Ranganathan and others vs State

S.S. Subramani, J.—Writ Petition No. 9380 of 1994 is filed by Bhabootmal Jain and his household servant Vagharam Choudhary. The said

writ petition was filed on 16-5-1994 on the following allegations.

It is alleged in the affidavit filed in support of the petition that the petitioners are law abiding citizens and the first petitioner has retired from active

business activities since past three years. The first petitioner has stated in the affidavit that his three sons are engaged in stainless steel business,

dealing only in indigenuous goods. It is said that the first petitioner''s eldest son Vijayaraj is the proprietor of a firm ''VIJAYA STEEL CENTER'' at

No. 11/C-1, Ekambareswaram Agraharam, Madras-3. According to the first petitioner, after visiting a nearby Jain Temple in the morning, he

generally used to sit in the shop for some time, for the past more than 3 years. The petitioner No. 1 states in his affidavit that the petitioners have

been constrained to take exception to the misuse of provisions of the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as (FERA)

by a number of over-enthusiastic Enforcement Officers under the sway of the fickle mistress that absolute power happens to be, against some

luckless victims, like the petitioners. It is stated that the petitioners have fallen into the bad books of the Enforcement Officers. There was a raid on

1-10-1993 in the shop belonging to the elder son Vijayaraj Jain. Nothing incriminating could be recovered, though a Mahazar was prepared on

that day. It is averred that after a lapse of more than seven months, the respondents, with a number of other Enforcement Officers, repeated the

same exercise without any reasonable or probable cause, simultaneously at the residence of the first petitioner and the shop of his eldest son at

Ekambareswarar Agraharam on 10-5-1994. At that time, the first petitioner was not present in the house. His second son Khimraj Jain was

present throughout. It is said that the second respondent and a couple of other Enforcement Officers ransacked the whole house. They

commenced the raid at about 1.30 p.m. and continued the search till about 3.00 p.m. on 10-5-1994. They did not find any incriminating material

whatsoever. Still, the Enforcement Officers arrested the first petitioner''s second son Khimraj Jain from the house, to falsely implicate him in a white

collar offence to be foisted on him through his involuntary statement recorded during the late hours of 10-5-1994 night, in Shastri Bhavan. It is said

that while the respondents were kind enough to give a copy of the Mahazar drawn at the house on 10-5-1994, they refused to give a copy of the

statement dictated by them and written by the first Petitioner''s son Khimraj Jain, for reasons, best known to them. It is further said that Khimraj

will separately agitate about his illegal arrest and detention by the Enforcement Officers. The first petitioner has further stated in the affidavit that

respondents 2 and 3, with a number of other Enforcement Officers, conducted a raid at the shop of Vijayaraj Jain, at a time when he was absent.

It is stated that the petitioners were present during the fateful time of raid on 10-5-1994, which had commenced around 11.45 a.m. The

Enforcement Officers did not find any incriminating materials the shop. However, from the Office situated in the first floor, they seized a sum of Rs.

3,21,800/- in Indian currency. According to the first petitioner, the said office room was locked by his son Vijayaraj, but the Officers broke open

the lock and seized the currency, which was the legitimate trade balance of the shop premises, which was under the management of his son

Vijayaraj. It is said that the Enforcement Officers commenced the search around 11.30 a.m. and continued the same till about 4.00 p.m. on 10-5-

1994. During the course of the raid, they have seized the sum of Rs. 3,21,800/- with some telephone books and some other insignificant papers of

no commercial value. They also prepared a mahazar and gave a copy to the first petitioner (copy of which is filed along with the writ petition.) It is

said that after conducting the search and seizure of the shop in the manner mentioned above, respondents 2 and 3 and other Enforcement Officers

took the petitioners to their illegal custody without there being any reason to believe that the petitioners are guilty of any offence punishable under

any of the provisions of FERA. They did not inform the petitioners about the grounds of their arrest from the shop on 10-5-1994. It is said that the

petitioners were served with summons only u/S. 40 of the FERA, 1973, but actually the petitioners were arrested by respondents 3 and 4 at about

4.00 p.m. on 10-5-1994 and lodged in the Enforcement Directorate Office at Shastri Bhavan. The petitioners have stated that in the dead of night,

the 3rd respondent dictated an inculpatory prolix statement to each of the petitioners separately to be written in their own hand writing, wherein

they have freely used the words like ''SINGAPORE'' ''DEEN,'' whereby they could attribute an offence of violation of the provisions of FERA

against the petitioners. Copy of the statement of the petitioners so recorded by the Enforcement Officers was not given to any of them, for

reason''s best known to the Enforcement Officers. The petitioners would say that the statements in question are not their voluntary statements and

they do not reflect the true state of affairs. Copies of the summons issued under S. 40 of FERA, 1973 by 3rd respondent against the petitioners

have been produced along with the writ petition. It is stated that the family members of the petitioners made frantic efforts to know the

whereabouts of the petitioners, but they could not succeed. On the morning of 11-5-1994, family members of the petitioners approached Mr. C.

R. Raghavan, Advocate, and instructed him to find out the whereabouts of the petitioners. The wife of the second son of the first petitioner gave a

telegram to the Chief Justice, who was then at Kodaikanal, for the release of all the detenus. It is said that the Advocate Mr. C. R. Raghavan also

visited the office of the Enforcement Directorate on 11-5-1994 around 8.45 a.m. but he could not find any Officer present in the Office, and he

was not permitted to meet any of the petitioners in the office. Thereafter, the first petitioner''s family members contacted their present Counsel, to

take suitable steps for release of the detenus, whereupon he made enquiries with the concerned vacation Officer to bring the matter before

appropriate Bench. But, before they moved the vacation Court, the petitioners themselves were released at 9.30 p.m. on 11-5-1994. The

petitioners were directed by the third respondent orally to attend the Enforcement Directorate Office on 12-5-1994 at 1.00 a.m. In the meanwhile,

the petitioners addressed a telegram to the third respondent, retracting their involuntary statements recorded by him and have also stated therein

that they would appear before the appropriate Officer only on receipt of summons by the concerned Officer. Copy of the telegram sent by the

petitioners in also produced along with the writ petition. It is stated that even though the petitioners have been released from illegal detention, yet,

the petitioners apprehend that their personal liberty lies at the hands of the over-zealous Enforcement Officers, who may arrest them, on the basis

of the involuntary and inculpatory statements given by them while they were under duress on 10-5-1994. Various grounds are mentioned in the

writ petition by the petitioners as to why they have invoked the extraordinary original jurisdiction of this Court.

It is stated that the Enforcement Officers have played a fraud on the Statute by resorting to illegal detention in the guise of summoning the

detenus to the Enforcement Officer, either to give evidence or produce a document. It is stated that the detention of the petitioners was, therefore,

mala fide, contrary to law and extrastatutory. It is said that S. 35 of FERA empowers an Enforcement Officer to arrest persons suspected of being

guilty of any offence punishable under FERA. Again, arrests are to be generally resorted to where the detected offence is of a serious nature,

evidence of personal culpability and strong prima facie as and the likelihood of the person tampering with the evidence or by remaining absconding.

It is said that there is no such allegation so far as the petitioners are concerned. It is also said that procedure fairness is among is the key purposes

of the Constitution of India. According to the petitioners, their arrest is in direct violation of Art. 21 of the Constitution. Petitioners would say that

there is a tendency on the part of the Enforcement Authority to bolster up false case for its own subjective satisfaction or for statistical purposes. It

is said that the powers conferred on the Enforcement Officers under Ss. 35 and 37 of FERA, though very wide, are not plenary. It is further said

that the powers under the Statute to conduct a search, seizure and arrest of suspected persons can be exercised by Competent Officers, but that

power is hedged with a condition that the same could be exercised only if the Officers had reason to believe. Which expression is not synonymous

with ''subjective satisfaction'' of the officers, and it is incumbent upon this Court to examine ex debito justitiae, whether the reason for the belief had

a rational connection or a relevant bearing to the formation of such belief and were not extraneous or irrelevant to the purpose of the sections. It is

stated that the recovery of Indian currency to the tune of Rs. 3,21,800/- from the shop of the first petitioner''s son cannot connect the petitioners

with the alleged violation of any of the provisions of FERA. It is also said that an offence cannot be presumed, and that the respondents are bent

upon treating something out of nothing, by manufacturing tons of evidence in the form of confessional statements obtained from the petitioners by

resorting to tactics which the Court would never countenance. It is said that the procedural requirements of S. 35 of FERA road with Art. 22 of

the Constitution are all mandatory. In the instant case, the petitioners were arrested by the Enforcement Officers at 4.00 p.m. on 10-5-1994 and

were kept in their illegal custody till 9.30 p.m. on 11-5-1994. This apart during the custody, each petitioner was induced under threat of bodily

injury, to give inculpatory statements in their own handwriting copies of which have not been given to the petitioners. It is stated that the arrest and

detention of the petitioners by the Enforcement Officers for more than 30 hours and voluntarily causing hurt to extort confessional statement from

the petitioners renders the entire investigation process illegal, ultra vires and unconstitutional being violative of the Constitution of India read with S.

58 of FERA, 1973. It makes the judicial process an object of aberration and abuse, which ought to be prevented to secure the ends of justice.

For the above reasons, the petitioners wanted this Court to issue an appropriate wirt, order or direction, declaring the search and seizure of Rs.

3,21,800/- and arrest of the petitioners herein by the respondents on 10-5-1994 from the premises bearing Door No. 11-C/1 Ekambareshwar

Agraharam, Part Town, Madras-3, to be unconstitutional, ultra vires, illegal and prohibiting the respondents from continuing the investigation

relating to petitioners, and also for other reliefs which this may deem fit and proper in the circumstances of the case.

Along with the writ petition, the petitioners filed W.P. No. 14267 of 1994 praying for an order staying all further proceedings as incorporated in

Summons No. T3/130/82/C/94 dated 10-5-1994, pending disposal of the writ petition.

The writ petition came up for admission on 18-5-1994. This Court ordered notice in W.P. No. 14267 of 1994, while admitting the writ petition.

For the writ petition, a counter-affidavit was filed by the respondents, stating that the Officers of the Enforcement Directorate, while conducting

investigations under FERA have been acting strictly in accordance with the procedure laid down by law. The allegation that the petitioners were in

the bad books of the Enforcement Officers is denied. It is stated that the Directorate of Enforcement conducts investigation when there is sufficient

material in their hands which necessitates an investigation. It is admitted that on 1-10-1993, there was a search carried out by the Official, of the

Enforcement Directorate at Shop No. 11-C/I, Ekambareshwar Agraharam. It is stated by the respondents that even though nothing had been

recovered, no adverse inference can be inferred against the respondents. It is further stated by the respondents that the allegation in the affidavit

that nothing incriminating was found at the time of search on 10-5-1994 is not correct, as a sum of Rs. 3,21,800/- was seized from the shop, and,

according to the first petitioner in the voluntary statement given by him to the Officers of the Directorate of Enforcement, a sum of Rupees

3,20,000/- had been paid by an unknown persons by order of one Dean of Singapore having telephone No. 2944422 and the balance of Rs.

1800/- belonged to the shop. It is stated that copy of the voluntary statement given by the first petitioner will be given to him as and when any

adjudication proceedings under the Foreign Exchange Regulation Act are initiated. It is also averred that the first petitioner''s sons Vijayaraj and

Khimraj filed W.P. No. 9539 of 1994 challenging Section 40 of FERA as inconstitutional, unenforceable, and also for the issue of a writ of

mandamus, directing the return of the sum of Rs. 3,21,800/- and other documents law-fully seized under the Mahazar dated 10-5-1994. It is

stated that the respondents have filed detailed counter-affidavit in W.P. No. 9539 of 1994. It is further stated that a reading of the Mahazar dated

10-5-1994 will disprove the statement that the respondents had broken open locks and seized the sum of Rs. 3,21,800/-. It is also denied that the

said amount was the legitimate trade balance of the shop. The first petitioner himself, in his voluntary statement, has stated that there are no account

books. In view of this, the claim of the petitioners that the search of the shop of Vijayaraj Jail at Ekambareshwarar Agraharam on 10-5-1994 was

without reasonable or probable cause is not correct. It is further contended in paragraph 8 of the counter that the petitioners were not taken into

custody at any time as alleged, and that summons were issued to the petitioners to appear in the Office of the Enforcement Directorate, Madras.

Accordingly, the petitioners appeared before the Officials of the Enforcement Directorate and gave voluntary statements, in their own handwriting,

in which they have used the words ''Singapore'' and ''Deen''. It is further contended that a show cause notice dated 20-10-1994 for contravention

of Section 9(1)(b) of FERA, to the extent of Rs. 3,20,000/- has been issued to the first petitioner. The said show cause notice has been returned

undelivered with the remarks ''Not found, Not claimed and later served in person on 11-1-1995. In the said show cause notice, the petitioners

were also informed that if they want they can also inspect the Originals of the documents which the Department wants to rely on.

In the later portions of the counter-affidavit, the respondents have also stated that the petitioners were never arrested and detained, as alleged in

the affidavit, and that there was no violation of Article 21 of the constitution of India. It is further stated that the Department had enough material in

its possession, leading the Officers to believe that the facts and circumstances of the case necessitated a search and seizure. It is further stated that

the seizure of currency of Rs. 3,21,800/- was made by, the Officers concerned, as the first petitioner was not able to give any satisfactory

explanation regarding, the said amount. The statement given by the first petitioner was voluntary and he was not induced or coerced to give any

statement. It is further stated that the concerned Enforcement Officers were satisfied on the basis of information in their possession that a search

was necessary, and the seizure of the sum of Rs. 3,21,800/- in Indian Currency was warranted as no satisfactory explanation had been given by

the first petitioner. The respondents wanted dismissal of the writ petition.

After the counter-affidavit was filed, the petitioners in W.P. No. 9380 of 1994 filed W.P. No. 4841 of 1995 to amend that writ petition. We

have, by a separate order, allowed the said petition for amendment.

Without waiting for a formal order in the amendment petition namely, W.M.P. No. 4841 of 1995, the petitioner, on 27-2-1995, filed an

amended writ petition and affidavit, incorporating the proposed amendments, and also a typed set of papers containing the statement given by the

first petitioner before the enforcement authorities which is in vernacular language, English translation of the same, and also the show-cause notice

received by him on 11-1-1995.

The presentation of an amended petition and affidavit is not the proper procedure. Normally, after the petition is allowed, the amendments will

be carried out in the writ petition. In the instant case, the parties know the legal consequences of the proposed amendments and, therefore, we do

not stand on technicalities since we have beard arguments on the entire matter.

Now let us see as to what is the relief that is sought for in the amended writ petition. The petitioners pray for the issue of an appropriate writ

order or direction in the nature of certiorari, calling for the records in the case of T. 4/77/82/C/94, on the file of the first respondent (Mr. A. K.

Banerjee, Deputy Director, Enforcement Directorate), and to quash the Memorandum of Show Cause Notice ante-dated as 20-10-1994 (acutally

served on the petitioner No. 1 on 11-1-1995). The other reliefs sought for in the amended writ petition are the same that were prayed for before

amendment. So, the additional prayer that is sought is to quash the show-cause notice.

The relief of quashing the show-cause notice is sought for on the basis that the proceedings have not been initiated within six months from the

date of seizure of the amount from the business premises. It is said that though the search and seizure were on 10-5-1994, proceedings have been

initiated only on 11-1-1995 when the first petitioner received the show cause notice which, according to, the petitioners, is beyond six months, and

hence invalid. It is also stated that since it is beyond six months, the respondents are not entitled to retain the amount seized and the same is liable

to be returned. It is also stated that before initiation of proceedings, there was no reason to believe that the petitioners have violated any of the

provisions of FERA, and the respondents are only fishing out the suspicion, and the entire procedure adopted by the respondents is illegal.

Since the respondents have already filed a counter-affidavit in the amendment petition, meeting out all the contentions made therein, a further

counter-affidavit was not filed by the respondents to the amended writ petition. Writ Petition No. 9539 of 1994.

This writ petition is filed by the two sons of the first petitioner in W.P. No. 9380 of 1994.

In the affidavit filed in support of the said writ petition, which is sworn by the first petitioners therein, it is stated that they are law abiding

citizens earning their livelihood by legitimate means. The first petitioner is a wholesale dealer in stainless steel utensils, running a proprietary firm in

the name and style of ''Vijay Steel Centre'' at No. 11-C/1, Ekambareshwar Agraharam, Park Town, Madras-3, duly registered under the Tamil

Nadu General Sales Tax Act as well as Central Sales Tax Act. The second petitioner is running a factory at No. 3, T. R. Mudali Street, Madras-

79, engaged in manufacturing stain less steel Dip-Dabbas on job works. Both the petitioners are assesses under Income Tax Act. The petitioners

are residing with their parents in a rented house at No. 63, Nathaji Subhash Chandra Bose Road, Madras-600 079. It is said that on 1-10-1993,

an army of officers from the Enforcement Directorate, without any credible information or reasonable or probable cause, gatecrashed into the shop

of the first petitioner and ransacked the entire shop premises. The first petitioner was not present at the relevant time, but the second petitioner was

present. The raid continued for more than an hour, but nothing incriminating was found. A Mahazar was also prepared. It is said that the drama did

not end there, and that after seven months, respondents 3 and 4, with an army of several other Enforcement Officers, repeated the same exercise,

and this was on 10-5-1994. The Officers simultaneously raided the shop as well as the residence. During this period, the second petitioner alone

was present in the house premises, and the petitioners'' father Bhabootmal and their servant Vagharam were present in the shop premises. It is said

that at the commencement of the raid in both the places, the Enforcement Officers reportedly showed two cyclostyled parchment of papers

purporting to be search warrants, reportedly signed by the second respondent. The Officers took the signature of the second petitioner in one of

the so-called search warrants and that of the petitioners'' father and their servant Vagharam on the other one. It is said that nothing incriminating

was found in the house premises. But, however, from the shop premises belonging to the first petitioner, the Officers seized a sum of Rs.

3,21,800/- in Indian currency and also other documents which included a Directory of Metal Merchants Association, Telephone Index (2 Nos.)

and on note book with 23 written pages. It is further said that the amount represented the trade balance of the shop premises, proper account of

which is maintained by the first petitioner. Neither the petitioners'' father nor their servant was concerned or connected with the Indian Currency in

question. The same was disclosed by the father to the Enforcement Officers. A Mahazar was prepared on 10-5-1994, both at the residential

Premises and the shop premises. Copies of the same have been filed along with the writ petition. It is said that the second petitioner was arrested

from the residence, and the petitioners'' father and their servant were arrested from the shop premises by about 4-00 p.m. on 10-5-1994. They

were not informed about the ground of arrest. They were lodged in the hall of ''the Enforcement Directorate at the III Block in the III Floor of the

Shastri Bhawan Building for two days without being produced before any Magistrate and without permitting them to contact any of their family

members or any advocate. It is said that on 10-5-1994 night, the 4th respondent directed the detenus to give a statement in their own hand writing,

as dictated by the Officers. The detenus were warned of serious bodily injury if they refused to co-operate. Thus the statements were obtained

from them, but they were not given copies thereof When they were not released till the morning of 11-5-1994, the second petitioner''s wife gave a

telegram to the Chief Justice, who was then at Kodaikanal, requesting for appropriate direction to release the second petitioner, his father and their

servant, who according to her, were taken into illegal custody. The second petitioner''s wife deputed an advocate also to visit the Office of the

Enforcement Directorate at Shastri Bhawan, but the Advocate was not allowed to meet any of the detenus. The detenus continued to remain in

their custody for the second day, i.e., 11-5-1994 also, without being produced before any Magistrate. At last, at about 9-30 p.m. on 11-5-1994,

all the three detenus were released by the Enforcement Officers.

It is said that the second petitioner is aggrieved by the illegal raid of his residential premises and his illegal arrest and detention by the

Enforcement Officers on 10-5-1994 for more than 30 hours. According to the petitioners, the safeguards provided under the FERA have been

given a goby, and in the Enforcement Directorate, ad herence to the prescribed procedure is only optional and not mandatory. It is said that on 21-

5-1994, the first petitioner received summons from the fourth respondent, calling upon him to appear before the fourth respondent in person on

27-5-1994 at 10-30 a.m. The Fourth respondent called upon the first petitioner to produce his passport, bank pass book and property details.

According to the petitioners, the summons is blank and bald. It does not indicate what is the subject-matter of the investigation. The petitioners are

questioning the constitutional validity of S. 40 of the FERA, 1973. It is said that the petitioners are aggrieved by the highhanded manner in which

the entire search and seizure were made. They seek relief from this Court on the grounds stated therein. According to them, there is no reason to

believe that they have committed any offence coming under FERA, and there is nothing material before the so-called search and seizure for the

satisfaction of the respondents to make a search or to arrest the second petitioner. It is further stated that even though the second petitioner has

given a statement, a copy of the, same has not been given to him and the statement given by him is not voluntary. It was obtained under coercion

and as dictated by the fourth respondent herein. It is said that S. 37 of FERA confers drastic powers of search and seizure on the Enforcement

Officers, and that, unlike similar English Statute, there is no requirement of taking prior approval of any other authority after placing the materials on

the basis of which the search is proposed to be conducted. The only safeguard against abuse of power is the requirement of having ''reason to

believe''. But even this slender requirement is invariably followed in breach rather than in its compliance. It is said that the Enforcement Officers

make a scare-crow of his ritual by adopting ingenious methods. The Enforcement Officers would bring with them a cluster of search warrants

sealed and signed in advance by some Enforcement Officers, comparatively higher, in rank, and they would fill up the blanks at the time of

conducting the raid, show the said search warrant from a distance and call upon the occupant of the house or shop to put his signature on the so-

called search warrant, without giving him a copy thereof. It is further said that the so-called search warrants seldom contain any ground, on the

basis of which it can even be surmised that the Officer had ''reason to believe'' that documents useful for the purpose of investigation under FERA

were being secreted in that place. Thus, according to the petitioners, the Officers of the Enforcement Branch acquire unfettered right to break into

any home or office at any time and carry out search and seizure proceedings. This makes a mockery of the statutory requirement of ''reason to

believe'' which is the only feeble safeguard that a citizen has against unlawful trespass by the Enforcement Officials into his home or office. The

petitioners also say that the Supreme Court of India as well as various High Courts have held in many cases that where the Officer competent to

take action can exercise his authority of taking action only when he has ''reason to believe'', the court can examine the materials to find out whether

an honest and reasonable man of ordinary prudence can base his reasonable belief upon such materials, although the sufficiency of the reasons for

the belief cannot be investigated by the Court.

Nevertheless, it should be based on definite information which must be anterior in point of time of the search or seizure, and not subsequent to it. It

cannot, therefore, be the result of the facts discovered or circumstances revealed during the process of search and seizure. It is also stated that the

reasonable belief should always be above the uncertain thing, called ''suspicion''. According to the petitioners, in this case, the search was really of

fishing nature, and the second respondent who reportedly issued bald and blanket search warrants and the respondents 3 add 4, with an army of

other Enforcement Officers, who conducted the search in the hope to fine some incriminating documents, acted contrary to the provisions of S. 37

of FERA. It is further said that even though the petitioners'' father presented before the Officers that the amount seized by them represented the

trade balance, the respondents were in a hurry to act, and acted with vengeance because they found the petitioners'' servant to be protesting too

such. It is also averred that, to conduct a raid or, to arrest any person and detain him in custody, the Enforcement Officers do not need any law or

any procedure known to law. To prosecute any citizen, they do not require any independent evidence or tangible material. The inculpatory

statement of the person concerned, obtained by threat and inducement, is made admissible in courts. It is said that the phrase ''reason to believe''

has practically lost its legal as well as grammatical meaning in the Enforcement Branch. The Enforcement Officials have unlimited powers to enter

people''s premises and take their property away, and these powers are frequently exercised on a massive scale. When their action is challenged in

a Court of law, the Officers refuse to divulge the grounds for formation of the belief on the ground that it would frustrate the investigation

altogether. It is said that the process has gone too far. It is further said that the arrest of the second petitioner from his residence on 10-5-1994 at

about 4-00 p.m. by the Enforcement Officers and keeping him in their illegal custody till 9-30 p.m. on 11-5-1994 is unconstitutional, ultra vires and

in colourable exercise of the power of arrest enjoyed by the over-enthusiastic, Enforcement Officers Further arrayed as parties to these writ

petitioners. Further, according to the petitioners, the arrest and detention of the second petitioner offends Art. 22 of the Constitution as well as S.

35 of the FERA, 1973, and hence it is without jurisdiction. It is further stated that the search and seizure of the sum of Rs. 3,21,800/- with other

documents from the de jure custody of petitioner No. 1 is mala fide and, the respondents 3 and 4 along with other Enforcement Officers have

rendered themselves liable to be prosecuted for offences punishable under Ss. 219, 220 and 330 of the IPC, read with S. 58, of the FERA. It is

stated that even though the intention in passing the legislation is good, in the hands of unscrupulous and unprincipled Executive, it has become curse

on, the people. According to the petitioners, S. 40 of FERA gives unbridled power, to a designated Officer to summon any person on the pretext

of Conducting an investigation without revealing the subject matter of such investigation, and that an uncanalised power is conferred upon

Enforcement Officers under the said Section, and this power is used by the Officers in the guise of investigation, and the victims are subjected to

third degree methods to give voluntary statements in their own handwriting. According to the petitioners, in substance, the impugned law seeks to

infringe the Fundamental Rights of a citizen as conferred by Arts. 14, 19(1), 20(3), and 21 of the Constitution, and that it seeks to abridge or

abrogate those of the rights as enshrined in Chapter III of the Constitution. Therefore, the petitioners seek to declare that S. 40 of the Foreign

Exchange Regulation Act to be invalid and unenforceable in so far as the petitioners are concerned. They also pray that a writ of Mandamus may

he issued directing the ''respondents to return the sum of Rs. 3,21,800/- and other documents alleged to have been seized illegally by the

Enforcement Officers, under the Mahazar dated 10-5-1994 from the office of the first petitioner, with interest thereon at 24% p.a. from the date of

seizure till the date of repayment, and also for a direction to the respondents to pay suitable monetary compensation for the illegal search and

seizure of Indian Currency belonging to the first petitioner, and also for the intentional, deliberate and motivated harassment of the second petitioner

by the Enforcement Officers, and also for a further direction to the first respondent Union of India to set the Criminal Law in motion against the

respondents 3 and 4 and other 6 Enforcement Officers responsible for the illegal search and seizure of the Indian currency of the first petitioner and

arrest and detention of the second petitioner, and for other reliefs as this Court may deem fit and proper in the circumstances of the case.

A detailed counter-affidavit has been filed by the respondents, and the same is sworn to by the second respondent-Deputy Director of the

Enforcement Directorate, stating as follows :-

On the basis of reliable information, the shop premises of Messrs. Vijay Steel Centre were searched on 19-1-1993 by the Officers of Enforcement

Directorate, in terms of S. 37 of the FERA. While the first petitioner''s shop premises was searched between 11-45 Hrs. and 15-40 Hrs. on 10-5-

1994, his residence was searched the same day between 13-30 Hrs. and 14-15 Hrs. As regards the amount of Rs. 3,21,800/- father of the

petitioners explained in his statement dated 10-5-1994 that in the morning of 10-5-1994, he had received Rupees 3,20,000/- from an unknown

person by order of one Deen of Singapore having Telephone No. 2944422 and that the balance amount of Rs. 1,800/- belonged to the shop, and

that there were no accounts for the said amount of Rs. 1,800/- and the Cash book was also not there. The searchers were conducted in terms of

Section 37 of the FERA, as a result of which Rs. 3,21,800/- and certain documents were seized under the reasonable belief that the same would

be useful for further investigation under FERA. The sequence of events right from the commencement of the search till the conclusion of the search

have been clearly spilt out in the mahazar duly drawn on the spot. Apart from the father of the petitioners, two independent witnesses had affixed

their signatures on the search warrant as well as the said Mahazar. A copy of the Mahazar was also given to the petitioners'' father, and there was

nothing illegal in the search or the seizure. The search of the residence of the petitioners did not result in any recovery and the search was

conducted in the presence of the second petitioner, Khimraj Jain. Subsequently, the fourth respondent, who was available in another premises in

the same locality, visited the residential premises of the petitioners. On the spot itself, the second petitioner gave statement before the said Officer

under S. 39 of FERA. Thereafter the Officer left the spot. The second petitioner was not arrested as contended by the petitioners. The petitioners''

father and their servant Vagharam, who received summons to appear in the, Office of the Enforcement Directorate, Madras, appeared accordingly

and gave their statements dated 10-5-1994 before the Summoning Officer, and left the Office immediately. They Were not arrested as alleged by

the petitioners. According to the respondents, both of them gave statement on their own volition, and no coercion or on force was used. The

petitioners'' father, who was shown the documents seized from the shop of Messrs. Vijay Steel Centre on 10-5-1994, stated that the writings in

those documents were that of his son, first petitioner herein. Moreover, Vagharam, employed in Messrs. Vijay Steel Centre, also stated in his

statement dated 10-5-1994 that only the first petitioner could explain about the seized documents. In such circumstances, summons dated 20-5-

1994 was issued to the first petitioner in terms of S. 40 of FERA, directing him to appear before the Enforcement Directorate on 27-5-1994 at

10-30 Hrs., with the document is specified therein, in the Schedule. The searches did not result in the seizure of the first petitioner, Passport or

bank passbook or the details of his properties, and, therefore, the first petitioner had been asked to produce the same during his appearance. All th

necessary ingredients of a summons, under S. 40 of FERA were complied with, and the same was also clearly pointed out in the summons. The

second petitioner was not at all arrested. He gave a statement before the Enforcement Officer on 10-5-1994 under S. 39 of the FERA, in his

resident itself after the search was completed. He was not brought to the office of the respondents at all. The respondents deny the allegation that

the second petitioner was kept in illegal custody. It is stated that copies of the statements will be furnished to the petitioners as and when

proceedings are initiated for adjudication. It is further stated by the respondent in their counter that the search under S. 37 of FERA is not such a

simple procedure as averred by the petitioners. Certain procedures have to be, followed invariably while conducting search and seizure operations.

It is not mandatory on the part of the Officer who is authorising the search of the premises under S. 37 of FERA, to mention in the search warrant

the grounds basis of which he has ''reason'' to believe that documents useful for the purpose of investigation under FERA are secreted in that place.

It is further stated that the respondents had some basis for the reasonable belief. It is also stated by the respondents that the search warrants were

not bald and blank, as alleged by the petitioners. It is further stated by the respondents that in respect of the amount seized from the shop, the

petitioners could not produce any accounts or explain the source for the same.

A reply affidavit has been filed by the petitioners wherein they have reiterated their original contentions. They have further stated that the

unknown person ''Deen of Singapur'' or his fictitious Telephone number are not found in the text of the Mahazar dated 10-5-1994. They also say

that the deponent of the counter-affidavit has not produced copy of the petitioners'' father''s statement dated 10-5-1994, and that the Enforcement

Officers have recorded the statement of the first petitioner u/s 40 of the FERA on 27-5-1994, which is subsequent to 10-5-1994. These

statements have not been produced before Court. The statement of the respondents that the fourth respondent was present and took a statement

from the second petitioner is also not admitted. They say that the deponent of the counter-affidavit has rendered himself liable to be punished u/s

196 of the Indian Penal Code, by having fabricated false evidence. They have also stated that the respondents have not produced, any tangible

material before Court to come to a conclusion that prima facie the currency notes were tainted with contravention of any specific provision of law.

They want this Court to declare Section 40 of FERA as unconstitutional and invalid. They further say that the respondents have come forward with

a cock and bull story denying the arrest of the petitioners'' father and their servant and also the second petitioner. They wanted an enquiry to be

conducted into the offence committed by the respondents, u/s 195(1)(6) of the Criminal Procedure Code.

Along with the writ petition No. 9539 of 1994, the petitioners filed W.M.P. No. 16365 of 1994 for a direction to return the sum of Rupees

3,21,800/- seized by the respondents.

A learned Judge of this Court, after hearing both sides, dismissed the said petition. It is against that order, Writ Appeal No. 679 of 1995 has

been filed.

In the order dismissing W.M.P. No. 16365 of 1994, the learned Judge has directed that both the writ petitions may he heard together.

When this writ appeal came up for admission, this Court felt that it is better to dispose of the writ petition also along with the writ appeal, and

hence they were also called for hearing.

In the writ appeal also, the petitioners (appellants) have filed C.M.P. No. 8257 of 1995 to restrain the respondents, Enforcement Officers,

from continuing the adjudication proceedings, C.M.P. No. 8258 of 1995, for a direction to the respondents to return Rs. 3,20,000/-, seized from

the father of the petitioners.

In the writ appeal the appellants are referred to as sons, who are the petitioners in W.P. 9539 of 1994.

Even though the constitutionality of Section 40 of FERA was questioned in the writ petitions rejoinder and reply affidavit, at the time of

arguments, learned counsel for the petitioners submitted that he reserves that argument to be raised in some other case and that therefore that

question need not be decided in these petitions. The learned Additional Central Government Standing counsel also did not have any, objection to

this course. So, we make it clear that we are not deciding the constitutionality of Section 40 FERA in these proceedings.

In both these writ petitions the main contention that is put forward by the petitioners is that there is no ''reason to believe'' for the issue of

search warrants, and the action of the respondents is highhanded and the same amounts to infringement of their privacy. They also say that ''reason

to believe'' is a condition precedent before issuing any search warrant and the materials which the respondents are said to have collected, must be

anterior to the issue of search warrant. They also contend that even in the counter-affidavit, the details of the materials have not been disclosed,

and the act of the respondents is only in the nature of investigation on the basis of some suspicion. According to them, the respondents are

searching for materials, and no ground has been made out for the issue of search warrant. In fact, according to them, the respondents are, liable to

be Prosecuted for having violated the provision of FERA, especially Section 58 of that Act, and they want that the respondents should be

proceeded against for the same.

In the counter-affidavit in both the cases, it is stated that the respondents had information about the violation of FERA, and only after getting

information, the search was made. According to them, there was ''reason to believe'', and the materials collected by them will satisfy any Court that

they acted bona fide, and in accordance with law. It is stated by them that being an economic offence and that too which requires investigation the

seizure itself was effected only for the purpose of investigation, and any disclosure of the details will tamper the same. It is further stated that the

information which they have collected is confidential, which cannot be disclosed.

When the matter was being argued learned Additional Central Government Standing Counsel expressed that they are prepared to handover

the file for inspection by the Court, and they are ready with the concerned file. In fact, the file was also handed over to us for inspection. But the

learned counsel for the petitioners submitted that we should not take into consideration anything contained in the file as the same had not been

disclosed in any proceedings before Court even though counter affidavit has been filed in both the writ petition. According to the learned counsel

for the petitioners, if we look into the files the petitioners will be prejudiced and he pleaded that we should not look into the same.

Section 37 of FERA reads thus :-

37(1) of any officer of Enforcement, not below the rank of an Assistant Director of Enforcement, has reason to believe that any documents which,

in his opinion, will be useful for, or relevant to any investigation or proceeding under this Act, are secreted in any place, he may authorise any

officer of Enforcement to search for and seize or may himself search for and seize such documents.

(2) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to searches, shall, so far as may be, apply to searches under this

Section subject to the modification that sub-section (5) of Section 165 of the said Code shall have effect as if for the word ''Magistrate'' wherever

it occurs, the words ""Director of Enforcement or other officer exercising his powers"" were substituted.

The language used is, ''officer of Enforcement ..... has reason to believe that any documents which, in his opinion, will be useful for, or relevant

to, any investigation or proceeding under this Act, are secreted in any place, he may authorise any officer of Enforcement to search for and seize

such documents''. The question as to what is the scope of ''reason to believe'' has come up for consideration in various decisions of the Supreme

Court and High Courts, In this connection, it is also to be noted that the circumstances under which an officer of the Enforcement Directorate

entertains the belief has to be viewed from his experienced eye, which is well equipped to interpret the suspicious circumstances and form a

reasonable belief in the light of the said circumstances. That reasonable belief which the Officer had entertained is not a matter which can be placed

under legal microscope, with an over indulgent eye which sees no evil anywhere within the range of its eyesight. In State of Gujarat Vs. Mohanlal

Jitamalji Porwal and Another, , their Lordships of the Supreme Court, while considering the scope of Sections 123 and 135(1) read with Section

111 of the Customs Act, 1962, held thus :-

..... This Court has administered caution to the Courts not to sit in appeal in regard to this question and has observed that if prima facie there are

grounds to justify the belief the Courts have to accept the Officer''s belief regardless of the fact which the Court of its own might or might not have

entertained the same belief. The law declared by this Court is binding on the High Court and it was not open to the High Court to do exactly what

it was cautioned against by this Court. Section 123 of the Act does not admit of any other construction. Whether or not the officer concerned had

entertained reasonable belief under the circumstances is not a matter Which can be placed under legal microscope, with an over indulgent eye

which sees no evil anywhere within the range of its eyesight. The circumstances have to be viewed from the experienced eye of the officer who is

well equipped to interpret the suspicious, circumstances and to form a reasonable belief in the light of the said circumstances."" The said decision

was followed by the Supreme Court in Indru Ramchand Bharvani and Others Vs. Union of India (UOI) and Others, , which was also a case under

the customs Act. It is further held in that case that once it is held that there are materials relevant and germane, the sufficient of the materials is not

open to judicial review. We are only concerned whether there was material or not, and not its sufficiency. For, that is a matter which the officer of

the Department has to consider, and whether that material has got any connection with the search and seizure. In paragraph 16 of the said

judgment, their Lordships held thus :-

..... reasonable belief"" that the goods were smuggled goods is not a question on which the Court can sit on appeal. The circumstances under which

the officer concerned entertains reasonable belief, have to be judged from his experienced eye who is well equipped to interpret the suspicious

circumstances and to form a reasonable belief.

In Pukhraj Vs. D.R. Kohli, , their Lordships were considering the question of confiscation of goods under Sea Customs Act. A contention was

taken before Court that seizure of gold from the appellant in that case had been effected by the Officer concerned without any reasonable belief

that the goods were smuggled. The argument was that the question as to whether there was any reasonable belief or not is justifiable, and since

there is no material on record to show that the belief could have been reasonable the statutory presumption cannot be raised. Their Lordships

repelled the contention. It was said that there are two broad features, in the seizure which cannot he ignored. The first feature was the quantity of

the gold in question. The appellant in that case was carrying five bars of gold weighing 290.6 Tolas, the value of which was nearly Rs. 30,000/-

and the second feature was, he was travelling without a ticket. On these two circumstances, their Lordships said that the Officer concerned was

justified in having an impression that the gold that was being carried by the appellant was smuggled gold. Their Lordships further said that the

sufficiency of the ''reasonable belief'' cannot be challenged before Court, as the Court is not sitting in Appeal over the decision of the said officer.

All that it can consider is, whether there is ground which prima facie justifies the said reasonable belief.

Issardas Daulat Ram and Others Vs. The Union of India (UOI) and Others, , is also a case under the Sea Customs Act. Their Lordships aid,

that there cannot be a direct evidence and the same can be deduced or inferred otherwise. In that case, it was held thus :- (at page 1509. of Cri

LJ)

Though there is no direct evidence that the gold which was confiscated had came into the country after March 25, 1947 when the first notification

under the Foreign Exchange Regulations Act placing a ban on the importation of gold was issued, it is not as if this cannot he deduced or inferred

otherwise.

Where in order to reach his finding about the gold being smuggled, the Collector referred to the conduct of the appellants to whom the gold

belonged in connection with (a) the credibility of the story about the purchase of that gold from three parties, (b) the price at which the gold was

stated to have been purchased which was less than the market price, and (c) the hurry exhibited in trying to get the gold melted at the refinery with

a small bit of silver added so as to reduce the fineness of the gold and thus approximate the resultant product to licit gold found in the market;

Held that those were undoubtedly relevant pieces of evidence which bore on the question regarding the character of the gold, whether it was licit

or illicit. There was, therefore, material before the Collector, to justify the finding that the gold was smuggled.

In S. Narayanappa and Others Vs. Commissioner of Income Tax, Bangalore, the question that came up for consideration was u/s 34 of the

Income Tax Act regarding the reopening of the assessment. While interpreting ''reason to believe'' u/s 34 of the Income Tax Act, their Lordships

held thus :- (at page 524)

..... It is true that two conditions must be satisfied in order to confer jurisdiction on the Income Tax Officer to issue the notice u/s 34 in respect of

assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year. The first condition is that the

Income Tax Officer must have reason to believe that the income, profits or gains chargeable to Income Tax had been under-assessed. The second

condition is that he must have reason to believe that such ""under-assessment"" has occurred by reason of either (i) omission or failure on the part of

an assessee to make a return of his income u/s 22, or (ii) omission or failure on the part of the assessee to disclose fully and truly all the material

facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income Tax Officer

acquires jurisdiction to issue a notice under the Section. But the legal position is that if there are in fact some reasonable grounds for the Income

Tax Officer to believe that there had been any non-disclosure as regards any fact, which could have material bearing on the question of under-

assessment that would be sufficient to give jurisdiction to the Income Tax Officer to issue the notice u/s 34. Whether these grounds are adequate or

not is not a matter for the Court to investigate. In other words, the sufficiency of the grounds which induced the Income Tax Officer to act is not a

justiciable issue. It is of course open for the assessee to contend that the Income Tax Officer did not hold the belief that there had been such non-

disclosure. In other words, the existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief .....

In R.S. Seth Gopikrishan Agarwal Vs. R.N. Sen, Assistant Collector of Customs and Others, , their Lordships were considering the very

same words, namely, ''reason to believe'' u/s 105 of the Customs Act. The entire paragraph 6 and a portion of paragraph 7 are relevant for our

purpose, and they read thus :-

The relevant Part of the authorization reads thus :-

Whereas information has been laid before me of the suspected commission of offence u/s 11 read with Section 111 of the Customs Act 1962 (52

of 1962) and it has been made to appear that the production of contraband goods and documents relating thereto are essential to the enquiry

about to be made in the suspected offence ... Though the words ""reason to believe"" are not in terms embodied in the authorization, the phraseology

used in effect and substance meant the same thing.

The next contention is that on a reasonable construction of the said provision it should be held that the Assistant Collector of Customs should not

only give reasons for his belief but also the particulars of the nature of the goods and of the documents, for, if the reasons and the particulars are

not given, the officer authorized may make a roving search of the house which is not in the contemplation of the said section. This argument may be

dealt with in two parts. In terms Section 105 of the Act does not say that the Assistant Collector shall give reasons. The power conferred on him

u/s 105 is not subject to any such condition. Though he cannot make a search or authorize any officer to make a search unless he has reason to

believe the existence of the facts mentioned is the section, the Section does not compel him to give reasons. While it may be advisable, and indeed

proper, for him to give reasons, the non-mention of reasons in itself does not vitiate the order. Nor can we agree with the appellant that the

particulars of the nature of the goods and of the documents should be given in the authorization. Obviously, no question of giving of particulars

arises if he himself makes the search, but if he authorizes any officer to do so, he cannot give the particulars of the documents, for they will be

known only after the search is made. .....

Balumal Jamnadas Batra Vs. State of Maharashtra, was also a case under the Customs Act, where a person was carrying gold. Their

Lordships of the Supreme Court justified the action of the Department and held that there was ''reason to believe'' for the following reasons :-

..... The very appearance of the goods and the manner in which they were packed indicated that they were newly manufactured and brought into

this country very recently from another country. The inscriptions on them and writing on the boxes were parts of the state in which the goods in

unopened boxes were found from which inferences about their origin and recent import could arise. The appellant''s conduct, including his

untruthful denial of their possession, indicated consciousness of their smuggled character or mens rea. In any cast, there was some evidence to

enable the Courts to come to the conclusion that the goods must have been known to the appellant to be smuggled even if he was not a party to a

fraudulent evasion of duty .....

36-.A. The Supreme Court had occasion to consider the scope of Section 31 of FERA, in the decision reported in Dr Partap Singh and Another

Vs. Director of Enforcement, Foreign Exchange Regulation Act and Others, . In that case also, the only averment in the counter affidavit was that

on the basis of official record and reliable information, the Officer had entertained reasonable belief in issuing search warrant. The Officers of the

Enforcement Directorate expressed their willingness to handover the file before Court, and in fact, at the time when the matter was heard first the

file was not before Court, as on the next adjourned date as directed by Court, the Department produced the file and the Court perused the same

for its own satisfaction whether the Department had material to entertain a reasonable belief. From paragraph 8 onwards, the judgment deals with

the argument put forward by the learned counsel for the petitioner before Court. The argument advanced by the learned counsel for the petitioners

in this case is also similar. It is contended by learned counsel that the counter affidavit has only repeated the wordings in the Section, which is not

sufficient to discharge the burden. He further argued that in case the Court is going to look into the file, the contents of the same should be

disclosed to him also so that he can controvert the same. The entire law has been discussed by their Lordships from paragraph 9 onwards, which

reads thus at page 827 of Cri LJ :-

When an officer of the Enforcement Department proposes to act u/s 37 undoubtedly, he must have reason to believe that the documents useful for

investigation or proceeding under the Act are secreted. The material on which the belief is grounded may be secret, may be obtained through

intelligence or occasionally may be conveyed orally by informants. It is not obligatory upon the officer to disclose this material on the mere

allegation that there was no material before him on which his reason to believe can be grounded. The expression ''reason to believe'' is to be found

in various statutes. We may take note of one such. Section 34 of the Income Tax Act, 1922 inter alia provides that the Income Tax Officer must

have ''reason to believe'' that the incomes, profits or gains chargeable to Income Tax have been under-assessed, then alone he can take action u/s

In S. Narayanappa and Others Vs. Commissioner of Income Tax, Bangalore, , the assessee challenged the action taken u/s 34 and amongst

others it was contended on his behalf that the reasons which induced the Income Tax Officer to initiate proceedings u/s 34 were justifiable, and

therefore, these reasons should have been communicated by the Income Tax officer to the assessee before the assessment can be reopened. It

was also submitted that the reasons must be sufficient for a prudent man to come to the conclusion that the income escaped assessment and that

the Court can examine the sufficiency or adequacy of the reasons on which the Income Tax Officer has acted. Negativing all the limbs of the

contention, this Court held that ''if there are in fact some reasonable grounds for the Income Tax Officer to believe that there had been any non-

disclosure as regards any fact, which could have a material bearing on the question of under-assessment, that would be sufficient to give jurisdiction

to the Income Tax Officer to issue notice u/s 34. The Court in terms held that whether these grounds are adequate or not is not a matter for the

Court to investigate.

The expression ''reason to believe'' is not synonymous with subjective satisfaction of the officer. The belief must be held in good faith; it cannot be

merely a pretence. In the same case, it was held that it is open to the Court to examine the question whether the reasons for the belief have a

rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the Section. To this

limited extent the action of the Income Tax Officer in starting proceedings u/s 34 is open to challenge in a Court of law. (See Calcutta Discount

Company Limited Vs. Income Tax Officer, Companies District, I and Another, . In R.S. Seth Gopikrishan Agarwal Vs. R.N. Sen, Assistant

Collector of Customs and Others, , this Court repelled the challenge to the validity of the search of the premises of the appellant and the seizure of

the documents found therein. The search was carried out under the authority of an authorisation issued u/s 126-L(2) of the Defence of India

(Amendment) Rules, 1973 (Gold Control Rules) for search of the premises of the appellant. The validity of the authorisation was challenged on the

ground of mala fides as also on the ground that the authorisation did not expressly employ the phrase ''reason to believe'' occurring in Section 105

of the Customs Act. Negativing both the contentions, Subba Rao, C.J. speaking for the Court observed that the subject underlying Section 105 of

the Customs Act which confers power for issuing authorisation for search of the premises and seizure of incriminating articles was to search for

goods liable to be confiscated or documents secreted in any place, which are relevant to any preceding under the Act. The legislative policy

reflected in the Section is that the search must be in regard to the two categories mentioned in the Section. The Court further observed that though

under the Section, the officer concerned need not give reasons if the existence of belief is questioned in any collateral proceedings he has to

produce relevant evidence to sustain his belief. A shield against the abuse of power was found in the provision in the provision that the officer

authorised to search has to send forthwith to the Collector of Customs a copy of any record made by him. Sub-section (2) of Section 37 of the

Act takes care for this position inasmuch as that where an officer below the rank of the Director of Enforcement carried out the search, he must

send a report to the Director of Enforcement. The last part of the submission does not commend to us because the file was produced before us

and as stated earlier, the Officer issuing the search warrant had material which he rightly claimed to be adequate for forming the reasonable belief

to issue the search warrant.

It was however contended that when sub-section (2) of Section 37 is read in juxtaposition with sub-section (1), the legislative mandate clearly

manifests itself that before issuing a search warrant in exercise of the power conferred by Section 37(1), it is obligatory upon the officer issuing the

search warrant to record in writing the grounds of his belief and specifying in such. ""Writing as far as possible, the thing for which search is to be

made because Section 37(2) provides that the provisions of the Code of Criminal Procedure, 1898 (now 1973) relating to searches, shall, so far

as may be, apply to searches under this section subject to the modification that sub-section (5) of Section 165 of the said Code shall have effect as

if for the word ''Magistrate'', wherever it occurs, the words ""Director of Enforcement or other officer exercising his power"" is substituted. It was

submitted that if the power to search premises is conferred on the officer therein mentioned, it is hedged in with a condition that in exercise of the

power he is bound by the requirements of Section 165 of the Code. In other words, it was said that by sub-section (2) of Section 37, Section 165

of the Code is incorporated in pen and ink in Section 37. It was urged that the Section should be read as Section 37(1) as it is and Section 165(1)

of the Code be read as Section 37(2). Continuing along this line, it was submitted that read thus, the necessary intendment of the Legislature

becomes revealed in that such drastic power of search and seazure without notice to the person affected can be exercised, if the officer has reason

to believe which must have its foundation on some material or grounds which must be stated in the search warrant itself or in a record anterior to

the issuance of the search warrant so that when questioned the contemporaneous record would be available to the Court to examine the contention

whether there was material for taking such a drastic action or that the action was taken for extraneous or irrelevant reasons. In support of this

submission, reliance was placed on a decision of the Punjab and Haryana High Court in H.L. Sibal Vs. Commissioner of Income Tax and Others, .

The Court was examining the expression in consequence of information in his possession has reason to believe"" in Section 132 of the Income Tax

Act, 1961. The Court after referring to the decision of this Court in The Commissioner of Commercial Taxes and Others etc. Vs. R.S. Jhaver and

Others etc., held that ''the obligation to record in writing, the grounds of the belief as enjoined by Section 165(1), if not complied with would vitiate

the issuance of search warrant and the seizure of the articles''. It was then submitted that if the search is illegal, anything seized during such an illegal

search has to be returned as held by a learned single Judge of the Calcutta High Court in New Central Jute Mills Co. Ltd. Vs. T.N. Kaul and

Others, . Section 37(2) provides that ''the provisions of the Code relating to searches, shall so far as may be, apply to searches directed u/s 37(1).

Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Section 165 has to be

generally followed. The expression ''so far as may be'' has always been construed to mean that those provisions may be generally followed to the

extent possible. The submission that Section 165(1) has been incorporated by pen and ink in Section 37(2) has to be negatived in view of the

positive language employed in the Section that the provisions relating to searches shall so far as may be apply to searches u/s 38(1). If Section

165(1) was to be incorporated by pen and ink as sub section (2) of Section 37, the legislative draftsmanship will leave no room for doubt by

providing that the provisions of the Code of Criminal Procedure relating to searches shall apply to the searches directed or ordered u/s 37(1)

except that the power will be exercised by the Director of Enforcement or other officer exercising his power and he will be substituted in place of

the Magistrate. The provisions of sub-section (2) of Section 37 has not been cast in any such language. It merely provides that the search may be

carried out according to the method prescribed in Section 165(1). If the duty to record reasons which furnish grounds for entertaining a reasonable

belief were to be recorded in advance, the same could have been incorporated in section 37(1), otherwise a simple one line Section would have

been sufficient that all searches as required for the purpose of this Act shall be carried out in the manner prescribed in Section 165 of the Code by

the Officer to be set out in the section. In order to give full meaning to the expression ''so far as may be'', sub-section (2) of Section 37 should be

interpreted to mean that broadly the procedure relating to search as enacted in Section 165 shall be followed. But if a deviation becomes

necessary to carry out the purposes of the Act in which Section 37(1) is incorporated, it would be permissible except that when challenged before

a court of law, justification will have to be offered for the deviation. This view will give full play to the expression ''so far as may be''.

Finally, their Lordships approved the decision reported in R.S. Seth Gopikrishan Agarwal Vs. R.N. Sen, Assistant Collector of Customs and

Others, and held that it is not obiligatory on the part of the Department to record reasons which furnish ground for entertaining reasonable belief to

be recorded in advance. Their Lordships have said that if that would have been the intention of the Legislature a simple one line section would have

been sufficient that ''all searches as required for the purpose of this Act shall be carried out in the manner prescribed in Section 165 of the Code.''

Our High Court had occasion to consider a similar case in C.M.P. No. Nil of 198 (unnumbered) in W.A. Nos. 1454/87, 360 and 361/89 and

a batch of writ petitions (Mohideen Abdul Kadir v. The Collector of Central Excise, Coimbatore order dated 28-9-1989). ""herein a Division

Bench has held thus :

Dealing with W.P. Nos. 11181 and 11246 of 1988, learned counsel contented that there was no basis for the authorities to entertain a reasonable

belief that 20 lakhs of Indian Currency seized in the case, were liable for confiscation and that, therefore, the seizure is illegal. Reliance was placed

upon the decision of the Supreme Court in Pukhraj Vs. D.R. Kohli, wherein the Court held that possession of 290.6 tolas of gold with a person

who was travelling without ticket, was prima facie sufficient to justify reasonable belief and that the Court was not sitting in appeal over the decision

of the officer. It is also pertinent that this question was gone into and these observations were made in an appeal against the orders of confisation

and penalty. In the instant case, Rs. 20 lakhs found in a lorry booking office sought to be transported in a goods vehicle without way bills or any

other record, are circumstances enough, for a reasonable belief.

In 1976 Tax LR 1388 (The Superintendent of Central Excise v. A. Govindarajan), the expression ''reason to believe'' came up for

consideration u/s 101(1) of the Customs Act. In that case, the only information received by the Department was, that a person will be coming in a

car near a choultry between certain hours, and if the car was intercepted, either contraband gold or the sale proceeds thereof in currency notes

would be found. There was no description either of the car or of the person. On this information, a car was intercepted and searched. The question

that came up for consideration was, whether the said information alone will be sufficient for the search, and whether it is a bona fide act on the part

of the Department'' stating that there was ''reason to believe''. In paragraph 25 of the judgment (Page 1391), a Division Bench of the Karnataka

High Court held thus :-

We are unable to agree with the view of the learned single Judge that the aforesaid information was too vague on account of absence of

description of the car and the name of the person who would come in it. It is too much to except that the authorities would be able to gather before

hand all particulars of the activities of smugglers. At the time when the Customs Officer at Madras passed on to appellant 2 the information that a

person would be coming in a car with contraband gold or sale proceeds thereof, that officer might not have had information as to which person

would be employed to smuggle gold and to bring the sale proceeds thereof and in what car he would come to Bangalore. Generally, smugglers

would do everything in their power to keep their activities secret and to escape detection .....

The Bench further held thus :-

..... We are unable to agree with the view of the learned single Judge that this car must have been stopped and searched by the appellants in the

course of a fishing expedition or a random search on the off chance of finding contraband goods. The search proceeded on the definite information

received by the appellants from the Customs Officer, Madras. Such information received by the appellants from the Customs Officer, Madras.

Such information provided a reasonable belief that the writ petitioner had smuggled gold or sole proceeds thereof, liable to confiscation. We are

unable to agree with the learned single Judge that there was no such reasonable belief preceding the search and the seizure by the appellants.

In 1977 KLT 1009 (Venugopalan v. Unnikutty Panicker), the Kerala High Court has said that ''reasonable belief'' only means a belief within

the limits of reason based on the materials available and not an absurd conclusion''. In that case, a learned Judge of the Kerala High Court upheld

the contention of the Department regarding ''reasonable belief'' only on the ground of appearance of goods, inscriptions thereon and the fact that

the accused were not in a position to give proper explanation for the possession of such a large quantity of yarn in unopened bundles.

In Union of India Vs. Shyamsunder and others, , the question that came up for consideration was, whether the Enforcement Officers had

reason to belief that certain wrist watches with foreign origin, in the possession of the accused therein, were smuggled watches. The trial Court as

well as the first appellate Court convicted the accused. The High Court reversed the same. The matter was taken before the Supreme Court. Their

Lordships, following the decisions reported in State of Gujarat Vs. Mohanlal Jitamalji Porwal and Another, held thus :-

The learned Additional Solicitor General, Mr. K. T. S. Tulsi took us very meticulously through recorded evidence and the impugned judgment as

well as the judgments of the trial Court and the appellate Court and contended that the prosecution has satisfactorily established the charge by

satisfactorily establishing all the necessary ingredients that are required to constitute an offence within the meaning of Section 135 of the Customs

Act. In support of his contention he has relied upon three decisions of this Court which we presently refer to. In State of Gujarat Vs. Mohanlal

Jitamalji Porwal and Another, this Court had laid down the law as follows (at p. 1323 of AIR) :

..... Whether or not the official concerned had seized the article in the ""reasonable belief'' that the goods were smuggled goods is not a question on

which the Court can sit in appeal. The law to this effect has been declared in no ambiguous terms in Pukhraj Vs. D.R. Kohli, . This Court has

administered caution to the Courts not to sit in appeal in regard to this question and has observed that if prima facie there are grounds, to justify the

belief the Courts have to accept the officer''s belief regardless of the fact where the Court of its own might or might not have entertained the same

belief. The law declared by this Court is binding on the High Court and it was not open to the High Court to do exactly what it was cautioned

against by this Court. Section 123 of the Act does not admit of any other construction. Whether of not the officer concerned had entertained

reasonable belief under the circumstances is not a matter which can be placed under legal microscope, with an over indulgent eye which sees no

evil anywhere within the range of its eyeslight. The circumstances have to be viewed from the experienced eye of the officer who is well equipped

to interpret the suspicious circumstances and to form a reasonable ""belief in the light of the said circumstances .....

Their Lordships further said that the above said proposition of law was reiterated by the Supreme Court in Indru Ramchand Bharvani and Others

Vs. Union of India (UOI) and Others, . While deciding the case, the Supreme Court took note of the fact that the respondents in that case had

failed to discharge the burden of proving as to how they came into possession of the watches, which was taken as one circumstance to hold that

there was ''reasonable belief''.

In N. Nagendra Rao and Co. Vs. State of Andhra Pradesh, , the Supreme Court had occasion to consider the expression ''reason to believe''

in Essential Commodities Act. In paragraph 5 of the judgment (at page 216), it was held thus :-

..... The expression ""reason to believe"" has been interpreted by this Court to mean that even though formation of opinion may be subjective but it

must be based on material on the record. It cannot be arbitrary, capricious or whimsical. It is, thus, a cheek on exercise of power to seize the

goods ...

It is on the above settled position of law, we have to consider whether there was ''reasonable belief'' on the part of the respondents in this case

to order search and seizure, and whether the act done by them was in any way tainted with mala fides or lacking in good faith.

It is not disputed by the parties that there was a prior search in the premises of the first petitioner in W.P. No. 9539 of 1994. Of course the

search did not result in the recovery of any incriminatingmaterials. That search was not questioned by any one. It is averred in the counter affidavit

that even that search was based on reliable information that some violation of FERA was there. Even though that search did not result in the

recovery of any incriminating material, the officers continued to have an eye on the activities of the petitioners, and a few months thereafter, on 10-

5-1994, simultaneous search was made both at the residence and at the shop premises. When the search was made in the shop premises, the

respondents could recover a sum of Rs. 3,21,800/-. The same was not accounted, and when questioned, the father of the petitioners in W.P. No.

9539 of 1994 admitted that he received a sum of Rs. 3,20,000/- on that day from an unknown person by order of one Deen of Singapore, having

telephone Number 2944422, and the balance sum of Rs. 1,800/- belonged to the shop. Even regarding the sum of Rs. 1,800/-, he admitted that

there was no account for the same. He has also said in the statement written by him in his own handwriting that the amount was recovered from the

drawer of a counter table, and the amoount thus received was to be distributed to various persons in accordance with the instructions given by the

said Deen. He has also said that he will be getting some commission for the same, i.e., Rs. 200/- for every lakh of rupees. He has also said that he

was acquainted with the said Deen since he used to visit the shop for purchasing fancy jewellery. Of course, the statement of the father has been

retracted two days later. But, when there is no proper explanation for the possession of the amount by the father, it can be inferred that there was

''reasonable belief'' on the part of the respondents for ordering a search and seizure of the amount.

It is in this connection, we have to consider the objections raised by learned counsel for the petitioners for our perusing the file produced by the

Department. When the officers of the Enforcement Directorate expressed their readiness to produce the entire file, and in fact, produced the entire

file, learned counsel for the petitioners did not want us to peruse the same, unless he is also given an opportunity to go through the same and make

submissions over the same. For the said purpose, he also relied on the decision reported in Taraprasanna Choudhry Vs. Agricultural Income Tax

Officer, where in it was said thus (at page 537) :-

The Court should not entertain this evidence which was produced at the hearing. In numerous cases during the last few years, I have repeatedly

observed that if the respondents want to rely upon any records or other public documents, extracts of the material portion thereof (if not copies)

should be appended to the counter affidavits so that the petitioner might have timely notice and an opportunity to contradict them in his affidavit in

reply .....

The said decision has no application to the facts of this case. Here, We are concerned about an investigation which, in the very nature, is secret.

The very purpose of the investigation will be thwarted if the details are published or made open. In this connection, it is worthwhile to consider a

Bench decision of Patna High Court reported in Ram Swarup Sahu and Others Vs. Commissioner of Income Tax and Others, , where it was held

thus :-

..... the document and information on the basis of which the authority had arrived at his satisfaction for conducting the search and seizure could not

be disclosed to the petitioner as it would hamper the inquiry pending against them .....

In fact in most cases concerning the challenge of search and seizure, we find that Courts have been perusing the file produced by the Department

for their satisfaction. But, in the instant case in view of the objection raised by the learned counsel for the petitioners, we do not want to look into

the same, we are of the view that the assertion made by the Department that there was ''reason to believe'' stands good, especially ia view of their

Bona fides in producing the file before Court. The circumstances also disclose that the Department had reason to believe that a search and seizure

should be ordered.

Learned counsel for the petitioners wanted us to rely on the decision reported in The Commissioner of Commercial Taxes and Others etc. Vs.

R.S. Jhaver and Others etc., . It was a case under Madras General Sales Tax Act, the question that came up for consideration was, whether the

search ordered by the Magistrate was proper when he has not complied with the provisions of Section 165 of the Criminal Procedure Code, and

the consequences of the said search. Their Lordships have dealth with the matter in paragraph 17 (at page 66) and said that when a search is

ordered in accordance with Section 165, Cr.P.C., the same has to be in writing, and as far as possible, the Magistrate must specify in such writing

the thing for which the search is to be made. This decision was also considered in Dr Partap Singh and Another Vs. Director of Enforcement,

Foreign Exchange Regulation Act and Others, , and it was after taking note of the said decision, their Lordships pointed out the difference between

the wordings used in the Code and FERA. In Section 37(2) of FERA, the words used are :

The provisions of the Code of Criminal Procedure, 1973 relating to searches, shall, so far as may be, apply to searches"" directed Section 37(1) of

FERA. The very argument before the Supreme Court was that there should be strict compliance of Section 165, Cr.P.C. The said contention was

repelled, and it was there-after their Lordships held that the reasons need not be in writing.

Learned counsel for the petitioners also relied on a decision reported in Bishnu Krishna Shrestha Vs. Union of India (UOI), , a judgment

delivered by a learned Judge of the Calcutta High Court, under FERA. On the facts of that case, the learned Judge said that there was no ''reason

to believe''. In that case, the search was made on the basis of a direction from the Department, but on the directions of a Minister. The file alleged

to contain the information was also produced before Court, and, after perusing the file, the Court said that one of the documents produced before

Court could be the basis for the formation of requisite belief in the case. In fact the Enforcement Directorate in that case was directed to make an

enquiry about the nationality of the petitioner therein, and, it was while making such enquiry, they searched the premises of the petitioner therein.

The facts of that case are entirely different, and they have no relevancy to the facts of this case. These writ petitions have also been prepared on

the basis of the decision reported in Bishnu Krishna Shrestha Vs. Union of India (UOI), . The Calcutta High Court has also held that if the search

is held invalid, the document which was taken into custody must also be returned. This Court as well as the Supreme Court have held otherwise -

vide Dr Partap Singh and Another Vs. Director of Enforcement, Foreign Exchange Regulation Act and Others, .

Learned counsel for the petitioners also relied on various other decisions to impress upon us that the ''reason to believe'' must be honest and

must be based on some material anterior to the search. The said legal position can never be doubted. But, on facts we are of the view that the

Department had reasonable belief that Section 37 of FERA was not violated by them. This is the main contention raised in both the writ petitions.

It was then contended by learned counsel for the petitioners (in W.P. No. 9380 of 1994) that the entire proceedings have now been vitiated,

since notice of adjudication has been issued after six months of the search and seizure. It is averred in the amended affidavit filed in support of

W.P. No. 9380 of 1994 that the show cause notice dated 20-10-1994 was actually served on them only 11-1-1995. It is a notice u/s 50 of

FERA wherein it is stated that Shri Bhabootmal the first petitioner in W.P. No. 9380 of 1994) has contravened the provisions of Section 9(1)(b)

of FERA. It is also said therein that the first petitioner in W.P. No. 9380 of 1994 may look into the originals of the documents which the

department was going to rely upon. i.e., his own written statement and the mahazar prepared at the time of search. An English translation of the

statement written by the first petitioner in W.P. 9380 of 1994 was also enclosed in the Annexure to the notice.

The said contention is refuted by the Department on the ground that within six months, they have initiated proceedings. The notice sent to the

said Bhabootmal was returned with endorsements ""Not found"" or ""Not claimed"", and ultimately the Department could serve it on him only on 11-

1-1995.

In the reply affidavit, the first petitioner (Bhabootmal) has stated that no postal article was tendered to him before 11-1-1995 and that he was

not aware of any such notice. According to him, when he affirms that no postal article was tendered to him, it is for the Department to show that

the postal article was, in fact, tendered to him within six months.

The legal position can only be in favour of the Department. In Gujarat Electricity Board and Another Vs. Atmaram Sungomal Poshani, , their

Lordships considered the presumption regarding a letter sent by registered post. In paragraph 8, their Lordships said thus : -(at page 1439 of AIR)

There is presumption of service of a letter sent under registered cover if the same is returned back with a postal endorsement that the addressee

refused to accept the same. No doubt the presumption is rebuttable and it is open to the party concerned to place evidence before the Court to

rebut the presumption by showing that the address mentioned on the cover was incorrect or that the postal authorities never tendered the

registered letter to him or that there was no occasion for him to refuse the same. The burden to rebut the presumption lies on the party, challenging

the factum of service. In the instant case the respondent failed to discharge this burden as he failed to place material before the Court to show that

the endorsement made by the postal authorities was wrong and incorrect. Mere denial made by the respondent in the circumstances of the cases

was not sufficient to rebut the presumption relating to service of the registered cover.

This Court, in Deputy Director, Enforcement Directorate, Madras and another Vs. Naina Maricair, has held that proceedings u/s 51 of FERA

commences as soon as a show cause notice is issued, and not when a notice of hearing is issued. In paragraph 15 of the judgment, it is held thus

(at Page 28) :-

We shall now refer to some of the decisions placed before us. As rightly contended by the learned counsel for the respondent, in K.A. Abdul

Khader Vs. The Deputy Director of Enforcement, rendered by V. Ramaswami, J. (as he then was) this question whether adjudication proceedings

commence on the notice being issued under rule 3(1) or whether they commence on a notice u/R. 3(3) had neither been raised nor decided.

Learned Judge, while general analysing the provisions of the Act, has made a passing observation that proceedings commence when a show cause

notice is issued. The learned Judge, later in Sivarajan v. Dy. Director (1987) 12 ECC 256 has gone elaborately into this aspect and has equated

the notice under R. 3(1) to an officer memo, issued before disciplinary proceedings are initiated in ordinary civil cases in regard to Government

servants. With due respect to the learned judge, we are not inclined to agree with the view of the learned Judge for the reasons already enumerated

above. The decision of the learned Judge in K.A. Abdul Khader Vs. The Deputy Director of Enforcement, was the subject matter of W.A. 65 of

1976, wherein even though the question that directly came up for decision was, whether the date to be reckoned with, was the date of issuance of

the notice or the date of service of the notice, the Bench also discussed the issue as to when adjudication proceedings u/s 51 of the Act

commence, when a show cause notice is issued u/r. 3(1) and the requirements of Section 19 (g)(Present Section 41) are satisfied. Ramaswami, J

(as he then was) in his later decision in Sivarajan v. Dy Director (1987) 12 ECC 256 did not choose to place reliance on the view expressed by

the Division Bench on the ground that the point, as raised in the case before him, was not raised before the Division Bench and decided. We,

however, agree with the view expressed by the Division Bench in W.A. 65 of 1976. The High Court of Kerala in Bhaskaran Pillai v. Enforcement

Directorate 1978 Ker LT 436 : 1978 Tax LR 225 has also taken a view that proceedings u/s. 51 of the Act commence as soon as a show cause

notice is issued u/r. 3(1) and not when a notice of hearing is issued u/r. 3(3). We, therefore, hold that adjudication proceedings u/s 51 of the Act

commence, when a show cause notice is issued by the adjudicating officer u/r. 3(1) and not when a notice of hearing is issued u/r. 3(3).

In this case, learned Additional Central Government Standing Counsel showed before us the postal cover sent to the first petitioner in W.P. 9380

of 1994, which was returned. It is seen therefrom that the same was despatched on 20-10-1994, but the same could not be served for the reasons

''not found'' ''not claimed''. It is the same notice that was again issued to the first petitioner in WP. 9380 of 1994 who received the same after a

period of six months, i.e., on 11-1-1995. Therefore, under no stretch of imagination it can be said that the proceedings are vitiated.

Learned Counsel for the petitioners further submitted that Indian currency is not a document, for the purpose of Section 34 of FERA and

hence the Department cannot continue to retain the same. For the said purpose, learned Counsel relied on the decision reported in 1971 MLJ

(Cri) 553 (M. K. Koidunny v. Collector of Customs and Central Excise, Cochin-3). In that case, a learned Judge of the Kerala High Court has

held that for the purpose of section 19(2) of FERA, currency notes cannot be considered as documents. The circumstances are entirely different.

Here, in this case, we are concerned about the provisions of Section 37 to 40 of FERA. There is an explanation added to Section 33 where it is

said ""For the purpose of this section, Section 34 and Sections 36 to 41 (both inclusive), ""document"" includes Indian currency, foreign exchange

and books of account. This Court has also held in K.M. Amir Abdul Kader Vs. The Deputy Director, Enforcement Directorate, Madras, that

Indian currency is also a document for the purpose of Section 37 of FERA. It was also held so in the decision reported in Deputy Director,

Enforcement Directorate, Madras and another Vs. Naina Maricair, . So, that contention of the learned counsel for the petitioners also fails.

It is contended by learned counsel for the petitioners that the second petitioner in W.P. No. 9539 of 1994 and the petitioners in W.P. No.

9380 of 1994 were arrested and detained in custody, and they were in illegal detention for more than 30 hours since they were not produced

before a Magistrate and, therefore, the entire proceedings are illegal.

So far as the second petitioner in Writ petition No. 9539 of 1994 is concerned, he admitted that he was the person present when the search

was made. He has not cared to file any affidavit before the Court saying that he was arrested or detained. Instead, the affidavit is sworn to by the

first petitioner in W.P. No. 9539 of 1994, who was admittedly not in the vicinity during the relevant time. At the same time, the averment in the

counter affidavit is that the second petitioner was not even summoned, and that he gave a statement at his residence immediately after the search

was completed and he has signed the statement at his residence itself, and he was never taken to the Enforcement Directorate at any time. Why the

second petitioner remains silent and why he has not filed a reply affidavit, is not explained.

So far as the petitioners in W.P. No. 9380 of 1994 are concerned, even though it is alleged that they were detained, the same is also denied

by the respondent. According to them, they were summoned to be present in their office at 6.00 p.m. on 10-5-1995 pursuant to the summons

issued to them on that day, which they received as 4.30 p.m. It is the case of the Department that they were summoned at 6.00 p.m. only to enable

them to close the business for the day. It is also their case that immediately after the statement was taken, they were discharged, and they were

never arrested. In this case, the second petitioner, in 9380 of 1994 has not filed any affidavit alleging that he was detained. He has also given a

statement before the Enforcement Directorate. Under FERA, the Department is given power to arrest any person.

56A. If the Department has intention to arrest any person, there is nothing to prevent it from issuing a warrant. Section 35 of FERA enables the

Department to do so. When they have got such a power, they need not summon persons and thereafter detain them. Moreover, there is a denial

by the Departmental regarding the alleged arrest. Except for a mere allegation in the petitions there is no evidence on the part of the petitioners, to

prove the same.

Learned Counsel for the petitioners also submitted that it was improper on the part of the Enforcement officers to direct the petitioners in W.P.

No. 9380 of 1994 to appear before them after 6.00 p.m., and thereafter detain them for questioning, and that is also a suspicious circumstance

against the respondents, and the statements might have been taken but the officers by compulsion.

The said submission of the learned counsel for the petitioners also cannot be accepted in view of the decision reported in Balkrishna

Chhaganlal Soni Vs. State of West Bengal, where (in paragraph 15) it is stated thus :

... A businessman may be wantonly humiliated if he is arrested and kept in the bazaar and interrogated at length in the presence of a crowd which

is sure to collect. The provision is plain that an authorised customs official is entitled to examine any person at any time, at any place in the course

of an enquiry. ... ... ..."" The said judgment was followed by our High Court in Writ Appeals Nos. 891 to 893 of 1988 (The Deputy Director,

Enforcement Directorate, Madras-6 v. P. Mansoor Mohamed Ali Jinnah and others), as per Judgment dated : 11-11-1988, the First Bench has

held (in paragraph 32) as follows :-

A further argument was advanced that the statements have been recorded out of office hours, and as such, as rightly pointed out by the learned

single Judge, no reliance can be placed on these statements. We have already held that there is no material in the present case to show that the

statements were recorded out of office hours. The observation of the Supreme Court in Balkrishna Chhaganlal Soni Vs. State of West Bengal,

answers this contention. In this case, the Supreme Court has pointed out thus :

The provision (Section 107 of the Customs Act) is plain that an authorised Customs official is entitled to examine any person at any time, at any

place, in the course of an enquiry."" ... ...

In paragraph 31 of the said Judgment, the learned Judges have said that it would be better if the authorities under the Customs Act as well as

FERA take the statements of a person in his own hand, so that there may not be any complaint subsequently that the authorities have not recorded

the statements properly. The said paragraph can usefully be extracted :-

Drawing the attention of this Court to an observation made by a Division Bench of this Court in Writ Appeal No. 1015 of 1987 batch

(Vittalanathan v. The Collector of Customs, Coimbatore) - Judgment dt : 30-11-1987, reading.

We have not been able to find any authority in any provision of law which can compel a witness to write down his own statement. It is open to the

customs officers to ask questions and whatever answers are given by the witness can be taken down by the officer.

It has been submitted that in the present case, the statements should be excluded from consideration since the respondents have been made to

write down statements in their own hands. Though there is no provision of law under the Customs Act requiring a person to write down his own

statement, at the same time there is no prohibition to a person giving his statement in writing in his own hand. In fact, it would be better if the

authorities under the Customs Act and the FERA take the statements of a person in his own hand, so that there may not be any complaint

subsequently that the authorities have not recorded the statements properly. We have drawn strength for the above view from the observation

made by the Supreme Court in the Judgment in Amba Lal Vs. The Union of India (UOI) and Others, reading as follows (at page 329 of Cri LJ):-

It would have been better if the customs authorities had taken that admission in writing from the appellant, for that would prevent the retraction of

the confession on second thoughts. That apart, it is more satisfactory if a body entrusted with functions such as the customs authorities are

entrusted with, takes that precaution when its decision is ""Mainly to depend upon such admission.

See also The State of Bombay Vs. Kathi Kalu Oghad and Others, . In view of the above decisions of the Supreme Court, this argument cannot be

availed of.

In 1983 Mad LW (Cri) 289 (Roshan Beevi v. Joint Secretary to the Government of Tamilnadu Public Department (Las and Order)), a Full

Bench of our High Court considered the question of arrest and custody. In paragraph 27 of the Judgment (at page 305), the learned Judges have

laid down the law thus :-

In an enquiry held u/s 107 or Section 108 of the Customs Act not only the persons who subsequently may become the accused with reference to

the matter under enquiry, but also persons who are conversant or suspected to be conversant with the smuggling of any goods, are examined. This

is the reason why in the said sections the words ""any person"" disciplinary proceedings are initiated in ordinary civil cases in regard to Government

servants. With due respect to the learned Judge, we are not inclined to agree with the view of the learned Judge for the reasons already

enumerated above. The decision of the learned Judge in K.A. Abdul Khader Vs. The Deputy Director of Enforcement, was the subject matter of

W.A. 65 of 1976, wherein even though the question that directly came up for decision was, whether the date to be reckoned with, was the date of

issuance of the notice or the date of service of notice, the Bench also discussed the issue as to when adjudication proceedings u/s 51 of the Act

commence, when a show cause notice is issued u/r. 3(1) and the requirements of Section 19(g) (Present Section 41) are satisfied Ramaswami, J

(as he then was) in his later decision in Sivarajan v. Dy Director (1987) 12 ECC 256 did not choose to place is to be deemed to be a judicial

proceeding within the meaning of the abovesaid penal provisions. Section 107 and Section 108 are analogous to the provisions of Section 160(1),

Cri.P.C. As rightly pointed out by the Advocate General, if a person who appears before a Customs Officer in compliance with the summons for

the purpose of giving information or evidence, as in the case of a person appearing before a police officer u/s 160(1), Cri.P.C. can it be said that

such a person comes into the custody of the Custom''s Officer concerned, amounting to arrest ? In our view, there is no such custody amounting to

an arrest in such a situation. Further, as rightly pointed out by Mr. P. Rajamanickam, the learned public prosecutor, there is no question of

surveillance, official or unofficial, in summoning a person for interrogation, and a person taken for interrogation cannot be said to have been

arrested within the meaning of the said term. If such wide interpretation is given then even the attendance of a person before a police officer u/s

160(1), Cri.P.C. would amount to an arrest. That is definitely not the law.

Learned counsel for the petitioners submitted that before filing the writ petitions, a telegram was issued to the Chief Justice requesting him to

direct the respondents to release the detenus, and an attempt was made to file a writ of habeas corpus during vacation, and all this will show that

the petitioners were detained. According to him, the denial by the Department regarding the arrest and detention, cannot be believed.

We are of the view that the sending of the telegram and the attempt to file writ of habeas corpus are only methods adopted by the petitioners

to create suspicion, and we cannot rely on the same for the purpose of entering a finding that they were arrested.

In W.P. No. 9539 of 1994 and Writ Appeal No. 679 of 1995, the question that is raised is, that since proceedings have been initiated beyond

six months, the Enforcement Directorate has no authority to retain the amount seized from the shop premises, and that the same is not necessary

for the purpose of adjudication.

We have already held that the proceedings have been initiated on 20-10-1994 itself, even though the show-cause notice was ultimately

received by the first petitioner in W.P. No. 9380 of 1994 on 11-1-1995. This Court has also considered recently an identical question in writ

Appeal No. 791 of 1995 (The Assistant Director, Directorate of Enforcement Trivandrum v. A. J. Kingsley Fernandes - Judgment dated 31-8-

1995). Relevant portion of paragraph 5 of the said judgment reads thus :-

We may point out at once that in all these decisions, Section 41 of the Act was not considered and that too in the context of one similar to this

case. Further, the expression, ""commencement of the proceeding"" also has not been considered except in R. Sivarajan v. Deputy Director,

Enforcement Directorate (Mad (1988) 63 Com Cas 34). In that case, a learned single Judge of this Court on distinguishing a Division Bench

Decision has held that mere issuance of a show cause notice does not amount to commencement of the proceedings. We find it very difficult to

agree with the said view. In our view, there was no justification whatsoever for the learned single Judge in R. Sivarajan''s case to distinguish

unreported Division Bench Decision of this Court in W.A. 65 of 1976 dated 16-9-1976 (Deputy Director v. K. A. Abdul Khader), which has

been subsequently followed in Deputy Director, Enforcement Directorate, Madras and another Vs. Naina Maricair, , another Division Bench of

this Court. We accordingly, overrule the decision in R. Sivarajan''s case in so far as it touches upon the commencement of the proceedings as

required by Section 41 of the Act. As already pointed out, the other decisions do not deal with the question as to when the proceeding u/s 41 of

the Act can be considered to have commenced. In our view, a proceeding u/s 41 of the Act can be held to have commenced on issuance of the

show cause notice.

The respondents have a case that the amount that was seized by them belonged to the father, and not the sons (petitioners in W.P. 9539 of

1994). The statement given by the father is also relied on by them for the said purpose. The statement has been written by the father himself in his

own handwriting. An English translation of the same has also been produced, wherein he has admitted that he received a sum of Rs. 3,20,000/-

from an unknown person under instructions from one Deen of Singapore. In this connection, it should also he remembered that the said amount

was recovered from the drawer of a counter table, in the shop. The source is not properly explained. Apart from an allegation in the writ petitions

that it represented the trade balance as on that date, there is no other explanation as regards the source for the presence of the said sum in the shop

at the time of seizure. Apart from the statement of the father, there is no other statement from any of the petitioners. The question of trade balance

was raised only in W.P. No. 9539 of 1994, long after the statement by the father. For the first time, it was raised only in the reply notice issued by

the first petitioner in W.P. No. 9380 of 1994 Bhabootmal Jain through Counsel by way of reply to the show-cause notice. When there is a dispute

as to the person from whose custody the same was received, till the entire adjudication is over, it will not be proper to direct the return of the

amount.

The learned single Judge who passed the Order in W.M.P. No. 16365 of 1994 in W.P. No. 9539 of 1994 has said that the same cannot be

decided without further details. Except for filing Writ Appeal No. 679 of 1995, no other details are given. Under the above circumstances, we do

not think that any ground has been made out for the return of the currency seized, before final order is passed on the adjudication notice. Hence

the Writ Appeal is liable to be dismissed.

Learned counsel for the petitioners also submitted that the very notice dated 20-10-1994 issued to the father is invalid, for, possessing Indian

currency is not an offence under FERA.

On going through the notice, it is seen that the respondent''s case is that the petitioners have violated the provisions of Section 9(1)(b) of FERA

which says that ''no person in, or resident in, India shall receive otherwise than through an authorised dealer, any payment by order or on behalf of

any person resident outside India''. In this case, the father has received the amount, not from an authorised dealer, but from an unknown person on

the instructions of one Deen of Singapore. Hence, prima facie the respondents have made out grounds for proceeding against the father, and,

therefore, the proceedings initiated against the father cannot be held to be invalid. No ground has been made out to quash the same.

Learned Additional Central Government Standing Counsel also contended that the petitioners in W.P. No. 9380 of 1994 have been given only

a show cause notice, and at this stage, this Court may not exercise the extraordinary original jurisdiction. According to him, if a show cause notice

is issued, it means that the petitioners are given an opportunity to explain, and if only their explanation is not accepted, proceedings will be initiated

and against the Order that may be passed by the Department, there is an appeal, a second appeal and other procedures covered by statute. Being

a show cause notice, fact will have to be proved, and the petitioners also will be given opportunity to adduce their evidence. He wanted that this

Court should not interfere at this stage.

Learned counsel for the petitioners contended that when the show cause notice is issued without any basis, the same amounts to an abuse of

process or something done without jurisdiction.

We have already held that the respondents had reason to believe that there was material for ordering search and seizure. The question whether

proceedings have to be initiated under S. 51 of FERA is to be decided by the Department after the explanations of the petitioners are received. At

this preliminary stage, the Court will be reluctant to interfere. In Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop

India Ltd. and Others, their Lordships of the Supreme Court deprecated the practice of invoking the extraordinary jurisdiction of this Court when

the petitioners have not effective alternative remedy. In that case, it has been held thus :-

Art. 226 is not meant to short circuit or circumvent statutory procedures. It is only where statutory remedies are entirely illsuited to meet the

demands of extraordinary situations, as for instance where the very vires of the statute is in question or where private or public wrongs are so

inextricably mixed up and the prevention of public injury and the vindication of public justice require it that recourse may be had to Art. 226 of the

Constitution. But then the Court must have good and sufficient reason to by-pass the alternative remedy provided by statute. Surely matters

involving the revenue where statutory remedies are available are not such matters. The Supreme Court can take judicial notice of the fact that the

vast majority of the petitions under Art. 226 of the Constitution are filed solely for the purpose of obtaining interim order and thereafter prolong the

proceedings by one device or the other. The practice needs to be strongly discouraged"".

In (Asia Tobacco Co. Ltd. v. Union of India), a Bench of this Court, (in which one among us is a party (Srinivasan, J.) has held thus :-

Asia Tobacco Co. Ltd. Vs. Union of India and Another, ""It would be too premature to go into the merits of modus operandi which has been

adopted by the Department as to whether Rule 9(2) will be attracted. Whether the modus operandi establishes a case of evasion and if such

evasion is within the four corners of Rule 9(2) can properly be determined only when the full and complete enquiry is made in pursuance of show

cause notice. It would not, therefore, be proper at this stage to go into the validity of the notice on the footing that it does not fall within Rule 9(2).

A Division Bench of the Karnataka High Court has also considered a similar question in the decision reported in Loharu Steel Industries Ltd.

Vs. Collector of Central Excise, . Paragraphs 7 to 9 of the said judgment are relevant for our purpose, and they read thus :-

The Supreme Court in Geep Flashlight Industries Ltd. v. Union of India, AIR 1977 SC 455 : 1977 Lab IC 20 : 1983 (13) ELT 1996 (SC) was

called upon to decide as to whether certiorari jurisdiction can be exercised against a show cause notice issued u/s 131(3) of the Customs Act as it

stood. The Supreme Court, after considering the submissions made, held as follows :-

Once the provisions contained in Section 131(3) are attracted the Central Government may of its own motion annual or modify any order

passed u/s 128 or Section 130. This provision is the power of Central Government to annul or modify any order. This power is exercised by the

Central Government suo motu. Of course the power is to be exercised on giving notice to the person concerned.

The provision contained in section 131(5) of the Act speak of limitation only with regard to non-levy or short-levy. It is significant that Section

131(5) does not speak. of any limitation in regard to revision by the Central Government of its motion to annual or modify and order of erroneous

refund of duty. The provisions contained in Section 131(5) with regard to non-levy or short-levy cannot be equated with erroneous refund

inasmuch as the three categories of errors in the levy are dealt with separately.

The appellant''s prayers for writs of certiorari and mandamus are misconceived. There is no order either judicial or quasi-judicial which can

attract certiorari. No mandamus can go because there is nothing which is required to be done or forborne under the Act. The issue of the notice in

the present case requires the parties to represent their case. There is no scope for mandamus to do any duty or act under the statute. A writ of

prohibition cannot be issued for the obvious reason that the Central Government has jurisdiction to revise.

Thus the proposition laid down in Para 24 in categorical terms states that no order, either judicial or quasi-judicial, which can attract certiorari, is

said to have been passed when the show cause notice is issued and, therefore, until the adjudication is made, the exercise of jurisdiction is not

called for. In the instant case the show-cause notice is issued u/s 11-A of the Act by the Collector of Central Excise, Bangalore on the grounds of

suppression of facts of production and clearance from the department with an intention to evade payment of Central Excise Duty. As per the

proviso of Section 11A(1) of the Act, the collector of Central Excise is competent to issue show-cause notice on the ground of suppression of

facts. Therefore, the show-cause notice does not suffer from lack of jurisdiction. We may also point out that certiorari jurisdiction is not intended to

by-pass the statutory provisions. In Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. and Others, .

While considering the scope of Article 226 of the Constitution, the Supreme Court has held as follows :-

In Titaghur Paper Mills Co. Ltd. and Another Vs. State of Orissa and Others, , A. P. Sen, E. S. Venkataramiah and R. B. Misra, JJ. held that

where the statute itself provided the petitioner with an efficacious alternative remedy by way of an appeal to the Prescribed Authority, a second

appeal to the Tribunal and thereafter to have the case stated to the High Court, it was not for the High Court to exercise its extraordinary

jurisdiction under Art. 226 of the Constitution ignoring as it were, the complete statutory machinery. That it has become necessary, even now, for

us to repeat this admonition is indeed a matter of tragic concern to us. Art. 226 is not meant to short circuit or circumvent Statutory procedures. It

is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations, as for instance where the very vires of the

statute is in question or where private or public wrongs are so inextricably mixed up and the prevention of public injury and the vindication of public

justice require it that recourse may be had to Art. 226 of the Constitution. But then the Court must have good and sufficient reason to by-pass the

alternative remedy provided by statute. Surely matters involving the revenue where statutory remedies are available are not such matters. We can

also take judicial notice of the fact that the vast majority of the petitions under Art. 226 of the Constitution are filed solely for the purpose of

obtaining interim orders and thereafter prolong the proceedings by one device or the other. The practice certainly needs to be strongly

discouraged.

In addition to this, we may point out here that a Division Bench of this Court in Karnataka State Road Transport Corporation and Another Vs.

Karnataka State Transport Authority and Another, had an occasion to consider as to under what circumstances the extraordinary jurisdiction of

this court under Art. 226 of the Constitution can be exercised when there exists an equally efficacious alternative remedy of appeal and it was held

thus :- at page 10

Even where an equally efficacious alternative remedy exists, where, however, fundamental rights are affected, where rules of natural Justice are

violated, or where there is a failure on the part of the authority concerned to confine itself within the bounds of its legitimate jurisdiction or where

there is a failure to exercise the jurisdiction vested in it or where there is an error of law apparent on the face of the record, a person aggrieved can

invoke the extraordinary jurisdiction of this court under Art. 226 without reference to any remedy however equally efficacious it be. The existence

of an alternative remedy does not oust the jurisdiction of the High Court under Art. 226 .......

The case on hand does not fall in any one of the exceptions mentioned above. There is not even a determination made about the liability of the

appellant. The facts stated in the show-cause notice are yet to be determined after the cause is shown and the evidence, if any, adduced by the

appellant. As far as the jurisdiction is concerned, it has already been pointed out that the ground stated in the show-cause notice clearly falls within

the jurisdiction of the Collector as per Section 11A of the Act.

We now take up for consideration three judgments of this court on which reliance is placed. In Mysore Acetate and Chemical Co. Ltd. Vs.

Assistant Collector, Central Excise, Mysore, the Superintendent of Central Excise, M.O.R. Mandya by his notice No. CC 2193/81 dated 10-10-

1981 and revised show-cause notice No. 0C27/82 dated 1-1-1982 called upon the petitioner therein to pay excise duty on ''acetic anhydride''

manufactured and supplied to drug manufacturers as a drug intermediate taking the view that it was a chemical and its supply as a drug intermediate

did not entitle it for an exemption from excise duty under the Notification dated 1st March 1978. A contention was raised that as only a show-

cause notice was issued, it would be open to the petitioner to put forth its case before the authority who had issued the show-cause notice and that

authority would be bound to decide the same and that thereafter the petitioner can work out his remedy under the statute by way of appeal. In

para 7 of the judgment, the learned single Judge appears to have agreed with this contention; but nevertheless interfered with the show cause

notice. The relevant portion of the judgment is as follows.

What is challenged are show cause notices and therefore, it is open to the petitioner to appear before the Superintendent and urge the very

case pleaded before this Court who is bound to examine and decide the same and that decision can be challenged in appeals or other remedies

can hardly be doubted.

The fact that the notices are show cause notices and the petitioner has an opportunity to appear and urge its case does not touch on the

jurisdiction of this Court to examine them and decide the question at the threshold itself.

But the excise duty is payable on the manufactured goods by the manufacturer in the first instance though it may happen that he may pass on the

same to the buyer of goods or consumer. On the very terms of the show cause notices, the petitioner is bound to pay the exise duty which it has

not been paying from 1-3-1978. In all probability, the Superintendent is likely to stick to his view expressed in the show cause notices. In the

circumstances, I consider it proper to examine the validity of the show cause notices and decide the questions finally.

Paras 10 to 16 xxx xxx

On the above discussions, it follows that the action of the Superintendent is manifestly illegal and the same justifies the interference by this

court."" ... ... ...

In view of the above said legal position, we find force in the submissions made by the learned Additional Central Government Standing

Counsel.

In these Writ Petitions, there is no order either judicial or quasi-judicial. No writ of mandamus can also be issued since there is nothing which is

required to be done or for-born under the Act. The petitioners have been directed only to present their case and they will be given opportunity to

explain why they should not be proceeded with for the alleged violation of FERA. There cannot be any writ of prohibition, for, the Department is

acting only under the Statute in discharging their official duties, which they are bound to do under law. So, there cannot be any question of issuing

any writ or order or direction as prayed for by the petitioners.

We also feel that writ petition No. 9380 of 1994 is not properly framed. Four Officers by their names have been impleaded. It is well settled

that no writ can be issued against invididuals without the State or its Organs being made parties. But, since the respondents have not pointed out

this defect at the time of arguments, we do not want to dispose of the writ petition. No. 9380 of 1994 on that ground alone.

W.M.P. No. 28173 of 1994 in W.P. No. 9539 of 1994.

In this petition, the petitioners want this Court to hold a preliminary enquiry and record a finding that an offence u/s 198, IPC has been committed

by the second respondent and make a complaint thereof to the competent Magistrate having jurisdiction to try the offence.

We do not find any ground on the basis of mere allegation by the petitioners that the second respondent has committed the offence complained

of. In view of our findings in the writ petitions, we hold that this writ Miscellaneous petition is not maintainable, and accordingly it is dismissed.

W.M.P. No. 14488 of 1994 in W.P. No. 9539 of 1994; This petition is to stay all further proceedings against the petitioners in the said writ

petition in pursuance of summons No. T3/130/S2/C/94 (AKP).

In fact, this W.M.P. has become infructuous since the first petitioner himself has appeared before the Authorities and given a statement on 27-

5-1994. According to the respondents, the proceedings are not over, and the first petitioner, though agreed to appear on the next day, absented

himself.

u/s 40 of FERA, the Enforcement Directorate has power to summon any person whose attendance it considers necessary either to give

evidence or to produce a document during the course of any investigation or proceeding under this Act. Sub-section (3) of Section 40 of FERA

also says that all persons so summoned shall be bound to attend either in person or by authorised agents, and all persons so summoned shall be

bound to state the truth upon any subject respecting which they are examined or make statements and produce such documents as may be

required.

We have already stated that the father of the petitioners in W.P. No. 9539 of 1994 has given a statement in respect of certain documents

seized that the handwriting is that of his son Vijayaraj Jain, the first petitioner in W.P. No. 9539 of 1994. The father as well as the servant

(Petitioners in W.P. No. 9380 of 1994) have stated that only Vijayaraj Jain knows the contents and veracity of the documents seized. It is on the

basis of the said information given by the father and the servant, the Department wanted the son also to be summoned. u/s 40 of FERA, the

Department has power to summon any person during the course of investigation. When a proceeding is pending against the father u/s 9(1) of

FERA, for an alleged. violation of Section 9(1)(b) of FERA, on the basis of the statement given by the father, his son is sought to be examined.

There is nothing improper on the part of the Enforcement Directorate in issuing the summons. We do not find any ground to stay the proceedings,

and hence this W.M.P. is also dismissed.

W.M.P. No. 32741/94 in W.P. 9539/94 :

This petition is by the petitioners in the main writ petition, seeking a direction against the respondents to restrain them from trespassing into the

shop, office and/or residence of the petitioners and/or illegally arresting any or all the petitioners or any of their family members, servant and

recording any further statement from any or all of them under duress, and pass such further or other orders as this Court may deem fit and proper.

We cannot pass an order of prohibitory injunction as sought for by the petitioners, since any such order will amount to prohibiting the

respondents from discharging their statutory duty. There is also no basis for the apprehension of the petitioners that statements will be recorded

from them under duress. The respondents, while discharging their official duties, are entitled to enter into the shop, office and or residence of the

petitioners or their relations add record their statements, if the same is relevant for the purpose of any investigation. Hence this W.M.P. is also

dismissed.

W.M.P. No. 27601 of 1994 in W.P. 9539/94 :

In view of the disposal of the main writ petition, this W.M.P. is also dismissed.

In the result, Writ Appeal No. 679 of 1995 and writ petitions Nos. 9380 and 9539 of 1994 are dismissed. No costs.

In view of the dismissal of the main Writ Appeals, C.M.P. Nos 8257 and 8258 of 1995 filed therein are also dismissed. We have already

given the reasons for dismissasl of the Writ Appeal in Paragraphs 64 and 65 of this Judgment.

W.M.P. No. 14267 of 1994 in W.P. No. 9380 of 1994 :

In view of the dismissal of the main Writ Petition, this W.M.P. is dismissed.

Order accordingly.