TaxTMI 
TaxTMI 
1987 (4) TMI 398
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....Department of Revenue, dated December 13, 1985, under sub-section (1) of section 3 of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, on being satisfied that it was necessary to detain him "with a view to preventing him from acting in any manner prejudicial to the augmentation of foreign exchange. Intelligence gathered by the Directorate of Revenue Intelligence, Bombay, was that one Subbash Gadia, the brother-in-law of the detenu, Mohanlal Jatia, a very rich and prosperous businessman of Bombay, was under-invoicing the imports of yarn from Japan. On the basis of the said information, the officers of the Directorate of Revenue Intelligence and officers of the Customs, Bombay, searched his residential premises at A-121, Sea Lord, Cuffe Parade, Colaba, Bombay, under the Customs Act, 1962, on June 27, 1985, which resulted Un seizure of certain documents. As the seized documents not only revealed violation of the provisions of the Customs Act but also indicated certain payments and transactions in violation of the Foreign Exchange Regulation Act, 1973, the matter was referred to the office of the Enforcement Directorate for purposes of investiga....
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....ting to the detenu, Mohanlal Jatia, and it is extracted : "44. When confronted with the documents seized from Subhash Gadia's residence, even though you have denied any connection in respect of various unauthorised transactions between you, Greenland Corporation, Japan and others abroad, but the following documents clearly revealed that you have been indulging in various unauthorised transactions in violations of provisions of Foreign Exchange Regulation Act, 1973. A. Page 338 S.G. 6 Trial balance W Greenland Corporation entries of ML, GN, RN, R.G.T. and Gadia admits before that they are Jatia's account. B. „ M.L. Jatia's, i.e. A your accounts maintained in Japan, however, you admit receipt of gifts by your children such as T.V., Video, and M.V. Parts. C. Page 215 S.G. 6. Keeping U.S. $ 2 lakhs in fixed deposit on June 2, 1983, in Kamal Account, also including 20 lakhs $ (dollars). D. Page 335 S.G. 6 American dollar account as on January 31, 1984. E. Page 318 S.G. 6 Account in Japanese Yen total of 141147.27 F.D.R. amount of Jananese Yen 10931471.16 to be equally divided betwee....
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....iled second petition under article 226 of the Constitution, being W.P. No. 385 of 1986, for quashing the impugned order of detention along with an application for expending the period of parole. On April 14, 1986, the parole period having expired, the detenu was taken into custody and lodged in the Central Prison, Bombay. The writ petition came up for hearing before the High Court on April 18, 1985, and admitted but the application for extending the period of parole was rejected. Aggrieved by the refusal of interim relief, the petitioner again moved this court under article 136 of the Constitution which was dismissed as withdrawn. It appears that the impugned order of detention was mainly challenged on two grounds, namely: (1) There was no material on which the satisfaction of the detaining authority could be reached that the detention of the detenu was necessary under section 3(1) of the Conservasion of Foreign Exchange and Prevention of Smuggling Activites Act with a view to preventing him from acting in any manner prejudicial to the augmentation of foreign exchange, and (2) There was total non-application of mind on the part of the detaining authority to the material on recor....
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....resentation was received from the detenu. Along with the counter-affidavit, the respondents have filed copies of the letter of the Under Secretary to the Government of India, Ministry of Finance, Department of Revenue, dated August 4, 1986, addressed to the Under Secretary, President's Secretariat and of the reply of even date sent by the Under Secretary, President's Secretariat, to him which shows that no such representation had been received in the President's Secretariat, as alleged. They have also filed a note explaining the manner in which the dak is acknowledged at the President's Secretariat. There is a further affidavit filed by K. C. Singh, Deputy Secretary to the President of India, explaining the manner of handling the dak at the Rashtrapati Bhawan. The petitioner has filed an affidavit of Ashok Jain claiming to be a friend of the Jatia family supporting the assertion that he handed over the representation in person at the Rashtrapati Bhawan on April 15, 1986. During the pendency of the proceedings, the Union Government has made an application under section 340 of the Code of Criminal Procedure, 1973, for prosecution of the persons responsible for forging the document....
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.... Act, and even assuming that the statements recorded by R. C. Singh could be treated to be statements relatable to section 39(b) of the Foreign Exchange Regulation Act, it is not possible to say whether the detaining authority would have based his satisfaction upon such material. (5) There was non-application of mind on the part of the detaining authority as the grounds of detention are based on several factual misstatements. According to learned counsel, -the factual errors were self-evident as the entries relied upon in paragraph 4 of the grounds of detention do not find place in the account books of Messrs Greenland Corporation. The failure of the Central Government to place before the detaining authority, the original account books of Messrs Greenland Corporation, deprived the detaining authority to apply his mind to the correctness or otherwise of the facts stated therein. (6) There was infraction of the constitutional safeguards enshrined in article 22(5) inasmuch as there was failure on the part of the detaining authority to consider the representation filed by the detenu under section 8(b) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act th....
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....officer of Enforcement may exercise the powers and discharge the duties conferred or imposed on him under this Act." "5. Entrustment of functions of Director or other officer of Enforcement. -The Central Government may, by order and subject to such conditions and limitations as it thinks fit to impose, authorise any officer of customs or any Central Excise Officer or any police officer or any other officer of the Central Government or a State Government to exercise such of the powers and discharge such of the duties of the Director of Enforcement or any other officer of Enforcement under this Act as may be specified in the order." Section 39 deals with the power of the Director or any other officer of Enforcement to examine persons and provides : "39. Power to examine persons.-The Director of Enforcement or any other officer of Enforcement authorised in this behalf by the Central Government, by general or special order, may, during the course of any investigation or proceeding under this Act,- (a)require any person to produce or deliver any document relevant to the investigation or proceeding ; (b )examine any person acquainted with the facts and circumstances of the....
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....tion could be sustained on the remaining grounds. He seeks to draw sustenance from the decision of the Constitution Bench of this court in Mohd. Shakeel Wahid Ahmed v. State of Maharashtra [1983] 2 SCR 614; AIR 1983 SC 541. We are afraid the contention cannot prevail. The decision in Mohd. Shakeel's case is clearly distinguishable. In Mohd. Shakeel's case [1983] 2 SCR 614; AIR 1983 SC 541, three of the four grounds of detention on which the appellant was detained were held by the High Court to be bad for one reason or another but it held that the remaining ground did not suffer from any defect and was enough to sustain the order of detention. On appeal, Shri Jethmalani, learned counsel for the detenu, sought to challenge the constitutional validity of section 5A of the Act and the case was, therefore, referred to a Constitution Bench. At the hearing, Bhri Jethmalani confined his submission to an altogether different point which ultimately prevailed, namely, that the remaining ground of detention was also bad for the reason that there was failure on the part of the State Government to place before the detaining authority the opinion which the Advisory Board had recorded in favour....
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....ion was whether the material was relevant and would have influenced the mind of the detaining authority. In the counter-affidavit filed by the Under Secretary to the Government of India, Ministry of Finance, it had been averred that the representation of the detenu along with his reply to the show-cause had been considered by the Advisory Board and after considering all the facts it was of the opinion that there was sufficient cause for detention. It was held that such ex post facto consideration of the detenu's reply to the show-cause could not fill up the lacuna of non-consideration thereof by the detaining authority before passing the order of detention. Both these decisions proceeded on the well-settled principle that if material and vital facts which would influence the mind of the detaining authority one way or the other on the question whether or not to make the detention order are not placed, it would vitiate its subjective satisfaction rendering the detention order illegal. We fail to see the relevance of these decisions to the present case. Before touching upon the merits, we wish to make a few observations. It is not suggested at the Bar that the grounds for detention....
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....han in accordance with law.' " Nevertheless, as observed by the court in Mangalbhai Motiram Patel's case [1980] 4 SCC 470, 477-78 ; AIR 1981 SC 510, 515 : "The community has a vital interest in the proper enforcement of its laws, particularly in an area such as conservation of foreign exchange and prevention of smuggling activates in dealing effectively with, persons engaged in such smuggling and foreign exchange racketeering by ordering their preventive detention and at the same time, in assuring that the law is not used arbitrarily to suppress the citizen of his right to life and liberty." The Government must, therefore, ensure that the constitutional safeguards of article 22(5) read with sub-section (1) of section 3 of the Act are fully complied with. In the instant case, however, there was no infraction of the constitutional safeguards (contained in article 22(5). We are satisfied that there was no failure on the part of the Government in discharging its obligation under article 22(5). The relevant records of the Enforcement Directorate have been placed before us. They clearly show that there was sufficient material for the formation of the subjective satisfaction of t....
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.... Whether there was non-application of mind on the part of the detaining authority and, therefore, the impugned order of detention was bad as there were factual mis-statements detailed in items A to F of the gorunds of detention. And (3) Whether there was infraction of the constitutional safeguards contained in article 22(5) due to the failure on the part of the Central Government to consider the representation filed by the detenu under section 8(b) read with section 11 of the Act, alleged to have been presented through one Ashok Jain and received at the President's Secretariat on April 15, 1986, and, therefore, the continued detention of the petitioner was rendered invalid and unconstitutional. We wish to deal with these contentions in seriatim in the order in which they have been advanced. On the first of these questions, we have no hesitation in repelling the contention that there was no material on which the detaining authority could have based the subjective satisfaction under sub-section (1) of section 3 of the Act. The argument of learned counsel stems from the hypothesis that R. C. Singh was not a gazetted officer of Enforcement within the meaning of section 40 of the For....
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....n 40(1) has the right to object to the power and authority of the officer issuing the summons. It must, therefore, logically follow that when the persons summoned like Subhash Gadia and Mohanlal Jatia were examined by R. C. Singh, it was not open to others to raise an objection that R. C. Singh was not competent to record the statements under section 40(1). The statements made by them were not hit by section 25 of the Evidence Act, 1872, and could be used against the detenu. There is no substance in the contention that R.C. Singh was not a gazetted officer of Enforcement. The word "gazetted" does not imply that this appointment of such officer should be published in the Official Gazette. All that is required by section 40(1) of the Foreign Exchange Regulation Act is that such officer recording the statement must be holding a gazetted post of an officer of Enforcement, in contradistinction to that of an Assistant Officer of Enforcement which is a non-gazetted post. It cannot be Disputed that R. C. Singh had been appointed as Enforcement Officer on an ad hoc basis on November 24, 1982, and he continued to function as such at the time when he recorded the statement under section 40(1)....
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....tion Act, the Directorate of Enforcement is primarily charged with the duty of administering the Act. Section 3 defines different classes of officers of Enforcement. The expression "officers of Enforcement" as defined in section 3 embraces within itself not only (a) a Director, (b) Additional Director, (c) Deputy Director and (d) Assistant Director, of Enforcement but also (e) such other class of officers of Enforcement as may be appointed for the purpose of the Act. Obviously, R. C. Singh, who was an Assistant Enforcement Officer having been appointed as an officer of Enforcement on an ad hoc basis in 1982 fell within the category "such other class of officers" covered by section 3(e ). Sub-section (1) of section 4 provides that the Central Government may appoint such persons, as it thinks fit, to be officers of Enforcement. Sub-section (2) thereof provides for delegation of such power of appointment by the Central Government to a Director of Enforcement or an Additional Director of Enforcement, etc., to appoint officers of Enforcement below the rank of an Assistant Director of Enforcement. Sub-section (3) of section 4 of the Foreign Exchange Regulation Act provides that subject t....
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....f the provisions prescribed by the Code, I hold that what would otherwise be relevant does not become irrelevant because it was discovered in the course of a search in which those provisions were disregarded." The question arose before the Judicial Committee of the Privy Council in the well-known case of Kuruma v. Reginam [1955] 1 All ER 236. In dealing with the question, Lord Goddard C.J., delivering the judgment of the Privy Council, said (at page 239) : "...the test to be applied, both in civil and in criminal cases, in considering whether evidence is admissible is whether it is relevant to the matters in issue. If it is, it is admissible and the court is not concerned with how it was obtained." The learned C.J. further observed (at page 239) : "In their Lordships' opinion, when it is a question of the admission of evidence strictly, it is not whether the method by which it was obtained is tortious but excusable, but whether what has been obtained is relevant to the issue being tried." Again, the House of Lords in R. v. Sang [1979] 2 All ER 1222 (HL) reiterated the same principle that if evidence was admissible, it matters not how it was obtained. Lord Diplock, af....
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....the submission of learned counsel for another reason. Where an office exists under the law, it matters not how the appointment of the incumbent is made, so far as validity of its acts is concerned. It is enough that he is clothed with the insignia of the office and exercises its powers and functions. The official acts of such persons are recognised as valid under the de facto doctrine, born of necessity and public policy to prevent needless confusion and endless mischief. In Gokaraju Rangaraju's case [1981] 3 SCR 474; AIR 1981 SC 1473, Chinnappa Reddy J. explained that this doctrine was engrafted as a matter of policy and necessity to protect the interest of the public. He quoted the following passage from the judgment of Sir Ashutosh Mukherjee J. in Pulin Behari v. King Emperor [1912] 15 Cal LJ 517 at page 574 : "The substance of the matter is that the de facto doctrine was introduced into the law as a matter of policy and necessity, to protect the interest of the public and the individual where these interests were involved in the official acts of persons exercising the duties of an office without being lawful officers. The doctrine in fact is necessary to maintain the supr....
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....at the initials "ML" or " MLJI" in the various entries as well as the telex messages stand for himself, i.e., Mohanlal Jatia. As to the so called factual mis-statements, the argument proceeds on the wrongful assumption that the facts stated in paragraph 44 of the grounds of detention are the "grounds" when they are in reality nothing but "facts". The High Court has rightly observed that the facts stated in paragraph 44 of the grounds cannot be read in isolation and that the grounds of detention have to be read as a whole with the accompanying documents and material. As is quite apparent, the ground of detention was only one, viz., that the detenu was engaged in activities prejudicial to the augmentation of foreign exchange and, therefore, it became necessary in the public interest to place him under detention. Sufficiency of grounds is not for the court but for the detaining authority for the performance of his subjective satisfaction that the detention of the detenu, Mohanlal Jatia, under section 3(1) of the Act was necessary. It was a matter of legal inference to be drawn from several facts which appear in the grounds and the facts are not merely in paragraph 44 but also in ot....
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....director or shareholder or a partner. The said documents disclose that the detenu, Mohanlal Jatia, with the initials "ML" and his brothers, GN, SN and RN, namely, Ganesh Narayan Jatia, Satya Narayan Jatia and Ram Niranjan Jatia, are maintaining secret accounts with Messrs Greenland Corporation, Japan. They also clearly indicate that the detenu and his brothers were found to be engaged in transferring funds from or to India in an unauthorised manner on a very large scale. Subhash Gadia in his statement revealed that pages 316, 317 and 318 of the seized documents, SG 6, are written in his handwriting and the account is in Yen. He further revealed that the said accounts relate to Satya Narayan Jatia, Ganesh Narayan Jatia and Mohanlal Jatia. The detenu was furnished a copy of the statement made by Subhash Gadia. As hereinbefore adumbrated, the detenu when confronted denied having entered into the transaction. However, when confronted with the various entries appearing in the seized documents, SG 6, the detenu admitted that the initials "ML" or "MLJI" relate to him both in the accounts as well as in the telex messages. The various entries show transactions involving foreign exchange to ....
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....ut they crept in in the proposal and have been reproduced in paragraph 44 of the grounds. It is somewhat strange that these words should be introduced when they were not there in the books of account but the fact remains that there is a typographical error. The High Court rightly observes that a single typographical mistake about making a reference to US $ 20 lakhs would not necessarily show the non-application of mind when the entry of US $ 2 lakhs (dollars) is reflected in various places in the account such as MLJI Khata P 175 and Kamal Account P 226, copies of which were furnished to the detenu. Even assuming that the words "also including 20 lakhs $ (dollars)" were introduced in paragraph 44 of the grounds, that would not be a factor vitiating the impugned order of detention. The detaining authority was still entitled to act upon the entry relating to a fixed deposit of US $ 2 lakhs (dollars) for the formation of his subjective satisfaction. As regards Items D and E, the contention of the petitioner is that reference to American Dollar account as on January 31, 1984, as per page 335 of SG 6 and Japanese Yen account: Final position at Bombay of 141147.27 set out at page 318 t....
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....6 such as on the reverse of page 215, there is an entry to the effect that US $ 78,000 were converted into Indian rupees at Rs. 11.75 equivalent to 9,16,500 and that the said amount was capitalised on July 19, 1983, in the name of GN. Paragraph 33 of the grounds involves the complicity of the detenu by making reference to a secret account maintained by SN, GN and ML to the effect: " It was found that all of you are engaged in transferring funds from or to India on a very large scale." In this coded account, the modus operandi adopted at every place is to delete two zeros from the converted Indian currency. Learned counsel for the petitioner tried to spell out an argument that the use of the word "or" shows that the ground was vague or indefinite. According to learned counsel, it is quite apparent that the detaining authority was not definite as to the nature of payment, i.e., whether the conversion of foreign exchange into rupees represented payments made or amounts received. Nothing really turns on this. The fact remains that the detenu had been admittedly keeping a secret account of foreign currency abroad without the permission of the Reserve Bank of India. It is quite app....
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....national activities by anti-social elements affecting the maintenance of public order or the economic welfare of the country. Placing the interests of the nation above, the individual liberty of the anti-social and dangerous elements who constitute a grave menace to society by their unlawful acts, the preventive detention laws have been made for effectively keeping out of action the detenus during a prescribed period by means of preventive detention. The objective underlying preventive detention cannot be achieved or fulfilled if the detenu is granted parole and brought out of detention. Even if any conditions are imposed with a view to restrict the movements of the detenu while on parole, the observance of those conditions can never lead to an equation of the period of parole with the period of detention. One need not look far off to see the reason because the observance of the conditions of parole, wherever imposed, such as reporting daily or periodically before a designated authority, residing in a particular town or city, travelling within prescribed limits alone and not going beyond, etc., will not prevent the detenu from moving and acting as a free agent during the rest of th....
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....eriod of bail from the term of detention period. For these reasons, the plea for treating the period of parole as part of the detention period has to necessarily fail. One last point remains. Besides refuting the contention of the petitioner that the detenu had made a written representation addressed to the President of India on April 15,1986, and that there has been an infraction of the constitutional safeguard embodied in article 22(5) of the Constitution and section 11 of the Act due to the failure of the Central Government to consider the said representation, the respondents have preferred an application under section 340 of the Code of Criminal Procedure, 1973, for prosecution of the persons responsible for forging the document purporting to be the alleged representation made by the detenu under section 8(4) of the Act and for making certain interpolations in the dak register kept at the Rashtrapati Bhavan. The respondents have placed sufficient material before the court to show that the alleged representation addressed to the President of India was neither filed by the detenu nor was it received at the President's Secretariat on April 15, 1986. The respondents have placed ....
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....esident's Secretariat. As per the affidavit filed by Shri K. C. Singh, Deputy Secretary to the President, President's Secretariat, a visitor coming with a petition to the Rashtrapati Bhavan has first to approach the Reception and then he is given a printed pass and sent with, an escort to the Central Registry and after he delivers the letter, he will be escorted back to the Reception to return his pass and then leave the building. Ashok Jain in his affidavit has categorically stated that he went to the Rashtrapati Bhavan at "roughly about 6.00 p.m." and a person at the Reception directed a peon to show him the Central Registry, that no one enquired about his name or issued him any pass and that he went to the Central Registry as pointed out by the peon and delivered a sealed envelope and obtained an endorsement of acknowledgment on the xerox copy of the representation. In view of the conflicting affidavits, there is room for inference that either Ashok Jain did not personally go and deliver the sealed envelope at the President's Secretariat or that he was able to wield influence to such an extent as to be taken to the Central Registry without the procedural requirement of every vis....
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....esident by name." All these things not only warrant an inference that the detenu and his associates have gone to deplorable lengths to create evidence favourable to the detenu but arouse convulsive thoughts in our minds about the efficiency and integrity of the concerned sections of the President's Secretariat. We are constrained to give expression to our feelings of anguish by means of these observations because at the level of the President's Secretariat, every section of the Secretariat is expected to observe the highest standards of morality, integrity and efficiency. The case with which and the facile manner in which the detenu's agent, Ashok Jain, claims to have entered the President's Secretariat and delivered the dak and obtained an endorsement of acknowledgment in a copy of the representation and the length to which the concerned Secretariat staff have gone to give credence to the version of Ashok Jain not only reveals the deep fall in standards but also the lack of security and vigilance. We feel fully persuaded to hold that this is a fit case in which the detenu, his wife (petitioner herein), Ashok Jain and all other persons responsible for the fabrication of false....