2001 (12) TMI 89 - HC - Customs

Summary

Issues Involved:
1. Legality and validity of the action taken by the Customs Department to freeze the petitioners' bank account.
2. Breach of principles of natural justice.
3. Arbitrary and high-handed actions by the Customs Department.
4. Responsibility for maintaining and losing the record of the case.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Action:
The core issue was whether the Customs Department's direction to the Bank to freeze the petitioners' bank account was legal and valid. The Customs Department alleged that the funds in the petitioners' account were the sale proceeds of goods illegally sold by M/s. Bharat Export Corporation. However, no material evidence was provided to substantiate this claim. The Court found that no investigation or action was taken by the Customs Department for 18 years to justify the freezing of the petitioners' account. Thus, the action was deemed baseless and unjustified.

2. Breach of Principles of Natural Justice:
The Court emphasized that the Customs Department's action was a clear breach of natural justice principles. The petitioners were not given any notice or opportunity to be heard before their bank account was frozen. The Court highlighted that any administrative order affecting citizens' rights must be made in conformity with the principles of natural justice, which include the right to be informed of the case against them and to have a fair opportunity to respond. The lack of such an opportunity rendered the Customs Department's action void ab initio.

3. Arbitrary and High-Handed Actions:
The Court noted that the Customs Department's actions were not only arbitrary but also high-handed. The Department had no material evidence to conclude that the petitioners' bank balance was linked to M/s. Bharat Export Corporation. Moreover, the Department had no authority to direct the bank to freeze the account without initiating any legal proceedings under the Customs Act. The prolonged deprivation of the petitioners' right to use their funds for 18 years was deemed unwarranted and unjustifiable.

4. Responsibility for Maintaining and Losing the Record:
The Court expressed its dismay at the Customs Department's failure to produce the case record, which was claimed to be missing. The Court directed the Commissioner of Customs, Mumbai, to initiate an inquiry to identify the person responsible for maintaining and losing the record and to take disciplinary action against them. The Court also mandated that a report of this inquiry be submitted to the Court for compliance.

Conclusion:
The Court quashed and set aside the Customs Department's action of freezing the petitioners' bank account, allowing the petitioners to operate their account without any hindrance. The Court also awarded costs of Rs. 10,000 to the petitioners, to be paid within 30 days. The Commissioner of Customs was directed to conduct an inquiry into the loss of the case record and take appropriate disciplinary action. The judgment emphasized the importance of adhering to principles of natural justice and the need for accountability in administrative actions.