K.A. Abdul Khader vs The Deputy Director of Enforcement

V. Ramaswami, J.—On the basis of some reliable information that the petitioner had received a payment from a local person unauthorisedly

as per the instructions of a person resident outside India, his person was searched u/s 19A of the Foreign Exchange Regulation Act, 1947 while he

was travelling in a bus at Tambaram on 12th May, 1973. The search resulted in the seizure of Indian currency of Rs. 50,000 and two bus tickets.

It is further stated in the counter-affidavit that on interrogation, the petitioner voluntarily admitted in writing that the amount was received at Madras

on the previous day from an unknown person as per the instructions of his uncle Sri Latheef of No. 9, Queen St., Penang, and he was carrying the

money to his native place Abhiramam, Ramanathapuram District, for the purchase of property for his uncle as instructed in the letter. Thereafter,

the petitioner filed this writ petition praying for the issue of a writ of mandamus or any other appropriate writ directing the respondents herein to

return the sum of Rs. 50,000 seized from him on 12th May, 1973. In the affidavit originally filed in support of the writ petition the petitioner

challenged the applicability of Section 5 of the Foreign Exchange Regulation Act. He also contended that the impugned action was violative of

Articles 14, 19 and 31 of the Constitution. The learned Counsel for the petitioner did not press any of these contentions at the time of argument.

But he has raised an additional ground in W.M.P. No. 2417 of 1975. In this, he had stated that the seizure of the documents u/s 19-G was

effected on 12th May, 1973, but no notice commencing the proceedings u/s 3 was served on him within a period of one year and that, therefore,

the respondent could not retain the money any longer. Accordingly, he was entitled for a return of the sum of Rs. 50,000. Since this point arises in

view of the subsequent events which happened after the filing of the writ petition, I have permitted the petitioner to raise this additional ground.

It appears that subsequent to the seizure, on 10th April, 1974 a show cause notice bearing T4/26/M/74/(SGN) for alleged violation of Section

5(1)(a) of the Foreign Exchange Regulation Act, 1947 was issued by the Additional Director of Enforcement, Enforcement Directorate, New

Delhi, to the petitioner to his address at No. 297, Thambu Chetti Street Madras-1. This is the address which the petitioner had given in the original

writ petition. This notice sent by registered post acknowledgment due was returned unserved with a note ''left'' by the postal authorities. When the

petitioner through his lawyer issued a notice on 16th July, 1974 for the return of the money since the period of one year had expired, the

respondent replied by letter dated 20th July, 1974 addressed to the advocate for the petitioner that they had already sent a notice on 10th May,

1974 which was returned unserved with a note aforesaid and enclosed a copy of the said notice and stated that in those circumstances ,the

question of return of seized currency does not arise.

Section 19-G confers a power on the competent authority to retain the document seized in accordance with the provisions of the Act for a

period not exceeding one year and if before the expiry of the said period of one year ""any proceeding'' u/s 23 has been commenced"" until the

disposal of those proceedings, including proceedings, if any, before the appellate Board and the High Court. The other part of the provision is not

relevant to be quoted for the purpose of their case.

The question for consideration is whether any proceedings u/s 23 have been commenced in this case in order to give an extended period

beyond the period of one year. Section 23-D of the Act states that for the purpose of adjudicating under Clause (a) of Sub-section (1) of Section

26 whether any person has committed a contravention, the Director of Enforcement shall hold an enquiry in the prescribed manner after giving that

person a reasonable opportunity of being heard. Adjudication Proceedings and Appeal Rules, 1957 framed u/s 27 of the Foreign Exchange

Regulation Act, 1947, provides for the manner of holding the enquiry. Rule 3 of these Rules prescribes that the Director shall in the first instance,

issue a notice to such person requiring him to show cause within such period as may be specified in the notice, why adjudication proceedings

should not be held against him. The other rules deal with the other procedures to be followed. It is therefore clear that the proceedings for

adjudication contemplated u/s 19-G commences with the issue of a notice to show cause. Rule 11 of the Adjudication Proceedings and Appeal

Rules deals with the service of notice and it reads as follows:

Service of notice: A notice issued under these rules shall be served on any person in the following manner, that is to say (a) by delivering on

tendering the notice to that person or his duly authorised agent; or (b) by sending the notice to him by registered post with acknowledgment due to

the address of his place of residence or his last known place of residence or the place where he carries on or last carried on, business or personally

works, or last worked for gain; or (c) if the notice cannot be served under Clause (a) or Clause (b) by affixing it on the outer door or some other

conspicuous part of the premises in which that person resides or is known to have last resided, or carried on business or personally works or last

worked, for gain and the written report thereof shoul6d be witnessed by two persons.

It is contended by the learned Counsel for the petitioner that unless a notice is actually served on the petitioner as required under Clause (a) or

(b) and in cases where such actual service could not be effected under Clause (a) or (b), the service of notice is effected by affixing it as provided

in Clause (c), there is no service of notice and unless there is service of notice there was no commencement of the proceedings. On the other hand,

the learned Counsel for the respondent contended that a mere issue of a notice by registered post to the last known place of residence is enough

and actual service is not necessary. Neither of the learned Counsel were able to cite any decision m support of their respective contentions.

Section 27 of the General Clauses Act, 1897 (Central Act X of 1897) provides that.

Where any Central Act or Regulation made, after the commencement of this Act authorises or requires any document to be served by post. unless

a different intention appears, the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post, a letter

containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter could be delivered in the ordinary

course of post.

This provision would be applicable to the interpretation of the Foreign Exchange Regulation Act and the provisions thereof or the Rules framed

thereunder. But, I am afraid even this provision could not help the respondent. This will apply only to a case where the letter addressed to the party

had not been returned unserved. It would also apply only if a different intention does not appear from the provisions of the Act or the Regulations

made thereunder. It is seen from Rule 11 extracted above that Clause (a) contemplates delivering or tendering of the notice to that person or his

duly authorised agent. Clause (b) contemplates sending the notice to him by registered post with acknowledgment due. Clause (e) clearly points

out that notice will have to be actually served and in cases where it cannot be served it should be done by affixture. That the presumption normally

invoked by Section 27 of the General Clauses Act could not be invoked in the instant case is made clear by the provisions contained in Clause (e)

which requires that wherever the notice could not be effected, it will have to be done by affixing it in the outer door or some other conspicuous part

of the premises. Though no objection could be taken for sending the registered notice to the last known address of the petitioner, when it was

returned unserved, the department should have taken action to serve the petitioner by affixing it in the outer door or some conspicuous part of the

premises in which that person last resided as provided under Rule 11(c). Unless such an affixture was effected notice could not be deemed to have

been served on the petitioner and therefore, there was no commencement of the proceedings u/s 23 Compliance with the conditions prescribed in

Section 19-G is mandatory, if the department wants to retain the amounts beyond the period of one year. Since notice as required by the Rules

had not been effected, the extended period is not available to the department.

The petition is accordingly allowed, and the rule nisi is made absolute. But, there will be no order as to costs.