TaxTMI 
TaxTMI 
2006 (8) TMI 585
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....during 2002-04 foreign currency of the value of over eighty crores of rupees from unauthorized sources in violation of the provisions of Foreign Exchange law. After depositing that much foreign currency in cash in his aforesaid Firm's bank account with United Western Bank Ltd., Karol Bagh, New Delhi showing it as advance payments for export of some items from foreign tourists visiting India on the basis of forged Currency Declaration Forms(CDFs) and other forged supporting documents the detenu took certain incentives from the Government. The detenu while indulging in these activities defrauded the Government to the tune of ₹ 9.5 crores under Duty Exemption Pass Book(DEPB) and about ₹ 78 lakhs under Duty Drawback Schemes by way of export incentive when, in fact, no export proceeds had been received. The Duty Drawback amounts earned by the detenu clandestinely and fraudulently used to be credited in his account with Punjab National Bank, IGI Airport. In this manner the detenu had allegedly acted prejudicially to the augmentation of foreign exchange resources of the country thereby necessitating his preventive detention. 3. Initially the detenu was arrested by the Cus....
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....004 and after investigation a complaint was filed in the Court of ACMM, New Delhi on 01-10-2004 under Sections 132 & 135 of the Customs Act. Show cause notice under Customs Act was issued on 30-05-2005 to the detenu but the impugned detention order was passed only on 05.08.2005 and the detenu was arrested on 21/09/05. Learned Counsel submitted that the delay in issuance of the detention order and its execution has remained unexplained and that fact vitiates the detention order. 5. In support of his arguments on the point of delay in passing of the detention order as well as its execution Mr. R.K. Anand, also cited some judgments of the Hon'ble Supreme Court and many of this Court. Those judgments of Hon'ble Supreme Court are reported as "Rajinder Arora v. UOI" JT 2006(3) 518, "Naresh Kumar Goyal v. UOI" JT 2005 (12) 428, "A. Mohd. Farook v. Jt. Secretary, GOI" 2000 SCC(Crl.) 411, "Ahmed Mohaideen v. State of Tamil Nadu" 1999 Crl.L.J. 3488, "P.U. Ikbal v. UOI" , "T.A. Abdul Rehman v. State of Kerala" , "S.K. Abdul Munnaf v. The State of West Bengal" , "Lakshman Khatik v. The State of West Bengal"....
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.... a number of currency declaration forms(CDFs) purporting to be of foreign tourists used by the detenu for depositing cash foreign currency in his bank had to be looked into and a detailed enquiry was necessary considering the fact that foreign currency to the tune of almost a hundred crores of rupees was involved. Mr. Tikku submitted that the modus operandi of the detenu was to use forged currency declaration forms while depositing cash foreign currency in his bank account and the foreigners who had allegedly given the CDFs had also to be contacted to verify the genuineness of those CDFs and that process had to consume time and also that the decision to detain the detenu as a preventive measure could not have been taken in a haste without proper and detailed investigation. Learned Counsel also submitted that the show cause notice to the detenu was for the violation of the provisions of Customs Act and not for violation of foreign exchange laws. 7. Learned Counsel, thus, submitted that this is not a case which can be said to be suffering from the vice of delay in passing of the detention order. In support of his contention that when this kind of illegal activity of acquisition of f....
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....en noticed by us in para No. 5 and we find that in those cases the detention orders were quashed on account of delay in their issuance. However, out of the many judgments of this Court cited on behalf of the petitioner we find that two of them had been over-ruled by the Hon'ble Supreme Court way back in the year 1988 in "Rajender Kumar Natwar Lal Shah v. State of Gujarat and Ors. . Those two decisions of this Court which stand over-ruled were rendered in Crl. W. No. 124/85 "Bhupinder Singh v. UOI" and Crl. W. No. 43/84 "Shri Ramesh Lal v. The Administrator". 11. As far as the judgments of Supreme Court cited by the learned Counsel for the petitioner are concerned there is no quarrel about the legal proposition laid down therein. The sum and substance of those judgments is that the issuance of detention order and its execution should be done with expedition and within reasonable period. COFEPOSA Act does not lay down any time limit within which a detention order should be passed and then executed. Even in the various pronouncements of the Supreme Court which were cited by the learned Counsel for the petitioner no time limit has been laid down nor has it....
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....nths together due to the magnitude of the operations.... 10. Viewed from this perspective, we wish to emphasise and make it clear for the guidance of the different High Courts that.... It has been laid down by this Court in a series of decisions that the rule as to unexplained delay in taking action is not inflexible. Quite obviously, in cases of mere delay in making of an order of detention under a law like the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 enacted for the purpose of dealing effectively with persons engaged in smuggling and foreign exchange racketeering who, owing to their large resources and influence have been posing a serious threat to the economy and thereby to the security of the nation, the courts should not merely on account of delay in making of an order of detention assume that such delay, if not satisfactorily explained, must necessarily give rise to an inference that there was no sufficient material for the subjective satisfaction of the detaining authority or that such subjective satisfaction was not genuinely reached. .. 12. From the afore-said decision of the Hon'ble Supreme Court it becomes clear that merely ....
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....Supreme Court on the point of delay in passing of the detention order it was held in para No. 8 as under: 8. From the aforesaid rulings, the following principles can be summarized. Unexplained delay may vitiate an order of detention if the Court can infer that on account of that delay the nexus between the incident and the detention order has snapped. But there is no hard and fast rule regarding the length of time which can be regarded as sufficient to snap the nexus. The authorities may sometimes take time for a detailed investigation for action under the Customs Act and also for a criminal prosecution. It may also happen that there is no apprehension as long as the person is in custody in the criminal case and only after he is released on bail, the customs authorities might consider preventive detention necessary and address the Detaining Authority. It may also be that the Detaining Authority may take time in calling for particulars from the Sponsoring Authority, consider the same, place it before the Screening Committee and come to a conclusion later. One cannot say that investigation should have been hurried. The Detaining Authority is not obliged to explain the delay to the d....
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....a showing their having brought foreign currency to India and he used to show that he had been given the same by foreigners for purchase of shawls etc. while, in fact, no foreigner had actually done that. This he was found to have done during a period of two years from 2002 to 2004. Mr. Tikku submitted that the grounds of detention and the counter affidavit of the detaining authority clearly explain that thorough investigation was being conducted and that had to consume sufficient time. In this regard Mr. Tikku brought to our notice the following paragraphs of the counter affidavit of the detaining authority: 3 (xiv & xv): In reply to para-3 (xiv & xv) of the petition, it is submitted that the proposal for placing the detenue under preventive detention under COFEPOSA Act, 1974 was forwarded by the Customs Department. On examination of the proposal Along with the Relied Upon Documents, Joint Secretary (COFEPOSA) felt that the case has not been investigated in regard to the source from which the detenue acquired the foreign exchange in case for depositing in the bank. So he directed the Customs Department to investigate the case once again. Thereupon, the proposal was referred by the....
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....ere examined by the Directorate and it was found that the modus operandi adopted by you was to procure photocopies of passports of the foreigners visiting India from several sources; to forge the request letters by copying the signatures from such photocopies of passports of these foreigners; thereafter, forging the CDFs as issued by Customs to such tourists declaring import of foreign currency in excess of the stipulated amount on arrival in India, these CDFs were thereupon submitted to the Bank with large sums of foreign currency on behalf of such fictitious buyers and declared as advance payments against their export orders but were actually procured from unauthorized sources by you. It will not be out of place to mention here that the export of garments was made by you to consignees in Dubai of other nationalities, mainly from CIS countries. Forged documents, deposit of foreign exchange in cash and evidence of exports made to a consignee having no connection with the buyers, became the basis for obtaining Foreign Inward Remittance Certificate/Bank Realization Certificate from the remitting Bank, for you. 28. On 03.09.2004, a report in response to the Customs letter dated 13.08....
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....Shri Rajesh Aggarwal intimating that Shri Rajesh Aggarwal was out of station. A statement of yours was recorded on 09.02.2005, in which you stated, inter-alia, that you were the proprietor of M/s. G & S International; that in the year 1989 you were arrested and detained under COFEPOSA in another case by the Directorate of Enforcement; that M/s G & S International was maintaining a current account with the United Western Bank, Karol Bagh Branch, New Delhi; that you had withdrawn a huge amount of Indian Currency from that account and huge amount of foreign currency had been deposited; that on the basis of CDFs you and your son Shri Rajesh Aggarwal deposited the foreign currency worth ₹ 80,13,61,617.59 and ₹ 2,41,47,790.94 in the accounts of M/s. G & S International and M/s. A.S. Raj International, respectively; that the foreign buyers used to come to your office and used to handover foreign currency along with CDFs to you; that these foreign buyers never used to go to the Bank to deposit the currency; that all the CDFs might have been written in one handwriting; that in response to a question regarding the Flight details mentioned on CDFs, you stated that you had no idea ....
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....ioned on the CDFs, had arrived in India. 48. Thus, on the basis of (i) Bogus currency declaration forms as is evident from common handwriting in all the CDFs, dissimilarity of signatures on CDFs and passports submitted to bank authorities, and the fact that a D.I.Y. printing kit seized from your residence; (ii) Confirmation from Aeroflot and Uzbekistan Airlines stating that none of the passengers had arrived in India as per details mentioned on the CDFs submitted by you, it can logically be inferred that foreign currency to the tune of ₹ 80,13,61,617.51 in case of M/s. G & S International and ₹ 2,41,47,790.47 in case of M/s. A.S. Raj International, was acquired by you from unauthorized sources in gross violation of the Foreign Exchange Management Act, 1999. further, you had also obtained Foreign Inward Remittance Certificates (FIRCs) from the bank showing the above foreign currency as advance payments from the tourists. On the strength of the FIRCs, DEPB licenses were obtained by you from Directorate General of Foreign Trade(DGFT). You also tried to establish artificial link between your exports and foreign currency so deposited by you against the forged supporting doc....
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....ion with bank staff it cannot be said that the subjective satisfaction of the detaining authority that the detenu had the propensity to continue indulging in same activity, if not detained, was not genuine. These kind of activities need thorough investigation which is bound to take sufficient time. The petitioner herself has placed on record an order dated 6-5-2005 of the Commissioner of Customs whereby detenu's request for defreezing his bank accounts was declined. It was mentioned in that order that the accounts could not be defreezed as investigation was incomplete for want of records from exporters and their non-appearance in response to the summons. So it cannot be said that authorities were sleeping over the matter. Here we may also state that in most of the judgments relied upon by the learned Counsel for the petitioner the persons who were detained preventively were found to have indulged in solitary incidents of smuggling etc. and so in those cases it was held that the undue delay in the issuance of detention order had snapped the link between the prejudicial activity and the purpose of detention. In the present case, however, the prejudicial activities of the detenu c....
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....tention order cannot be quashed on that ground. 22. Considering the reply in para No. 3(xxxvii) of the counter affidavit of the detaining authority to the effect that the detention order could not be executed due to non-availability of the detenu at the given address, which reason we have no doubt to disbelieve, we are of the view that the detention order need not be quashed because of the time taken in arresting the detenu after the passing of the detention order. On this aspect of the matter we may also make a useful reference to a decision of the Supreme Court in Abdul Salam v. UOI and Ors. wherein dealing with the objection of the delay in execution of the detention order it was held (in para No. 15) that "That apart there is no decision where a Court has gone to the extent of holding that a mere delay in arresting the accused renders the detention invalid." In the said case the delay in execution of the detention order was 21/2 months and the same was not found to be fatal. In Dalbir Singh's case(supra) this Court had also held that the delay in execution of the detention order to be fatal must be of such length and remain unexplained so as to snap the nexus bet....
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....pies of the orders passed by this Court in the two writ petitions of the detenu as also the order dated 06-05-2005 of the Commissioner of Customs declining to defreeze the bank account of the detenu in United Western Bank Ltd. and also the copies of the writ petitions filed by the detenu which if had been placed before the detaining authority the impugned detention order would not have been passed because of the reason that with the freezing of the detenu's bank account with United Western Bank Ltd., which was the only authorized bank account in the name of detenu's firm where foreign exchange transactions could be done, the detenu could not have continued to deposit cash foreign currency in that account, which activity was the foundation for issuing the impugned detention order. Learned Counsel submitted that if the detenu could not have operated this foreign exchange bank account and it being not the case of the authorities that he had any other such account in which he could deposit foreign currency the detaining authority could not have recorded the satisfaction that there was likelihood of the detenu indulging in similar kind of activity in future necessitating his pre....
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....tenu uner preventive detention was for acquiring foreign currency illegally from the market, fabrication of CDFs and supporting documents and, therefore, despite the freezing of the bank accounts of the detenu these activities could be carried on by the detenu in the name of other persons and, therefore, the contention of the petitioner that freezing of the bank accounts of the detenu would have prevented him from carrying out the prejudicial activities cannot be taken on its face value. It has also been stated that there was nothing favorable to the detenu in the afore-said order dated 6/5/05 of the Commissioner of Customs declining to defreeze his bank accounts. We are in full agreement with the said stand of the detaining authority. We also feel that despite the fact that the bank account of the detenu was frozen the detaining authority could still have been satisfied about the likelihood of his continuing to indulge in same activity by opening other bogus bank accounts since even in the existing account meant for deposit of export proceeds he was depositing foreign currency in cash on the strength of forged CDFs in collusion with bank staff and that is evident from a reading of....
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....thority that adjudication proceedings by the Directorate of Enforcement which was concerned with the violation of Foreign Exchange laws had not been initiated when the detention order was passed. It has been claimed that there was a passing reference to adjudication proceedings under the Customs Act and just because it had not been taken note of that adjudication proceedings under the Customs Act had, in fact, been initiated already that would not vitiate the detention order which was passed because of his activities considered to be prejudicial to the augmentation of the foreign exchange resources of the country. In our view the detention order does not suffer from the vice of non-application of mind by the detaining authority for this reason put forth on behalf of the detenu. 27. As far as the submission of the learned Counsel for the petitioner, which is the last contention raised by him, that some documents had not been placed before the detaining authority by the sponsoring authority nor were they supplied to the detenu and so for that reason also the detention order is liable to be quashed is concerned we find the same also to be devoid of any merit. In this regard we may no....
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.... and have also gone through the counter affidavit of the detaining authority on the aspect of non supply of some documents to the detenu. In the counter affidavit it has been claimed by the detaining authority that all the documents which were considered relevant for the preventive detention of the detenu were supplied to him. In paragraph No. 3(xxi) of the writ petition the petitioner has pleaded that in para No. 26 of the grounds of detention it has been alleged that the Customs Department vide letter dated 10-09-2004 forwarded copies of Panchnamas and statements to the detaining authority which were duly examined but at least five documents referred to in the list annexed with the letter dated 10-09-2004 of the Customs Department were not a part of the relied upon documents list of which had been supplied to the detenu along with the grounds of detention and that showed that subjective satisfaction of the detaining authority was without considering those documents. The petitioner, however, has not specified as to which particular document was not considered by the detaining authority and, therefore, we cannot accept the argument that the detaining authority passed the detention ....