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2002 (4) TMI 789 - SC - Companies LawWhether a person who violates the provisions of the FEMA to a large extent can be detained under the preventive detention Act, namely, COFEPOSA Act? Held that - Appeal allowed. The order passed by the High Court holding that what was considered to be the criminal violation of FERA has ceased to be criminal offence under FEMA, the detention order cannot be continued after 1-6-2000, cannot be justified. Considering the fact that detention order was passed in February, 2000 and the fact that the impugned judgment was passed by the High Court in November, 2000, this would not be a fit case for directing the detenu to surrender to undergo the remaining period of detention.
Issues Involved:
1. Validity of detention under COFEPOSA Act after the repeal of FERA and its replacement by FEMA. 2. Interpretation of Section 3 of COFEPOSA Act in context of preventive detention. 3. Relationship between COFEPOSA Act and FEMA. 4. Applicability of preventive detention when the underlying act is no longer a criminal offense. Detailed Analysis: 1. Validity of detention under COFEPOSA Act after the repeal of FERA and its replacement by FEMA: The High Court quashed the detention order on the grounds that the criminal violation under FERA ceased to be so after its repeal and replacement by FEMA. The Supreme Court, however, disagreed, emphasizing that the COFEPOSA Act's purpose is preventive, not punitive. The Court clarified that the preventive detention under COFEPOSA does not necessitate the act to be a criminal offense. The COFEPOSA Act aims to prevent activities prejudicial to the conservation or augmentation of foreign exchange, regardless of whether such activities are punishable under the new FEMA. 2. Interpretation of Section 3 of COFEPOSA Act in context of preventive detention: Section 3 of the COFEPOSA Act empowers the authority to detain individuals to prevent them from acting in a manner prejudicial to the conservation or augmentation of foreign exchange. The Supreme Court highlighted that the language of Section 3 does not require any pending criminal action for detention. The Court emphasized that preventive detention under COFEPOSA is based on the satisfaction of the authority regarding the potential future activities of the individual, not on the existence of a past criminal offense. 3. Relationship between COFEPOSA Act and FEMA: The Court explained that COFEPOSA and FEMA occupy different fields. COFEPOSA deals with preventive detention to prevent violations of foreign exchange regulations, while FEMA regulates and manages foreign exchange through authorized persons and imposes penalties for contraventions. The Court stated that the preventive detention under COFEPOSA is a precautionary measure to prevent future illegal activities that are prejudicial to foreign exchange conservation, irrespective of whether such activities are criminal offenses under FEMA. 4. Applicability of preventive detention when the underlying act is no longer a criminal offense: The Supreme Court rejected the High Court's view that preventive detention under COFEPOSA cannot continue after the repeal of FERA. The Court reasoned that accepting this view would result in an implied repeal of substantial parts of Section 3 of COFEPOSA, which is not justified. The Court reiterated that preventive detention is distinct from punitive detention and does not require the act to be a criminal offense. The preventive detention is intended to prevent future activities that could harm the national economy and security. Conclusion: The Supreme Court set aside the High Court's judgment, holding that the detention under COFEPOSA was valid despite the repeal of FERA. The Court emphasized the preventive nature of COFEPOSA and clarified that it does not require the underlying act to be a criminal offense. However, considering the time elapsed since the detention order, the Court did not direct the detenu to surrender for the remaining period of detention. The appeal was allowed to the extent of setting aside the High Court's judgment.
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