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1971 DIGILAW 340 (KER)

P. Karthiyumma v. Director Of Enforcement

1971-12-15

MADATHIMYALLIL UTHUP ISAAC

body1971
JUDGMENT M.U. Issac, J. 1. The petitioner is a retired school teacher residing at Chowghat. On 18-12-1967, the second respondent, the Assistant Enforcement Officer, Ernakulam, conducted a search of the petitioner's house, on the basis of an information that one Hasan Ali, Partner of M/s. Jahfar Stores, Mannady, Madras 1 was making payments to persons in India including the petitioner by means of bank drafts under instructions of a person residing in Penang. It happened that during the course of the search, a postman came with a registered envelope addressed to the petitioner, Which was handed over to her. The envelope was opened; and it contained a letter and demand draft for Rs. 10,000/- in her favour. The draft, along with the envelope and the letter, was seized by the second respondent. The case was investigated. In due course the first respondent, the Director of Enforcement, Ministry of Finance, New Delhi issued to the aforesaid Hasan Ali a memorandum, Ex. R3, dated 17-9-1968, requiring him to show cause in writing within 14 days of receipt of the said memorandum why adjudication proceedings as contemplated in S.23D of the Foreign Exchange Regulation Act, 1947 (hereinafter referred to as the Act) should not be held against him for contravention of S.5(1)(c)of the Act. The payments alleged to have been made in contravention of the said provision amount to Rs.65,610/-. A list of the persons to whom the above amount was paid is appended to Ex. R3; and No. 5 in that list is the petitioner before me. The petitioner did not, however, (hear anything from the respondents after the seizure of the draft and the letter from her possession on 18-12-1967, until she got a memorandum, Ex. P3 dated 20th September, 1969 from the first respondent. Ex. P3 called upon her to show cause within 14 days of receipt of that memorandum why adjudication proceedings as contemplated in S.23D of the Act should not be held against her for contravention of S.5(1)(aa) of the Act, in that, she received from a resident in Malaya a sum of Rs. 10,000/- as per the draft seized from her possession and why this draft should not be confiscated to the Central Government under S.23(IB) of the Act. She wrote to the first respondent by letter, Ex. 10,000/- as per the draft seized from her possession and why this draft should not be confiscated to the Central Government under S.23(IB) of the Act. She wrote to the first respondent by letter, Ex. P4, dated 9th October 1969, showing cause against the proposed action, and also demanding return of the draft on the ground that its retention was beyond the period allowed by S.19G of the Act was illegal. There Was no response from the respondents. The petitioner has, therefore, filed this petition to declare the proceedings against her as per Ex. P3 as illegal, to prohibit the respondents from taking any further proceedings against her, and to direct the first respondent to return to the petitioner the documents seized from her possession. The last relief alone has been pressed before me by counsel for the petitioner. 2. The short question that arises for decision is whether the retention of the demand draft and the letter seized from the petitioner is beyond the period permitted by S.19G of Act. If so, the petitioner is entitled to succeed, and to have a writ of mandamus directing the respondents to return the said documents to her S.19G reads: "19G. 2. The short question that arises for decision is whether the retention of the demand draft and the letter seized from the petitioner is beyond the period permitted by S.19G of Act. If so, the petitioner is entitled to succeed, and to have a writ of mandamus directing the respondents to return the said documents to her S.19G reads: "19G. Where in pursuance of an order made under sub-s.(2) of S.19 or of the provisions of S.19A, 19C or 19D, or of a requisition or summons under S.19E or 19F, any document is furnished or seized and the Director of Enforcement or any other Officer of Enforcement has reason to believe that the said document would be evidence of the contravention of any of the provisions of this Act or of any rule, direction or order made thereunder, and that it would be necessary to retain the document in his custody, he may so retain the said document for a period not exceeding one year or if, before the expiry of the said period of one year, any proceedings under S.23 (a) have been commenced before him, until the disposal of those proceedings, including the proceedings, if any, before the Appellate Board and the High Court, or (b) have been commenced before a Court, until the document has been filed in that Court." The period of one year from the seizure of the document has admittedly expired; and therefore, the only question is whether any proceedings under S.23 have been commenced before any of the authorities mentioned under S.19G before the expiry of the said period. According to the respondent, proceedings under S.23 of the Act have been started against Hasan Ali, as per Ex. R3 within the period of one year, that the said proceedings are pending, and that the documents in question are being retained as they are required for evidence in the said proceedings. Counsel for the petitioner advanced two contentions in answer to the above position taken up by the respondents. 3. The first contention is that the issue of a notice like Ex. R3 does not amount to starting of any proceedings, that it is only a step anterior to the starting of proceedings, and that the proceedings are started only when the authority concerned decides to do so, after considering the explanation, if any, received in reply to such a notice. R3 does not amount to starting of any proceedings, that it is only a step anterior to the starting of proceedings, and that the proceedings are started only when the authority concerned decides to do so, after considering the explanation, if any, received in reply to such a notice. S.23 deals with penalty and procedures. It does not, however, give any indication as to when the proceedings start. S.23D deals with power to adjudicate. Sub-s.(1) of that Section reads: "23D(1) For the purpose of adjudging under clause (a) of sub-s.(1) of S.23 whether any person has committed a contravention, the Director of Enforcement shall hold an enquiry in the prescribed manner after giving that person a reasonable opportunity of being heard and if, on such enquiry, he is satisfied that the person has committed the contravention, he may impose such penalty as he thinks fit in accordance with the provisions of the said S.23." The prescribed manner of conducting an enquiry under S.23 is contained in the Adjudication Proceedings and Appeal Rules, 1957. R.3(1) reads: "in holding an inquiry under sub-s.(1) of S.23D of the Act for the purpose of adjudging under clause (a) of sub-s.(1) of S.23 whether any person has committed contravention, the Director shall, in the first instance, issue a notice to such person requiring him to show cause within such period as may be specified in the notice (being not less than ten days from the date of service thereof) why adjudication proceedings should not be held against him". It is clear from the above rule that the adjudication proceedings commence with the issue of the notice as mentioned therein. It is not possible to accept the contention of the counsel that it starts only at a later stage. The show cause notice is issued after the Director makes a decision to start adjudication proceedings on the basis of the materials available to him. It may happen that, after receiving the explanation of the offender, the Director may drop the proceedings, if he finds that the charge cannot be sustained. He may do so at any stage of the proceedings; but it does not mean that the proceedings are not commenced by the issue of the show cause notice. 4. It may happen that, after receiving the explanation of the offender, the Director may drop the proceedings, if he finds that the charge cannot be sustained. He may do so at any stage of the proceedings; but it does not mean that the proceedings are not commenced by the issue of the show cause notice. 4. The next argument is that the proceedings mentioned in S.19G should be one against the person who furnished the document or from whom it was seized; on a close reading of this section, it is not possible to accept the above argument. S.19E empowers the Enforcement Director to require any person to produce or deliver any document relevant to the enquiry. S.19F empowers, the Director of Enforcement to summon any person to produce any document in any enquiry which he is making in connection with any offence under the Act. S.19G is general in terms; and it refers not only to documents seized from a person's possession, but also to documents produced pursuant to a requisition under S.19E or summons under S.19F. It may very often happen that a person, who is required to produce a document under the above sections, may not have contravened any provision of the Act, and the document is required as evidence in proceedings against other persons who have contravened the provisions of the Act. S.19G applies to Such documents also in the same manner as it applies to documents seized from an offender's possession. It is, therefore, clear that the person from whose possession the document has been seized or who has produced the document is not entitled to get it back until the proceedings in which the said document is required for evidence are disposed of; provided the said proceedings are commenced before the expiry of one year from the date of seizure or production of the document. It follows that the petitioner is not entitled to succeed. This writ petition is accordingly dismissed. No costs.