2023 (3) TMI 1332 - HC - FEMA

Search operation under Section 37 of FEMA - writ petitioner mainly contended that, no incriminating materials were seized while conducting the raid in the premises of the petitioner - More than 5 years lapsed, still the respondents have not initiated any action under the FEMA 1999 - HELD THAT - The original files relating to the initiation of proceedings are placed before this Court. Regarding the delay on the part of the respondents, the learned Additional Solicitor General of India drew the attention of this Court with reference to the letter sent by the learned counsel for the petitioner, who in turn by letter dated 04.12.2017 has stated that they have approached the High Court of Madras by filing a writ petition and therefore no further action to be continued pursuant to the search conducted. Petitioner issued a letter through his counsel not to conduct further enquiry or investigation and on the other hand before this Court the petitioner has stated that the respondents, even after lapse of 5 years, have not initiated any action. Such a dual stand taken is impermissible and therefore the writ petition is to be rejected. The mandatory condition contemplated under the Act regarding reason to believe , the file indicates certain intelligence informations about various investments which has been partly narrated in the counter filed by the respondents. Since the writ petition has been filed at the preliminary stage, certain informations and materials referred in the original files in the interest of petitioner need not be recorded in the order passed in the present writ petition. The counter reveals that there may be more such instances which is to be unearthed and the intelligence informations provided are also to be enquired into further for the purpose of initiation of further action. Investigations are to be conducted and an opportunity was provided to the writ petitioner to produce all those documents with reference to the informations or otherwise. The petitioner instead of furnishing documents and statements have chosen to file the present writ petition. The original files reveals that the authorities have formed an opinion that there is a reason to believe, which is the condition stipulated in the Act and on satisfaction, they conducted a search and thereafter issued summons to the petitioner to respond and submit his explanations and documents. This being the factum established, this Court is of the considered opinion that the search and seizure conducted cannot be held as illegal or ultravires to the provisions of FEMA, 1999 and Income Tax Act and CPC. The petitioner is bound to respond and defend the facts in the manner known to law. There is a prima facie case established with reference to certain transactions and investments in foreign countries and certain details are also available in the file which require a detailed investigation and necessarily the petitioner has to cooperate for further investigation and establish his case with documents and evidences. Accordingly, the petitioner has failed to establish any ground for interference and consequently, the writ petition stands dismissed.

Summary

Issues Involved:
1. Validity of the search and seizure conducted under Section 37 of the Foreign Exchange Management Act, 1999.
2. Alleged violation of Fundamental Rights under Articles 14 and 21 of the Constitution of India.
3. Compliance with procedural requirements and "reason to believe" for conducting the search and seizure.

Summary:

1. Validity of the Search and Seizure:
The petitioner challenged the search and seizure conducted on 01.12.2017 at his residential and hospital premises, claiming it was without jurisdiction, vitiated by malice, and an abuse of authority. The petitioner argued that the search did not yield any incriminating material, and the foreign currency found was within permissible limits and returned. The respondents contended that the search was based on "reason to believe" that the petitioner had contravened provisions of FEMA, supported by intelligence information and digital evidence of significant foreign transactions.

2. Alleged Violation of Fundamental Rights:
The petitioner claimed that the search and seizure were arbitrary and violated his Fundamental Rights under Articles 14 and 21 of the Constitution of India. The respondents argued that the search was conducted following due process, and the petitioner was provided opportunities to produce relevant documents and evidence. The court found that the search and seizure were conducted in accordance with the law and did not violate the petitioner's rights.

3. Compliance with Procedural Requirements and "Reason to Believe":
The petitioner argued that the search was conducted without a valid "reason to believe" and lacked application of mind, rendering it invalid. The court referred to the Supreme Court's judgment in Director General of Income Tax (Investigation), Pune and Others Vs. Spacewood Furnishers Private Limited and Others, emphasizing the necessity of a reasonable belief and application of mind for issuing a search warrant. The respondents presented the original files and intelligence information justifying the search, demonstrating compliance with procedural requirements. The court concluded that there was a prima facie case for conducting the search based on the information available, and the petitioner was required to cooperate with the investigation.

Conclusion:
The court dismissed the writ petition, stating that the petitioner failed to establish any grounds for interference. The search and seizure were deemed legal and in accordance with FEMA, 1999, and the petitioner was directed to cooperate with the ongoing investigation. No costs were awarded, and connected miscellaneous petitions were closed.