1985 (2) TMI 309 - HC - FEMA

Summary

Issues Involved:
1. Legality of the seizure and retention of Rs. 1.72 lakhs by the Enforcement Directorate.
2. Application of Section 41 of the Foreign Exchange Regulation Act, 1973.
3. Interpretation of the term "document" under the Act.
4. Justification for retaining the seized currency beyond one year.
5. Applicability of Section 53(1)(b) of the Act.
6. Relevance of Section 110 of the Customs Act.

Issue-wise Detailed Analysis:

1. Legality of the seizure and retention of Rs. 1.72 lakhs by the Enforcement Directorate:
The petitioner was stopped and searched by the officers of the Enforcement Directorate on 2-6-1983, leading to the seizure of Rs. 1.72 lakhs. The petitioner argued that the retention of the currency beyond one year without initiating proceedings was illegal. The respondent countered by stating that a show cause notice was issued on 3-12-1984, and thus, the retention was justified. The court concluded that the retention of the currency beyond one year without initiating proceedings under Section 51 or Section 56 of the Act was illegal.

2. Application of Section 41 of the Foreign Exchange Regulation Act, 1973:
Section 41 of the Act allows the retention of seized documents for a period not exceeding one year unless proceedings under Section 51 or Section 56 are initiated within that period. The court noted that no proceedings were initiated within one year from the date of seizure (2-6-1983). Therefore, the retention of the currency beyond 2-6-1984 was deemed illegal.

3. Interpretation of the term "document" under the Act:
The petitioner contended that Indian currency falls within the expression "document" as per the explanation to Section 33 of the Act. The court agreed, stating that the seized currency could be considered a "document" under the Act, and thus, its retention was subject to the limitations set out in Section 41.

4. Justification for retaining the seized currency beyond one year:
The court referred to the Supreme Court's decision in S.O. Arjunan Chettiar v. Enforcement Officer, which disapproved the retention of documents beyond one year without initiating proceedings. The court emphasized that the statutory provision must be obeyed, and the currency should be returned if proceedings were not initiated within the specified period.

5. Applicability of Section 53(1)(b) of the Act:
The respondent argued that Section 53(1)(b) allowed the retention of the seized currency. However, the court clarified that Section 53(1)(b) pertains to the powers of the adjudicating officer and the Appellate Board to require the production of documents during proceedings. It does not justify the retention of seized documents beyond the period specified in Section 41.

6. Relevance of Section 110 of the Customs Act:
The petitioner cited Section 110 of the Customs Act and related Supreme Court decisions to argue for the return of the seized currency. The court noted the differences in language between Section 41 of the Act and Section 110 of the Customs Act, making it unnecessary to delve into the Customs Act provisions. The court focused on the statutory requirements under the Foreign Exchange Regulation Act.

Conclusion:
The court directed the respondent to complete the proceedings initiated against the petitioner within four months and return the seized currency by 15th June 1985. The writ petition was allowed, and the rule nisi was made absolute. No order as to costs was issued.