2016 (5) TMI 518 - SC - FEMA

Supreme Court upholds detention order under COFEPOSA Act for Hawala transactions violating Foreign Exchange Regulations.

The Supreme Court upheld a detention order issued under the COFEPOSA Act against the detenue for involvement in Hawala transactions violating Foreign ... Preventive detention passed against the detenue [husband of the appellant herein] as well as few other persons - Held that:- It has come on record and noted in the order of detention that large sums of money were received in the said bank account which was opened in the name of the detenue and the money which was disbursed from this account amounted to ₹ 40.52 crores. It was further found by the detaining authority that the detenue was also one of the persons involved in Hawala transactions which were carried out. In such circumstances, satisfaction of the detaining authority to detain the detenue cannot be faulted with. Issues:Detention order under COFEPOSA Act, 1974 against the detenue challenged in High Court. Appellant's writ petition dismissed. Appellant claimed lack of knowledge about illegal transactions. Appellant argued that transactions did not violate Foreign Exchange Management Act, 1999.Analysis:The Supreme Court dealt with the challenge to a detention order issued under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA) against the detenue. The order detailed the involvement of the detenue in Hawala transactions amounting to over Rs. 600 crores, violating Foreign Exchange Regulations. The detenue was accused of actively participating in illegal money transactions totaling Rs. 40.52 crores from June 2000 to January 2002. The detaining authority found the detenue to be engaged in activities prejudicial to foreign exchange resources, justifying the detention under COFEPOSA.The appellant contested the detention order in the High Court of Madras, arguing lack of knowledge about the illegal transactions and that signing blank cheques did not constitute an offense under the Foreign Exchange Management Act, 1999. However, the High Court dismissed the writ petition, upholding the detention order. The detaining authority's satisfaction regarding the detenue's involvement in Hawala transactions and large money transfers through the detenue's bank account was deemed valid by the Supreme Court.Upon reviewing the High Court's judgment and the details of the case, the Supreme Court found no errors in the analysis or conclusions. The Court affirmed the detention order against the detenue, emphasizing the substantial sums involved in the illegal transactions and the detenue's active participation. Consequently, the appeal was dismissed for lack of merit, upholding the detention order against the detenue under the COFEPOSA Act, 1974.