1995 (12) TMI 309 - HC - Companies Law

Summary

Issues Involved:
1. Legality of the seizure on April 4, 1989, under FERA.
2. Allegation of re-seizure violating fundamental rights.
3. Compliance with Section 38 of the Foreign Exchange Regulation Act (FERA).

Detailed Analysis:

Issue 1: Legality of the Seizure on April 4, 1989, under FERA
The petitioner challenged the seizure of Rs. 5,55,000 under the Foreign Exchange Regulation Act, 1973 (FERA), arguing that it amounted to re-seizure and violated his fundamental rights. The court previously quashed the initial seizures on February 18, 1986, and February 20, 1986, due to procedural deficiencies. The Division Bench allowed the Enforcement Directorate to take further lawful actions, leading to the contested seizure on April 4, 1989. The court held that the Enforcement Directorate was entitled to seize the currency under Section 38 of FERA, as the previous court orders did not preclude such action.

Issue 2: Allegation of Re-seizure Violating Fundamental Rights
The petitioner argued that the seizure on April 4, 1989, constituted an illegal re-seizure, violating Article 19(1)(f) of the Constitution of India. The court rejected this argument, distinguishing the case from the Calcutta High Court's decision in Sri Jethanand Tahilram v. Union of India. The court noted that the initial seizure by the Enforcement Directorate was not valid as it did not involve taking possession contrary to the wishes of the person in possession. Therefore, the April 4, 1989, seizure could not be considered a re-seizure. The court also emphasized that it had expressly reserved the right for the Enforcement Directorate to take further lawful actions, thus no fundamental rights were violated.

Issue 3: Compliance with Section 38 of FERA
The petitioner contended that the seizure did not comply with Section 38 of FERA, which requires the authorized officer to have a reason to believe that the seized item is useful for or relevant to any investigation or proceeding under the Act. The court clarified that the reasons for the belief need not be fresh or contemporaneous with the seizure. The reasons that existed on February 20, 1986, were deemed sufficient for the April 4, 1989, seizure. The court found that the petitioner's possession of a large sum of money without satisfactory explanation provided reasonable grounds for the belief that there was a contravention of FERA, thus validating the seizure under Section 38.

Conclusion:
The court rejected both contentions raised by the petitioner, upholding the legality of the seizure on April 4, 1989, under Section 38 of FERA. The petition was dismissed, and the court urged the relevant authority to expedite the pending proceedings related to the seized money.