2024 (3) TMI 1420 - HC - Customs

Section 457 Cr.P.C. Applies to NDPS Cases; Vessel Interim Release to Owner Upheld with Reduced Indemnity and Safeguards

Asian Pacific Shipping Company Ltd. (Onwer) Versus Union of India & Anr. (Vice Versa)

HC held Section 457 Cr.P.C. applies to NDPS matters and upheld the trial court's discretion to order interim release of the seized vessel to its owner, ... Challenge to interim release of the vehicle by the learned court - recovery of alleged contraband articles from the ship or not - legality in considering the application of the Petitioner-Shipping Company under Section 457 of Cr.P.C. for interim release of the vessel - validity of terms and conditions subject to which the vessel was directed to be released interimly in favor of the shipping company. Legality in considering the application of the Petitioner-Shipping Company under Section 457 of Cr.P.C. for interim release of the vessel - HELD THAT:- The language employed in Section 457 of Cr.P.C. is self- explanatory. Therefore, the same does not call for an in-depth analysis. Moreover, Section 457 of Cr.P.C. has been elaborately discussed and analysed in various judgments delivered by the Hon’ble Supreme Court as well as this Court. Undisputedly, the provision contained in Section 457 of Cr.P.C. is a procedural provision to be followed by the police upon seizure of property. The first sub-Section provides whenever the seizure of the property is reported to a Magistrate and such property is not produced before a Criminal Court during an inquiry or trial, the Magistrate may pass such order as he thinks fit respecting the disposal or delivery of such property to the person entitled to the possession thereof, and if such person cannot be ascertained, respecting the custody and production of such property. A duty is cast upon the Magistrate to pass necessary orders once the property is seized and reported to such Magistrate. Moreover, discretion has been vested with the Magistrate for disposal of such property or delivery of such property to the person entitled to the possession thereof. If the owner of the property is known, then the order shall be passed with regard to the disposal of such property and if the owner is unknown, then such order shall be passed with regard to the custody and production of such property. In the instant case, since the owner of the property is known, the Magistrate is duty bound to pass an order with respect to the disposal of such property or delivery of such property to the person entitled to the possession thereof. This Court observes that when the shipping company filed an application for interim release of the vehicle before the learned Court in seisin over the matter, at that time the learned court in seisin over the matter was well aware of the requirement of the seized vessel during investigation as well as trial. Moreover, the ownership of such vessel remains undisputed. The question, therefore, which remains is as to whether the seized property is required during the inquiry or trial? In reply to the said question, this Court would like to observe that none other than the court in seisin over the matter is in the best position to decide with regard to the use of the seized property during inquiry or trial. Thus, by virtue of the impugned order dated 12.02.2024, the learned court in seisin over the matter has exercised its discretion in favour of the release of the seized property to its real owner, subject to certain terms and conditions. To understand the scope and ambit of Section 457 of the Cr.P.C., this Court would like to refer to certain judgments of the Hon’ble Supreme Court in this regard. In Basavva Kom Dyamanagouda Patil v. State of Mysore [1977 (4) TMI 170 - SUPREME COURT]. The question arose as to whether the seized ornaments kept in the truck should be returned to the rightful owner while the criminal case is still pending. The Hon’ble Supreme Court after analysing the provision contained under Section 457 of Cr.P.C. held that the power under Section 457 Cr.P.C. should be exercised promptly to prevent unnecessary hardship to the owner. Further, it was emphasized that seized property should not be kept in police custody for an indefinite period unless it is essential for the investigation. In Sunderbhai Ambala Desai v. State of Gujarat [2002 (10) TMI 773 - SUPREME COURT], the Hon’ble Supreme Court was dealing with an issue with regard to disposal of seized property under Sections 451 and 457 of the Cr.P.C. While addressing the prolonged retention of seized property in the custody of police authorities, the Hon’ble Supreme Court observed that timely disposal of such property is very much essential. Ater a critical analysis of the judgments discussed, this Court has no hesitation in coming to a conclusion that the provisions contained in Sections 451 and 457 of the Cr.P.C. would be applicable to the cases involving offence under the provisions of the NDPS Act. Therefore, any property/ vehicle seized in connection with such cases can very well be dealt with by the trial court by resorting to the provisions contained under Sections 451 and 457 of the Cr.P.C. Conditions imposed by the learned trial court while releasing the vessel in question - HELD THAT:- As to the value of the vessel, it is no doubt a difficult proposition to accurately assess the exact value of the vessel involved in the present case. Keeping in view the law involved through various judgments of the Hon’ble Supreme Court as well as this Court, the learned trial court while directing interim release of the vehicle/ property is duty bound to ensure that while taking on Zima, the person concerned secures the property/ vehicle/ vessel in question and further gives an undertaking that he shall not sell, transfer, alienate or part with possession of such property till conclusion of the trial and shall further give an undertaking to the effect that he shall produce such property/ vehicle/ vessel before the trial court as and when required by the trial court within a reasonable period of time. Furthermore, the learned Division Bench of this Court in Rabindra Kumar Behera’s case, while answering the reference, has laid down the conditions that are required to be fulfilled while directing interim release of the vehicle/ property/ vessel. Reverting back to the financial condition imposed in condition Nos.1 and 2, this Court finds that the condition No.1 with regard to furnishing a Bank Guarantee would be a harsh condition so far the Petitioner-Shipping Company is concerned since they are not having any bank account in India. Therefore, the condition No.1 requires reconsideration by this Court. Accordingly, the condition No.1 is hereby waived. So far the condition No.2 is concerned, the value of the vessel has been assessed on a hypothetical basis. In other words, the real value of the vessel has not yet been assessed by any certified valuer in the present case. Basing upon the insurance declaration, the value of the vessel has been arrived at Rs.100 crores. Therefore, this Court is of the view that the same may not be the actual cost of the vessel which is stranded at the Paradeep port at the moment. Since no valuation report by a certified valuer could be produced in course of the hearing of the present application by the customs authorities, this Court is required to take a reasonable approach in the matter, particularly, keeping in view the factual background of the present case and the progress made in the investigation so far. Accordingly, the condition No.2 is modified to the extent that instead of Rs.100 crores, the Petitioner-Shipping Company shall now furnish an indemnity bond to the tune of Rs.75 crores and instead of one solvent surety for the like amount, they shall furnish two solvent sureties for the like amount. Further, it is directed that the other conditions of order dated 12.02.2024 shall remain intact. Conclusion - i) Section 457 of Cr.P.C. applies to cases involving the NDPS Act, allowing for interim release of seized property. ii) The legality of the interim release order upheld but the conditions are modified to be more reasonable, waiving the bank guarantee requirement and reducing the indemnity bond. The Criminal Revision Petition is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the learned trial court committed illegality in entertaining and granting interim release of a seized vessel under Section 457 Cr.P.C. in a matter involving alleged commission of offences under the NDPS Act, 1985. 2. Whether the conditions imposed by the trial court for interim release-specifically requirement of a Bank Guarantee and an Indemnity Bond with solvent surety-were excessive, unreasonable or otherwise unsustainable; and if so, what modifications (if any) are appropriate. 3. Whether the provisions of the NDPS Act prohibit application of Sections 451 and 457 Cr.P.C. for interim release of property seized in NDPS investigations, and the extent to which principles and precedents on Section 457 Cr.P.C. apply to vessels and vehicles seized in NDPS cases. 4. Whether the allegation that the Customs/Union of India was not afforded opportunity of hearing before the trial court (an asserted denial of audi alteram partem) vitiates the trial court's order. ISSUE-WISE DETAILED ANALYSIS Issue 1: Legality of granting interim release under Section 457 Cr.P.C. in an NDPS-connected seizure Legal framework: Section 457 Cr.P.C. empowers a Magistrate to make orders respecting disposal or delivery of seized property to the person entitled, and to impose such conditions as the Magistrate thinks fit. Sections 451/457 Cr.P.C. operate as procedural powers for custody/disposal where seized property is not produced during inquiry/trial. Precedent Treatment: Decisions of the Supreme Court and this Court (including Basavva Kom Dyamanagouda Patil, Sunderbhai Ambala Desai, General Insurance Council, and Division Bench rulings of this Court such as Rabindra Kumar Behera and Ashish Ranjan Mohanty) emphasize prompt disposal, pragmatic exercise of discretion, and safeguards on interim release to prevent deterioration or loss of value. Interpretation and reasoning: The Court held that Section 457 is self-explanatory and vests broad discretion in the court seised to release property to its rightful owner subject to conditions. The learned trial court was in a better position to form a view on the necessity of retention for investigation/trial, and exercised its discretion to release the vessel subject to conditions. The seized vessel's ownership was undisputed and the record showed investigation ongoing without necessity to retain the vessel in custody to preserve evidence. Ratio vs. Obiter: Ratio-Section 457 Cr.P.C. applies to cases where property is seized and is available for interim release subject to court-imposed conditions; trial courts may exercise discretion to release seized property in NDPS cases when retention is not necessary for investigation/trial. Obiter-practical observations about docked vessels turning to junk and policy preferences for preventing indefinite custody. Conclusion: No illegality was committed by the trial court in considering and granting interim release of the vessel under Section 457 Cr.P.C.; the order to release subject to conditions falls within the court's discretionary power. Issue 2: Validity and reasonableness of the conditions of release (Bank Guarantee and Indemnity Bond) Legal framework: Conditions under Section 457 Cr.P.C. may include security, undertakings, embargo on sale/transfer and sureties to ensure identification, preservation and production of the property during trial; Supreme Court and High Court precedents prescribe practical safeguards (photography/video, superdari bond, undertakings, sureties, restraint on sale/transfer). Precedent Treatment: Authorities cited (Basavva; Sunderbhai; General Insurance Council; Bishwajit Dey; Rabindra Kumar Behera; Ashish Ranjan Mohanty) require balancing state interest with owner's right, insist on reasonable and practicable conditions, and direct courts to avoid unduly harsh financial conditions that would nullify the relief. Interpretation and reasoning: The Court examined whether the Bank Guarantee requirement (Rs.10 crores executed in an Indian nationalized bank) and the Indemnity Bond (Rs.100 crores with one solvent surety) were proportionate. Considerations included: petitioner is a foreign entity without Indian banking relationships, lack of certified valuation of the vessel (valuation relied on insurance declaration), factual progress of investigation (crew statements, no arraignment to date), and practical hardship/loss to owner from prolonged immobilization. The Court found the bank guarantee condition unduly harsh and impracticable for a foreign owner with no Indian bank account. The indemnity figure of Rs.100 crores was regarded as hypothetical in absence of a certified valuation and therefore required moderation. Ratio vs. Obiter: Ratio-Conditions for interim release must be reasonable, practicable and proportionate to preserve state interest while not rendering relief nugatory; funding/guarantee requirements must consider the owner's ability to comply and reliability of valuation. Obiter-reference to international treaties and MHA guidance for mutual legal assistance as mitigating factors for apprehensions about production/non-production. Conclusion: Condition requiring a Bank Guarantee in India was waived as unduly harsh (modified). The Indemnity Bond requirement was reduced from Rs.100 crores to Rs.75 crores and surety requirement increased from one to two solvent sureties for the like amount; other conditions of the trial court's order were left intact. This modification is founded on proportionality, absence of certified valuation, and fairness in ensuring production and preservation. Issue 3: Applicability of Sections 451/457 Cr.P.C. to NDPS cases and whether NDPS Act bars interim release Legal framework: NDPS Act contains specific provisions relating to confiscation (Sections 60, 63), burden of proof (Section 35), and special procedures; interplay with Cr.P.C. Sections 451/457 was analyzed to determine whether general procedural powers remain available in NDPS matters. Precedent Treatment: Division Bench answers (Rabindra Kumar Behera) and several Supreme Court pronouncements establish there is no specific bar under the NDPS Act to the interim release of property; the general powers under Sections 451/457 Cr.P.C. can be invoked subject to appropriate safeguards. This Court followed and applied those decisions. Interpretation and reasoning: After reviewing statutory scheme and precedents (including recent Supreme Court guidance), the Court held that provisions of Cr.P.C. (Sections 451/457) apply to NDPS-related seizures for interim release purposes. The Court reiterated the need to impose suitable conditions to protect State interests and ensure production of property for trial while preventing arbitrary denial of owner rights. Ratio vs. Obiter: Ratio-NDPS Act does not create an absolute bar on interim release; Cr.P.C. powers are available and must be exercised with conditions to protect investigation and trial. Obiter-observations on the necessity to balance investigative needs and protection against depreciation/deterioration of property. Conclusion: Sections 451 and 457 Cr.P.C. are applicable to seized vessels/vehicles in NDPS cases and permit interim release subject to legally appropriate conditions; therefore, NDPS Act does not prohibit such release per se. Issue 4: Allegation of denial of opportunity to Customs/Union of India before trial court Legal framework: Principle of audi alteram partem requires reasonable opportunity of hearing before passing orders affecting rights. Trial courts must record that notice or opportunity was afforded to prosecuting agencies. Precedent Treatment: The Court examined the trial court's record and the report by the learned Additional District & Sessions Judge in response to the Court's specific enquiry. Interpretation and reasoning: The Court called for and examined the trial court's reply and TCR; record showed appearance of the Special Public Prosecutor, submission of written objections by Customs, and that the trial court had considered the Customs contentions in its order (paras 7-9). Given these materials, the Court found the preliminary objection of non-grant of opportunity to be without merit. Ratio vs. Obiter: Ratio-Where the record discloses appearance and written objections by the prosecution and consideration by the trial court, allegation of denial of hearing is overruled. Obiter-procedural admonition to courts to ensure clear record of opportunity provided when passing orders. Conclusion: The objection that Customs/Union of India was not afforded opportunity to be heard is overruled; no vitiation of the trial court's order on that ground was found. Overall Disposition and Legal Conclusions 1. The trial court's exercise of discretion to grant interim release of the seized vessel under Section 457 Cr.P.C. in an NDPS-linked seizure was lawful and not vitiated by want of jurisdiction. 2. The Bank Guarantee condition imposed by the trial court was excessive in the facts (foreign owner without Indian banking relationships) and was waived; the Indemnity Bond quantum was excessive as assessed on an uncertified valuation and has been reduced with an increased surety requirement-ensuring practicable, proportionate safeguards while protecting State interest. 3. Sections 451 and 457 Cr.P.C. apply to NDPS cases for purposes of interim release, subject to appropriate conditions; NDPS Act does not operate as an absolute bar to such interim release. 4. The challenge to the trial court's order on the ground of denial of hearing to Customs/Union of India is rejected on the basis of the record demonstrating appearance, written objections and consideration of those objections by the trial court.