Preventive detention for alleged foreign exchange violations fails without concrete material showing an actual FEMA breach.

Preventive detention under COFEPOSA cannot be sustained without substantive material showing an actual foreign exchange transaction or a real FEMA violation attributable to the detenu. Mere possession of foreign currency within the permissible RBI limit, unsupported hawala allegations, and statements lacking concrete transaction details were insufficient to form valid subjective satisfaction; the detention order was therefore held illegal and the detenu was directed to be released forthwith if not required in any other case.

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Issues: Whether the detention order under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 was sustainable when the record did not disclose material showing any violation of the Foreign Exchange Management Act, 1999 or any actual foreign exchange transaction attributable to the detenu.

Analysis: Preventive detention must rest on relevant material forming a rational basis for subjective satisfaction. Mere possession of foreign currency within the permissible RBI limit did not, by itself, establish a FEMA violation. The statements relied upon did not disclose any concrete foreign exchange transaction, nor did they indicate how the detenu had dealt in foreign currency in a manner offending FEMA. Allegations of hawala-type dealings, without supporting material showing an actual foreign exchange transaction, were insufficient to sustain the detention. In the absence of such foundational material, the subjective satisfaction was vitiated and the authority was found to have acted without proper application of mind.

Conclusion: The detention order was illegal and could not be sustained. The detenu was directed to be released forthwith, if not required in any other case.

Ratio Decidendi: A preventive detention order is liable to be set aside when the record does not contain substantive material showing the alleged prejudicial foreign exchange activity and the subjective satisfaction is formed without an evidentiary foundation.

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