Customs, Excise and Gold Tribunal - Mumbai
B.P. Nayak, And Ors. vs Commissioner Of Customs (Prev.) on 2 February, 2001
Equivalent citations: 2001(75)ECC115, 2001(136)ELT604(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The facts leading to these appeals are, briefly, as follows:
2. On an information received by them, the officers of Directorate of Revenue Intelligence identified and picked up on 21st February 1995, five persons from the Nariman Point branch of the Syndicate Bank, Mumbai. These five persons Sayyed Munawar, Khan Imtiaz Murtuza, Mohammed Ibrahim Basheer, Hussein Shaikh Abubakar and Zakir Hussein Rehmatullah, were carrying four sacks. Zakir Hussein told the officers that the two sacks with him contained Rs. 50.78 lakhs which had been withdrawn by him from the current account of Acrobond Exports. Sayyed Munawar said that the two sacks with him contained Rs. 50 lakhs, which he had brought from shop No. 27 in Manish Market. The shop belongs to Mustafa Majnoo Iqbal, and Hussein. He said that the money was the sale proceeds of various types of smuggled goods. Officers seized the currency under the belief that it was the sale proceeds of smuggled goods.
3. The resulting investigations brought to light the following facts. Rs. 92,28,625 debited to the current account of Acrobond Exports and Hitesh Exports was in the pay order account of Syndicate Bank. Nahalchand Lallochand, Nucleas Securities Ltd. and Wall Street Finance Limited. These were the moneychangers authorised by the Reserve Bank of India and had delivered foreign exchange in return for the pay order issued by Acrobond and Hitesh Exports. Rs. 25,36,000 debited to the account of Vijaya Agencies was in the pay order account of Moulana Azad Road Branch of Bombay Mercantile Cooperative Bank. Rs. 6.34 lakhs out of this account was paid to Trade Wings Limited, another moneychanger, who had issued foreign exchange in return. Pay order for Rs. 19.02 lakhs had been issued to Nucleas Securities Limited but foreign exchange had not been issued in return. The officers issued instructions to bank stop payment of these amounts and also to block the various accounts in these banks.
4. Enquiries by the Directorate showed that the travellers cheque issued by the moneychanger referred to above had not been utilised by any of the persons concerned for the purpose of foreign travel for which they were issued, and that travellers cheques had been encashed abroad. Various statements were recorded and further seizures were made as a result of which notice was finally issued to the appellants before us and others. The illegalities alleged in the notice are these: Ambalal Soni, Mohammed Hussein Ismail Koradia and Firoz Batliwala received smuggled gold sent by Mustafa Majnoo from Dubai through passengers and disposed of it by sale for cash.
5. This money was deposited in several bank accounts in the Nariman Point branch of the Syndicate Bank, Moulana Azad Road and Abdul Rehman Street branches of the Bombay Mercantile Cooperative Bank. These accounts were being operated by Ambalal Soni and his associates in fictitious names. Feroz Batliwala, Mohammed Hussein Koradia and other persons arranged to get hold of persons holding passports and therefore eligible to travel abroad and arrange applications by or for them for personal or business travel abroad. These persons and fictitious firms applied to moneychangers already named, for issue of foreign exchange. The foreign exchange in the form of travellers cheques were collected from the purported passengers by Ambalal Soni and others and sent abroad for encashment. Payment to the foreign exchange dealers was made by means of pay orders drawn on the accounts operated by Ambalal Soni and others already referred to above.
6. The notice found that Syndicate Bank and the BMC Bank had, in the manner in which they permitted the accounts to be opened and operated entered themselves liable for penalty under Clause (b) of Section 112 of the Act. The four moneychanger had not followed the guidelines issued by the Reserve Bank of India with regard to issue of traveller's cheques and therefore rendered themselves liable to penalty both under Sections 112 and 114 of the Act. Ambalal Soni and others were liable to penalty under Sections 112 and 114 of the Act for dealing in smuggled gold and for export contrary to law of foreign exchange, attracting Clause (d) of Section 113 of the Act. Currency seized from the five persons totalling of Rs. 1,00,78,000 from the Syndicate Bank, Nariman Point branch, Rs. 38.28 lakh and Rs. 50.72 lakhs lying in the pay order accounts of Syndicate Bank, Rs. 6.34 lakhs and Rs. 19.02 lakhs lying in the pay orders account of BMC Bank, Mohammed Ali Road branch, and Rs. 81,000 seized from Ambalal Soni's residence was proposed for confiscation. A sum of Rs. 6,800 being the commission charged by the bank for issue of pay order; a sum totalling Rs. 14.85 lakh in Syndicate Bank and Rs. 17,000 with the BMC bank in the name of non-existent account holders were also ordered to be confiscated.
7. Ambalal Soni and various others did not reply to the notice or appear before the Commissioner. The other noticees did reply and were heard. The Commissioner thereupon passed the order impugned in these appeals. In that order he has ordered confiscation of the currency referred to above and imposed combined penalties under Sections 112 and 114 on Ambalal Soni, the money changers, Syndicate Bank, BMC Bank, and four employees of the BMC Bank, five employees of the Syndicate Bank.
8. We have heard at great length Mr. Sethna, counsel for the department and counsel named above for each of the appellants.
9. We will first consider the appeal of Ambalal Soni. The case against him consists essentially of statements of himself and various others. These are of, five persons from whom the currency was seized at the Syndicate Bank premises. Each of them has said that the currency was sale proceeds of smuggled goods.
10. The evidence against Amablal Soni insofar it relates to smuggling of gold, consist, apart from currency itself, statements of five persons from whom the cash was recovered in the premises of Syndicate Bank; statement of Ambalal Soni himself; statement of Firoz Batliwala and of Hossein Secretary, and the fictitious nature of the details of the bank accounts. We will summarise the evidence contained in the statements of various persons. Each of the five persons from whom the currency was seized at the Syndicate Bank has said that it was the sale proceeds of smuggled gold. In addition, Zakir Hossein Rehmatullah an employee of Ambalal Soni also says "Shri Ambalal and Firoz are receiving gold from Shri Hussein Secretary without bills or receipts and disposing the same in the market on cash basis." Rehmatullah was an employee of Ambalal Soni; describing himself as "a helper" with M/s. Ambalal Soni & Company. He was the one from whom the currency was found. He said in his statement that on 21st February he had opened two current accounts in the name of Choksi & Company and Shah Boremal Jewellers. He had made two withdrawals totalling Rs. 50.78 lakhs from the account of Acrobond Exports. He has made these withdrawals and filled the currency in the gunny bags. He was waiting to deposit the amount in the bank for obtaining pay orders and also waiting for Imtiaz to bring Rs. 50 lakhs to the bank for deposits. The other four persons who were working at shop at Manish Market explained, how at the behest of Hussein Secretary they went to the bank to deposit cash. All that, each of them says about the cash is, an acknowledgment that they informed the DRI officers who questioned them in the bank premises, that the money was sale proceeds of smuggled goods given by Hussein Secretary. Sayyed Munawar one of the four says that "I feel that it is sale proceeds of smuggled gold". Hussein Secretary in his statement narrates how he was working for Ali Moulana who received gold sent by Mustafa Majnoo, through NRI passengers from Dubai, and he in turn was part of this work attending to phone calls. He says how towards the end 1995 Ali Moulana stopped doing this work for Mustafa Majnoo because of disagreements and how he (Hussein Secretary) picked up this work. He says "Mustafa Majnoo instructed to deliver the gold in furture to Ambalal Soni at Pydhonie Ambalal Soni approached me in Manish Market in connection with the NRI passenger's gold. I started sending the said gold to him through Sayyed Munawar Rashid Hussein Abubaker sometimes on the instructions of Salim. Gold was also sent to other customers... My job was to ensure safe delivery of NRI passenger's gold and collection of money." He said that he has sent the amounts collected to Bombay Mercantile Cooperative Bank and handed over to Zakir. He describes how Ambalal Soni and others were operating bank accounts in benami names and obtaining foreign exchange travellers cheques and sending them to Dubai. He describes in detail the sending of the money to the bank on 21st February and says that this amount was received "from one of the gold dealers to whom gold was supplied earlier".
11. Only one statement of Ambalal Soni was recorded contrary to the usual practice of the Directorate of Revenue Intelligence of recording numerous statements. In that statement he says that he purchases gold and silver. He buys the gold through Hussein and from the market and sells the same in the market against cheque and cash payment, and hand over payment to Hussein Secretary for whatever gold was purchased from him. "I make payment to the person as instructed by Hussein". He goes on to describe how the money used to be deposited in banks. He goes on to say in detail about the travellers cheques received for foreign exchange. He says "this amount was proceeds of gold sale brought by Hussein". Firoz Batliwala in his statement says:
Since around September 1994 Shri Ambalal started obtaining foreign marked gold bars from passengers coming from gulf countries. In this business, Shri Ambalal has an associate named Hussein Secretary. Either individually or together, they used to regularly visit Sahar Airport, identify the passenger and obtain gold from them. Sometimes Shri Ambalal used to take me along with him to the Sahar Airport, Bombay (two words illegible) gold from passengers and thereafter carry the same to his office. For doing this work Shri Ambalal was giving me Rs. 700 to Rs. 1000 per passenger. On being asked I state that the passenger were being identified on the basis of the description of the passenger and copy of passport faxed to Shri Ambalal by the consigner of gold. I do not know how he was receiving these faxes.
12. The analysis of these statements leads to a very interesting conclusion. The persons who are directly concerned with the gold and the currency Ambalal Soni himself, Hussein Secretary and Firoz Batliwala, who has occasionally accompanied them to the airport, do not say that the gold was smuggled into India or that the money which was seized is the proceeds of the sale of such gold. All that Ambalal Soni says is that the gold was brought by "NRI passengers". Hussein Secretary only says that he gave Ambalal Soni "NRI passenger gold". It is the five persons from whom the money was seized, who say that the money represents sale proceeds of smuggled gold. The question that would arise is the basis on which these persons acquired the knowledge that the money was sale proceeds of smuggled gold is not explained in their statement. Unless they were parties to the smuggling they could not have obtained it first hand. The notice does not allege any such participation. In that case they would presumably have learned that from Ambalal Soni, Hussein Secretary or anyone else. The notice does not indicate that they obtained this information in such manner.
13. At the same time it does not appear to us from the tener of the statements of the other persons, more immediately concerned with the receipts of the gold and their disposal that they were asked about the legal or illegal nature of the gold that they deal with. Hussein Secretary said that he brought "NRI passenger gold". It would have been the most natural thing in the world for the investigating officers to ask him whether, when and from whom he obtained this gold and whether he had evidence of payment of duty on it. Similarly Ambalal Soni who was portrayed to us by the counsel for the department as a key player in the game, does not say anything about how he obtained the gold. Thus, persons who ought to know and would have been in a position to say, about the origin of the gold do not volunteer information and are not asked. Those who are evidently not in a position to know and voluble about the origin of the gold, but do not explain the source of their knowledge. It is not our role to comment upon the correctness of the investigation that has been undertaken. We mention these facts, however, because the counsel for the department referred to the totality of the circumstances. Considerable emphasis was placed on the fact that Mustafa Majnoo, one of the noticees has been prosecuted in the bomb blasts which took place at Mumbai in early 1993. This bench and every bench has to come to its conclusion on the legally admissible evidence before it and not upon extraneous factors connected with the persons with whom it is concerned, however, grave or significant those factors may be. The Tribunal also cannot come to its conclusions over and above what the investigating officers themselves have concluded. If the investigating officers had not considered it necessary to question the main participants about the nature of the gold, the Tribunal cannot be expected to make assumptions regarding that gold. It can only make its conclusion upon whatever evidence is gathered and presented to it.
14. This line of reasoning, would in the normal circumstances necessarily have led to the conclusion that there is insufficient evidence to conclude that the currency was sale proceeds of smuggled gold. The other factors in this case, however, come to the aid of the department. This is, the stand taken by Ambalal Soni himself, Hussein Secretary and others. From the statements of Ambalal Soni, Hussein Secretary and Firoz Batliwala it is clear that the gold which they received and sold was the gold which they obtained from "NRI passengers". It is also clear from the statements of Hussein Secretary that this was the gold sent by Mustafa Majnoo. One fact is therefore established that the gold was brought from abroad by passengers. Ambalal Soni has not at any stage in the proceedings attempted to disprove this fact. He has not taken a clear stand before the Commissioner or the departmental authorities that this money was anything other than the sale proceeds of the gold, the origin of which is not explained. He did not reply to the show cause notice, or appear before the Commissioner. No satisfactory reason has been advanced for his failure to do so. His absence of means could not have prevented a man living in Mumbai to appear before the Commissioner and say whatever he wishes to say.
15. We are totally unable to accept the contention of the counsel for the department that his failure to appear before the Commissioner destroys his right to appeal, which he combines with the argument that if Ambalal Soni went back before the Commissioner that authority could hear him and pass orders on the matter. When we pointed out to the learned Counsel that, this course of action, if permitted would result the Commissioner reviewing his own order which is impermissible in law, he did not proceed further. The right of any person to appeal before the Tribunal is not conditional upon his having participated in the proceedings before the authority whose order is being appealed. The provisions of the law are clear and it does not need any great argument that this right is unaffected by the conduct of the appellants in the proceedings before the lower authority.
16. However, in our view, it is permissible to draw inference from the course of conduct of Ambalal Soni. There might be various acceptable reasons as to why a person may not wish to disclose or keep no record of income which he has obtained by legible means. The most obvious reason that strikes one is evasion of tax. Let us assume that Ambalal Soni was dealing in gold that was brought by passengers and cleared on payment of duty. In that case evidence of such importation and clearance would be available. The duty receipts issued by the customs department to the passengers for payment of duty, cheques and entries in the cash or accounts book relating to payment made to the parties would be kept. Let us assume further in order to not to pay income tax or sales tax Ambalal Soni did not keep these accounts. In that event he would be entitled to plead rightly that, whatever his conduct with regard to payment of tax, the money was not liable to confiscation as sale proceeds of smuggled gold, if he could at a latter stage show such evidence or such entries. Ambalal Soni was in grave peril as a result of the investigations. He stood in danger of losing his liberty and did in fact lose it. For some time he was detained under COFEPOSA. He faced and still faces prosecution. A substantial sum of money stood in danger of being confiscated. Yet in the face of all this Ambalal Soni does not even claim before the authorities that the gold was obtained legitimately, or furnish a scintilla of information or evidence that would point out. He could have named at least a few passengers from whom he brought gold, given the dates on which he wen (sic) [went] to pick up the gold, pointed to some entries in his accounts. Yet none of these things is done. After the issue was hotly contested counsel for the department agreed to make available to Ambalal Soni and his Advocate the account books which was seized from him. Counsel for Ambalal Soni was unable to show any evidence in these account books to substantiate this version. He showed us some entries showing purchase of gold from some gold dealing firms but there is nothing to show that these are the firms which purchased the gold from the passengers to whom it was sent by Mustafa Majnoo. Hence he was unable to identify this as gold that was brought by NRI passengers. Ambalal Soni in fact in his statement says he makes payment on instructions of Hussein Secretary to Imtiaz Murtuza, Zakir Hussein and sometimes to Hussein himself and sometimes deposited the amount in the Syndicate Bank. He does not speak of having paid anyone else.
17. Hussein Secretary, Firoz Batliwala and Mustafa Majnoo did not contest before the Commissioner the allegations in the notice nor they have filed an appeal. We have therefore to conclude that they not disputed the allegations against them.
18. It was not disputed before us that the money which was found in the accounts with Syndicate Bank and Bombay Mercantile Co-operative Bank was deposited at the instance of Ambalal Soni nor that the accounts in which it was deposited are in fictitious names, there being no entities in the names of which the accounts were opened. No explanation was offered as to why, if the money was obtained by legitimate commerce, it was necessary to take recourse to fictitious names to bank it.
19. In the face of this overwhelming circumstantial evidence therefore the inference that the money was sale proceeds of gold smuggled into India is unavoidable. As we have noted already, that it is the proceeds of gold brought into India is not in dispute. In the total absence of evidence to show that it was brought into India and subsequent conduct of various parties this inference is unavoidable. We make a distinction betweer making an inference on circumstantial evidence and holding that the case against Ambala Soni is established because he is unable to prove the contrary. The line, though fine, still exists. Our conclusion is on the facts of this case and does not lay down any genera proposition. It is the conduct of the parties themselves and their attitude rather that evidence unearthed by the department in the form of statements or documents that has largely contributed to this outcome.
20. The conclusion therefore is that the money seized from the bank amounting to Rs. 1,00,78,000 is the sale proceeds of the gold smuggled into India and is therefore liable to confiscation under Section 121 and Ambalal Soni liable to penalty unden Section 112 for smuggling of the gold.
21. There is, however, no evidence to show that the amount of Rs. 81,000 seized from the residence of Ambalal Soni represents part of such sale proceeds. While there is no specific evidence to show that is not, we hold that it's liable to confiscation would result reversal of the burden to prove to Ambalal Soni which is not permissible. We therefore direct its release.
22. Penalty has been imposed on Ambalal Soni under Section 114 of the Act for his acts connected with sending out the foreign exchange. The allegation that Soni and his associates got hold of persons who were entitled to be given foreign exchange to enable them to go abroad for personal travel or business travel. These persons obtained Foreign exchange for personal travel at the instance of Ambalal Soni and his associates. In other cases applications were made, again at the instance of Ambalal Soni and his associates, purportedly by firm, which on verification found to be non-existent asking for release of foreign exchange to enable their employees to undertake business travel abroad. After the foreign exchange was obtained to these purported travellers, in the form of traveller's cheques, it was in turn picked up by Ambalal Soni and his associates, sent it abroad and encashed.
23. The counsel for Ambalal Soni did not dispute the acts concerned with in getting foreign exchange and sending it abroad. His argument is a legal one. It is that when the foreign exchange was obtained, it was obtained from a moneychanger. If it was not utilised for the purpose which it was issued, but sent abroad, there can be no contravention of Section 113 of the Act. This is the section that has been alleged to be violated for which penalty under Clause (d) of Section 113 is proposed.
24. Sub-section (2) of Section 13 of the Foreign Exchange Regulation Act, 1973 provides:
No person shall except with the general or special permission of the Reserve Bank or the written permission of the person authorised in this behalf by the Reserve Bank, take or send out of India any Indian currency or foreign exchange other than foreign exchange obtained by him from an authorised dealer or from a moneychanger.
It is true that the foreign exchange in question has been obtained from an authorised dealer or moneychanger. The object of the exclusion in the sub-section is clearer. It does not prohibit taking or send out foreign exchange which has been released by an authorised dealer or moneychanger for legitimate purpose. That would defeat the very object of obtaining of the foreign exchange by the person concerned to make use of it abroad. However, if read literally, the clause would except sending out or taking out of currency that a person as obtained from an authorised dealer or moneychanger by any means, legal or otherwise such as by theft or misrepresentation. Surely it cannot be argued that such a prohibition against taking out such foreign exchange excepts to such sums of money too. The object of exception must be construed having regard to the object for which it was provided and not in such a manner as to render it absurd. It is not disputed that there was never any such intention on the part of the persons who obtained the foreign exchange to utilise it for travel abroad. In fact, in the case of money issued for business travel on an application made by fictitious firms, that entire transaction was permeated with fraud right from its inception. In this kind of situation we are unable to accept the argument of the counsel. Penalty on Ambalal Soni under Section 114 is imposable. We do not think the amount of penalty imposed by the Commissioner is in commensurate with the gravity of offence and decline to alter it.
25. What remains for consideration is the money that remains in the pay order accounts of the two blanks, which was to be paid to the moneychangers against the pay orders issued to them from the accounts in these banks for procuring foreign exchange. The contentions of Mr. Nankani, representing all the moneychangers but one, (Trade Wings Limited), which was adopted by the counsel for Trade Wings are as follows: The moneychangers are holders in due course of the pay order. The money represents the sale proceeds of the foreign exchange sold by the moneychangers. The provisions of Section 121 of the Act will not apply because the foreign exchange is not sold with the knowledge that it was smuggled and when it was sold it was not smuggled. Such smuggling taken place later. Mr. Sethna for the department opposes this contention. He refers to the decision of the Tribunal in Wall Street Finance a CC appeal C/688/98-Bom, contending that the money in the fictitious accounts continues to remain sale proceeds.
26. We have already dealt with the arguments that the money deposited in the banks has not been shown to be sale proceeds of the smuggled gold and found ourselves unable to accept it. We now have to examine the alternative plea. The question that is to be answered whether the money, which in the hands of Ambalal Soni, which was originally proceeds of smuggled gold, continues to remain such sale proceeds and is liable to confiscation under Section 121 even if it changes hands in the course of commerce? It cannot be disputed that when the money was put into the bank, it was sale proceeds of smuggled gold. The ingredients of Section 121 were satisfied with regard to it. When the pay order issued to the moneychanger was presented to the bank, it pending payment acquiring pay order kept the money in a separate account. The money also acquired the character of the proceeds of sale of foreign exchange. That foreign exchange, as we have noted, was not "smuggled goods" when it was issued by the moneychanger. It only acquired this character only later when it was smuggled out. The money changer therefore could not obviously have any knowledge that the foreign exchange was "smuggled out". Therefore as proceeds of sale of that foreign exchange the money is not liable to confiscation under Section 121. We have to see, whether by acquiring its character as sale proceeds of foreign exchange the money has lost its identity as sale proceeds of smuggled gold sold by Ambalal Soni and his associates.
27. Section 120 of the Act provides that smuggled goods may be confiscated not withstanding any change in their form. It further provides whether that smuggled goods are mixed with other goods in such manner that the smuggled goods cannot be separated from such other goods, the whole of the goods shall be liable for confiscation. There is an exception. Where the owner of such mixed goods proves that he has no knowledge or reason to believe that it included any smuggled goods, only that part of the goods, the value of which is equal to the value of the smuggled goods shall be liable to confiscation. There is no such provision governing confiscation of sale proceeds Section 121 of the Act does not contain any comparable provision. Money which was originally sale proceeds of smuggled goods has changed its form and lost its character as such sale proceeds of smuggled goods when it was passed on as consideration for other goods or services. Thus, money paid out of such proceeds for purchase of a car represents at the hands of the seller of the car the proceeds of the sale of his car, to whom it is not the proceeds of the smuggled goods. He might be totally unaware that it is the proceeds of sale of such goods. There is a change in the form or character of the money. Therefore in the absence of any provision permitting such confiscation in such circumstances the money in question is not liable to confiscation.
28. We must also not (sic) [note] that holding to the contrary would lead absurd results. Let us consider an example. A person may buy, before it is cleared from customs, an imported car, paying for it out of the proceeds of the smuggled goods that he has sold. The importer of the car who receives part of the payment for it in advance pays the customs duty payable on the car out of this money. The customs duty in turn goes to the Consolidated Funds of India from where it is used pay the salary of a civil servant. By following the line of reasoning contrary to what we have expressed, the salary of that officer would be liable to confiscation as sale proceeds of smuggled goods. By following the well known principles of financial accounting such as first in first out or first in last out, the identity between the sale proceeds and the salary can (be) established. This is only one example. There will be many such examples. Surely it is not the intention of the Legislature while enacting Section 121 to provide for such a state of affairs. In the absence of any specific provision as for example that contemplated in the provision relating to money laundering we are of the view confiscation of the sale proceeds cannot be made once the goods lose their character or identity as sale proceeds of smuggled goods.
29. The issue in Wall Street Finance Ltd. v. CC did not relate to this aspect. The question that we are presently concerned with was not under consideration of the bench in that matter. The situation of facts also is considerably different. The bench has found evidence of awareness and illegal issue of foreign exchange on the part of the moneychanger or his agent. The situation before us is different.
30. Penalty has been imposed on the banks and their employees for their abetment in the acts of Ambalal Soni. The Commissioner has found that the employees of the bank, managers of the branches and their employees, were negligent in their performance of their duties. They did not follow the guidelines issued by the Reserve Bank of India. He has not accepted the plea made on behalf of the employees that they had no knowledge of the origin of the funds in the accounts or of the suspicious operation of the account. He has emphasised that the banks "ought to have been concerned in the operation of the benami accounts and heavy deposit of cash and immediate withdrawal in the form of pay orders in favour of the full-fledged moneychanger firms should have raised strong reason to believe the suspicious nature of the transactions. The Commissioner relies upon the statement of Zakir Hussein that the bank officers knew that the purpose of opening and operating the account was solely for deposit of large amounts of cash and obtaining pay orders from these deposits, and feels that they should have alerted the concerned officials.
31. As we see it the function of a bank is to accept money on behalf of its depositors and lend this money to creditors. Such transactions necessarily involve deposits into, and withdrawal from the bank or money, some of which may at times be large. We do not think that it is the legitimate function of any bank or its officials, unless the law requires it, to enquire into the source of the funds, before they decide to accept the" deposits. In our opinion that militates against the general concept of banking. The Commissioner's order does not disclose the existence of any legal requirement that the employees of the banks must satisfy themselves that the source of the funds are satisfactorily accounted for. Further we do not find any evidence that officials of the bank who were concerned with opening and operating of these accounts, or any of their supervisory officers, knew or had reason to believe that what has been deposited in the banks was money obtained by proceeds of sale of smuggled gold. The Commissioner himself does not cite any such specific evidence in support of his view.
32. Even if we assume for a moment that the bank officials acted negligently or carelessly in accepting these accounts, and had contravened regulations of the Reserve Bank of India in this regard, that will not establish their liability to penalty under Clause (b) of the Section 112 of the Act requires a particular state of mind of the person concerned. He must know or have reason to believe that the goods that he deals with are liable confiscation under Section 111. This state of mind has not been shown at all. It is the normal function of the bank employees to encourage deposits into his bank. That after all, is how the success of a bank is measured. We therefore do not find anything particularly strange or sinister in that these officers perhaps went out of their way to facilitate operations of the account of Zakir Hussein. As was argued by one of the counsel that this what any commercial establishment would do for a large scale customer. If there was negligence on the part of any of the employees of the banks, the Commissioner was at liberty to refer the matter to the Reserve Bank of India or to take appropriate action. We do not find that any such reference was made or action taken.
33. No gold has been seized or confiscated. There is not the slightest allegation that the banks or their employees directly abetted or were even aware of the smuggling of.