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2023 (6) TMI 250
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....re as follows:- The petitioner claims to be a Private Limited Company incorporated under the provisions of the Companies Act, 2013 and it further claims that the Board of Directors of the petitioner/ Company is constituted only of Indian citizens. More than 1500 employees and around 50,000 Indian families are directly or indirectly dependent on the business of the petitioner who, as claimed by the petitioner, are Indian citizens. The petitioner gets incorporated as a Private Limited Company on 7-10-2014 as a subsidiary of Xiaomi Singapore Private Limited and Xiaomi H.K. Limited and is engaged in the business of procurement, supply and distribution of Xiaomi products in India which is popularly referred to as 'MI'. The business of the petitioner includes mobile phones, smart phones, mobile phone accessories and peripherals, smart watches, televisions, network component devices, laptops, computers, television accessories and the list goes on. The petitioner operates as a re-seller/distributor of mobile phones and related products in India. It is mainly in the distribution segment. 3. The petitioner claims to be purchasing locally manufactured smart phones for re-sale from....
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....used in mobile phones sold by it. The petitioner claims that it, therefore, pays royalty for use of these essential patents to Qualcomm as the patents are essential for functioning of mobile phones in telecommunication network, be it 3G, 4G or LTE standards. The royalty payments for these licensed intellectual property rights including the patents are based upon Subscriber Unit License Agreement. The Subscriber Unit License Agreement ('SULA' for short) was entered into between Xiaomi Inc., China and Qualcomm, USA. This was amended and assigned to Xiaomi Communications Co. Limited by way of assignment and amendment agreement. Therefore, from 01-10-2013 the agreement was between Qualcomm Inc., Xiaomi Communications Co. Limited and Xiaomi Inc. and Xiaomi Corporation. Thereafter the assignment agreement dated 1-04-2015 was entered into between Qualcomm Inc., Xiaomi Communications Co. Ltd., (China) and Xiaomi Corporation (Cayman Islands). The assignment agreement took note of the earlier assignment agreement regarding existence of SULA between Qualcomm Inc. and Xiaomi Inc./Xiaomi Technology Co. Ltd. The trail of payment of royalty moves through agreements, assignments, amendment agreeme....
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.... Based upon the impugned seizure, seizure order was passed on 29th April 2022 invoking Section 37A(1) of the Act. 9. The petitioner files a petition before this Court calling in question an order of seizure / freezing dated 29-04-2022. This Court initially grants an interim order of permitting operation of the account for particular purposes. Later, this Court in terms of its order dated 05-05-2022 on the ground that the seizure order under Section 37A(1) of the Act is yet to be confirmed by the appropriate authority under Section 37A(3) of the Act, confirmed / clarified the interim order dated 05-05-2022 as clarified on 12-05-2022, to continue during the pendency of the confirmation proceedings. On the aforesaid score, the writ petition comes to be disposed. 10. After the disposal of the petition, the confirmation of the seizure order dated 29-04-2022 comes to be passed by the 6th respondent. It is the seizure order dated 29-04-2022 and the confirmation order dated 19-09-2022 of the seizure of Rs.5551,27,15,824/- is what drives the petitioner to this Court in the subject petition. While raising a challenge to the seizure order and the confirmation order, the petitioner has a....
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.... EMPLOYEES AND WORKERS UNION v. SRINIVASA RESORTS LIMITED AND OTHERS (2009) 5 SCC 342; (iii) AIR INDIA v. NERGESH MEERZA AND OTHERS (1981) 4 SCC 335; (iv) STATE OF MAHARASHTRA AND ANOTHER v. INDIAN HOTEL AND RESTAURANTS ASSOCIATIOIN AND OTHERS (2013) 8 SCC 519; (v) RADHA KRISHAN INDUSTRIES v. STATE OF HIMACHAL PRADESH AND OTHERS (2021) 6 SCC 771; (vi) INTERNET AND MOBILE ASSOCIATION OF INDIA v. RESERVE BANK OF INDIA (2020) 10 SCC 274 and (vii) DEPUTY COMMISSIONER OF INCOME TAX AND ANOTHER v. PEPSI FOODS LIMITED (2021) 7 SCC 413. Since attachment/freezing of the amount aforementioned is even before any order could be passed or any judgment could be delivered on the allegations so made against the petitioner, it becomes a drastic and draconian power available at the hands of the Directorate of Enforcement to attach any property. In support of this submission, the learned senior counsel would place reliance upon the following judgments:- (i) RAMAN TECH. AND PROCESS ENGG. CO. AND ANOTHER v. SOLANKI TRADERS (2008) 2 SCC 302 and (ii) RADHA KRISHAN INDUSTRIES (supra). The learned senior counsel would emphasise on t....
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....ment rendered by the Apex Court in the case of VIJAY MADANLAL CHOUDHARY v. UNION OF INDIA 2022 SCC OnLine SC 929 to buttress his submission that the power conferred under Section 37A cannot be held to be arbitrary. The learned Additional Solicitor General would further emphasise on the fact that the intention of the Legislature in bringing in the amendment to the Act in the year 2015 was to tackle the menace of black money being parked outside the nation, in the garb of business, like how the petitioner has managed and, therefore, it cannot be held to be arbitrary or otherwise. It is only regulatory. He would contend that the Delhi High Court in the case of J.SEKAR v. UNION OF INDIA 2018 SCC OnLine Del.6523 and the Apex Court in the case of ATTORNEY GENERAL FOR INDIA AND OTHERS v. AMRATLAL PRAJIVANDAS AND OTHERS (1994) 5 SCC 54 have clearly delineated the concept of reasons to believe which would straight away go against the contention of the petitioner. He would contend that judicial review in economic matters is extremely limited as is held by the Apex Court in the case of PRINCIPAL DIRECTOR OF INCOME-TAX (INVESTIGATION) AND OTHERS v. LALJIBHAI KANJIBHAI MANDALIA Civil Appeal No.....
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....ffering from absence of safeguards? and III. Whether the order passed by the authorized officer suffers from non-application of mind? Issue No. I: Whether the writ petition would be maintainable on the prayer that is sought i.e., to hold Section 37A of the Act to be unconstitutional on the ground that it is manifestly arbitrary and violative of Article 14 of the Constitution of India? 16. Since submissions and contra submissions are with regard to constitutional validity of the Act and maintainability of the writ petition in which challenge is to the vires of Section 37A of the Act and those submissions cutting at the root of the matter, I deem it appropriate to consider maintainability of the petition qua the challenge to the constitutional validity of Section 37A of the Act at the outset. 17. The constitutional validity of Section 37A of the Act is called in question by the petitioner. The petitioner is a Company, though registered in India, it is incorporated under the provisions of the prevailing Companies Act as obtaining in the People's Republic of China. The subsidiary companies are many in number, one of them is incorporated in India under the Companies....
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....r prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub-clauses either in the interests of the general public or for the protection of the interests of any Scheduled Tribe. (6) Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to,- (i) the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, or (ii) the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise. 21. Protection of life and personal liberty.-No person shall be deprived of his l....
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.... of laws. The protective umbrella of the equality clause is available to all persons. While the fundamental rights conferred by Articles 15, 16, 19 and 29 can be invoked by citizens alone, rights created by Article 14 by its terms are guaranteed to the individual or person. Therefore Article 14 of the Constitution can be invoked by an individual irrespective of the fact that he is a foreigner or a citizen or an alien or it is an artificial person. 15. Like a citizen, a foreigner is also entitled to avail the personal rights which are enshrined in Article 14 of the Constitution. In Basheshar Nath v. Commissioner of Income-tax, Delhi and Rajasthan 1959 SC 149, (1) the Supreme Court laid down that the benefit of Article 14 is not limited to citizens alone but is also available to any person within the territory of India. 16. The first respondent did not dispute the applicability of Article 14 to any person, whether a foreigner or a citizen, within the territory of India, but its contention was that under Article 19(1)(g), the first and third petitioners have no fundamental right to carry on any trade, business or profession in this country and the plea of the petitio....
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.... that if Section 52A contravenes Article 19(1)(f), a citizen of India may contend that his vessel cannot be confiscated even if it has contravened S. 52A, and in that sense, there would be inequality between the citizen and the foreigner, but that inequality is the necessary consequence of the basic fact that Article 19 is confined to citizens of India, and so, the plea that Article 14 is contravened also must take in Article 19 if it has to succeed. The plain truth is that certain rights guaranteed to the citizens of India under Article 19 are not available to foreigners and pleas which may successfully be raised by the citizens on the strength of the said rights guaranteed under Article 19 would therefore, not be available to foreigners." 18. It is significant to note that in the present case Article 14 is being invoked by the petitioners without falling back upon Article 19(1)(g). 19. In order to appreciate whether Article 14 as pleaded in the instant case is available to the first and third petitioners to challenge the decision of the NAA, it would be necessary to refer to the various nuances of Article 14 of the Constitution. 20. Article 14 prohibits....
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....be in public interest and in conformity with various aspects of Article 14, there is no reason why the same criteria may not be applied with equal vigour, where bidders are foreigners. In latter case grant of a contract or largess to one may not merely affect the competing parties but may also effect the entire country if the same is given in disregard of national interest and standards and norms laid down in Article 14 of the Constitution. Let us examine a case of two competing parties vying for a contract, one being a foreigner and the other being an Indian. In the event of the contract being granted to a foreigner, the Indian party indubitably can challenge the grant when the contract contravenes Article 14. Now for the reverse case where the contract is won by an Indian party, can it be justifiably contended that the foreigner who was in the run, will not be able to challenge the same though the action of the authority suffered from vide of arbitrariness. In the latter case there is no reason why the court should not use judicial review to scrutinise the action to see whether it is inconformity with Article 14 or falls foul of it. Access to, the court in all circumstan....
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....ional Covenant on Civil and Political Rights 1966 states, inter alia, that all persons shall be equal before the Courts and tribunals. 41. Having regard to the foregoing, we overrule the preliminary objection. We however hasten to add that we should not be understood to be laying down that the State should be unmindful of the national interest in case of grant of contracts to foreigners. In such contracts national interest has to be given primacy. Acting within the bound of reasonableness it may be legitimate for the State to take into considerational national priorities and considered trade and foreign policies for awarding contracts to foreigner." (Emphasis supplied) A five judge Bench of the Apex Court in the case of SHAYARA BANO (supra) has held as follows: "71. In this view of the law, a three-Judge Bench of this Court in K.R. Lakshmanan v. State of T.N. [K.R. Lakshmanan v. State of T.N., (1996) 2 SCC 226] struck down a 1986 Tamil Nadu Act on the ground that it was arbitrary and, therefore, violative of Article 14. Two separate arguments were addressed under Article 14. One was that the Act in question was discriminatory and, therefore, violative ....
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....ing the same before this Court in the name of public good and public morality, it is not open to the State Government to acquire the undertaking of horse-racing again in the name of public good and public purpose. It is ex facie irrational to invoke "public good and public purpose" for declaring horse-racing as gambling and as such prohibited under law, and at the same time speak of "public purpose and public good" for acquiring the race-club and conducting the horse-racing by the Government itself. Arbitrariness is writ large on the face of the provisions of the 1986 Act. 49. We, therefore, hold that the provisions of the 1986 Act are discriminatory and arbitrary and as such violate and infract the right to equality enshrined under Article 14 of the Constitution. 50. Since we have struck down the 1986 Act on the ground that it violates Article 14 of the Constitution, it is not necessary for us to go into the question of its validity on the ground of Article 19 of the Constitution." (emphasis supplied)" The Apex Court refers to its earlier judgment in the case of K.R. LAKSHMANAN V. STATE OF T.N. AND ANOTHER reported in (1996)2 SCC 226 to hold that the ....
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....er Article 19 are not available to foreigners and pleas which may successfully be raised by the citizens on the strength of the said rights guaranteed under Article 19 would, therefore, not be available to foreigners. That being so, we see no substance in the argument that if Section 52-A is construed against the appellant, it would be invalid, and so, the appellant would be able to resist the confiscation of its vessel under Article 31(1). We ought to make it clear that we are expressing no opinion on the validity of Section 52-A under Article 19(1)(f). If the said question were to arise for our decision in any case, we would have to consider whether the provisions of Section 52-A are not justified by Article 19(5). That is a matter which is foreign to the enquiry in the present appeal." A Division Bench of Allahabad High Court in a Judgment reported in POWER MEASUREMENT LIMITED (supra) has held as follows: "14. As such Art. 19(1)(d) and (e) are unavailable to foreigners because those rights are conferred only on the citizens. Certainly, the machinery of Art. 14 cannot be invoked to obtain that fundamental right. Rights under Arts. 19(1)(d) and (e) are expressly, withh....
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....olds that it is of the opinion that foreigners enjoy some fundamental rights of this country but the same are confined to Article 21 of the Constitution of India which deals with life and liberty and does not include the rights guaranteed under Article 19 of the Constitution. The question therein was right to free trade under Article 19(1)(g) and, therefore, held that it was available only to Indian citizens and not to foreigners. 19. On a coalesce of the judgments rendered by the Apex Court and that of different constitutional Courts what would unmistakably emerge is that Articles 14 and 21 of the Constitution of India, the nation's Grundnorm would be available to every person and they are not restricted to the citizens of the country only. However, Articles 15, 16 and 19 are restricted only to citizens of this country. The challenge in the case at hand is on the ground that the provision is unreasonable or manifestly arbitrary, both of which would come within the ambit of Article 14 of the Constitution of India and the petition challenging the constitutional validity on the ground that it is manifestly arbitrary and violative of Article 14 or unreasonable, again being violativ....
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.... F. Stand alone proposals to maximise benefits to the economy. ... ... ... 101. In the last 9 months several measures have been initiated in this direction. A major breakthrough was achieved in October, 2014 when a delegation from the Revenue Department visited Switzerland and the Swiss authorities agreed to (a) provide information in respect of cases independently investigated by the Income-tax Department; (b) confirm genuineness of bank accounts and provide non-banking information; (c) provide such information in a time bound manner; and (d) commence talks with India for Automatic Exchange of Information between the two countries at the earliest. Investigation into cases of undisclosed foreign assets has been accorded the highest priority, resulting in detection of substantial amounts of unreported income. For strengthening collection of information from various sources domestically, a new structure is being put in place which includes electronic filing of statements by reporting entities. This will ensure seamless integration of data and more effective enforcement. 102. Tracking down and bringing back the wealth which legitimately belongs to the ....
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.... Act, 1999 (FEMA) is also being amended to the effect that if any foreign exchange, foreign security or any immovable property situated outside India is held in contravention of the provisions of this Act, then action may be taken for seizure and eventual confiscation of assets of equivalent value situated in India. These contraventions are also being made liable for levy of penalty and prosecution with punishment of imprisonment up to five years." (Emphasis supplied) Tracking down and bringing back the wealth which ultimately belongs to the country is the abiding commitment to the country is what was the foundation that came about for amendment to the Act. Clause 9 supra makes specific reference to the Act. The Act was sought to be amended to the effect that if any foreign exchange, foreign security or any immovable property situated outside India is held in contravention of the provisions of the Act, then action may be taken for seizure and eventual confiscation of assets of equivalent value situated in India. Pursuant to this, the Finance Act, 2015 comes about, in which amendment to the Act is also envisaged. Section 142 of the Finance Act, 2015 deals with the genesi....
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....o India, then the Competent Authority or the Adjudicating Authority, as the case may be, on receipt of an application in this regard from the aggrieved person, and after affording an opportunity of being heard to the aggrieved person and representatives of the Directorate of Enforcement, shall pass an appropriate order as it deems fit, including setting aside of the seizure made under sub-section (1). (5) Any person aggrieved by any order passed by the Competent Authority may prefer an appeal to the Appellate Tribunal. (6) Nothing contained in Section 15 shall apply to this section." (Emphasis supplied) Section 37A brings about certain special provisions relating to assets held outside India in contravention of Section 4. Section 4 reads as follows: "4. Holding of foreign exchange, etc.-Save as otherwise provided in this Act, no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India." (Emphasis supplied) Section 4 deals with holding of foreign exchange, it directs that no person resident in India shall acquire, hold, own, possess....
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....ss. To strike down a provision on manifest arbitrariness, the arbitrariness should be on a higher pedestal and as the nomenclature suggests, it must be manifest. I deem it appropriate to notice the judgments relied on by the learned senior counsel representing the petitioner, in order to buttress his submission that the impugned provision is manifestly arbitrary. Authorities relied on by the petitioner: 23. The Apex Court in the case of SHAYARA BANO (supra) has held as follows: "87. The thread of reasonableness runs through the entire fundamental rights chapter. What is manifestly arbitrary is obviously unreasonable and being contrary to the rule of law, would violate Article 14. Further, there is an apparent contradiction in the three-Judge Bench decision in McDowell [State of A.P. v. McDowell and Co., (1996) 3 SCC 709] when it is said that a constitutional challenge can succeed on the ground that a law is "disproportionate, excessive or unreasonable", yet such challenge would fail on the very ground of the law being "unreasonable, unnecessary or unwarranted". The arbitrariness doctrine when applied to legislation obviously would not involve the latter chal....
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....le has been amply discharged by them." 114. In our opinion, the appellants herein have failed to satisfy the aforesaid test laid down by this Court. The counsel for the appellant had, however, sought to highlight before us the unhealthy practice of the customers showering money on the dancers during the performance, in the prohibited establishments. This encourages the girls to indulge in unhealthy competition to create and sustain sexual interest of the most favoured customers. But such kind of behaviour is absent when the dancers are performing in the exempted establishments. It was again emphasised that it is not only the activities performed in the establishments covered under Section 33-A, but also the surrounding circumstances which are calculated to produce an illusion of easy access to women. The customers who would be inebriated would pay little heed to the dignity or lack of consent of the women. This conclusion is sought to be supported by a number of complaints received and as well as case histories of girl children rescued from the dance bars. We are again not satisfied that the conclusions reached by the State are based on any rational criteria. We fail to se....
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.... that the expression "in the interest of general public" under Article 19(6) inter alia includes protecting morality. The relationship between law and morality has been the subject of jurisprudential discourse for centuries. The questions such as: Is the development of law influenced by morals? Does morality always define the justness of the law? Can law be questioned on grounds of morality? and above all, Can morality be enforced through law?, have been the subject-matter of many jurisprudential studies for over at least a century and a half. But no reference has been made to any such studies by any of the learned Senior Counsel. Therefore, we shall not dwell on the same. 126. Upon analysing the entire fact situation, the High Court has held that dancing would be a fundamental right and cannot be excluded by dubbing the same as res extra commercium. The State has failed to establish that the restriction is reasonable or that it is in the interest of general public. The High Court rightly scrutinised the impugned legislation in the light of observations of this Court made in Narendra Kumar [AIR 1960 SC 430 : (1960) 2 SCR 375], wherein it was held that greater the restricti....
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....or selling or serving IMFL and beer; (x) Suitability certificate under the Amusement Rules. 129. Before any of the licences are granted, the applicant has to fulfil the following conditions: (i) Any application for premises licence shall be accompanied by the site plan indicating inter alia the distance of the site from any religious, educational institution or hospital. (ii) The distance between the proposed place of amusement and the religious place or hospital or educational institution shall be more than 75 m. (iii) The proposed place of amusement shall not have been located in the congested and thickly populated area. (iv) The proposed site must be located on a road having width of more than 10 m. (v) The owners/partners of the proposed place of amusement must not have been arrested or detained for antisocial or any such activities or convicted for any such offences. (vi) The distance between two machines which are to be installed in the video parlour shall be reflected in the plan. (vii) No similar place of public amusement exists within a radius of 75 m. (viii) The conditions mentioned ....
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....ial placed on record by the State to show that it was not possible to deal with the situation within the framework of the existing laws except for the unfounded conclusions recorded in the Preamble as well as the Statement of Objects and Reasons. [See State of Gujarat v. Mirzapur Moti Kureshi Kassab Jamat [(2005) 8 SCC 534 : AIR 2006 SC 212] wherein it is held that: (SCC p. 573, para 75) the standard of judging reasonability of restriction or restriction amounting to prohibition remains the same, excepting that a total prohibition must also satisfy the test that a lesser alternative would be inadequate.] The Regulations framed under Section 33(1)(w) of the Bombay Police Act, more so Regulations 238 and 242 provide that the licensing authority may suspend or cancel a licence for any breach of the licence conditions. Regulation 241 empowers the licensing authority or any authorised police officer, not below the rank of Sub- Inspector, to direct the stoppage of any performance forthwith if the performance is found to be objectionable. Section 162 of the Bombay Police Act empowers a competent authority/Police Commissioner/ District Magistrate to suspend or revoke a licence for breach o....
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....usiness of exhibiting and publishing pornographic or obscene films and literature. This case is distinguishable because of the unfounded presumption that women are being/were trafficked in the bars. State of Punjab v. Devans Modern Breweries Ltd. [(2004) 11 SCC 26] dealt with liquor trade, whereas the present case is clearly different. The reliance on New York State Liquor Authority [69 L Ed 2d 357 : 452 US 714 (1981)] is completely unfounded because in that case endeavour of the State was directed towards prohibiting topless dancing in an establishment licensed to serve liquor. Similarly, R. v. Quinn [(1962) 2 QB 245 : (1961) 3 WLR 611 : (1961) 3 All ER 88 (CCA)] dealt with indecent performances in a disorderly house. Hence, this case will also not help the appellants. Therefore, we are not impressed with any of these submissions. All the activities mentioned above can be controlled under the existing regulations. 135. We do not agree with the submission of Mr Subramanium that the impugned enactment is a form of additional regulation, as it was felt that the existing system of licence and permits were insufficient to deal with problem of ever-increasing dance bars. We als....
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.... profession and that therefore a legislation, subordinate or otherwise whose effect or impact severely impairs the right to carry on a trade or business, not prohibited by law, would be violative of Article 19(1)(g). Reliance is placed in this regard on the decisions of this Court in (i) Mohd. Yasin v. Town Area Committee, Jalalabad [Mohd. Yasin v. Town Area Committee, Jalalabad, (1952) 1 SCC 205 : 1952 SCR 572 : AIR 1952 SC 115], where it was held that the right under Article 19(1)(g) is affected when "in effect and in substance", the impugned measures brought about a total stoppage of business, both, in a commercial sense and from a practical point of view, even though there was no prohibition in form and (ii) Bennett Coleman & Co. v. Union of India [Bennett Coleman & Co. v. Union of India, (1972) 2 SCC 788], where this Court held that the impact and not the object of the measure will determine whether or not, a fundamental right is violated. It is further contended, on the strength of the decision in Mohd. Faruk v. State of M.P. [Mohd. Faruk v. State of M.P., (1969) 1 SCC 853] , that the imposition of restriction on the exercise of a fundamental right may be in....
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....ase held that a mere ritualistic incantation of "money laundering" or "black money" does not satisfy the first test and that alternative methods should have been explored. 208. Let us now see whether the impugned Circular would fail the four-pronged test. In fact, the Privy Council originally set forth in Elloy de Freitas v. Permanent Secy. of Ministry of Agriculture, Fisheries, Lands & Housing [Elloy de Freitas v. Permanent Secy. of Ministry of Agriculture, Fisheries, Lands & Housing, (1999) 1 AC 69 : (1998) 3 WLR 675 (PC)] , only a three-fold test, namely, (i) whether the legislative policy is sufficiently important to justify limiting a fundamental right, (ii) whether the measures designed to meet the legislative objective are rationally connected to it and (iii) whether the means used to impair the right or freedom are no more than is necessary to accomplish the objective. These three tests came to be known as De Freitas test. But a fourth test, namely, "the need to balance the interests of society with those of individuals and groups" was added by the House of Lords in Huang v. Secy. of State for Home Deptt. [Huang v. Secy. of State for Home Deptt., (2007) 2 ....
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....or information ... It is not any and every material, howsoever, vague and indefinite or distant, remote or far fetching, which would warrant the formation of the belief. (2) The power conferred upon the authority under Section 83 of the Act for provisional attachment could be termed as a very drastic and far-reaching power. Such power should be used sparingly and only on substantive weighty grounds and reasons. (3) The power of provisional attachment under Section 83 of the Act should be exercised by the authority only if there is a reasonable apprehension that the assessee may default the ultimate collection of the demand that is likely to be raised on completion of the assessment. It should, therefore, be exercised with extreme care and caution. (4) The power under Section 83 of the Act for provisional attachment should be exercised only if there is sufficient material on record to justify the satisfaction that the assessee is about to dispose of wholly or any part of his/her property with a view to thwarting the ultimate collection of demand and in order to achieve the said objective, the attachment should be of the properties and to that extent, it is....
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....tachment; third the existence of opinion that it is necessary so to do for the purpose of protecting the interest of the government revenue; fourth, the issuance of an order in writing for the attachment of any property of the taxable person; and fifth, the observance by the Commissioner of the provisions contained in the rules in regard to the manner of attachment. Each of these components of the statute are integral to a valid exercise of power. In other words, when the exercise of the power is challenged, the validity of its exercise will depend on a strict and punctilious observance of the statutory preconditions by the Commissioner. While conditioning the exercise of the power on the formation of an opinion by the Commissioner that "for the purpose of protecting the interest of the government revenue, it is necessary so to do", it is evident that the statute has not left the formation of opinion to an unguided subjective discretion of the Commissioner. The formation of the opinion must bear a proximate and live nexus to the purpose of protecting the interest of the government revenue. 50. By utilising the expression "it is necessary so to do" the legislature has evinc....
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....5 [ Section 45 (1) provides as follows: "45. Provisional attachment.-(1) Where during the tendency of any proceedings of assessment or reassessment of turnover escaping assessment, the Commissioner is of the opinion that for the purpose of protecting the interest of the government revenue, it is necessary so to do, he may by order in writing attach provisionally any property belonging to the dealer in such manner as may be prescribed."] of the Gujarat Value Added Tax Act, 2003, one of us (Hon'ble M.R. Shah, J.) speaking for a Division Bench of the Gujarat High Court in Vishwanath Realtor v. State of Gujarat [Vishwanath Realtor v. State of Gujarat, 2015 SCC OnLine Guj 6564] observed: (Vishwanath Realtor case [Vishwanath Realtor v. State of Gujarat, 2015 SCC OnLine Guj 6564] , SCC OnLine Guj para 26) "26. Section 45 of the VAT Act confers powers upon the Commissioner to pass the order of provisional attachment of any property belonging to the dealer during the pendency of any proceedings of assessment or reassessment of turnover escaping assessment. However, the order of provisional attachment can be passed by the Commissioner when the Commissioner is of the opi....
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....ower for ordering provisional attachment must be preceded by the formation of opinion by the Commissioner that it is necessary to do so for the purpose of protecting the interest of Government revenue. The examination of the case in RADHA KRISHAN INDUSTRIES was on the touchstone of the application of attachment as violative of human rights, as also, constitutional right under Article 300A of the Constitution of India. It, therefore, becomes germane to notice the summary itself which reads as follows: "E. Summary of findings 76. For the above reasons, we hold and conclude that: 76.1. The Joint Commissioner while ordering a provisional attachment under Section 83 was acting as a delegate of the Commissioner in pursuance of the delegation effected under Section 5(3) and an appeal against the order of provisional attachment was not available under Section 107(1). 76.2. The writ petition before the High Court under Article 226 of the Constitution challenging the order of provisional attachment was maintainable. 76.3. The High Court has erred in dismissing the writ petition on the ground that it was not maintainable. 76.4. The power t....
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....eal against the order under Section 74(9), the provisions of sub-sections (6) and (7) of Section 107 will come into operation in regard to the payment of the tax and stay on the recovery of the balance as stipulated in those provisions, pending the disposal of the appeal." 25. There are other cases where the Apex Court considers the challenge of legislation on the touchstone of manifest arbitrariness and has turned it down. The Apex Court in the case of K.S. PUTTASWAMY v. UNION OF INDIA (2017) 10 SCC 1 observes as follows: "310. While it intervenes to protect legitimate State interests, the State must nevertheless put into place a robust regime that ensures the fulfilment of a threefold requirement. These three requirements apply to all restraints on privacy (not just informational privacy). They emanate from the procedural and content-based mandate of Article 21. The first requirement that there must be a law in existence to justify an encroachment on privacy is an express requirement of Article 21. For, no person can be deprived of his life or personal liberty except in accordance with the procedure established by law. The existence of law is an essential requirement.....
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....F INDIA (2019) 4 SCC 17 has held as follows: 77. NCLAT has, while looking into viability and feasibility of resolution plans that are approved by the Committee of Creditors, always gone into whether operational creditors are given roughly the same treatment as financial creditors, and if they are not, such plans are either rejected or modified so that the operational creditors' rights are safeguarded. It may be seen that a resolution plan cannot pass muster under Section 30(2)(b) read with Section 31 unless a minimum payment is made to operational creditors, being not less than liquidation value. Further, on 5-10-2018, Regulation 38 has been amended. Prior to the amendment, Regulation 38 read as follows: "38. Mandatory contents of the resolution plan.-(1) A resolution plan shall identify specific sources of funds that will be used to pay the- (a) insolvency resolution process costs and provide that the insolvency resolution process costs, to the extent unpaid, will be paid in priority to any other creditor; (b) liquidation value due to operational creditors and provide for such payment in priority to any financial creditor which shal....
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....nto a "means and includes" definition a category which does not fit therein, namely, real estate developers who do not, in the classical sense, borrow monies like banks and financial institutions. According to him, therefore, the object itself being discriminatory, the inclusion of real estate developers as financial debtors should be struck down. We have already pointed out how real estate developers are, in substance, persons who avail finance from allottees who then fund the real estate development project. The object of dividing debts into two categories under the Code, namely, financial and operational debts, is broadly to sub-divide debts into those in which money is lent and those where debts are incurred on account of goods being sold or services being rendered. We have no doubt that real estate developers fall squarely within the object of the Code as originally enacted insofar as they are financial debtors and not operational debtors, as has been pointed out hereinabove. So far as unequals being treated as equals is concerned, homebuyers/allottees can be assimilated with other individual financial creditors like debenture holders and fixed-deposit holders, who have advanc....
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....ted. It was also contended that since allottees are then said to have no expertise or knowledge in the working of the corporate debtor, they cannot participate effectively in the Committee of Creditors, and should therefore be kept out. The same answer as has been given hereinabove i.e. that allottees, like individual financial creditors who are already on the Committee of Creditors, are to have a voice in determining the corporate debtor and their own future. This contention, therefore, also fails." (Emphasis supplied) Later, the Apex Court in the case of MANISH KUMAR v. UNION OF INDIA (2021) 5 SCC 1 has held as follows: "23. Shri Piyush Singh, learned counsel for the petitioners would submit that once the right is conferred to make an application, then it cannot come conditioned with threshold limit as is provided in the impugned provisos. Secondly, he would point out that there is manifest arbitrariness. That apart, he would also contend that there is hostile discrimination qua other corporate debtor. The builder who is a corporate debtor, in other words, is given a more favourable treatment than other corporate debtors which is afflicted with the v....
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.... that he complained of the provision being under inclusive and over inclusive. The legislature, he points out, should have waited and at best could have acted if there is impeachable and empirical evidence warranting such a drastic incursion into the vested right of the homebuyer. He also highlights that in law there can only be one default. A homebuyer who before the amendment could by himself set the law into motion, is now left at the mercy of similarly circumstanced persons which itself is rendered impossible by the absence of an information generating mechanism which is accessible. ... ... ... 434. The doctrine of fairness, indeed, has been present in the mind of the courts, whenever a law, described as retrospective, comes up for interpretation with or without a challenge to the law. In the context of a challenge, on the ground of manifest arbitrariness, the test to be applied has been articulated as to whether it is capricious, irrational, does not disclose any principle, betrays absence of proportionality or whether it is excessive. We must also not lose sight of the fact that the law in question is an economic measure. 435. This is a case where t....
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..... A vested right under a statute can be taken away by a retrospective law. A right given under a statute can be taken away by another statute. We cannot ignore the fact that there was considerable public interest behind such a law. The sheer numbers, in which applications proliferated, combined with the results it could produce, cannot be brushed aside as an irrational or capricious aspect to have been guided by in making the law. Being an economic measure, the wider latitude available to the law giver, cannot be lost sight of." (Emphasis supplied) The Apex Court in the case of MANISH KUMAR (supra) at paragraphs 23 and 25 notices the submissions of the petitioner therein who had contended that certain provisions would suffer from manifest arbitrariness. The Apex Court rejects those submissions from paragraphs 434 to 437. The Apex Court holds that there is nothing capricious, unfair, unreasonable and vague to hold that the provisions would be manifestly arbitrary. The Apex Court clearly holds that manifest arbitrariness can be a ground to strike down legislation only if it is irrational or capricious inter alia. The above were the cases where the Apex Court has reject....
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....period of 180 days from the date of seizure, by either confirming or setting aside such order of seizure. While doing so, an opportunity of being heard should be granted to the aggrieved person and representatives of the Directorate of Enforcement. 31. Sub-section (4) mandates that the order of the competent authority confirming seizure of equivalent asset shall continue till the disposal of adjudication proceedings and thereafter the Adjudicating Authority would pass appropriate orders or directions in the adjudication order with regard to further action qua the subject matter i.e., the seizure made under sub-section (1). The proviso to Section 37A (4) permits that at any stage of the proceedings under the Act if the aggrieved person discloses the fact of such foreign exchange, foreign security or immovable property and brings it back to India, then the Competent Authority or the Adjudicating Authority on receipt of such application from the aggrieved person, after following the principles of natural justice shall pass appropriate orders as he deems fit including setting aside of the seizure under sub-section (1). Sub-section (5) mandates that any person aggrieved by any order ....
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....y that is property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence; and third - where such property is taken on field outside the country, then the property equivalent in value held within the country or abroad. ... ... ... 250. The other relevant definition is "proceeds of crime" in Section 2(1)(u) of the 2002 Act. This definition is common to all actions under the Act, namely, attachment, adjudication and confiscation being civil in nature as well as prosecution or criminal action. The original provision prior to amendment vide Finance Act, 2015 and Finance (No. 2) Act, 2019, took within its sweep any property (mentioned in Section 2(1)(v) of the Act) derived or obtained, directly or indirectly, by any person "as a result of" criminal activity "relating to" a scheduled offence (mentioned in Section 2(1)(y) read with Schedule to the Act) or the value of any such property. Vide Finance Act, 2015, it further included such property (being proceeds of crime) which is taken or held outside the country, then the property equivalent in value held within the country and by further amendment vide ....
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....fficient safeguard to the invocation of the powers under the second proviso to Section 5(1) of the 2002 Act. ii. There has to be a satisfaction that if the property involved in money-laundering or 'proceeds of crime' are not attached "immediately", such non-attachment might frustrate the confiscation proceedings under the 2002 Act. iii. The order passed under Section 5(1) of the 2002 Act is only provisional in nature. The life of this provisional attachment order passed under Section 5(1) of the 2002 Act is only for 180 days, subject to confirmation by an independent Adjudicating Authority. iv. Under Section 5(2) officer passing provisional attachment order has to immediately forward a copy of this order to the Adjudicating Authority in a sealed envelope. v. Under Section 5(5) of the 2002 Act, the officer making such order must file a complaint before the Adjudicating Authority within 30 days of the order of provisional attachment being made. vi. Section 5(3) of the 2002 Act provides that the provisional attachment order shall cease to have effect on the expiry of the period specified in Section 5(1) i.e. 180 days or on the date when the....
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....of the 2002 Act, on the conclusion of a trial for an offence under the 2002 Act if the Special Court finds that the offence of money-laundering has been committed it will order that the property involved in money-laundering or the property which has been involved in the commission of the offence of money-laundering shall stand confiscated to the Central Government. xiii. However, under Section 8(6) if the Special Court on the conclusion of the trial finds that no offence of money-laundering has taken place or the property is not involved in money-laundering it will release the property which has been attached to the person entitled to receive it. xiv. Under Section 8(7), if the trial before the Special Court cannot be conducted because of the death of the accused or because the accused is declared proclaimed offender, then the Special Court on an application of the Director or a person claiming to be entitled to possession of a property in respect of which an order under Section 8(3) is passed either to confiscate the property or release the property to the claimant, after considering the material before it. xv. Under Section 8(8), when a property is conf....
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....merely because the provisional attachment order passed under Section 5(1) is confirmed, it does not follow that the property stands confiscated; and until an order of confiscation is formally passed, there is no reason to hasten the process of taking possession of such property. The principle set out in Section 5(4) of the 2002 Act needs to be extended even after confirmation of provisional attachment order until a formal confiscation order is passed. Section 5(4) clearly states that nothing in Section 5 including the order of provisional attachment shall prevent the person interested in the enjoyment of immovable property attached under sub-section (1) from such enjoyment. The need to take possession of the attached property would arise only for giving effect to the order of confiscation. This is also because sub-section (6) of Section 8 postulates that where on conclusion of a trial under the 2002 Act which is obviously in respect of offence of money-laundering, the Special Court finds that the offence of money-laundering has not taken place or the property is not involved in money-laundering, it shall order release of such property to the person entitled to receive it. ....
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....nt's counsel to demonstrate why the appellate jurisdiction of the High Court under Section 35 of FEMA does not provide an efficacious remedy. In fact there could hardly be any reason since the High Court itself is the appellate forum. ... ... ... 35. In this case, liability of the appellant is not created under any common law principle but, it is clearly a statutory liability and for which the statutory remedy is an appeal under Section 35 of FEMA, subject to the limitations contained therein. A writ petition in the facts of this case is therefore clearly not maintainable." (Emphasis supplied) The Apex Court holds that the Act is a complete code by itself. Though was rendered at a point in time when Section 37A was not in existence, the entire enactment was considered by the Apex Court. 33. On a coalesce of the judgments relied on by the petitioner and others that are quoted hereinabove, as also the reasons rendered by this Court, what would unmistakably emerge is that Section 37A of the Act does not suffer from any manifest arbitrariness for this Court to strike it down on any of the grounds urged by the petitioner. The purpose behind the amend....
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....the content in those pages which clearly indicate application of mind. I decline to accept the submission that the order suffers from non-application of mind on perusal of the entire content in the order. Every submission of the petitioner is noted, considered threadbare and answered by the Competent Authority. The Competent Authority has not left any wood on the tree. Therefore, the order does not suffer from nonapplication of mind, as is sought to be projected and contended by the petitioner. Therefore, the only circumstance which the petitioner projects apart from challenging the constitutional validity for entertainment of the subject writ petition tumbles down, as the order of the Competent Authority does bear the stamp of application of mind through the order. Therefore, it is for the petitioner to avail of the remedy of filing an appeal before the Appellate Tribunal. SUMMARY: (i) The challenge to the constitutional validity of Section 37A of the Act by the petitioner is held to be maintainable and entertainable, on the fulcrum of the allegation that it is violative of Article 14 of the Constitution of India, as Article 14 is person centric, whereas fundamental rights u....