TMI Blog2012 (7) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... of foreign exchange is concerned, the restrictions in FEMA continue to be as rigorous as they were in FERA. Although contravention of its provisions is not regarded as a criminal offence, yet it is an illegal activity jeopardizing the very economic fabric of the country. On the touchstone of constitutional jurisprudence, as reflected by Article 22 read with Articles 14, 19 and 21, impugned provision cannot be rendered as unconstitutional. There is no constitutional mandate that preventive detention cannot exist for an act where such act is not a criminal offence and does not provide for punishment. An act may not be declared as an offence under law but still for such an act, which is an illegal activity, the law can provide for preventive detention if such act is prejudicial to the state security. After all, the essential concept of preventive detention is not to punish a person for what he has done but to prevent him from doing an illegal activity prejudicial to the security of the State. In complete agreement with the position stated in UOI vs. Venkateshan S.(2002 (4) TMI 789 (SC))“if the activity of any person is prejudicial to the conservation or augmentation of foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (as amended), I direct that the said Shri Raj Kumar Aggarwal @ Munna , be detained and kept in custody in the Central Jail, Tihar, New Delhi. Sd/- (Rasheda Hussain) Joint Secretary to the Government of India 3. The above detention order came to be passed in the backdrop of the following events. On February 17, 2009 the premises of Ambika Electronics situate at 136, MCD Market, Karol Bagh, New Delhi was raided by the Office of the Directorate of Enforcement, New Delhi. In the course of search, Indian currency amounting to Rs. 8.9 lacs (approximately) was recovered along with some documents. The enforcement authorities took into custody the passport of second petitioner (hereinafter referred to as detenue ) as well. On that day itself, i.e. February 17, 2009 Office of the Directorate of Enforcement also raided the residential premises of detenue s brother Anil Kumar Aggarwal at Pitam Pura, New Delhi and another commercial premises of Ambika Electronics at Beadanpura, Karol Bagh, New Delhi and M/s. Bhagwati Electronics, 135 Municipal Market, Karol Bagh, New Delhi belonging to one Kapil Jindal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f foreign exchange, the authorities were empowered to make a detention order against such person. 8. Not satisfied with the judgment of the Delhi High Court passed on March 18, 2010, the petitioners filed a special leave petition before this Court and it was mentioned on April 1, 2010. On that day, the Court directed for listing the matter on April 9, 2010 and in the meanwhile continued the interim order that was passed by the High Court operative during the pendency of the writ petition. 9. It may be noted here that while the above special leave petition was pending, the petitioners preferred the present writ petition. On May 11, 2010 the Court ordered the writ petition to be heard along with special leave petition (Crl.) no. 2698 of 2010. On May 13, 2010, the special leave petition and the present writ petition were listed before the Court. On that day in the special leave petition following interim order was passed : By order dated December 22, 2009, the High Court directed the Petitioner No. 2 i.e. Mr. Raj Kumar Aggarwal to join the investigation as and when called. The grievance made by the respondents is that Mr. Raj Kumar Aggarwal has failed to join the investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent noted above is unconstitutional. 14. Elaborating his arguments, Mr. Vikram Chaudhari submitted that there were three other Central Preventive Acts apart from COFEPOSA, namely, (a) National Security Act, 1980, (b) Prevention of Blackmarketing and Maintenance of Supplies of Essential Commodities Act, 1980 and (c) Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Act, 1974. In all these three enactments, there are corresponding penal provisions in the form of prosecution. However, in COFEPOSA viz., the power to detain a person to prevent him from indulging in any prejudicial activities relating to conservation or augmentation of foreign exchange is given although there is no corresponding penal punitive law available. He referred to various provisions of FEMA, particularly, Chapter IV that deals with contravention and penalties; Chapter V that provides for adjudication as well as appeal against the order of adjudicating authority vide Sections 16 and 17; Chapter VI that provides for establishment of Directorate of Enforcement; Section 40 that stipulates that the Central Government may in any peculiar circumstances suspend either indefinitely or for a limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uences. If such prejudicial act was not prosecutable in law and such act has not been made part of criminal penal law, preventive detention of a person from committing the prejudicial act which is not an offence is impermissible. In this regard, he sought to draw support from decisions of this Court in State of Bombay v. Atma Ram Sridhar Vaidya 1951 SCR 167; Bhut Nath Mete v. The State of West Bengal (1974) 1 SCC 645; Haradhan Saha v. The State of West Bengal and others (1975) 3 SCC 198; Kanchanlal Maneklal Chokshi v. State of Gujarat and others (1979) 4 SCC 14; Smt. Hemlata Kantilal Shah v. State of Maharashtra and another (1981) 4 SCC 647; State of Punjab v. Sukhpal Singh (1990) 1 SCC 35 and Rekha v. State of Tamil Nadu Through Secretary to Government and Another (2011) 5 SCC 244. 19. As regards the decision of this Court in Venkateshan S.1, learned counsel submitted that in that case the events which led to the detention of the detenue therein had taken place when FERA was in place and FEMA had not come into force and in view of the sunset clause the prosecution for violation of FERA could continue for next two years and, therefore, the said decision was clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OFEPOSA put in issue in the writ petition. He extensively referred to the provisions of FERA and FEMA and the preamble of COFEPOSA and submitted that dealings in foreign exchange by a person other than authorised persons/dealers have serious and deleterious consequences. The foreign exchange is the most precious reserve for national economy and necessary for the economic security of the State and illegal and/or unaccounted transactions through hawala have vide ramifications and are definitely prejudicial to the conservation and augmentation of foreign exchange and since the need for conservation and augmentation of foreign exchange resources of the country continue to exist, preventive mechanism laid down in COFEPOSA warrants its continuance and there is nothing unconstitutional about it. 23. Learned Additional Solicitor General submitted that the legislative power of the Parliament to enact criminal laws and preventive detention laws was traceable from two distinct Entries appearing in Seventh Schedule (List III) of the Constitution, i.e., Entry nos. 1 and 3 respectively. Parliament is, thus, fully competent to enact a law of either type (criminal or preventive detention) or bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of November, 1949, People of India resolved to constitute India into Sovereign Democratic Republic and in the Constituent Assembly adopted, enacted and gave to themselves an instrument of social contract the Constitution of India which became effective from January 26, 1950. The Constitution of India is fountainhead of all laws and provides the machinery by which laws are made. Any statutory law, in order to be valid, must be in conformity with the constitutional requirements. There cannot be any departure or deviation from this principle. For the purposes of the present matter, it is not necessary to deal with the diverse features of the Constitution elaborately, suffice, however, to state that Part III that provides for fundamental rights is the most important chapter insofar as individuals and citizens are concerned. 28. Article 12 for the purposes of Part III defines the State . 29. Article 13(2) mandates that the State shall not make any law which takes away or abridges the rights conferred by Part III and any law made in contravention of this provision shall be void to the extent of the contravention. 30. Article 14 states that the State shall not deny to any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or detained under the preventive detention law. 36. In the backdrop of the above constitutional provisions and scheme, the issue with regard to constitutional validity of Section 3(1) of COFEPOSA to the extent it empowers the competent authority to make an order of detention against any person with a view to preventing him from acting in any manner prejudicial to the conservation and augmentation of foreign exchange has fallen for consideration. 37. There appears to be consistent line of cases of this Court beginning from 1950 itself which says that preventive detention can constitutionally operate. In A.K. Gopalan v. The State of Madras 1950 SCR 88, which was decided by this Court within few months of coming into force of our Constitution, the Court upheld the constitutional validity of Section 3(1) of the Preventive Detention Act, 1950 on the touchstone of Articles 13, 14, 19, 21 and 22 of the Constitution. 38. In Atma Ram Sridhar Vaidya, Chief Justice Hari Lal Kania said that preventive detention was not by itself considered an infringement of any of the fundamental rights mentioned in Part III of the Constitution. He, however, clarified that this was, of course, subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atively different from punitive detention. The power of preventive detention is a precautionary power exercised in reasonable anticipation. It may or may not relate to an offence. It is not a parallel proceeding. It does not overlap with prosecution even if it relies on certain facts for which prosecution may be launched or may have been launched. An order of preventive detention may be made before or during prosecution. An order of preventive detention may be made with or without prosecution and in anticipation or after discharge or even acquittal. The pendency of prosecution is no bar to an order of preventive detention. An order of preventive detention is also not a bar to prosecution. 40. In Khudiram Das v. The State of West Bengal and others (1975) 2 SCC 81, a four-Judge Bench of this Court held that although a preventive detention law may pass the test of Article 22 yet it has to satisfy the requirements of other fundamental rights such as Articles 14 and 19. 40.1. While dealing with the constitutional validity of MISA, the four-Judge Bench in Khudiram Das16 stated in para 12 (pgs. 93-95 of the Report) as follows : 12. The next question which then arises for consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cooper s case and pointing out the context in which R.C. Cooper s case held that the acquisition of property directly impinged the right of the bank to carry on business, other than banking, guaranteed under Article 19 and Article 31(2) was not a protection against the infringement of that guaranteed right, proceeded on the assumption that the Act which is for preventive detention has to be tested in regard to its reasonableness with reference to Article 19. That decision accepted and applied the ratio in Shambhu Nath Sarkar s case as well as R.C. Cooper case to both of which Ray, C.J., was a party. This question, thus, stands concluded and a final seal is put on this controversy and in view of these decisions, it is not open to any one now to contend that a law of preventive detention, which falls within Article 22, does not have to meet the requirement of Article 14 or Article 19. Indeed, in Haradhan Saha s case this Court proceeded to consider the challenge of Article 19 to the validity of the Act and held that the Act did not violate any of the constitutional guarantees embodied in Article 19 and was valid. Since this Court negatived the challenge to the validity of the Act on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether a particular person is disposed to commit the prejudicial acts. The duty of deciding this question is thrown upon the State. The justification is suspicion or reasonable probability and not criminal charge which can only be warranted by legal evidence. It is true that in a case in which the liberty of such person is concerned we cannot go beyond natural construction of the statute. It is the duty of this Court to see that a law depriving the person of his liberty without the safeguards available even to a person charged with crime is strictly complied with. We have, however, to remember that individual liberty is allowed to be curtailed by an anticipatory action only in interest of what is enumerated in the statute. 9. .. As we have already seen the power of preventive detention is qualitatively different from punitive detention. The power of preventive detention is precautionary power exercised reasonably in anticipation and may or may not relate to an offence. It cannot be considered to be a parallel proceeding. The anticipated behaviour of a person based on his past conduct in the light of surrounding circumstances may provide sufficient ground for detention . . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, intended to prevent a person from indulging in a conduct, injurious to the society or the security of the State or public order, it has been recognised as a necessary evil and is tolerated in a free society in the larger interest of security of the State and maintenance of public order. However, the power being drastic, the restrictions placed on a person to preventively detain must, consistently with the effectiveness of detention, be minimal. In a democracy governed by the rule of law, the drastic power to detain a person without trial for security of the State and/or maintenance of public order, must be strictly construed. This Court, as the guardian of the Constitution, though not the only guardian, has zealously attempted to preserve and protect the liberty of a citizen. However, where individual liberty comes into conflict with an interest of the security of the State or public order, then the liberty of the individual must give way to the larger interest of the nation . 45.1. In the minority opinion, G.T. Nanavati, J. although differed with the view of majority on the question of law but he also noted: the distinction between preventive detention and punitive de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f foreign exchange, the authority is empowered to make a detention order against such person and the Act does not contemplate that such activity should be an offence. 9. The COFEPOSA Act contemplates two situations for exercise of power of preventive detention - (a) to prevent violation of foreign exchange regulations; and (b) to prevent smuggling activities. Under Section 2(e) of the COFEPOSA Act, smuggling is to be understood as defined under clause (39) of Section 2 of the Customs Act, 1962 which provides that smuggling in relation to any act or omission will render such goods liable to confiscation under Section 111 or Section 113. Section 111 contemplates confiscation of improperly imported goods and Section 113 contemplates confiscation of goods attempted to be improperly exported. This has nothing to do with the penal provisions i.e. Sections 135 and 135-A of the Customs Act which provide for punishment of an offence relating to smuggling activities. Hence, to contend that for exercising power under the COFEPOSA Act for detaining a person, he must be involved in criminal offence is not borne out by the said provisions. 10. The other important aspect is that the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered to be the criminal violation of FERA has ceased to be criminal offence under FEMA, the detention order cannot be continued after 1-6-2000, cannot be justified . 47. The Constitution recognizes preventive detention though it takes away the liberty of a person without any enquiry or trial. Preventive detention results in negation of personal liberty of an individual; it deprives an individual freedom and is not seen as compatible with rule of law, yet the framers of the Constitution placed the same in Part III of the Constitution. While giving to an individual the most valuable right personal liberty and also providing for its safeguard, the Constitution has perceived preventive detention as a potential solution to prevent the danger to the state security. The security of the State being the legitimate goal, this Court has upheld the power of the Parliament and State Legislatures to enact laws of preventive detention. The Court has time and again given the expression personal liberty its full significance and asserted how valuable, cherished, sacrosanct and important the right of liberty given to an individual in the Constitution was and yet legislative power to enact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and wrong. As early as 1947, the Central Legislature found it necessary to enact the Foreign Exchange Regulation Act, 1947 and Imports and Exports (Control) Act, 1947. Then came the Import (Control) Order, 1955 to place the policy regarding imports on a surer footing. In the year 1962, a new Customs Act replaced the antiquated Sea Customs Act, 1878. The menace of smuggling and foreign exchange violations, however, continued to rise unabated. Parliament then came forward with the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA). It provided for preventive detention of these antisocial elements . The Court in paragraphs 3 to 7 referred to COFEPOSA, SAFEMA and FERA, the amendments carried out in these Acts, and the constitutional protection given to COFEPOSA and SAFEMA. The preamble and the provisions of COFEPOSA were noted in paragraphs 9 to 14. The provisions of SAFEMA were noted in paragraphs 15 to 19. In paragraph 20 (pg. 71 of the Report) , the Court made following clarificatory observations: Though a challenge to the constitutional validity of 39th, 40th and 42nd Amendments to the Constitution was levelled in the writ petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig Refining Co., 94 L.Ed. 381, be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt states that the violations of foreign exchange regulations and smuggling activities are having an increasingly deleterious effect on the national economy thereby casting serious adverse effect on the security of the State. Be that as it may, it is not necessary to pursue this line of reasoning since we are in total agreement with the approach evolved in Union of India v. H.S. Dhillon, (1971) 2 SCC 779 - a decision by a Constitution Bench of seven Judges. The test evolved in the said decision is this in short: Where the legislative competence of Parliament to enact a particular statute is questioned, one must look at the several entries in List II to find out (applying the well-known principles in this behalf) whether the said statute is relatable to any of those entries. If the statute does not relate to any of the entries in List II, no further inquiry is necessary. It must be held that Parliament is competent to enact that statute whether by virtue of the entries in List I and List III or by virtue of Article 248 read with Entry 97 of List I. In this case, it is not even suggested that either of the two enactments in question are relatable to any of the entries in List II. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not receive full protection. 51.2. In paragraph 151 (pg. 111 of the Report), the Court recorded its conclusions. Clauses (iii) and (v) thereof are relevant for the present purposes which read as follows: (iii) All amendments to the Constitution made on or after 24-4-1973 by which the Ninth Schedule is amended by inclusion of various laws therein shall have to be tested on the touchstone of the basic or essential features of the Constitution as reflected in Article 21 read with Article 14, Article 19, and the principles underlying them. To put it differently even though an Act is put in the Ninth Schedule by a constitutional amendment, its provisions would be open to attack on the ground that they destroy or damage the basic structure if the fundamental right or rights taken away or abrogated pertains or pertain to the basic structure. (v) If the validity of any Ninth Schedule law has already been upheld by this Court, it would not be open to challenge such law again on the principles declared by this judgment. However, if a law held to be violative of any rights in Part III is subsequently incorporated in the Ninth Schedule after 24-4-1973, such a violation/infraction sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y foreign exchange: Provided that nothing in this sub-section shall apply to any purchase or sale of foreign currency effected in India between any person and a money-changer. Explanation.-For the purposes of this sub-section, a person, who deposits foreign exchange with another person or opens an account in foreign exchange with another person, shall be deemed to lend foreign exchange to such other person. (2) Except with the previous general or special permission of the Reserve Bank, no person, whether an authorised dealer or a money- changer or otherwise, shall enter into any transaction which provides for the conversion of Indian currency into foreign currency or foreign currency into Indian currency at rates of exchange other than the rates for the time being authorised by the Reserve Bank . FERA contained penal provisions. Section 50 provided for imposition of fiscal penalties while Section 56 made provision for prosecution and punishment. FERA stood repealed by FEMA in 1999. 54. Before we refer to FEMA, a brief look at the COFEPOSA may be appropriate. COFEPOSA came into force on December 19, 1974. Its preamble reads as under: An Act to provide for preven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 22 of the Constitution have been provided in Sections 8 and 9. Maximum period of detention is provided in Section 10. Notwithstanding the provision contained in Section 10, Section 10A provides for extension of period of detention in the situations contemplated therein and to the extent provided. Section 11 empowers the Central Government or the State Government, as the case may be, to revoke any detention order. 56. As noted above, FERA has been repealed by FEMA. FEMA was enacted to consolidate and amend the law relating to foreign exchange with the objective of facilitating the external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. Section 2(c) of FEMA defines authorised person which means an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under sub-section (1) of Section 10 to deal in foreign exchange or foreign securities. RBI may authorise any person to deal in foreign exchange or in foreign securities as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit. Section 10 provides for the complete p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of foreign exchange continues to be its important theme. Although contravention of its provisions is not regarded as a criminal offence, yet it is an illegal activity jeopardizing the very economic fabric of the country. For violation of foreign exchange regulations, penalty can be levied and its non-compliance results in civil imprisonment of the defaulter. The whole intent and idea behind COFEPOSA is to prevent violation of foreign exchange regulations or smuggling activities which have serious and deleterious effect on the national economy. In today s world the physical and geographical invasion may be difficult but it is easy to imperil the security of a State by disturbing its economy. The smugglers and foreign exchange manipulators by flouting the regulations and restrictions imposed by FEMA by their misdeeds and misdemeanours directly affect the national economy and thereby endanger the security of the country. In this situation, the distinction between acts where punishments are provided and the acts where arrest and prosecution are not contemplated pales into insignificance. We must remember : the person who violates foreign exchange regulations or indulges in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prosecution for violation of FERA could continue for next two years; (iii) High Court had held the continued detention after coming into force of FEMA to be bad; (iv) the constitutionality of Conservation of Foreign Exchange (COFE) part of COFEPOSA was not in issue and the facts brought the prejudicial act within the mischief of FERA inviting penal consequences, were highlighted by the learned counsel for the petitioners to distinguish Venkateshan S.1 . We are afraid, the above features hardly render Venkateshan S.1 inapplicable to the issue raised before us. We are in complete agreement with the position stated in Venkateshan S.1: if the activity of any person is prejudicial to the conservation or augmentation of foreign exchange, the authority is empowered to make a detention order against such person and the Act does not contemplate that such activity should be an offence . 62. It is too na ve to suggest that in today s economic scenario of abundant foreign exchange and booming foreign trade, contravention of foreign exchange laws does not pose any threat to the national interest for which a person has to be detained. 63. In view of the above, we do not find any merit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso an interim order has been in operation. In view of the order dated July 13, 2010 passed by this Court, the petitioners cannot be permitted to challenge the order of detention until its execution. 67. In view of the above, the leave to make additional prayer for quashing the detention order dated September 23, 2009 by means of criminal miscellaneous application does not deserve to be granted and is rejected. However, it is clarified that after the execution of the detention order, the petitioners shall be at liberty to challenge the detention order in accordance with law. 68. Since we have rejected the criminal miscellaneous application, the argument of the learned counsel for the petitioners that the impugned order of detention was passed way back on September 23, 2009; the impugned order was preventive in nature and the maximum period of detention as per law is one year, which would have lapsed by now and, therefore, no purpose for the execution of the detention order survives is noted to be rejected. The detention order could not be executed because of the contumacious conduct of the second petitioner and, therefore, he cannot take advantage of his own wrong. 69. Writ p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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