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vention of Smuggling Activities Act, 1974 on being satisfied that it was necessary to detain him with a view to prevent- ing him from acting in any manner prejudicial to the augmen- tation of foreign exchange.

Intelligence gathered by the Directorate of Revenue Intelligence, Bombay was that one Subhash Gadia, the broth- er-in-law of the detenu Mohanlal Jatia, a very rich and prosperous businessman of Bombay, was under-invoicing the imports of yarn from Japan. On the basis of the said information the officers of the Director- ate of Revenue Intelligence and officers the Customs, Bombay searched his residential premises at A- 121, Sea Lord Cuffe Parade, Colaba, Bombay under the Customs Act, 1962 on June 27, 1985 which resulted in seizure of certain documents. As the seized documents not only revealed violation of the provisions of the Customs Act but also indicated certain payments and transactions in violation of the Foreign Ex- change Regulation Act, 1973, the matter was referred to the office of the Enforcement Directorate for purposes of inves- tigation from the angle of the Foreign Exchange Regulation Act on October 24, 1985. The aforesaid Subhash Gadia was summoned under s. 40 of the Foreign Exchange Regulation Act and his statement was recorded by R.C. Singh, an officer of the Enforcement Directorate, Bombay on November 5, 1985. In his statement of even date, Subhash Gadia stated that he went to Japan in 1970 seeking employment with a proprietory concern known as Messrs Greenland Corporation, Tolo Build- ing, Osaka, Japan owned by a Nepali national and was engaged in exporting yarn, fibre, fabrics, chemicals etc. to India and Middle-East countries. Messrs J.M. Trading Corporation, 701, Tulsiani Chambers, 212 Nariman Point, Bombay (of which Mohanlal Jatia is a partner). are the sole-selling agents of Messrs Greenland Corporation for yarn and fibre. He further revealed that Satyanarayan Jatia, the eider brother of Mohanlal Jatia who is the partner of Messrs J.M. Trading Corporation, Bombay had been staying in Japan for some 35 years and was the sole representative of Messrs Greenland Corporation in Japan. While explaining the entries in the seized documents from his residence on June 27, 1985, Sub- hash Gadia admitted that the bunch marked S.G. 6 containing pages 1 to 94 are written by him in his own writing and that these contained accounts relating to his trade or business including imports and cash transactions and payments. He further confirmed that all the transactions reflected in these documents were his real business transaction dealings and some of which were not reflected in his regular account books. While explaining page 94 of the seized bunch S.G. 4. he stated that this page contained coded account in Indian rupees of his firm Messrs Piyush Corporation and that on the left side of this page credit entries were shown in Indian rupees with two zeros (00) missing and that while writing his account he had deleted two zeros in the credit side as well as debit side (right side) of the page. While decoding the codes he stated that the figure 8582/38 written on the right hand side was actually Rs.8,58,238 and this amount had been debited against A/S investment. Further, that A/S' investment was his private investment abroad in US dollars which had been utilised by him for under-invoicing of sever- al imports etc. Paragraph 44 of the grounds of detention revealed trans- actions relating to the detenu Mohanlal Jatia and it is extracted:

"44. When confronted with the documents seized from Subhash Gadia's residence even though you have denied any connection in respect of various unauthorised transactions between you, Greenland Corporation. Japan and others abroad, but the following documents clearly revealed that you have been indulging in various unauthorised transactions in violations of provisions of Foreign Exchange Regulation Act. 1973.

      A. Page338  Trial Balance of Greenland
       S.G. 6	   Corporation	  entries    of
		   ML, GN, RN, R.G.T. and
	    Gadia  admits  before  that
			   they are Jatia's account.
      B.     "	 M.L. Jatia's i.e. your account
		 maintained in Japan, how-
		 ever. you admit receipt of
		 Gifts by your children such
		 as T.V., Video and M.V.Parts.
      C. Page215  Keeping U.S. $ 2 lakhs in
      S.G. 6	  fixed deposit on 2.6.83 in
		  Kamal Account, also inclu-
		  ding 20 lakhs $ (dollars).
      D. Page335  American dollar account as
      S.G. 6	   on 31.1. 1984.

According to the learned counsel, the mistakes which crept in the proposal made by the initiating authority for the detention of the detenu recur in paragraph 44 of the grounds and it shows the casualness with which the grounds of detention were drawn which indicate nonapplication of mind. Although the argument at first blush appears to be attractive, but on deeper consideration does not stand to scrutiny. We wish to enumerate the so-called factual mis- statements listed as Items A to F in paragraph 44 of the grounds and deal with them in seriatim. Item A at p. 338 of the seized bunch SG 6 is the trial balance-sheet of Messrs Greenland Corporation, Japan. On that page, there are var- ious entries of ML, GN, RN and RG Jatia. It is mentioned by the detaining authority in paragraph 44 underneath Item A that Gadia 'admits' that they are Jatia's account. During interrogation Subhash Gadia stated that bunch of documents SG 6 relates to Messrs Greenland Corporation, Japan and that these entries 'may be related to the Jatia family'. The detaining authority was not wrong in treating the words 'may be' in the context in which they appear as being an admis- sion of fact made by the detenu. The detaining authority was entitled to make use of the decoding formula revealed by Subhash Gadia to connect the detenu Mohanlal Jatia with the initials 'ML' appearing in various transactions, more so because the relative telex messages sent by Messrs Greenland Corporation were seized from the office premises of Messrs J.M. Trading Corporation, J.M. Textile Pvt. Ltd., Ramgopal Textile Pvt. Ltd., Ram Gopal & Sons, Ram Gopal Synthetics Pvt. Ltd., Kamal Trading Corporation. Kalpana Trading Corpo- ratoin, Sudhir Trading Corporation, all situate at 701, Tulsiani cham-

bers, 212, Nariman Point, Bombay and the detenu admittedly is closely connected with these concerns being Director or shareholder or a partner. The said documents disclose that the detenu Mohanlal Jatia with the initials 'ML' and his brothers GN, SN and RN, namely. Ganesh Narayan Jatia, Satya Narayan Jatia and Ram Niranjan Jatia are maintaining secret accounts with Messrs Greenland Corporation, Japan. They also clearly indicate that the detenu and his brothers were found to be engaged in transferring funds from or to India in an unauthorised manner on a very large scale. Subhash Gadia in his statement revealed that pp. 316, 317 and 318 of the seized document SG 6 are written in his handwriting and the account is in Yen. He further revealed that the said ac- counts relate to Satya Narayan Jatia, Ganesh Narayan Jatia and Mohanlal Jatia. The detenu was furnished a copy of the statement made by Subhash Gadia. As hereinbefore adumbrated, the detenu when confronted denied to have entered into the transaction. However. when confronted with the various entries appearing in the seized document SG 6 the detenu admitted that the initials 'MI.' or 'MLJi' relate to him both in the accounts as well as in the telex messages. The various entries show transactions involving foreign exchange to the tune of several crores of rupees. For instance, at p. 318 of SG 6appear the details of FDR account standing in the name of Satya Narayan, Ganesh Narayna and Mohanlal Jatia to be divided equally and the sum total of the amount shown is 1,09,37,471.16 Yen. The said figure also finds place at p. 278 of the file SG 6 which gives details how the figure 1,09,37,471.16 has been arrived at. In the telex message appearing at pp. 35 and 36 in the bunch of seized document SG 6 arc given the details of the FDR account with instruc- tions to work out the average rate of interest between the three brothers Satya Narayan, Ganesh Naryana and Mohanlal payable on the FDR for 1,09,37,471.16 Yen. Similarly, Laxmi Ji account with Messrs Greenland Corporation, Japan is a capital account of Satya Narayan, Ganesh Narayan and Mohan- lal showing a capital investment of 48,62,96,325 Yen. We need not go into further details. The entries show the magnitude of the operation in foreign exchange carried on by the detenu.