1985 (4) TMI 219 - SC - Companies Law

Power to search premises, Section 37(2) should be interpreted to mean that broadly procedure relating to search as enacted in section 165 of Code shall be followed

Summary

Issues Involved:
1. Legality of the search warrant issued by the Assistant Director, Enforcement.
2. Requirement to record reasons for the search warrant.
3. Allegation of personal malice by respondent No. 6.
4. Tampering with documents by the Enforcement Directorate.
5. Consequences of an illegal search on the seizure of documents.

Detailed Analysis:

1. Legality of the Search Warrant Issued by the Assistant Director, Enforcement:
The appellants contended that the search warrant issued by respondent No. 2 was illegal as there was no material before him to entertain a reasonable belief that any documents useful for or relevant to any investigation under the Foreign Exchange Regulation Act, 1973, were secreted in any place. The court examined the affidavit-in-reply and the original records, concluding that respondent No. 2 had sufficient material to form a reasonable belief for issuing the search warrant. The search warrant was thus deemed justified and legal.

2. Requirement to Record Reasons for the Search Warrant:
The appellants argued that the officer issuing the search warrant must disclose the material on which he based his reasonable belief. The court noted that the expression "reason to believe" found in various statutes, including section 34 of the Indian Income-tax Act, 1922, does not require the officer to disclose his material. The court cited precedents, including Narayanappa v. CIT and Calcutta Discount Co. Ltd. v. ITO, to support the view that the sufficiency or adequacy of the reasons is not justiciable. The court concluded that the officer is not obligated to disclose his material, and the search warrant was validly issued.

3. Allegation of Personal Malice by Respondent No. 6:
The appellants alleged that respondent No. 6, actuated by personal malice, instigated respondent No. 2 to issue the search warrant. The court found the allegations of mala fides to be scanty and unsupported by evidence. The court noted that the affidavit of the servant Gyan Chand was not produced, the name of the friend who intervened was not mentioned, and the Police Officer involved could not be identified. The court dismissed the allegation of personal malice as a nefarious attempt to cook up an imaginary allegation.

4. Tampering with Documents by the Enforcement Directorate:
The appellants contended that the documents were tampered with by the officers of the Enforcement Directorate. The court examined the submissions and found no evidence of tampering. The court noted that the passbook numbers and account numbers tallied, and there were no erasures in the loose sheets. The court concluded that the contention of tampering was wholly imaginary and without merit.

5. Consequences of an Illegal Search on the Seizure of Documents:
The appellants argued that if the search was illegal, the seized documents must be returned. The court referred to the decision in Pooran Mal v. Director of Inspection (Investigation) of Income-tax, which held that relevant evidence obtained by illegal search or seizure is not to be excluded. The court emphasized that the illegality of the search does not vitiate the evidence collected during such illegal search. The court concluded that the documents seized during the search need not be returned, even if the search was illegal.

Conclusion:
The court found no merit in the contentions raised by the appellants. The search warrant was legally issued, the requirement to record reasons was not mandatory, the allegation of personal malice was unsupported, there was no tampering with documents, and the seizure of documents was valid despite the alleged illegality of the search. The appeal was dismissed with no order as to costs.