2021 (3) TMI 1303 - HC - FEMA

Search and seizure operation carried out by officers of FEMA - seizure of certain gold jewellery - maintainability of appeal - As argued bullion or jewellery being stock-in-trade of the business cannot be seized by the authorities - HELD THAT - With regard to the maintainability point, as part of the cause of action has arisen within the State of West Bengal, that is, the search and seizure has taken place in West Bengal and the petitioner is residing at West Bengal, in my view, there is no impediment in entertaining this writ petition before this High Court. Clause (2) of Article 226 of the Constitution of India clearly allows this High Court to have jurisdiction in such cases wherein the cause of action has partly arisen notwithstanding the fact that the seat of the authority dealing with the issue is outside the jurisdiction. Search and seizure of the excess jewellery that has been seized by the Enforcement Directorate , it is to be noted that in the writ petition, the petitioner has relied on several documents to indicate that this excess jewellery was duly accounted for and had been sent for job work. In my view, the Enforcement Directorate should look into the documents filed in the writ petition and pass a reasoned order on whether these goods are stock-in-trade or not. Enforcement Directorate finds that the same are duly accounted for, the same should be released in favour of the petitioner in accordance with law. The above enquiry and the reasoned order should be passed within a period of eight weeks from date.The authorities are also directed to allow the petitioner to have a lawyer of his choice to be present during the summons at an inaudible distance as per the guidelines laid down by the Supreme Court.

Summary

Issues: Challenge of search and seizure operation under FEMA, seizure of gold jewellery as stock-in-trade, jurisdiction of High Court, maintainability of writ petition, cooperation with authorities, presence of lawyer during enquiry.

Analysis:
1. Challenge of Search and Seizure Operation: The petitioner challenged a search and seizure operation conducted by the Enforcement Directorate under FEMA. The counsel for the petitioner argued against the specific seizure of gold jewellery, claiming it was part of the stock-in-trade. Reference was made to relevant provisions of FEMA and the Income-tax Act to support the argument that business stock-in-trade like bullion or jewellery cannot be seized.

2. Seizure of Gold Jewellery: The Enforcement Directorate justified the search and seizure based on information about smuggled goods being purchased by jewellers. They contended that the seized stock exceeded the recorded amount in the petitioner's books of account. The investigation was stated to be at an early stage, and the petitioner was accused of non-cooperation by missing summon dates. The court directed the Enforcement Directorate to examine the documents provided by the petitioner to determine if the excess jewellery was legitimately accounted for as stock-in-trade, with a requirement to issue a reasoned order within eight weeks.

3. Jurisdiction of High Court: The Additional Solicitor General raised a jurisdictional issue, arguing that the writ petition should have been filed in Jaipur where the central coordinating authority for the search and seizure was located, despite the operation taking place in Kolkata. The court ruled that as part of the cause of action arose in West Bengal, where the search occurred and the petitioner resided, the High Court had jurisdiction to entertain the petition under Article 226 of the Constitution.

4. Cooperation with Authorities: The court emphasized the petitioner's obligation to cooperate with the authorities, while also directing that the petitioner be allowed to have a lawyer present during summons, following Supreme Court guidelines. It was clarified that the court did not delve into the merits of the case, but stressed the importance of cooperation.

5. Presence of Lawyer During Enquiry: In addition to allowing the presence of a lawyer during the enquiry, the court instructed the authorities to follow Supreme Court guidelines regarding the lawyer's distance during the proceedings. The judgment concluded by disposing of the writ petition, noting that the lack of an affidavit-in-opposition meant the allegations in the petition were not admitted, and no costs were awarded.