TaxTMI 
TaxTMI 
2012 (7) TMI 202
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.... Hussain, Joint Secretary to the Government of India, specially empowered under Section 3(1) of the COFEPOSA (as amended). The said order reads as follows : "No. 673/02/2009-Cus. VIII Government of India Ministry of Finance Department of Revenue Central Economic Intelligence Bureau COFEPOSA Unit 6th Floor, 'B' Wing, Janpath Bhawan, Janpath, New Delhi - 110001 Dated 23rd September, 2009 ORDER Whereas, I Smt. Rasheda Hussain, Joint Secretary to the Government of India, specially empowered under Section 3(1) of the Conservation of Foreign Exchange & Prevention of Smuggling Activities Act, 1974 (as amended), am satisfied with respect to the person known as Shri Raj Kumar Aggarwal @ Munna, R/o SU-184, G.F. Near Park Citi Hostel Pitampura, New Delhi that with a view to preventing him from acting in any manner prejudicial to the conservation and augmentation of foreign exchange in future, it is necessary to make the following order:- Now, therefore, in exercise of the powers conferred by Section 3(1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (as amended), I direct that the said Shri Raj Kumar Aggarwal @ Munna , be....
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.... till the next date of hearing, i.e. December 22, 2009. 6. On December 22, 2009 the Division Bench allowed the application for impleadment of Raj Kumar Aggarwal as petitioner no. 2, issued rule and made interim order dated December 14, 2009 absolute during the pendency of writ petition, subject to his joining the investigation as and when called. The court on that day also issued a direction to the detenue to remain present in the matter during the course of hearing. 7. The Division Bench completed the hearing on February 4, 2010 and reserved the judgment in the matter. On March 18, 2010, the Division Bench dismissed the writ petition. While dealing with the effect of Foreign Exchange Management Act, 1999 (for short, 'FEMA') and the repeal of Foreign Exchange Regulation Act, 1973 (for short, 'FERA') , the Division Bench relied upon a decision of this Court in Union of India & Anr. vs. Venkateshan S. and another (2002) 5 SCC 285 and observed that if the activity of any person was prejudicial to the conservation or augmentation of foreign exchange, the authorities were empowered to make a detention order against such person. 8. Not satisfied with the judgment of the Delhi Hi....
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.... law challenging the order of detention and the grounds on which detention order has been passed after its execution. In which event, the matter shall be considered on its own merits uninfluenced by the observations made in the impugned order as well as dismissal of this petition. The High Court may consider the request of the petitioners/detenue for expeditious disposal of the writ petition to be filed." 12. We have heard Mr. Vikram Chaudhari, learned counsel for the petitioners and Mr. P.P. Malhotra, learned Additional Solicitor General for the respondents. 13. The crux of the argument advanced by Mr. Vikram Chaudhari is this: Articles 14, 19 and 21 of the Constitution do not contemplate preventive detention for an 'act' where no punitive detention (arrest and prosecution) is even contemplated or provided under law. Such an 'act' cannot be made the basis for a preventive detention and such an 'act' could not be termed as prejudicial so as to invoke the power of preventive detention and, therefore, Section 3(1) of COFEPOSA to the extent noted above is unconstitutional. 14. Elaborating his arguments, Mr. Vikram Chaudhari submitted that there were three other Central Preven....
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....FERA by FEMA, the said provision has become unconstitutional in the changed situation. 17. Learned counsel for the petitioners submitted that though Article 31B of the Constitution provided protection to the laws added to the Ninth Schedule by amendments but, as exposited by this Court in I.R. Coelho (Dead) by LRs. v. State of T.N. (2007) 2 SCC 1, constitutionality of such laws can be examined and if in judicial review, it is found that any of such laws abrogates or abridges rights guaranteed by Part-III of the Constitution, the Court can invalidate such law. According to him, since the impugned provision violates fundamental rights reflected in Article 21 read with Articles 14 and 19, despite protection granted to COFEPOSA being part of Ninth Schedule, in the judicial review the Court has power to declare the said law unconstitutional. 18. Mr. Vikram Chaudhari contended that preventive detention was aimed at preventing a person from committing prejudicial act which is necessarily an offence capable of inviting penal consequences. If such prejudicial act was not prosecutable in law and such act has not been made part of criminal penal law, preventive detention of a person fro....
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....d States v. Anthony Salerno and Vincent Cafaro 481 US 739 the constitutionality of pre-trial detention on the ground of dangerousness under the Bail Reform Act of 1984 was upheld and after Anthony Salerno and Vincent Cafaro 13 preventive detention laws were adopted in number of U.S. States but the said procedure has been used sparingly and in U.K. under the Prevention of Terrorism (Temporary Provisions) Act, 1984 a person may be detained upto 7 days. In Australia preventive detention orders and prohibited conduct orders are two mechanisms available under criminal law for addressing terrorism concerns and dangerous sex offenders. The preventive detention order permits detention of a person for a short period of time (upto 48 hours) subject to certain procedural rights. In Germany in 1998 law for the prevention of sexual offences and other dangerous criminal acts has been enacted. 22. Mr. P. P. Malhotra, learned Additional Solicitor General stoutly defended the constitutional validity of the part of Section 3(1) of COFEPOSA put in issue in the writ petition. He extensively referred to the provisions of FERA and FEMA and the preamble of COFEPOSA and submitted that dealings in forei....
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....e ground that it was destructive of the basic structure of the Constitution. The present case is not covered by the exception carved out in I.R. Coelho5 and moreover, the petitioners have miserably failed to make out a case as to how COFEPOSA or impugned provision was destructive of the basic structure of the Constitution. 25. In support of his submissions, learned Additional Solicitor General heavily relied upon the observations made by this Court in Venkateshan S.1. 26. Mr. P.P. Malhotra submitted that the objects and reasons of COFEPOSA clearly showed that the purpose of the enactment was to prevent violation of foreign exchange regulation and smuggling activities which have increasingly deleterious serious effect on the security of the State. Section 3 of COFEPOSA has not been amended or repealed by Parliament. Section 3(1) of COFEPOSA that authorises detention with a view to prevent activities prejudicial to the conservation or augmentation of foreign exchange is valid from constitutional angle. 27. On 26th day of November, 1949, People of India resolved to constitute India into Sovereign Democratic Republic and in the Constituent Assembly adopted, enacted and gave to....
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....generality of the provisions contained in article 31A, none of the Acts and Regulations specified in the Ninth Schedule nor any of the provisions thereof shall be deemed to be void, or ever to have become void, on the ground that such Act, Regulation or provision is inconsistent with, or takes way or abridges any of the rights conferred by, any provisions of this Part, and notwithstanding any judgment, decree or order of any court of tribunal to the contrary, each of the said Acts and Regulations shall, subject to the power of any competent Legislature to repeal or amend it, continue in force." 34. COFEPOSA is specified in the Ninth Schedule at Item No. 104. The amendment in COFEPOSA therein by Central Act 20 of 1976 is specified at Item No. 129 in the Ninth Schedule. 35. Article 22 is in two parts. First part that comprises of clauses 1 and 2 is applicable to those persons arrested or detained under a law otherwise than a preventive detention law. The second part that comprises of clauses 4 to 7 applies to persons arrested or detained under the preventive detention law. 36. In the backdrop of the above constitutional provisions and scheme, the issue with regard to constit....
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....detention from doing the same. A criminal conviction on the other hand is for an act already done which can only be possible by a trial and legal evidence. There is no parallel between prosecution in a court of law and a detention order under the Act. One is a punitive action and the other is a preventive act. In one case a person is punished to prove his guilt and the standard is proof beyond reasonable doubt whereas in preventive detention a man is prevented from doing something which it is necessary for reasons mentioned in Section 3 of the Act to prevent." With regard to the rights guaranteed to a detenue under Article 22(5), the Court said, "Article 22(5) shows that law as to detention is necessary. The requirements of that law are to be found in Article 22. Article 22 gives the mandate as to what will happen in such circumstances". 39.1. The Court in para 32 (pg. 208 of the Report) drew distinction between the power of preventive detention and punitive detention thus : "32. The power of preventive detention is qualitatively different from punitive detention. The power of preventive detention is a precautionary power exercised in reasonable anticipation. It may or may....
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....that Article 22 was a self-contained code and therefore a law of preventive detention did not have to satisfy the requirements of Articles 19, 14 and 21. The view of Fazl Ali, J., on the other hand, was that preventive detention was a direct breach of the right under Article 19(a)(d) and that a law providing for preventive detention had to be subject to such judicial review as is obtainable under clause (5) of that Article. In R.C. Cooper v. Union of India the aforesaid premise of the majority in Gopalan's case was disapproved and therefore it no longer holds the field. Though Cooper's case dealt with the inter-relationship of Article 19 and Article 31, the basic approach to construing the fundamental rights guaranteed in the different provisions of the Constitution adopted in this case held the major premise of the majority in Gopalan's case to be incorrect." Subsequently in Haradhan Saha v. State of West Bengal, (1975) 3 SCC 198, a Bench of five Judges, after referring to the decisions in A.K. Gopalan's case and R.C. Cooper's case and pointing out the context in which R.C. Cooper's case held that the acquisition of property directly impinged the right of the bank to carry o....
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....ondent's father under Section 3(2) of the National Security Act, 1980 read with Section 14A as inserted by National Security (Amendment) Act, 1987. In paragraphs 8 and 9 (pgs. 42 - 44 of the Report) this Court held : "8...........A clear distinction has to be drawn between preventive detention in which anticipatory and precautionary action is taken to prevent the recurrence of apprehended events, and punitive detention under which the action is taken after the event has already happened. It is true that the ordinary criminal process of trial is not to be circumvented and short-circuited by apparently handy and easier resort to preventive detention...... .......To apply what was said in Rex v. Halliday, ex parte Zadig (1917 AC 260), one of the most obvious means of taking precautions against dangers such as are enumerated is to impose some restriction on the freedom of movement of persons whom there may be any reason to suspect of being disposed to commit what is enumerated in Section 3 of the Act. No crime is charged. The question is whether a particular person is disposed to commit the prejudicial acts. The duty of deciding this question is thrown upon the State. The justifi....
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....Bench of this Court in Amratlal Prajivandas was directly concerned with constitutional validity of COFEPOSA. One of the issues before the Court was whether Parliament was not competent to enact that Act. We shall refer to this judgment a little later as it has substantial bearing on the matter under consideration and requires detailed reference. 45. In Sunil Fulchand Shah v. Union of India and others(2000) 3 SCC 409, the view of this Court on the question of law under consideration was not unanimous. Chief Justice Dr. A.S. Anand speaking for majority noted: "personal liberty is one of the most cherished freedoms, perhaps more important than the other freedoms guaranteed under the Constitution. It was for this reason that the Founding Fathers enacted the safeguards in Article 22 in the Constitution so as to limit the power of the State to detain a person without trial, which may otherwise pass the test of Article 21, by humanizing the harsh authority over individual liberty. Since, preventive detention is a form of precautionary State action, intended to prevent a person from indulging in a conduct, injurious to the society or the security of the State or public order, it has ....
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....t, namely, the COFEPOSA Act. As stated above, the object of FEMA is also promotion of orderly development and maintenance of foreign exchange market in India. Dealing in foreign exchange is regulated by the Act. For violation of foreign exchange regulations, penalty can be levied and such activity is certainly an illegal activity, which is prejudicial to conservation or augmentation of foreign exchange. From the objects and reasons of the COFEPOSA Act, it is apparent that the purpose of the Act is to prevent violation of foreign exchange regulations or smuggling activities which are having increasingly deleterious effect on the national economy and thereby serious effect on the security of the State. Section 3 of the COFEPOSA Act, which is not amended or repealed, empowers the authority to exercise its power of detention with a view to preventing any person inter alia from acting in any manner prejudicial to the conservation or augmentation of foreign exchange. If the activity of any person is prejudicial to the conservation or augmentation of foreign exchange, the authority is empowered to make a detention order against such person and the Act does not contemplate that such activi....
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....p with prosecution even if it relies on certain facts for which prosecution may be launched or may have been launched. An order of preventive detention may be made before or during prosecution. An order of preventive detention may be made with or without prosecution and in anticipation or after discharge or even acquittal. The pendency of prosecution is no bar to an order of preventive detention. An order of preventive detention is also not a bar to prosecution. 33. Article 14 is inapplicable because preventive detention and prosecution are not synonymous. The purposes are different. The authorities are different. The nature of proceedings is different. In a prosecution an accused is sought to be punished for a past act. In preventive detention, the past act is merely the material for inference about the future course of probable conduct on the part of the detenu." In light of the above reasoning, the Court while setting aside the order of the High Court held, "in our view the order passed by the High Court holding that what was considered to be the criminal violation of FERA has ceased to be criminal offence under FEMA, the detention order cannot be continued after 1-6-2000,....
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....marks in paragraph 1 (pg. 62 of the Report) highlighting the importance of regulation and control of foreign exchange: "Till the wind of liberalisation started blowing across the Indian economic landscape over the last year or two, the Indian economy was a sheltered one. At the time of Independence, India did not have an industrial base worth the name. A firm industrial base had to be laid. Heavy industry was the crying need. All this required foreign exchange. The sterling balances built up during World War II were fast dissipating. Foreign exchange had to be conserved, which meant prohibition of import of several unessential items and close regulation of other imports. It was also found necessary to raise protective walls to nurture and encourage the nascent industries. These controls had, however, an unfortunate fall out. They gave rise to a class of smugglers and foreign exchange manipulators who were out to frustrate the regulations and restrictions - profit being their sole motive, and success in life the sole earthly judge of right and wrong. As early as 1947, the Central Legislature found it necessary to enact the Foreign Exchange Regulation Act, 1947 and Imports and Exp....
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....also been made by the counsel to establish in what manner the said Amendment Acts violate Article 14." Then, in paragraph 21, the Court observed that COFEPOSA was a law relating to preventive detention and it has, therefore, to conform to the provisions in clauses (4) to (7) of Article 22. The Court quoted following observations in R.K. Garg v. Union of India & Ors.(1981) 4 SCC 675: "The court must always remember that 'legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry'; 'that exact wisdom and nice adaptation of remedy are not always possible' and that 'judgment is largely a prophecy based on meagre and uninterpreted experience'. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There may be crudities and inequities in complicated experimental economic leg....
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....dia". Evidently, they are two distinct and different expressions. "Security of a State" is a much wider expression. A State with a weak and vulnerable economy cannot guard its security well. It will be an easy prey to economic colonisers. We know of countries where the economic policies are not dictated by the interest of that State but by the interest of multinationals and/or other powerful countries. A country with a weak economy is very often obliged to borrow from International Financial Institutions who in turn seek to dictate the economic priorities of the borrowing State - it is immaterial whether they do so in the interest of powerful countries who contribute substantially to their fund or in the interest of their loan. In the modern world, the security of a State is ensured not so much by physical might but by economic strength - at any rate, by economic strength as much as by armed might. It is, therefore, idle to contend that COFEPOSA is unrelated to the security of the State. Indeed in the very preamble to the Act, Parliament states that the violations of foreign exchange regulations and smuggling activities are having an increasingly deleterious effect on the national ....
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....ji v. Union of India and others (1981) 1 SCC 166 and relevant Articles of the Constitution, particularly, Article 31B and 368, in paragraph 131, the Court referred to the decision in Amratlal Prajivandas (1994) 5 SCC 54. With regard to decision in Amratlal Prajivandas in paragraph 132, the Court held : "It is evident from the aforenoted passage that the question of violation of Articles 14, 19 or 21 was not gone into. The Bench did not express any opinion on those issues. No attempt was made to establish violation of these provisions. In para 56, while summarising the conclusion, the Bench did not express any opinion on the validity of the Thirty-ninth and Fortieth Amendment Acts to the Constitution of India placing COFEPOSA and SAFEMA in the Ninth Schedule. These Acts were assumed to be good and valid. No arguments were also addressed with respect to the validity of the Forty- second Amendment Act". 51.1. The Court affirmed the view taken in Waman Rao that the Acts inserted in the Ninth Schedule after April 24, 1973 would not receive full protection. 51.2. In paragraph 151 (pg. 111 of the Report), the Court recorded its conclusions. Clauses (iii) and (v) thereof are relevant....
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....in payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency for the conservation of the foreign exchange resources of the country and the proper utilization thereof in the interest of the economic development of the country. Section 2(b) defined 'authorised dealer'. Section 6 provided, inter alia, for authorisation of any person by the Reserve Bank of India (RBI) to deal in foreign exchange. The restrictions on dealing in foreign exchange were provided in Section 8. Sub-sections (1) and (2) of Section 8 read as follows : "8. Restrictions on dealing in foreign exchange.-(1) Except with the previous general or special permission of the Reserve Bank, no person other than an authorised dealer shall in India, and no person resident in India other than an authorised dealer shall outside India, purchase or otherwise acquire or borrow from, or sell, or otherwise transfer or lend to or exchange with, any person not being an authorised dealer, any foreign exchange: Provided that nothing in this sub-section shall apply to any purchase or sale of foreign currency effected in India between any person an....
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.... below the rank of a Secretary to that Government, specially empowered for the purposes of this section by that Government, may, if satisfied, with respect to any person (including a foreigner), that, with a view to preventing him from acting in any manner prejudicial to the conservation or augmentation of foreign exchange or with a view to preventing him from-- (i) smuggling goods, or (ii) abetting the smuggling of goods, or (iii) engaging in transporting or concealing or keeping smuggled goods, or (iv) dealing in smuggled goods otherwise than by engaging in transporting or concealing or keeping smuggled goods, or (v) harbouring persons engaged in smuggling goods or in abetting the smuggling of goods, it is necessary so to do, make an order directing that such person be detained:" Sub-section (3) mandates compliance set out therein as required in Article 22(5). Certain other safeguards as required under Article 22, particularly, sub-clause (a) to Clause (4) and sub-clause (c) to Clause (7) of Article 22 of the Constitution have been provided in Sections 8 and 9. Maximum period of detention is provided in Section 10. Notwithstanding the provision contained in Sect....
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....forcement for default is through civil imprisonment. However, insofar as conservation and/or augmentation of foreign exchange is concerned, the restrictions in FEMA continue to be as rigorous as they were in FERA. FEMA continues with the regime of rigorous control of foreign exchange and dealing in the foreign exchange is permitted only through authorised person. While its aim is to promote the orderly development and maintenance of foreign exchange markets in India, the Government's control in matters of foreign exchange has not been diluted. The conservation and augmentation of foreign exchange continues to be as important as it was under FERA. The restrictions on the dealings in foreign exchange continue to be as rigorous in FEMA as they were in FERA and the control of the Government over foreign exchange continues to be as complete and full as it was in FERA. 58. The importance of foreign exchange in the development of a country needs no emphasis. FEMA regulates the foreign exchange. The conservation and augmentation of foreign exchange continues to be its important theme. Although contravention of its provisions is not regarded as a criminal offence, yet it is an illegal ac....
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....ncept of preventive detention is not to punish a person for what he has done but to prevent him from doing an illegal activity prejudicial to the security of the State. Strictly speaking, preventive detention is not regulation (many people call it that way), it is something much more serious as it takes away the liberty of a person but it is accepted as a necessary evil to prevent danger to the community. The law of preventative detention arms the State with precautionary action and must be seen as such. Of course, the safeguards that the Constitution and preventive detention laws provide must be strictly insisted upon whenever the Court is called upon to examine the legality and validity of an order of preventive detention. 61. The following features, (i) detention order was issued on February 8, 2000 and the detenue was served with the same on February 15, 2000; (ii) the events had taken place when FERA was in place as FEMA had come into force only with effect from June 1, 2000; in view of the sunset clause in FEMA the prosecution for violation of FERA could continue for next two years; (iii) High Court had held the continued detention after coming into force of FEMA to be bad....
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.... COFEPOSA be declared unconstitutional. Presumably, the detention order was not challenged because special leave petition was already pending. Later on, the special leave petition was withdrawn by the petitioners. While dismissing the special leave petition as withdrawn, this Court granted liberty to the petitioners to avail such remedy as may be available in law in challenging the order of detention and the grounds on which detention order has been passed after its execution (emphasis supplied). The order of detention in question has not been executed so far in view of the contumacious conduct of the second petitioner. He is alleged to have absconded initially. Then on December 14, 2009 Delhi High Court, by an interim order directed that the detenue shall not be arrested till the next date of hearing, i.e. December 22, 2009. The said interim order was continued until the disposal of writ petition by the High Court and thereafter that interim order was continued by this Court in the special leave petition. In the writ petition also an interim order has been in operation. In view of the order dated July 13, 2010 passed by this Court, the petitioners cannot be permitted to challenge ....