Confiscation and natural justice: redemption conditions may stand, but undisclosed adverse material can invalidate the order.

A confiscation and redemption regime may validly require a Reserve Bank of India no objection certificate as a condition for release of goods where the transaction is controlled by foreign exchange restrictions and the governing customs framework. The note also states that a confiscation order based substantially on an undisclosed adverse report offends natural justice because the affected party must be given a fair opportunity to meet material used against them. On that reasoning, undisclosed ex parte material renders the determination invalid and requires fresh adjudication after disclosure and rebuttal.

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Issues: (i) Whether the Collector could lawfully impose a condition requiring production of a no objection certificate from the Reserve Bank of India while granting an option to redeem confiscated goods. (ii) Whether the confiscation order was vitiated for breach of natural justice because it was based on an undisclosed report adverse to the petitioners.

Issue (i): Whether the Collector could lawfully impose a condition requiring production of a no objection certificate from the Reserve Bank of India while granting an option to redeem confiscated goods.

Analysis: The relevant confiscation and redemption scheme under the Sea Customs Act operated in the setting of the Foreign Exchange Regulation Act and the controlling notification under the reserve-bank permission regime. Read with the statutory prohibition on bringing silver into the country without permission, the redemption option was not to be viewed in isolation. The condition was treated as part of the lawful regulatory framework governing release of the confiscated goods.

Conclusion: The condition requiring a no objection certificate from the Reserve Bank of India was held to be valid and not illegal.

Issue (ii): Whether the confiscation order was vitiated for breach of natural justice because it was based on an undisclosed report adverse to the petitioners.

Analysis: The order of confiscation was founded substantially on an adverse report which had not been disclosed to the petitioners and which they had no opportunity to explain or contradict. A person affected by an adverse administrative or quasi-judicial determination must be given a fair opportunity to meet material relied upon against them. Reliance on undisclosed material in this manner amounted to condemnation on ex parte statements and offended the principle of fair hearing.

Conclusion: The confiscation order was held to be vitiated by breach of natural justice and therefore without jurisdiction.

Final Conclusion: The writ petition succeeded, the confiscation order was set aside, and the matter was sent back for fresh adjudication after giving the petitioners an opportunity to meet the adverse material.

Ratio Decidendi: An authority exercising confiscatory or quasi-judicial powers must disclose and allow rebuttal of any adverse material relied upon against the affected party; an order founded on undisclosed ex parte material is invalid for breach of natural justice.

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