtained from them, but they were not given copied thereof. When they were not released till the morning of May 11, 1994, the second petitioner's wife gave a telegram to the Chief Justice, who was then at Kodaikanal, requesting for appropriate direction to release the second petitioner, his father and their servant, who according to her, were taken into illegal custody. The second petitioner's wife deputed an advocate also to visit the office of the Enforcement Directorate at Shastri Bhawan, but the advocate was not allowed to meet any of the detenus. The detenus continued to remain in their custody for the second day i.e., May 11, 1994, also, without being produced before any Magistrate. At last, at about 9.30 p.m. on May 11, 1994, all the three detenus were released by the Enforcement Officers.
17. It is said that the second petitioner is aggrieved by the illegal raid of his residential premises and his illegal arrest and detention by the Enforcement Officers on May 10, 1994, for more than 30 hours. According to the petitioners, the safeguards provided under the FERA have been given a go-by, and in the Enforcement Directorate, adherence to the prescribed procedure is only optional and not mandatory. It is said that on May 21, 1994, the first petitioner received summons from the fourth respondent, calling upon him to appear before then fourth respondent in person on May 21, 1994, at 10.30 a.m. The fourth respondent called upon the first petitioner to produce his passport, bank pass book and property details. According to the petitioners, the summons is blank and bald. It does not indicate what is the subject-matter of the investigation. The petitioners are questioning the constitutional validity if section 40 of the FERA, 1973. It is said that the petitioners are aggrieved by the highhanded manner in which the entire search and seizure were made. They seek relief from this court on the grounds stated therein. According to them, there is no reason to believe that they have committed any offence coming under the FERA, and there is no material before the so-called search and seizure for the satisfaction of the respondents to make a search or to arrest the second petitioner. It is further stated that even though the second petitioner has given a statement given by him is not voluntary. It was obtained under coercion and as dictated by the fourth respondent herein. It is said that section 37 of the FERA confers drastic powers of search and seizure on the Enforcement Officers, and that, unlike similar English statutes, there is no requirement of taking prior approval of any other authority after placing the materials on the basis of which the search is proposed to be conducted. The only safeguard against abuse of power is the requirement of having "reason to believe". But even this slender requirement is invariably followed in the breach rather than in its compliance. It is said that the Enforcement Officers make a scare-crow of his ritual by adopting ingenious methods. The Enforcement Officers would bring with them a cluster of search warrants sealed and signed in advance by some Enforcement Officers, comparatively higher in rank, and they would fill up the blanks at the time of conducting the raid, to show the said search warrant from a distance and call upon the occupant of the house or shop to put his signature on the so-called search warrants, without giving him a copy thereof. It is further said that the so-called search warrants seldom contain any ground, on the basis of which it can even be surmised that the officer had "reason to believe" that documents useful for the purpose of investigation under the FERA were being secreted in that place. Thus, according to the petitioners, the officers of the Enforcement Branch acquire an unfettered right to break into any home or office at any time and carry out search and seizure proceedings. This makes a mockery of the statutory requirement of "reason to believe" which is the only feeble safeguard that a citizen has against unlawful trespass by the Enforcement Officials into his home or office. The petitioners also say that the Supreme Court of India as well as various High Courts have held in many cases that where the officer competent to take action can exercise his authority of taking action only when he has "reason to believe", the court can examine the materials to find out whether an honest and reasonable man of ordinary prudence can base his reasonable belief upon such materials, although the sufficiency of the reasons for the belief cannot be investigated by the court. Nevertheless, it should be based on definite information which must be anterior in point of time to the search or seizure, and not subsequent to it. It cannot, therefore, be the result of the facts discovered or circumstances revealed during the process of search and seizure. It is also stated that the reasonable belief should always be above the uncertain thing, called "suspicion". According to the petitioners, in this case, the search was really of fishing nature, and the second respondent who reportedly issued bald and blanket search warrants and respondents Nos. 3 and 4, with an army of other Enforcement Officers, who conducted the search in the hope of finding some incriminating documents, acted contrary to the provisions of section 37 of the FERA. It is further said that even though the petitioners' father represented before the officers that the amount seized by them represented the trade balance, the respondents were in a hurry to act, and acted with vengeance because they found the petitioners" servant to be protesting too much. It is also averred that, to conduct a raid or to arrest any person and detain him in custody, the Enforcement Officers do not need any law or any procedure known to law. To prosecute any citizen, they do not require any independent evidence or tangible material. The inculpatory statement of the person concerned, obtained by threat and inducement, is made admissible in courts. It is said that the phrase "reason to believe" has practically lost its legal as well as grammatical meaning in the Enforcement Branch. The Enforcement Officials have unlimited powers to enter people's premises and take their property away, and these powers are frequently exercised on a massive scale. When their action is challenged in a court of law, the officers refuse to divulge the grounds for formation of the belief on the ground that it would frustrate the investigation altogether. It is said that the process has gone too far. It is further said that the arrest of the arrest of the second petitioner from his residence on May 10, 1994, at about 4 p.m. by the Enforcement Officers and keeping him in their illegal custody till 9.30 p.m. on May 11, 1994, is unconstitutional, ultra vires and in colourable exercise of the power of arrest enjoyed by the over-enthusiastic Enforcement Officers arrayed as parties to these writ petitions. Further, according to the petitioners, the arrest and detention of the second petitioner offends article 22 of the Constitution as well as section 35 of the FERA, 1973, and hence it is without jurisdiction. It is further stated that the search and seizure of the sum of Rs. 3,21,800 with other documents from the de jure custody of petitioner No. 1 is mala fide and respondents Nos. 3 and 4 along with other Enforcement Officers have rendered themselves liable to be prosecuted for offences punishable under sections 219, 220 and 330 of the Indian Penal Code, 1860, read with section 58 of the FERA. It is stated that even though the intention in passing the legislation is good, in the hands of an unscrupulous and unprincipled executive, it has become a curse on the people. According to the petitioners, section 40 of the FERA gives unbridled power to a designated officer to summon any person on the pretext of conducting an investigation without revealing the subject-matter of such investigation, and that an uncanalised power is conferred upon Enforcement officers under the said section, and this power is used by the officers in the guise of investigation, and the victims are subjected to this degree methods to give voluntary statements in their own hand-writing. According to the petitioners, in substance, the impugned law seeks to infringe then fundamental rights of a citizen as conferred by articles 14, 19(1), 20(3) and 21 of the Constitution, and it seeks to abridge or abrogate those of the rights as enshrined in Chapter III of the Constitution. Therefore, the petitioners seek to declare section 40 of the Foreign Exchange Regulation Act to be invalid and unenforceable in so far as the petitioners are concerned. They also pray that a writ mandamus may be issued directing the respondents to return the sum of Rs. 3,21,800 and other documents alleged to have been seized illegally by the Enforcement Officers under the mahazar dated May 10, 1994, from the office of the first petitioner, with interest thereon at 24 per cent. per annum from the date of seizure till the date of repayment, and also for a direction to the respondents to pay suitable monetary compensation for the illegal search and seizure of Indian currency belonging to the first petitioner, and also for the intentional, deliberate and motivated harassment of the second petitioner by the Enforcement Officers, and also for a further direction to the first respondent. Union of India, to set the criminal law in motion against respondents Nos. 3 and 4 and six other Enforcement Officers responsible for the illegal search and seizure of the Indian currency of the first petitioner and arrest and detention of the second petitioner, and for other reliefs as this court may deem fit and proper in the circumstances of the case.
18. A detailed counter-affidavit has been filed by the respondents, and the same is sworn to by the second respondent, Deputy Director of the Enforcement Directorate, stating as follows :
On the basis of reliable information, the shop premises of Vijay Steel Centre were searched on January 19, 1993, by the officers of Enforcement Directorate, in terms of section 37 of the FERA. While the first petitioner's shop premises were searched between 11.45 hrs. and 15.40 hrs. on May 10, 1994, his residence was searched the same day between 13.30 hrs. and 14.15 hrs. As regards the amount of Rs. 3,21,800, the father of the petitioners explain in his statement dated May 10, 1994, that on the morning of May 10, 1994, he had received Rs. 3,20,000 from an unknown person by order of one Deen of Singapore having telephone No. 2944422 and that the balance amount of Rs. 1,800 belonged to the shop, and that there were no accounts for the said amount of Rs. 1,800 and the cash book was also not there. The searches were conducted in terms of section 37 of the FERA, as a result of which Rs. 3,21,800 and certain documents were seized under the reasonable belief that the same certain documents were seized under the reasonable belief that the same would be useful for further investigation under the FERA. The sequence of events right from the commencement of the search till the conclusion of the search have been clearly spelt out in the mahazar duly drawn up on the spot. Apart from the father of the petitioners, two independent witnesses had affixed their signatures on the search warrant as well as the said mahazar. A copy of the mahazar was also given to the petitioners' father, and there was nothing illegal in the search or the seizure. The search of the residence of the petitioners did not result in any recovery and the search was conducted in the presence of the second petitioner, Khimraj Jain. Subsequently, the fourth respondent, who was available in another premises in the same locality, visited the residential premises of the petitioners. On the spot itself, the second petitioner gave a statement before the said officer under section 39 of the FERA. Thereafter, the officer left the spot. The second petitioner was not arrested as contended by the petitioners. The petitioners' father and their servant, Vagharam, who received summons to appear in the officer of the Enforcement Directorate, Madras, appeared accordingly and gave their statements dated May 10, 1994, before the Summoning Officer, and left the office immediately. They were not arrested as alleged by the petitioners. According to the respondents, both of them gave statements of their own volition, and no coercion or force was used. The petitioners' father, who was shown the documents seized from the shop of Vijay Steel Centre on May 10, 1994, stated that the writings in these documents were that of his son, first petitioner herein. Moreover, Vagharam, employed in Vijay Steel Centre, also stated in his statement dated May 10, 1994, that only the first petitioner could explain about the seized documents. In such circumstances, summons dated May 20, 1994, was issued to the first petitioners in terms of section 40 of the FERA, directing him to appear before the Enforcement Directorate on May 27, 1994 at 10.30 hrs. with the documents specified therein, in the Schedule. The searches did not result in the seizure of the first petitioner's passport or his bank pass book or the details of his properties, and, therefore, the first petitioner had been asked to produce the same during his appearance. All the necessary ingredients of a summons under section 40 of the FERA were complied with, and the same was also clearly pointed out in the summons. The second petitioner was not at all arrested. He gave a statement before the Enforcement Officer on May 10, 1994, under section 39 of the FERA, in his residence itself after the search was completed. He was not brought to the office of the respondents at all. The respondents deny the allegation that the second petitioner was kept in illegal custody. It is stated that copies of the statements will be furnished to the petitioners as and when proceedings are initiated for adjudication.
19. It is further stated by the respondents in their counter that the search under section 37 of the FERA is not such a simple procedure as averred by the petitioners. Certain procedures have to be followed invariably while conducting search and seizure operations. It is not mandatory on the part of the officer who is authorising the search of the premises under section 37 of the FERA, to mention in the search warrant the grounds on the basis of which he has "reason to believe" that documents useful for the purpose of investigation under the FERA are secreted in that place. It is further stated that the respondents had some basis for the reasonable belief. It is also stated by the respondents had some basis for the reasonable belief. It is also stated by the respondents that the search warrants were not bald and blank, as alleged by the petitioners. It is further stated by the respondents that in respect of the amount seized from the shop, the petitioners could not produce any accounts or explain the source for the same.
20. A reply affidavit has been filed by the petitioners wherein they have reiterated their original contentions. They have further stated that the unknown person "Deen of Singapore" or his fictitious telephone number are not found in the text of the mahazar dated May 10, 1994. They also say that the deponent of the counter-affidavit has not produced copy of the petitioners' father's statement dated May 10, 1994, and that the Enforcement Officers have recorded the statement of the first petitioner under section 40 of the FERA on May 27, 1994, which is subsequent to May 10, 1994. These statements have not been produced before the court. The statement of the respondents that the fourth respondent was present and took a statement from the second petitioner is also not admitted. They say that the deponent of the counter-affidavit has rendered himself liable to be punished under section 196 of the Indian Penal Code, 1860, by having fabricated false evidence. They have also stated that the respondents have not produced any tangible material before court to come to a conclusion that prima facie the currency notes were tainted with contravention of any specific provision of law. They want this court to declare section 40 of the FERA as unconstitutional and invalid. They further say that the respondents have come forward with a cock and bull story denying the arrest of the petitioners' father and their servant and also the second petitioner. They wanted an enquiry to be conducted into the offence committed by the respondents, under section 195(1)(6) of the Criminal Procedure Code.
21. Along with Writ Petition No. 9539 of 1994, the petitioners filed W.M.P. No. 16365 of 1994 for a direction to return the sum of Rs. 3,21,800 seized by the respondents.
22. A learned judge of this court, after hearing both sides, dismissed the said petition. It is against that order, Writ Appeal No. 679 of 1995 has been filed.
23. In the order dismissing W.M.P. No. 16365 of 1994, the learned judge has directed that both the writ petitions may be heard together.
24. When this writ appeal came up for admission, this court felt that it is better to dispose of the writ petitions also along with the writ appeal, and hence they were also called for hearing.
25. In the writ appeal also, the petitioners (appellants) have filed C.M.P. No. 8257 of 1995, to restrain the respondents-Enforcement Officers from continuing the adjudication proceedings, C.M.P. No. 8258 of 1995, for a direction to the respondents to return Rs. 3,20,000, seized from the father of the petitioners.
26. In the writ appeal, the appellants are referred to as sons, who are the petitioners in W.P. No. 9539 of 1994.
27. Even though the constitutionality of section 40 of the FERA was questioned in the writ petitions rejoinder and reply affidavit, at the time of arguments, learned counsel for the petitioners submitted that he reserves that argument to be raised in some other case and that, therefore, that question need not be decided in these petitions. Learned Additional Central Government standing counsel also did not have any objection to this course. So, we make it clear that we are not deciding the constitutionality of section 40 of the FERA in these proceedings.
28. In both these writ petitions, the main contention that is put forward by the petitioners is that there is no "reason to believe" for the issue of search warrants, and the action of the respondents is highhanded and the same amounts to infringement of their privacy. They also say that "reason to believe" is a condition precedent before issuing any search warrant and the materials which the respondents are said to have collected, must be anterior to the issue of search warrant. They also contend that even in the counter-affidavit, the details of the materials have not been disclosed, and the act of the respondents is only in the nature of investigation on the basis of some suspicion. According to them, the respondents are searching for materials, and no ground has been made out for the issue of search warrant. In fact, according to them, the respondents are liable to be prosecuted for having violated the provision of the FERA, especially section 58 of that Act, and they want that the respondents should be proceeded against for the same.
29. In the counter-affidavit, in both the cases, it is stated that the respondents had information about the violation of the FERA, and only after getting information, the search was made. According to them, there was "reason to believe", and the materials collected by them will satisfy any court that they acted bona fide and in accordance with law. It is stated by them that it being an economic offence and that too which requires investigation the seizure itself was effected only for the purpose of investigation, and any disclosure of the details will hamper the same. It is further stated that the information which they have collected is confidential, which cannot be disclosed.
30. When the matter was being argued learned Additional Central Government standing counsel expressed that they are prepared to hand over the file for inspection by the court, and they are ready with the concerned file. In fact, the file was also handed over to us for inspection. But learned counsel for the petitioners submitted that we should not take into consideration anything contained in the file as the same had not been disclosed in any proceedings before the court even though a counter-affidavit has been filed in both the writ petitions. According to learned counsel for the petitioners, if we look into the files the petitioners will be prejudiced and he pleaded that we should not look into the same.
31. Section 37 of the FERA reads thus :
"37(1) If any Officer of Enforcement, not below the rank of an Assistant Director of Enforcement, has reason to believe that any documents which, in his opinion, will be useful for, or relevant to, any investigation or proceeding under this Act, are secreted in any place, he may authorise any Officer of Enforcement to search for and seize or may himself search for the seize such documents.
(2) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches, shall, so far as may be, apply to searches under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word 'Magistrate', wherever it occurs, the words 'Director of Enforcement or other officer exercising his powers' were substituted."
32. The language used is, "Officer of Enforcement ... has reason to believe that any documents which, in his opinion, will be useful for, or relevant to, any investigation or proceeding under this Act, are secreted in any place, he may authorise any Officer of Enforcement to search for and seize such documents." The question as to what is the scope of "reason to believe" has come up for consideration in various decisions of the Supreme Court and High Courts. In this connection, it is also to be noted that the circumstances under which an Officer of the Enforcement Directorate entertains the belief has to be viewed from his experienced eye, which is well equipped to interpret the suspicious circumstances and form a reasonable belief in the light of the said circumstances. That reasonable belief which the officer had entertained is not a matter which can be placed under a legal microscope, with an over indulgent eye which sees no evil anywhere within the range of its eyesight. In State of Gujarat v. Mohanlal Jitamalji Porwal , their Lordships of the Supreme Court, while considering the scope of sections 123 and 135(1) read with section 111 of the Customs Act, 1962, held thus :
"This court has administered caution to the courts not to sit in appeal in regard to this question and has observed that if prima facie there are grounds to justify the belief the courts have to accept the officer's belief regardless of the fact whether the court of its own might or might not have entertained the same belief. The law declared by this court is binding on the High Court and it was not open to the High Court to do exactly what it was cautioned against by this court. Section 123 of the Act does not admit of any other construction. Whether or not the officer concerned had entertained reasonable belief under the circumstances is not a matter which can be placed under a legal microscope, with an overindulgent eye which sees no evil anywhere within the range of its eyesight. The circumstances have to be viewed from the experienced eye of the officer who is well-equipped to interpret the suspicious circumstances and to form a reasonable belief in the light of the said circumstances."
33. The said decision was followed by the Supreme Court in Indru Ramchand Bharvani v. Union of India which was also a case under the Customs Act. It is further held in that case that once it is held that there are materials relevant and germane, the sufficiency of the materials is not open to judicial review. We are only concerned whether there was material or not, and not its sufficiency. For that is a matter which the officer of the department has to consider, and whether that material has got any connection with the search and seizure. In paragraph 16 of the said judgment, their Lordships held thus :
"... 'reasonable belief' that the goods were smuggled goods, is not a question on which the court can sit on appeal. The circumstances under which the officer concerned entertains reasonable belief, have to be judged from his experienced eye of one who is well equipped to interpret the suspicious circumstances and to form a reasonable belief."
34. In Pukhraj v. D. R. Kohli, , their Lordships were considering the question of confiscation of goods under Sea Customs Act. A contention was taken before the court that seizure of gold from the appellant in that case had been effected by the officer concerned without any reasonable belief that the goods were smuggled. The argument was that the question as to whether there was any reasonable belief or not is justiciable, and since there is no material on record to show that the belief could have been reasonable, the statutory presumption cannot be raised. Their Lordships repelled the contention. It was said that there are two broad features, in the seizure which cannot be ignored. The first feature was the quantity of the gold in question. The appellant in that case was carrying five bars of gold weighing 290.6 tolas, the value of which was nearly Rs. 30,000 and the second feature was, he was travelling without a ticket. On these two circumstances, their Lordships said that the officer concerned was justified in having an impression that the gold that was being carried by the appellant was smuggled gold. Their Lordships further said that the sufficiency of the "reasonable belief" cannot be challenged before the court, as the court is not sitting in appeal over the decision of the said officer. All that it can consider is, whether there is ground which prima facie justifies the said reasonable belief.
35. Issardas Daulat Ram v. Union of India, , is also a case under the Sea Customs Act. Their Lordships said that there cannot be a direct evidence and the same can be deducted or inferred otherwise. In that case, it was held thus (headnote) :
"Though there is no direct evidence that the gold which was confiscated had come into the country after March 25, 1947, when the first notification under the Foreign Exchange Regulation Act placing a ban on the importation of gold was issued, it is not as if this cannot be deduced or inferred otherwise.
Where in order to reach his finding about the gold being smuggled, the Collector referred to the conduct of the appellants to whom the gold belonged in connection with (a) the credibility of the story about the purchase of that gold from three parties, (b) the price at which the gold was stated to have been purchased which was loess than the market price, and (c) the hurry exhibited in trying to get the gold melted at the refinery with a small bit of silver added, so as to reduce the fineness of the gold and thus approximate the resultant product to licit gold found in the market
36. Held, that those were undoubtedly relevant pieces of evidence which bore on the question regarding the character of the gold, whether it was licit or illicit. There was, therefore, material before the Collector, to justify the finding that the gold was smuggled.
37. In S. Narayanappa v. CIT, , the question that came up for consideration was under section 34 of the Income-tax Act, regarding the reopening of the assessment. While interpreting "reason to believe" under section 34 of the Income-tax Act, their Lordships held thus :
"It is true that two conditions must be satisfied in order to confer jurisdiction on the Income-tax Officer to issue the notice under section 34 in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year. The first condition is that the Income-tax Officer must have reason to believe that the income, profits and gains chargeable to income-tax had been underassessed. The second condition is that he must have reason to believe that such 'underassessment' had occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer acquires jurisdiction to issue a notice under the section. But the legal position is that if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of underassessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue the notice under section 34. Whether these grounds are adequate or not is not a matter for the court to investigate. In other words, the sufficiency of the grounds which induced the Income-tax Officer to act is not a justiciable issue. It is of course open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. In other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief."
38. In R. S. Seth Gopikisan Agarwal v. R. N. Sen, Asst. Collector of Customs and Central Excise, , their Lordships were considering the very same words, namely, "reason to believe", under section 105 of the Customs Act. The entire paragraph 6 and a portion of paragraph 7 are relevant for out purpose, and they read thus (page 1299) :
"The relevant part of the authorisation reads thus :
Whereas information has been laid before me of the suspected commission of offence under section 11 read with section 111 of the Customs Act, 1962 (52 of 1962), and it has been made to appear that the production of contraband goods and documents relating thereto are essential to the enquiry about to be made in the suspected offence ... Though the words 'reason to believe' are not in terms embodied in the authorisation, the phraseology used in effect and substance means the same thing.
The next contention is that on a reasonable construction of the said provision it should be held that the Assistant Collector of Customs should not only give reasons for his belief but also the particulars of the nature of the goods and of the documents, for, if the reasons and the particulars are not given, the officer authorised may make a roving search of the house which is not in the contemplation of the said section. This argument may be dealt with in two parts. In terms, section 105 of the Act does not say that the Assistant Collector shall give reasons. The power conferred on him under section 105 is not subject to any such condition. Though he cannot make a search or authorise any officer to make a search unless he has reason to believe in the existence of the facts mentioned in the section, the section does not compel him to give reasons. While it may be advisable, and indeed proper, for him to giver reasons, the non-mention of reasons in itself does not vitiate the order. Nor can we agree with the appellant that the particulars of the nature of the goods and of the documents should be given in the authorisation. Obviously, no question of giving of particulars arises if he himself makes the search, but if he authorize any officer to do so, he cannot give the particulars of the documents, for they will be known only after the search is made ..."
39. In Balumal Jamnadas Batra v. State of Maharashtra , was also a case under the Customs Act, where a person was carrying gold. Their Lordships of the Supreme Court justified the action of the department and held that there was "reason to believe" for the following reasons :
"The very appearance of the goods and the manner in which they were packed indicated that they were newly manufactured and brought into this country very recently from another country. The inscriptions on them and writing on the boxes were parts of the state in which the goods in unopened boxes were found from which inferences about their origin and recent import could arise. The appellant's conduct, including his untruthful denial of their possession, indicated consciousness of their smuggled character or mens rea. In any case, there was some evidence to enable the courts to come to the conclusion that the goods must have been known to the appellant to be smuggled even if he was not a party to a fraudulent evasion of duty ..."
40. The Supreme Court had occasion to consider the scope of section 37 of the FERA, in the decision in Dr. Partap Singh v. Director of Enforcement, Foreign Exchange Regulation Act . In that case also, the only averment in the counter-affidavit was that on the basis of official record and reliable information the officer had entertained reasonable belief in issuing a search warrant. The Officers of the Enforcement Directorate expressed their willingness to hand over the file before the court, and in fact, at the time when the matter was heard first the file was not before the court, and on the next adjourned date as directed by the court, the department produced the file and the court perused the same for its own satisfaction whether the department had material to entertain a reasonable belief. From paragraph 8 onwards, the judgment deals with the argument put forward by learned counsel for the petitioner before the court. The argument advanced by learned counsel for the petitioners in this case is also similar. It is contended counsel for the petitioners in this case is also similar. It is contended by learned counsel that the counter-affidavit has only repeated the wordings in the section, which is not sufficient to discharge the burden. He further argued that, in case the court is going to look into the file, the contents of the same should be disclosed to him also so that he can controvert the same. The entire law has been discussed by their Lordships from paragraph 9 onwards, which reads thus :
"When an Officer of the Enforcement Department proposes to act under section 37 undoubtedly, he must have reason to believe that the documents useful for investigation or proceeding under the Act are secreted. The material on which the belief is grounded may be obtained through intelligence or occasionally may be conveyed orally by informants. It is not obligatory upon the officer to disclose this material on the mere allegation that there was no material before him on which his reason to believe can be grounded. The expression 'reason to believe' is to be found in various statutes. We may take not of one such. Section 34 of the Indian Income-tax Act, 1922, inter alia, if provides that the Income-tax officer must have 'reason to believe' that the income, profits or gains chargeable to income-tax have been under assessed, then alone he can take action under section 34. In S. Narayanappa v. CIT , the assessee challenged the action taken under section 34 and amongst others it was contended on his behalf that the reasons which induced the Income-tax Officer to initiate proceedings under section 34 were justiciable, and, therefore, these reasons should have been communicated by the Income-tax Officer to the assessee before the assessment can be reopened. It was also submitted that the reasons must be sufficient for a prudent man to come to the conclusion that income has escaped assessment and that the court can examine the sufficiency or adequacy of the reasons on which the Income-tax Officer has acted. Negativing all the limbs of the contention, this court held that 'if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any non-disclosure as regards any fact, which could have a material bearing on the question of underassessment, that would be sufficient to give jurisdiction to the Income-tax Officer to issue notice under section 34.' The court in terms held that whether these grounds are adequate or not is not a matter for the court to investigate.
The expression 'reason to believe' is not synonymous with the subjective satisfaction of the officer. The belief must be held in good faith; it cannot merely be a pretence. In the same case, it was held that it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under section 34 is open to challenge in a court of law. (see Calcutta Discount Co. Ltd. v. ITO ). In Seth Gopikisan Agarwal (R. S.) v. R. N. Sen, Assistant Collector of Customs , this court repelled the challenge to the validity of the search of the premises of the appellant and the seizure of the documents found therein. The search was carried out under the authority of an authorisation issued under rule 126L(2) of the Defence of India (Amendment) Rules, 1963 (Gold Control Rules), for search of the premises of the appellant. The validity of the authorisation was challenged on the ground of mala fides as also on the ground that the authorisation did not expressly employ the phrase 'reason to believe' occurring in section 105 of the Customs Act. Negativing both the contentions, Subba Rao C.J., speaking for the court, observed that the object underlying section 105 of the Customs Act which confers power for issuing authorisation for search for goods liable to be confiscated or documents secreted in any place, which are relevant to any proceeding under the Act. The legislative policy reflected in the section is that the search must be in regard to the two categories mentioned in the section. The court further observed that though under the section, the officer concerned need not give reasons, if the existence of belief is questioned in any collateral proceedings, he has to produce relevant evidence to sustain his belief. A shield against the abuse of power was found in the provision that the officer authorised to search has to sen forthwith to the Collector of Customs a copy of any record made by him. Sub-section (2) of section 37 of the Act takes care of this position inasmuch as that where an officer below the rank of the Director of Enforcement carried out the search, he must send a report to the Director of Enforcement. The last part of the submission does not commend itself to us because the file was produced before us and as stated earlier, the officer issuing the search warrant had material which he rightly claimed to be adequate for forming the reasonable belief to issue the search warrant.
It was, however, contended that when sub-section (2) of section 37 is read in juxtaposition with sub-section (1), the legislative mandate clearly manifests itself that before issuing a search warrant in exercise of the power conferred by section 37(1), it is obligatory upon the officer issuing the search warrant to record in writing the grounds of his belief and specifying in such writing, so far as possible, the thing for which the search is to be made because section 37(2) provides that the provisions of the Code of Criminal Procedure, 1898 (now 1973), relating to searches, shall, so far as may be, apply to searches under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word 'Magistrate', wherever it occurs, the words 'Director of Enforcement or other office exercising his power' is substituted. It was submitted that if the power to search premises is conferred on the officer therein mentioned, it is hedged in with a condition that in exercise of the power he is bound by the requirements of section 165 of the Code. In other words, it was said that by sub-section (2) of section 37, section 165 of the Code is incorporated in pen and ink in section 37. It was urged that the section should be re-read as section 37(1) as it is and section 165(1) of the Code be read as section 37(2). Continuing along this line, it was submitted that read thus, the necessary intendment of the legislature becomes revealed in that such drastic power of search and seizure without notice to the person affected, can be exercised, if the officer has reason to believe which must have its foundation on some material or grounds which must be stated in the search warrant itself or in a record anterior to the issuance of the search warrant so that when questioned the contemporaneous record would be available to the court to examine the contention whether there was material for taking such a drastic action or that the action was taken for extraneous and irrelevant reasons. In support of this submission, reliance was placed on a decision of the Punjab and Haryana High Court in H. L. Sibal v. CIT [1975] 101 ITR 112; [1976] Tax LR 311. The court was examining the expression 'in consequence of information in his possession, has reason to believe' in section 132 of the Income-tax Act, 1961. The court after referring to the decision of this court in Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver , held that 'the obligation to record in writing, the grounds of the belief as enjoined by section 165(1), if not complied with would vitiate the issuance of the search warrant and the seizure of the articles'. It was then submitted that if the search is illegal, anything seized during such an illegal search has to be returned as held by a learned single judge of the Calcutta High Court in New Central Jute Mills Co. v. T. N. Kalu, .
Section 37(2) provides that 'the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under section 37(1). Reading the two sub-sections together it merely means that the methodology prescribed for carrying out the search provided in section 165 has to be generally followed. The expression 'so far as may be' has always been construed to mean that those provisions may be generally followed to the extent possible. The submission that section 165(1) has been incorporated by pen and ink in section 37(2) has to be negatived in view of the positive language employed in the section that the provisions relating to searches shall so far as may be apply to searches under section 37(1). If section 165(1) was to be incorporated by pen and ink as sub-section (2) of section 37, the legislative draftsmanship will leave no room for doubt by providing that the provisions of the Code of Criminal Procedure, relating to searches shall apply to the searches directed or ordered under section 37(1) except that the power will be exercised by the Director of Enforcement or other officer exercising his power and he will be substituted in place of the Magistrate. The provisions of sub-section (2) of section 37 have not been cast in any such language. It merely provides that the search may be carried out according to the method prescribed in section 165(1). If the duty to record reasons which furnish grounds for entertaining a reasonable belief were to be recorded in advance, the same could have been incorporated in section 37(1), otherwise a simple one-line section would have been sufficient that all searches as required for the purpose of this Act shall be carried out in the manner prescribed in section 165 of the Code by the officer to be set out in the section. In order to give full meaning to the expression 'so far as may be', sub-section (2) of section 37 should be interpreted to mean that broadly the procedure relating to search as enacted in section 165 shall be followed. But, if a deviation becomes necessary to carry out the purposes of the Act in which section 37(1) is incorporated, it would be permissible except that when challenged before a court of law, justification will have to be offered for the deviation. This view will give full play to the expression 'so far as may be'."
41. Finally, their Lordships approved the decision in Seth Gopikisan Agarwal (R. S.) v. R. N. Sen, Assistant Collector of Customs and Central Excise, , and held that it is not obligatory on the part of the department to record reasons which furnish ground for entertaining reasonable belief to be recorded in advance. Their Lordships have said that if that had been the intention of the Legislature, a simple one-line section would have been sufficient that "all searches as required for the purpose of this Act shall be carried out in the manner prescribed in section 165 of the code".
42. Our High Court had occasion to consider a similar case in C.M.P. No. Nil of 1989 (unnumbered) in W.A. Nos. 1454/1987, 360 of 361 of 1989 and a batch of writ petitions (Mohideen Abdul Kadir v. Collector of Central Excise - order dated September 28, 1989), wherein a Division Bench has held thus :
"Dealing with W.P. Nos. 11181 and 11246 of 1988, learned counsel contended that there was no basis for the authorities to entertain a reasonable belief that Rs. 20 lakhs of Indian currency seized in the case, were liable for confiscation and that, therefore, the seizure is illegal. Reliance was placed upon the decision of the Supreme Court in Pukhraj v. D. R. Kohli, , wherein the court held that possession of 290.6 tolas of gold with a person who was travelling without a ticket, was prima facie sufficient to justify a reasonable belief and that the court was not sitting in appeal over the decision of the officer. It is also pertinent that this question was gone into and these observations were made in an appeal against the orders of confiscation and penalty. In the instant case, Rs. 20 lakhs found in as lorry booking office sought to be transported in a goods vehicle without way bills or any other record, are circumstances enough, for a reasonable belief."
43. In Superintendent of Central Excise v. A. Govindarajan [1976] Tax LR 1388, the expression "reason to believe" came up for consideration under section 101(1) of the Customs Act. In that case, the only information received by the department was, that a person will be coming in a car near a choultry between certain hours, and if the car was intercepted, either contraband gold or the sale proceeds thereof in currency notes would be found. There was no description either of the car or of the person. On this information, a car was intercepted and searched. The question that came up for consideration was, whether the said information alone will be sufficient for the search, and whether it is a bona fide act on the part of the department stating that there was "reason to believe". In paragraph 25 of the judgment, a Division Bench of the Karnataka High Court held thus (page 1391) :
"We are unable to agree with the view of the learned single judge that the aforesaid information was too vague on account of absence of description of the car and the name of the person who would come in it. It is too much to expect that the authorities would be able to gather before hand all particulars of the activities of smugglers. At the time when the Customs Officer at Madras passed on to appellant No. 2, the information that a person would be coming in a car with contrabard gold or, sale proceeds thereof, that officer might not have had information as to which person would be employed to smuggle gold and to bring the sale proceeds thereof and in what car be would come to Bangalore. Generally smugglers would do everything in their power to keep their activities secret and to escape detection ...."
44. The Bench further held thus (page 1392) :
"We are unable to agree with the view of the learned single judge that this car must have been stopped and searched by the appellants in the course of a fishing expedition or a random search on the off chance of finding contraband goods. The search proceeded on the definite information received by the appellants from the Customs Officer, Madras. Such information provided a reasonable belief that the writ petitioner had smuggled gold or sale proceeds thereof liable to confiscation. We are unable to agree with the learned single judge that there was no such reasonable belief preceding the search and the seizure by the appellants".
45. In Venugopalan v. Unnikutty Panicker [1977] KLT 1009, 1011, the Kerala High Court has said that "reasonable belief only means a belief within the limits of reason based on the materials available and not an absurd conclusion". In that case, a learned judge of the Kerala High Court upheld the contention of the department regarding "reasonable belief" only on the ground of appearance of goods, inscriptions thereon and the fact that the accused were not in a position to give proper explanation for the possession of such a large quantity of yarn in unopened bundles.
46. In Union of India v. Shyamsundar, , the question that came up for consideration was, whether the Enforcement Officers had reason to believe that certain wrist watches of foreign origin, in the possession of the accused therein, were smuggled watches. The trial court as well as the first appellate court convicted the accused. The High Court reversed the same. The matter was taken before the Supreme Court. Their Lordships, following the decisions in Pukhraj v. D. R. Kohli, and State of Gujarat v. Mohanlal Jitamalji Porwal :
"The learned Additional Solicitor-General, Mr. K. T. S. Tulsi, took us very meticulously through the recorded evidence and the impugned judgment as well as the judgments of the trial court and the appellate court and contended that the prosecution has satisfactorily established the charge by satisfactorily establishing all the necessary ingredients that are required to constitute an offence within the meaning of section 135 of the Customs Act. In support of his contention he has relied upon three decisions of this court which we presently refer to. In State of Gujarat v. Mohanlal Jitamalji Porwal , this court had laid down the law as follows (at page 1323 of AIR) :
'Whether or not the official concerned had seized the article in the "reasonable belief" that the goods were smuggled goods is not a question on which the court can sit in appeal. The law to this effect has been declared in no ambiguous terms in Pukhraj v. D. R. Kohli, . This court has administered caution to the courts not to sit in appeal in regard to this question and has observed that if prima facie, there are grounds to justify the belief the courts have to accept the officer's belief regardless of the fact whether the court of its own might or might not have entertained the same belief. The law declared by this court is binding on the High Court and it was not open to the High Court to do exactly what it was cautioned against by this court. Section 123 of the Act does not admit of any other construction. Whether or not the officer concerned had entertained reasonable belief under the circumstances is not a matter which can be placed under a legal microscope, with an over indulgent eye which sees no evil anywhere within the range of its eyesight. The circumstances have to be viewed from the experienced eye of the officer who is well equipped to interpret the suspicious circumstances and to form a reasonable belief in the light of the said circumstances' ..."
Their Lordships further said that the above said proposition of law was reiterated by the Supreme Court in Indru Ramchand Bharvani v. Union of India and Assistant Collector of Customs v. Mohanlal Shankerlal Kansara [1990] (Suppl.) SCC 793. While deciding the case, the Supreme Court took note of the fact that the respondents in that case had failed to discharge the burden of proving as to how they came into possession of the watches, which was taken as one circumstance to hold that there was "reasonable belief".
47. In N. Nagendra Rao and Co. v. State of Andhra Pradesh , the Supreme Court had occasion to consider the expression "reason to believe" in the Essential Commodities Act. In paragraph 5 of the judgment, it was held thus :
"The expression 'reason to believe' has been interpreted by this court to mean that even though formation of opinion may be subjective but it must be based on material on the record. It cannot be arbitrary, capricious or whimsical. It is, thus, a check on exercise of power to seize the goods ..."
48. It is on the above settled position of law, we have to consider whether there was "reasonable belief" on the part of the respondents in this case to order search and seizure and whether the act done by them was in any way tainted with mala fides or lacking in good faith.
49. It is not disputed by the parties that there was a prior search in the premises of the first petitioner in W.P. No. 9539 of 1994. Of course the search did not result in the recovery of any incriminating materials. That search was not questioned by any one. It is averred in the counter-affidavit that even that search was based on reliable information that some violation of FERA was there. Even though that search did not result in the recovery of any incrimination material, the officers continued to have an eye on the activities of the petitioners, and a few months thereafter on May 10, 1994, a simultaneous search was made both at the residence and at the shop premises. When the search was made in the shop premises, the respondents could recover a sum of Rs. 3,21,800. The same was not accounted, and, questioned, the father of the petitioners in W.P. No. 9539 of 1994, admitted that he received a sum of Rs. 3,20,000 on that day from an unknown person by order of one Deen of Singapore, having telephone number 2944422, and the balance sum of Rs. 1,800 belonged to the shop. Even regarding the sum of Rs. 1,800, he admitted that there was no account for the same. He has also said in the statement written by him in his own handwriting that the amount was recorded from the drawer of a counter table, and the amount, thus, received was to be distributed to various persons in accordance with the instructions given by the said Deen. He has also said that he will be getting some commission for the same, i.e., Rs. 200 for every lakh of rupees. He has also said that he was acquainted with the said Deen since he used to visit the shop for purchasing fancy jewellery. Of course, the statement of the father has been retracted two days later. But, when there is no proper explanation for the possession of the amount by the father, it can be inferred that there was "reasonable belief" on the part of the respondents for ordering a search and seizure of the amount.
50. It is in this connection, we have to consider the objections raised by learned counsel for the petitioners to our perusing the file produced by the department. When the officers of the Enforcement Directorate expressed their readiness to produce the entire file, and in fact, produced the entire file, learned counsel for the petitioners did not want us to peruse the same, unless he is also given an opportunity to go through the same and make submissions over the same. For the said purpose, he also relied on the decision in Taraprasanna Choudhry v. Agrl. ITO, , wherein it was said thus :
"The court should not entertain this evidence which was produced at the hearing. In numerous cases during the last few years. I have repeatedly observed that if the respondents want to rely upon any records or other public documents, extracts of the material portion thereof (if not copies) should be appended to the counter-affidavit so that the petitioner might have timely notice and an opportunity to contradict them in his affidavit in reply".
51. The said decision has no application to the facts of this case. Here, we are concerned with an investigation which, in the every nature, is secret. The very purpose of the investigation will be thwarted if the details are published or made open. In this connection, it is worthwhile to consider a Bench decision of the Patna High Court in Ram Swarup Sahu v. CIT [1992] 196 ITR 841, where it was held thus (headnote) :
"..... the documents and information on the basis of which the authority had arrived at his satisfaction for conducting the search and seizure could not be disclosed to the petitioner as it would hamper the inquiry pending against them ..."
52. In fact, in most cases concerning the challenge of search and seizure, we find that courts have been perusing the file produced by the Department for their satisfaction. But, in the instant case in view of the objection raised by learned counsel for the petitioners, we do not want to look into the same, we are of the view that the assertion made by the department that there was "reason to believe" stands good, especially in view of their bona fides in producing the file before the court. The circumstances also disclose that the Department had reason to believe that a search and seizure should be ordered.
53 Learned counsel for the petitioners wanted us to rely on the decision in Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver . It was a case under the Madras General Sales Tax Act. The question that came up for consideration was, whether the search ordered by the Magistrate was proper when he has not complied with the provisions of section 165 of the Criminal Procedure Code, and the consequences of the said search. Their Lordships have dealt with the matter in paragraph 17 (at page 66) an said that when a search is ordered in accordance with section 165 of the Criminal Procedure Code, the same has to be in writing, and as far as possible, the Magistrate must specify in such writing the thing for which the search is to be made. This decision was also considered in Dr. Partap Singh v. Director of Enforcement, Foreign Exchange Regulation Act , and it was after taking note of the said decision, their Lordships pointed out the difference between the wording used in the Code and the FERA. In section 37(2) of the FERA, the words used are : "The provisions of the Code of Criminal Procedure, 1973, relating to searches, shall, so far as may be, apply to searches" directed under section 37(1) of the FERA. The very argument before the Supreme Court was that there should be strict compliance with section 165 of the Criminal Procedure Code. The said contention was repelled, and it was thereafter their Lordships held that the reasons need not be in writing.
54. Learned counsel for the petitioners also relied on a decision in Bishnu Krishna Shrestha v. Union of India , a judgment delivered by a learned judge of the Calcutta High Court, under the FERA. On the facts of that case, the learned judge said that there was no "reason to believe". In that case, the search was made on the basis of a direction from the Department, but on the directions of a Minister. The file alleged to contain the information was also produced before the court, and, after perusing the file, the court said that one of the documents produced before the court could be the basis for the formation of requisite belief in the case. In fact the Enforcement Directorate in that case was directed to make an enquiry about the nationality of the petitioner therein, and, it was, while making such enquiry, they searched the premises of the petitioner therein. The facts of that case are entirely different, and they have no relevancy to the facts of this case. These writ petitions have also been prepared on the basis of the decision in Bishnu Krishna Shrestha v. Union of India. The Calcutta High Court has also held that if the search is held invalid, the document which was taken into custody must also be returned. This court as well as the Supreme Court have held otherwise, vide Dr. Pratap Singh v. Director of Enforcement, Foreign Exchange Regulation Act .
55. Learned counsel for the petitioners also relied on various other decisions to impress upon us that the "reason to believe" must be honest and must be based on some material anterior to the search. The said legal position can never be doubted. But, on the facts, we are of the view that the Department had reasonable belief that section 37 of the FERA was not violated by them. This is the main contention raised in both the writ petitions.
56. It was then contended by learned counsel for the petitioners (in W.P. No. 9380 of 1994) that the entire proceedings have now been vitiated, since notice of adjudication has been issued after six months of the search and seizure. It is averred in the amended affidavit filed in support of W.P. No. 9380 of 1994 that the show-cause notice dated October 20, 1994, was actually served on them only on January 11, 1995. It is a notice under section 50 of FERA wherein it is stated that Shri Bhabootimal, the first petitioner (in W.P. No. 9380 of 1994) has contravened the provisions of section 9(1)(b) of the FERA. It is also said therein that the first petitioner in W.P. No. 9380 of 1994, may look into the originals of the documents which the Department was going to rely upon, i.e., his own written statement and the mahazar prepared at the time of search. An English translation of the statement written by the first petitioner in W.P. No. 9380 of 1994 was also enclosed in the annexure to the notice.
57. The said contention is refuted by the Department on the ground that within six months, they have initiated proceedings. The notice sent to the said Bhabootimal was returned with endorsements "Not found" or "Not claimed", and ultimately the Department could serve it on him only January 11, 1995.
58. In the reply affidavit, the first petitioner (Bhabootimal) has stated that no postal article was tendered to him before January 11, 1995, and that he was not aware of any such notice. According to him, when he affirms that no postal article was tendered to him, it is for the Department to show that the postal article was, in fact, tendered to him within six months.
59. The legal position can only be in favour of the Department. In Gujarat Electricity Board v. Atmaram Sungomal Poshani , their Lordships considered the presumption regarding a letter sent by registered post. In paragraph 8, their Lordships said thus (page 611) :
"There is presumption of service of a letter sent under registered cover if the same is returned back with a postal endorsement that the addressee refused to accept the same. No doubt the presumption is rebuttable and it is open to the party concerned to place evidence before the court to rebut the presumption by showing that the address mentioned on the cover was incorrect or that the postal authorities never tendered the registered letter to him or that there was no occasion for him to refuse the same. The burden to rebut the presumption lies on the party, challenging the factum of service. In the instant case, the respondent failed to discharge this burden as he failed to place material before the court to show that the endorsement made by the postal authorities was wrong and incorrect. Mere denial made by the respondent in the circumstances of the case was not sufficient to rebut the presumption relating to service of the registered cover."
60. This court in Deputy Director, Enforcement Directorate v. Naina Maricair, , has held that proceedings under section 51 of the FERA commenced as soon as a show-cause notice is issued, and not when a notice of hearing is issued. In paragraph 15 of the judgment, it is held thus (page 28) :
"We shall now refer to some of the decisions place before us. As rightly contended by learned counsel for the respondent, in Abdul Khader (K. A.) v. Deputy Director of Enforcement, Information Directorate, AIR 1976 Mad 233, rendered by V. Ramaswami J. (as he then was) this question whether adjudication proceedings commence on the notice being issued under rule 3(1) or whether they commence on a notice under rule 3(3) had neither been raised nor decided. The learned judge, while generally analysing the provisions of the Act, has made a passing observation that proceedings commence when a show-cause notice is issued. The learned judge, later in Sivarajan (R.) v. Deputy Director, Enforcement Directorate [1987] 12 ECC 256; [1988] 63 Comp Cas 34 (Mad) has gone elaborately into this aspect and has equated the notice under rule 3(1) to an office memo, issued before disciplinary proceedings are initiated in ordinary civil cases in regard to the Government servants. With due respect to the learned judge, we are not inclined to agree with the view of the learned judge for the reasons already enumerated above. The decision of the learned judge in Abdul Khader (K. A.) v. Deputy Director of Enforcement information Directorate, AIR 1976 Mad 233, was the subject-matter of W.A. No. 65 of 1976, wherein even though the question that directly came up for decision was, whether the date of issuance of the notice or the date of service of the notice, the Bench also discussed the issue as to when adjudication proceedings under section 51 of the Act commence, when a show-cause notice is issued under rule 3(1) and the requirements of section 19(g) (present section 41) are satisfied. Ramaswami J. (as he then was) in his later decision in Sivarajan (R.) v. Deputy Director, Enforcement Directorate [1987] 12 ECC 256; [1988] 63 Comp Cas 34 (Mad) did not choose to place reliance on the view expressed by the Division Bench on the ground that the point, as raised in the case before him, was not raised before the Division Bench and decided. We however, agree with the view expressed by the Division Bench in W.A. No. 65 of 1976. The High Court of Kerala in Bhaskaran Pillai v. Enforcement Directorate [1978] KLT 436; [1978] Tax LR 225, has also taken a view that proceedings under section 51 of the Act commence as soon as a show-cause notice is issued under rule 3(1) and not when a notice of hearing is issued under rule 3(3). We, therefore, hold that adjudication proceedings under section 51 of the Act commence, when a show-cause notice is issued by the adjudicating officer under rule 3(1) and not when a notice of hearing is issued under rule 3(3)."
61. In this case, learned additional Central Government standing counsel showed before us the postal cover sent to the first petitioner in W.P. No. 9380 of 1994, which was returned. It is seen therefrom that the same was despatched on October 20, 1994, but the same could not be served for the reasons "not found" "not claimed". It is the same notice that was again issued to the first petitioner in W.P. No. 9380 of 1994, who received the same after a period of six months, i.e., on January 11, 1995. Therefore, under no stretch of imagination can it be said that the proceedings are vitiated.
62. Learned counsel for the petitioners further submitted that Indian currency is not a document, for the purpose of section 34 of the FERA and hence the Department cannot continue to retain the same. For the said purpose, learned counsel relied on the decision in Koidunny (M. K.) v. Collector of Customs and Central Excise, Cochin [1971] MLJ (Crl.) 553. In that case, a learned judge of the Kerala High Court has held that for the purpose of section 19(2) of the FERA, currency notes cannot be considered as documents. The circumstances are entirely different. Here, in this case, we are concerned about the provisions of sections 37 to 40 of the FERA. There is an Explanation added to section 33 where it is said : "For the purpose of this section, section 34 and sections 36 to 41 (both inclusive), 'document' includes Indian currency, foreign exchange and books of account." This court has also held in Amir Abdul Kader (K. M.) v. Deputy Director, Enforcement Directorate, , that Indian currency is also a document for the purpose of section 37 of the FERA. It was also held so in the decision in Deputy Director, Enforcement Directorate v. Naina Maricair, . So, that contention of learned counsel for the petitioners also fails.
63. It is contended by learned counsel for the petitioners that the second petitioner in W.P. No. 9539 of 1994, and the petitioners in W.P. No. 9380 of 1994, were arrested and detained in custody, and they were in illegal detention for more than 30 hours since they were not produced before a Magistrate and, therefore, the entire proceedings are illegal.
64. So far as the second petitioner in Writ Petition No. 9539 of 1994 is concerned, he admitted that he was the person present when the search was made. He has not cared to file any affidavit before the court saying that he was arrested or detained. Instead, the affidavit is sworn to by the first petitioner in W.P. No. 9539 of 1994, who was admittedly not in the vicinity during the relevant time. At the same time, the averment in the counter-affidavit is that the second petitioner was not even summoned, and that he gave a statement at his residence immediately after the search was completed and he has signed the statement at his residence itself, and he was never taken to the Enforcement Directorate at any time. Why the second petitioner remains silent and why he has not filed a reply affidavit, is not explained.
65. So far as the petitioners in W.P. No. 9380 of 1994, are concerned, even though it is alleged that they were detained, the same is also denied by the respondent. According to them, they were summoned to be present in their office at 6 p.m. on May 10, 1995, pursuant to the summons issued to them on that day, which they received at 4.30 p.m. It is the case of the Department that they were summoned at 6 p.m. only to enable them to close the business for the day. It is also their case that immediately after the statement was taken, they were discharged, and they were never arrested. In this case, the second petitioner, in W.P. No. 9380 of 1994 has not filed any affidavit alleging that he was detained. He has also given a statement before the Enforcement Directorate. Under the FERA, the department is given power to arrest any person.
66. If the Department has intention to arrest any person, there is nothing to prevent it from issuing a warrant. Section 35 of the FERA enables the Department to do so. When they have got such a power, they need not summon persons and thereafter, detain them. Moreover, there is a denial by the Department regarding the alleged arrest. Except for a mere allegation in the petitions there is no evidence on the part of the petitioners, to prove the same.
67. Learned counsel for the petitioners also submitted that it was improper on the part of the Enforcement Officers to direct the petitioners in W.P. No. 9380 of 1994 to appear before them after 6 p.m., and thereafter, detain them for respondents, and the statements might have been taken by the officers by compulsion.
68. The said submission of learned counsel for the petitioners also cannot be accepted in view of the decision in Balkrishna Chhaganlal Soni v. State of West Bengal it is stated thus (page 124) :
"A businessman may be wantonly humiliated if he is arrested and kept in the bazaar and interrogated at length in the presence of a crowd which is sure to collect. The provision is plain that an authorised customs official is entitled to examine any person at any time, at any place in the course of an enquiry ..."
69. The said judgment was followed by our High Court in Deputy Director, Enforcement Directorate v. P. Mansoor Mohamed Ali Jinnah (Writ Appeals Nos. 891 to 893 of 1988, decided on November 11, 1988), the Bench has held (in paragraph 32) as follows :
"A further argument was advanced that the statements have been recorded out of office hours, and as such, as rightly pointed out by learned single judge, no reliance can be place on these statements. We have already held that there is no material in present case to show that the statements were recorded out of office hours. The observation of the Supreme Court in Balkrishna Chhaganlal Soni v. State of West Bengal, , answers this contention. In that case, the Supreme Court has pointed out thus :
'The provision (section 107 of the Customs Act) is plain that an authorised Customs Official is entitled to examine any person at any time, at any place, in the course of an enquiry'."
70. In paragraph 31 of the said judgment, the learned judges have said that it would be better if the authorities under the Customs Act as well as the FERA take the statements of a person in his own hand, so that there may not be any complaint subsequently that the authorities have not recorded the statements properly. The said paragraph can usefully be extracted :
"Drawing the attention of this court to an observation made by a Division Bench of this court in Vittalanathan v. Collector of Customs (Writ Appeal No. 1015 of 1987, decided on November 30, 1987) regarding :
'We have not been able to find any authority in any provision of law which can compel a witness to write down his own statement. It is open to the Customs Officers to ask questions and whatever answers are given by the witness can be taken down by the officer'."
71. It has been submitted that in the present case, the statements should be excluded from consideration since the respondents have been made to write down statements in their own hand. Though there is no provision of law under the Customs Act requiring a person to write down his own statement, at the same time there is no prohibition to a person giving his statement in writing in his own hand. In fact, it would be better if the authorities under the Customs Act and the FERA take the statement of a person in his own hand, so that there may not be any complaint subsequently, that the authorities have not recorded the statements properly. We have drawn strength for the above view from the observation made by the Supreme Court in the judgment in Amba Lal v. Union of India, AIR 1961 SC 264, 267, reading as follows :
"It would have been better if the customs authorities had taken that admission in writing from the appellant, for that would prevent the retraction of the confession on second thoughts. That apart, it is more satisfactory if a body entrusted with functions such as the customs authorities are entrusted with, takes that precaution when its decision is mainly to depend upon such admission."
72. See also State of Bombay v. Kathi Kalu Oghad, . In view of the above decisions of the supreme court, this argument cannot be availed of.
73. In Roshan Beevi v. Joint Secretary to the Government of Tamilnadu Public Department [1983] LW (Crl.) 289, a Full Bench of the Madras High Court considered the question of arrest and custody. In paragraph 27 of the Judgment (at page 305), the learned judges have laid down the law thus :
"In an enquiry held under section 107 or section 108 of the Customs Act not only the person who subsequently may become the accused with reference to the matter under enquiry, but also persons who are conversant or suspected to be conversant with the smuggling of any goods, are examined. This is the reason why in the said sections the words 'any person', are used so as to denote all the persons inclusive of the persons who subsequently become accused. At that stage, there is no question of empowered in this behalf by general or special order of the Collector of Customs has reason to believe that any person has been guilty of an offence punishable under section 135. Section 107 and section 108, as they stand, do not give any power to the customs Officer to take any person under compulsion and detain him for a prolonged period under the guise of enquiry, investigation or interrogation. The statutory threat embodied in sub-section (4) of section 108 is to the effect that in case the person summoned to give evidence and produce documents in connection with the enquiry relating to the smuggling of any goods, fails to do so or gives a false statement, he will be liable to be proceeded against under section 193 or section 228, I.P.C., and for that purpose, that enquiry is to be deemed to be a judicial proceeding within the meaning of the abovesaid penal provisions. Section 107 and section 108 are analogous to the provisions of section 160(1) of the Criminal Procedure Code. As rightly pointed out by the Advocate-General, if a person who appears before a Customs Officer in compliance with the summons for the purpose of giving information or evidence, as in the case of a person appearing before a police officer under section 160(1) of the Criminal Procedure code, can it be said that such a person comes into the custody of the Customs officer concerned, amounting to arrest ? In our view, there is no such custody amounting to an arrest in such a situation. Further, as rightly pointed out by Mr. P. Rajamanickam, the learned public prosecutor, there is no question of surveillance, official or unofficial, in summoning a person for interrogation, and a person taken for interrogation cannot be said to have been arrested within the meaning of the said term. If such wide interpretation is given, then even the attendance of a person before a police officer under section 160(1) of the Criminal Procedure Code, would amount to an arrest. That is definitely not the law".
74. Learned counsel for the petitioners submitted that before filing the writ petitions a telegram was issued to the Chief Justice requesting him to direct the respondents to release the detenus, and an attempt was made to file a writ of habeas corpus during vacation, and all this will show that the petitioners were detained. According to him, the denial by the Department regarding the arrest and detention, cannot be believed.
75. We are of the view that the sending of the telegram and the attempt to file writ of habeas corpus are only methods adopted by the petitioners to create suspicion, and we cannot rely on the same for the purpose of entering a finding that they were arrested.
76. In W.P. No. 9539 of 1994 and Writ Appeal No. 679 of 1995, the question that is raised is, that since proceedings have been initiated beyond six months, the Enforcement Directorate has no authority to retain the amount seized from the shop premises, and that the same is not necessary for the purpose of adjudication.
77. We have already held that the proceedings have been initiated on October 20, 1994, itself, even though the show-cause notice was ultimately received by the first petitioner in W.P. No. 9380 of 1994 on January 11, 1995. This court has also considered recently an identical question in Assistant Director, Directorate of Enforcement v. A. J. Kingsley Fernandes (Writ Appeal No. 791 of 1995 decided on August 31, 1995). The relevant portion of paragraph 5 of the said judgment reads thus :
"We may point out at once that in all these decisions, section 41 of the Act was not considered and that too in the context to one similar to this case. Further, the expression, 'commencement of the proceeding' also has not been considered except in Sivarajan (R.) v. Deputy Director, Enforcement Directorate [1988] 63 Comp Cas 34 (Mad). In that case, a learned single judge of this court on distinguishing a Division Bench decision has held that mere issuance of a show-cause notice does not amount to commencement of the proceedings. We find it very difficult to agree with the said view. In our view, there was no justification whatsoever for the learned single judge in R. Sivarajan's case [1988] 63 Comp Cas 34 (Mad) to distinguish the unreported Division Bench decision of this court in Deputy Director v. Abdul Khader (K. A.) (Writ Appeal No. 65 of 1976, decided on September 16, 1976), which has been subsequently followed in Deputy Director, Enforcement Directorate v. Naina Maricair, , by another Division Bench of this court. We, accordingly, overrule the decision in R. Sivarajan's case, [1988] 63 Comp Cas (Mad) in so far as it touches upon the commencement of the proceedings as required by section 41 of the Act. As already pointed out, the other decisions do not deal with the question as to when the proceeding under section 41 of the Act can be considered to have commenced. In our view, a proceeding under section 41 of the Act can be held to have commenced on issuance of the show-cause notice ..."
78. The respondents have a case that the amount that was seized by them belonged to the father, and not to the sons (petitioners in W.P. No. 9539 of 1994). The statement given by the father is also relied on by them for the said purpose. The statement has been written by the father himself in his own handwriting. An English translation of the same has also been produced, wherein he has admitted that he received a sum of Rs. 3,20,000 from an unknown person under instructions from one Deen of Singapore. In this connection, it should also be remembered that the said amount was recovered from the drawer of a counter table, in the shop. The source is not properly explained. Apart from an allegation in the writ petitions that it represented the trade balance as on that date, there is no other explanation as regards the source for the presence of the said sum in the shop at the time of seizure. Apart from the statement of the father, there is no other statement from any of the petitioners. The question of trade balance was raised only in W.P. No. 9539 of 1994, long after the statement by the father. For the first time, it was raised only in the reply notice issued by the first petitioner in W.P. No. 9380 of 1994, Bhabootimal Jain through counsel by way of reply to the show-cause notice. When there is a dispute as to the person from whose custody the same was received, till the entire adjudication is over, it will not be proper to direct the return of the amount.
79. The learned single judge who passed the order in W.P. No. 16365 of 1994, in W.P. No. 9539 of 1994, has said that the same cannot be decided without further details. Except for filing write Appeal No. 679 of 1995, no other details are given. Under the above circumstances, we do not think that any ground has been made out for the return of the currency seized, before the final order is passed on the adjudication notice. Hence, the writ appeal is liable to be dismissed.
80. Learned counsel for the petitioners also submitted that the very notice dated October 20, 1994, issued to the father is invalid, for, possessing Indian currency is not an offence under the FERA.
81. On going through the notice, it is seen that the respondent's case is that the petitioners have violated the provisions of section 9(1)(b) of the FERA which says that "no person in, or resident in, India shall receive otherwise than through an authorised dealer, any payment by order or on behalf of any person resident outside India." In this case, the father has received the amount, not from an authorised dealer, but from an unknown person on the instructions of one Deen of Singapore. Hence, prima facie, the respondents have made out grounds for proceeding against the father, and, therefore, the proceedings initiated against the father cannot be held to be invalid. No ground has been made out to quash the same.
82. Learned Additional Central Government standing counsel also contended that the petitioners in W.P. No. 9380 of 1994, have been given only a show-cause notice, and at this stage, this court may not exercise the extraordinary original jurisdiction. According to him, if a show-cause notice is issued, it means that the petitioners are given an opportunity to explain, and only if their explanation is not accepted, proceedings will be initiated, and against the order that may be passed by the Department, there is an appeal, a second appeal and other procedures covered by statute. Being a show-cause notice, facts will have to be proved, and the petitioners also will be given opportunity to adduce their evidence. He wanted that this court should not interfere at this stage.
83. Learned counsel for the petitioners contended that when the show-cause notice is issued without any basis, the same amounts to an abuse of process or something done without jurisdiction.
84. We have already held that the respondents had reason to believe that there was material for ordering search and seizure. The question whether proceedings have to be initiated under section 51 of the FERA is to be decided by the Department after the explanations of the petitioners are received. At this preliminary stage, the court will be reluctant to interfere. In Assistant Collector of Central Excise, Chandan Nagar v. Dunlop India Ltd. , their Lordships of the Supreme Court deprecated the practice of invoking the extraordinary jurisdiction of this court when the petitioners have got effective alternative remedy. In that case, it has been held thus (headnote) :
"Article 226 is not meant to short-circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations, as for instance where the very vires of the statue is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to article 226 of the Constitution. But then the court must have good and sufficient reason to bypass the alternative remedy provided by statute. Surely matters involving the revenue where statutory remedies are available are not such matters. The Supreme Court can take judicial notice of the fact that the vast majority of the petitions under article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and thereafter prolonging the proceedings by one device or the other. The practice needs to be strongly discouraged."
85. In Asia Tobacco Co. Ltd. v. Union of India [1988] 33 ELT 279 (Mad), a Bench of this court, (in which one among us is a party - Srinivasan J.) has held thus :
"It would be too premature to go into the merits of the modus operandi which has been adopted by the Department as to whether rule 9(2) will be attracted. Whether the modus operandi establishes a case of evasion and if such evasion is within the four corners of rule 9(2) can properly be determined only when the full and complete enquiry is made in pursuance of show-cause notice. It would not, therefore, be proper at this stage to go into the validity of the notice on the footing that it does not fall within rule 9(2)."
86. A Division Bench of the Karnataka High Court has also considered a similar question in the decision in Loharu Steel Industries Ltd. v. Collector of Central Excise, [1993] 66 ELT 179. Paragraphs 7 to 9 of the said judgment are relevant for our purpose, and they read thus :
"The Supreme Court in Geep Flashlight Industries Ltd. v. Union of India, , was called upon to decide as to whether certiorari jurisdiction can be exercised against a show-cause notice issued under section 131(3) of the Customs Act as it stood. The Supreme Court, after considering the submissions made, held as follows (page 459) :
'Once the provisions contained in section 131(3) are attracted the Central Government may of its own motion annual or modify any order passed under section 128 or section 130. This provisions is the power of Central Government to annual or modify any order. This power is exercised by the Central Government suo motu. Of course the power is to be exercised on giving notice to the person concerned.
The provisions contained in section 131(5) of the Act speak of limitation only with regard to non-levy or short-levy. It is significant that section 131(5) does not speak of any limitation in regard to revision by the Central Government of its own motion to annual or modify any order of erroneous refund of duty. The provisions contained in section 131(5) with regard to non-levy or short-levy cannot be equated with erroneous refund inasmuch as the three categories of errors in the levy are dealt with separately.
87. The appellant's prayers for writs of certiorari and mandamus are misconceived. There is no order either judicial or quasi-judicial which can attract certiorari. No mandamus can go because there is nothing which is required to be done or forborne under the Act. The issue of the notice in the present case requires the parties to represent their case. There is no scope for mandamus to do any duty or act under the statute. A writ of prohibition cannot be issued for the obvious reason that the Central Government has jurisdiction to revise.'
88. Thus, the proposition laid down in para. 24 in categorical terms states that no order, either judicial or quasi-judicial, which can attract certiorari, is said to have been passed when the show-cause notice is issued and, therefore, until the adjudication is made, the exercise of jurisdiction is not called for. In the instant case, the show-cause notice is issued under section 11A of the Act by the Collector of Central Excise, Bangalore, on the grounds of suppression of facts of production and clearance from the Department with an intention to evade payment of Central Excise Duty. As per the proviso to section 11A(1) of the Act, the Collector of Central Excise is competent to issue show-cause notice on the ground of suppression of facts. Therefore, the show-cause notice does not suffer from lack of jurisdiction.
89. We may also point out that certiorari jurisdiction is not intended to bypass the statutory provisions. In Assistant Collector of Central Excise, Chandan Nagar v. Dunlop India Ltd., . while considering the scope of article 226 of the Constitution, the Supreme Court has held as follows :
90. 'In Titaghur Paper Mills Co. Ltd. v. State of Orissa , A. P. Sen, E. S. Venkataramiah and R. B. Misra JJ. held that where the statute itself provided the petitioners with an efficacious alternative remedy by way of an appeal to the prescribed authority, a second appeal to the Tribunal and thereafter to have the case stated to the High Court, it was not for the High Court to exercise its extraordinary jurisdiction under article 226 of the Constitution ignoring as it were, the complete statutory machinery. That it has become necessary, even now, for us to repeat this admonition is indeed a matter of tragic concern to us. Article 226 is not meant to short-circuit or circumvent statutory procedures. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations, as for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to article 226 of the Constitution. But then the court must have good and sufficient reason to bypass the alternative remedy provided by statute. Surely matters involving the revenue where statutory remedies are available are not such matters. We can also take judicial notice of the fact that the vase majority of the petitions under article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and, thereafter prolong the proceedings by one device or the other. The practice certainly needs to be strongly discouraged.'
91. In addition to this, we may point out here that a Division Bench of this court in Karnataka State Road Transport Corporation v. Karnataka State Transport Authority, AIR 1984 Kar 4, had an occasion to consider as to under what circumstances the extraordinary jurisdiction of this court under article 226 of the Constitution can be exercised when there exists an equally efficacious alternative remedy of appeal and it was held thus (page 10) :
"Even where an equally efficacious alternative remedy exists, where, however, fundamental rights are affected, where rules of natural justice are violated, or where there is a failure on the part of the authority concerned to confine itself within the bounds of its legitimate jurisdiction or where there is a failure to exercise a jurisdiction vested in it or where there is an error of law apparent on the face of the record, a person aggrieved can invoke the extraordinary jurisdiction of this court under article 226 without reference to any remedy however equally efficacious it be. The existence of an alternative remedy does not oust the jurisdiction of the High Court under article 226 ...'
92. The case on hand does not fall in any one of the exceptions mentioned above. There is not even a determination made about the liability of the appellant. The facts stated in the show-cause notice are yet to be determined after the cause is shown and the evidence, if any, adduced by the appellant. As far as the jurisdiction is concerned, it has already been pointed out that the ground stated in the show-cause notice clearly falls within the jurisdiction of the Collector as per section 11A of the Act.
93. We now take up for consideration three judgments of this court on which reliance is placed. In Mysore Acetate and Chemicals Co. Ltd. v. Assistant Collector, Central Excise , the Superintendent of Central Excise, M.O.R. Mandya by his notice No. OC 2193/81, dated October 13, 1981, followed up show-cause notice No. OC 2741/81, dated October 10, 1981, and revised show-cause notice No. OC 27/82, dated January 1, 1982, called upon the petitioner therein to pay excise duty on 'acetic anhydride' manufactured and supplied to drug manufacturers as a drug intermediate taking the view that it was a chemical and its supply as a drug intermediate did not entitled it for an exemption from excise duty under the notification dated March 1, 1978. A contention was raised that as only a show-cause notice was issued, it would be open to the petitioner to put forth its case before the authority who had issued the show-cause notice and that authority would be bound to decide the same and that thereafter the petitioner can work out his remedy under the statute by way of appeal. In para. 7 of the judgment, the learned single judge appears to have agreed with this contention, but nevertheless interfered with the show-cause notice. The relevant portion of the judgment is as follows :
'7. What is challenged are show cause-notices and, therefore, it is open to the petitioner to appear before the superintendent and urge the very case pleaded before this court who is bound to examine and decide the same and that decision can be challenged in appeals or other remedies can hardly be doubted.
8. The fact that the notices are show-cause notices and the petitioner has an opportunity to appear and urge its case does not touch on the jurisdiction of this court to examine them and decide the question at the threshold itself.
9. But the excise duty is payable on the manufactured goods by the manufacturer in the first instance though it may happen that he may pass on the same to the buyer of goods or consumer. On the very terms of the show-cause notices, the petitioner is bound to pay the excise duty which it has not been paying from March 1, 1978. In all probability, the superintendent is likely to stick to his view expressed in the show-cause notices. In the circumstances, I consider it proper to examine the validity of the show-cause notices and decide the questions finally.
Paras. 10 to 16 ...
17. On the above discussions, it follows that the action of the superintendent is manifestly illegal and the same justifies the interference by this court'."
94. In view of the above said legal position, we find force in the submissions made by learned Additional Central Government standing counsel.
95. In these writ petitions, there is no order either judicial or quasi judicial. No writ of mandamus can also be issued since there is nothing which is required to be done or forborne under the Act. The petitioners have been directed only to present their case and they will be given opportunity to explain why they should not be proceeded against for the alleged violation of the FERA. There cannot be any writ of prohibition, for, the Department is acting only under the statute in discharging their official duties, which they are bound to do under law. So, there cannot be any question of issuing any writ or order or direction as prayed for by the petitioners.
96. We also feel that Writ Petition No. 9380 of 1994 is not properly framed. Four officers by their names have been impleaded. It is well-settled that no writ can be issued against individuals without the State or its organs being made parties. But, since the respondents have not pointed out this defect at the time of arguments, we do not want to dispose of the Writ Petition No. 9380 of 1994, on that ground alone.
97. W.M.P. No. 28173 of 1994, in W.P. No. 9539 of 1994 :
In this petition, the petitioners want this court to hold a preliminary enquiry and record a finding that an offence under section 198 of the Indian Penal Code, has been committed by the second respondent and make a complaint thereof to the competent Magistrate having jurisdiction to try the offence.
We do not find any ground on the basis of a mere allegation by the petitioners that the second respondent has committed the offence complained of. In view of our findings in the writ petitions, we hold that this writ miscellaneous petition is not maintainable, and accordingly, it is dismissed.
W.M.P. No. 14488 of 1994 in W.P. No. 9539 of 1994 :
This petition is to stay all further proceedings against the petitioners in the said writ petition in pursuance of Summons No. T3/130/S2/C/94 (AKP).
98. In fact, this W.M.P. has become infructuous since the first petitioner himself has appeared before the authorities and given a statement on May 27, 1994. According to the respondents, the proceedings are not over, and the first petitioner, though he agreed to appear on the next day, absented himself.
99. Under section 40 of the FERA, the Enforcement Directorate has power to summon any person whose attendance it considers necessary either to give evidence or to produce a document during the course of any investigation or proceeding under this Act. Sub-section (3) of section 40 of the FERA also says that all persons so summoned shall be bound to attend either in person or by authorised agents, and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and produce such documents as may be required.
100. We have already stated that the father of the petitioners in W.P. No. 9539 of 1994, has given a statement in respect of certain documents seized that the handwriting is that of his son Vijayaraj Jain, the first petitioner in W.P. No. 9539 of 1994. The father as well as the servant (petitioners in W.P. No. 9380 of 1994) have stated that only Vijayaraj Jain knows the contents and veracity of the documents seized. It is on the basis of the said information given by the father and the servant, the Department wanted the son also to be summoned. Under section 40 of the FERA, the department has power to summon any person during the course of investigation. When a proceeding is pending against the father under section 9(1) of the FERA, for an alleged violation of section 9(1)(b) of the FERA, on the basis of the statement given by the father, his son is sought to be examined. There is nothing improper on the part of the Enforcement Directorate in issuing the summons. We do not find any ground to say the proceedings, and hence this W.M.P. is also dismissed.
101. W.M.P. No. 32741 of 1994 in W.P. No. 9539 of 1994 :
This petition is by the petitioners in the main writ petition, seeking a direction against the respondents to restrain them from trespassing into the shop, office and/or residence of the petitioners and/or illegally arresting any or all the petitioners or any of their family members, servants and recording any further statement from any or all of them under duress, and pass such further or other orders as this court may deem fit and proper.
102. We cannot pass an order of prohibitory injunction as sought for by the petitioners, since any such order will amount to prohibiting the respondents from discharging their statutory duty. There is also no basis for the apprehension of the petitioners that statements will be recorded from them under duress. The respondents, while discharging their official duties, are entitled to enter into the shop, office and/or residence of the petitioners or their relations and record their statements, if the same is relevant for the purpose of any investigation. Hence, this W.M.P. is also dismissed.
103. W.M.P. No. 27601 of 1994 in W.P. No. 9539 of 1994 :
In view of the disposal of the main writ petition, this W.M.P. is also dismissed.
104. In the result, Writ Appeal No. 679 of 1995 and Writ Petitions Nos. 9380 and 9539 of 1994 are dismissed. No costs.
105. In view of the dismissal of the main writ appeal, C.M.P. Nos. 8257 and 8258 of 1995 filed therein are also dismissed. We have already given the resons for dismissal of the writ appeal in paragraphs 64 and 65 of this judgment.
106. W.M.P. No. 14267 of 1994 in W.P. No. 9380 of 1994 :
In view of the dismissal of the main writ petition, this W.M.P. is dismissed.