Seized currency must be returned within a year under Foreign Exchange Act

The court ruled that retaining seized currency beyond one year without initiating proceedings under section 51 of the Foreign Exchange Regulation Act, 1973, is unlawful. Notices issued under rule 3(1) were deemed insufficient to constitute the commencement of proceedings. The court directed the respondents to return the seized currency to the petitioners by a specified date and made no cost order.

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Issues Involved:
1. Initiation of proceedings under section 51 of the Foreign Exchange Regulation Act, 1973.
2. Legality of retaining seized currency beyond one year.
3. Validity of notices issued under rule 3(1) of the Adjudication Proceedings and Appeal Rules, 1974.

Issue-wise Detailed Analysis:

1. Initiation of proceedings under section 51 of the Foreign Exchange Regulation Act, 1973:
The primary issue raised was whether the proceedings under section 51 of the Foreign Exchange Regulation Act, 1973, had been initiated within one year from the date of seizure. The court examined sections 41, 50, and 51 of the Act to determine the relevant provisions. Section 41 allows the retention of seized currency for up to one year unless proceedings under section 51 are commenced within that period. Section 51 mandates an inquiry to determine if a contravention has occurred, leading to penalties under section 50. The court clarified that the initiation of proceedings under section 51 begins with the issuance of a notice under rule 3(3) of the Adjudication Proceedings and Appeal Rules, 1974, not with the notice under rule 3(1). The latter is merely a preliminary step to decide whether adjudication proceedings should be held.

2. Legality of retaining seized currency beyond one year:
The court emphasized that the retention of seized currency beyond one year is only permissible if proceedings under section 51 have commenced within that period. The notices issued in the cases at hand were under rule 3(1), which do not constitute the commencement of proceedings under section 51. Consequently, the retention of the currency beyond one year without initiating proper proceedings was deemed unlawful. The court cited the Supreme Court's decision in Arjunan Chelliar v. Enforcement Officer, which disapproved of retaining documents beyond the statutory period without commencing adjudication proceedings.

3. Validity of notices issued under rule 3(1) of the Adjudication Proceedings and Appeal Rules, 1974:
The court analyzed the procedural requirements under rule 3 of the Adjudication Proceedings and Appeal Rules, 1974. It concluded that the notice issued under rule 3(1) is akin to an office memo in disciplinary proceedings and does not mark the commencement of adjudication proceedings under section 51. The court rejected the respondents' contention that the notice under rule 3(1) should be treated as the initiation of proceedings. The court also referred to a similar case, K. M. Amir Abdul Kader v. Deputy Director, where it was held that issuing a show-cause notice under rule 3(1) without further action does not commence adjudication proceedings.

Conclusion:
The court held that the retention of the currency seized from the petitioners was unjustified as the proceedings under section 51 had not commenced within the statutory period of one year. Consequently, the court directed the respondents to return the seized currency to the petitioners by January 20, 1987, and there was no order as to costs.

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