2004 (4) TMI 315 - HC - Companies Law

Summary

Issues Involved:
1. Legality of retention of documents and currency seized under the Foreign Exchange Regulation Act (FERA).
2. Requirement of pre-decisional or post-decisional hearing before extending the retention period.
3. Applicability of precedents from other Acts like the Customs Act to FERA.
4. Whether the retention of documents beyond the statutory period without proper extension is permissible.

Detailed Analysis:

1. Legality of Retention of Documents and Currency Seized under FERA:
The petitioner deposited Rs. 1,05,70,000 in response to a notice under section 33(2) of FERA. The Enforcement Directorate seized Indian currency and documents from the petitioner and others on July 17, 1996. The petitioner argued that the retention of documents beyond six months without proper extension violated section 41 of FERA. Section 41 allows retention for six months, extendable by another six months with reasons recorded in writing. The court noted that the documents were furnished by January 2, 1997, and the initial six-month period expired on June 30, 1997. Since the notice under section 51 was issued on July 16, 1997, after the expiry of the six months, the retention was deemed illegal.

2. Requirement of Pre-decisional or Post-decisional Hearing:
The petitioner contended that the extension of the retention period required a pre-decisional or post-decisional hearing. The court found that the order dated January 7, 1997, was not an extension order as per the proviso to section 41. The six-month period started on January 2, 1997, and expired on July 1, 1997. The notice under section 51 issued on July 16, 1997, was beyond this period, making the extension invalid. Therefore, the question of a hearing did not arise.

3. Applicability of Precedents from Other Acts:
The petitioner relied on precedents from the Customs Act and other Acts. The court distinguished FERA from the Customs Act, noting that section 41 of FERA does not include a provision for returning documents if proceedings are not initiated within the specified period, unlike section 110 of the Customs Act. The court cited various judgments, including Union of India v. Rai Bahadur Shreeram Durga Prasad (P.) Ltd., which emphasized the need for strict interpretation of penal provisions and the importance of adhering to statutory time frames.

4. Retention of Documents Beyond Statutory Period:
The court acknowledged that while the retention beyond the statutory period was not permissible, the petitioner was not entitled to a mandamus for the return of documents. The court referred to the Supreme Court's decision in Nilratan Sircar's case, which allowed retention of documents by the Director of Enforcement despite procedural lapses. The court emphasized the importance of balancing individual rights with societal interests, particularly in cases involving economic offences. The court directed the respondents to conclude the adjudication proceedings within twelve weeks.

Conclusion:
The court dismissed the writ petition, holding that the retention of documents and currency beyond the statutory period without proper extension was illegal. However, considering the broader public interest and the ongoing adjudication proceedings, the court refrained from issuing a mandamus for the return of documents. The respondents were directed to complete the adjudication process within twelve weeks.