Independent passport impounding power under FEMA upheld, with time-bound review required to protect travel rights.

The Passports Act, 1967 was held not to be an exhaustive code excluding independent powers under other enactments. An impounding order issued under section 37(3) of FEMA, read with section 131 of the Income-tax Act, was sustained because the court treated those powers as distinct from the Passport Act regime and rejected the argument that a pending formal proceeding was required. The order was also found supported by adequate recorded material, including an ongoing investigation and risk of evidence being tampered with abroad. However, passport impounding cannot continue indefinitely, so the authorities were directed to review the matter within four months.

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Issues: (i) Whether a passport can be impounded under section 37(3) of the Foreign Exchange Management Act, 1999 read with section 131 of the Income-tax Act, 1961 notwithstanding the scheme of the Passports Act, 1967; (ii) Whether the impugned order was vitiated for want of adequate material and reasons.

Issue (i): Whether a passport can be impounded under section 37(3) of the Foreign Exchange Management Act, 1999 read with section 131 of the Income-tax Act, 1961 notwithstanding the scheme of the Passports Act, 1967.

Analysis: The power under the Passports Act, 1967 to vary, impound or revoke passports was held not to be exhaustive. The Act was treated as a special code for passport regulation, but not as excluding independent powers conferred by other enactments. Section 23 of the Passports Act, 1967 shows that its provisions are in addition to and not in derogation of other laws relating to foreign exchange. Section 37(3) of the Foreign Exchange Management Act, 1999 confers on enforcement officers the like powers available to income-tax authorities, and the court held that the limitations in section 131 of the Income-tax Act, 1961 do not curtail the distinct power exercised under FEMA. The contention that a pending formal proceeding was a pre-condition was rejected.

Conclusion: The impounding of the passport under section 37(3) of the Foreign Exchange Management Act, 1999 was upheld and the challenge failed.

Issue (ii): Whether the impugned order was vitiated for want of adequate material and reasons.

Analysis: The order recorded that the investigation was at a crucial stage, evidence was being collected, statements were being recorded, and there was apprehension that evidence abroad might be tampered with. In the context of a sensitive foreign-exchange investigation, the court held that the material was sufficient to justify retention of the passport. At the same time, an order impounding a passport cannot be allowed to operate indefinitely because of the impact on the right to travel and business activity, and the authorities were directed to review the matter within four months.

Conclusion: The impugned order was not invalid for want of material, though it required review within four months.

Final Conclusion: The passport impounding was sustained as lawful, and the petition failed, but the administrative restraint was made subject to time-bound reconsideration.

Ratio Decidendi: A passport may be impounded by an authority acting under an independent statutory power conferred by a later special enactment, even where the Passports Act, 1967 provides its own impounding mechanism, and such power is sustainable if exercised for a legitimate investigatory purpose on recorded material.

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