1988 (8) TMI 277 - HC - FEMA

Summary

Issues:
1. Validity of the detention order under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
2. Consideration of vital factors by the detaining authority.
3. Retraction of statements made by witnesses and its impact on the detention order.

Analysis:
The High Court of Bombay considered a case where the Joint Secretary to the Government of India issued a detention order under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, to prevent the detenu from acting prejudicially to foreign exchange augmentation. The grounds of detention mentioned the detenu's alleged involvement in unauthorized purchase and sale of foreign exchange, affecting the country's foreign exchange resources adversely. The detaining authority based its decision on statements made by witnesses Kishinchand and Bharat implicating the detenu in the illegal activities. However, during the proceedings, it was revealed that Kishinchand and Bharat had retracted their statements, a crucial fact not brought to the attention of the detaining authority.

The petitioner's counsel argued that the failure to disclose the retraction of statements to the detaining authority rendered the detention order invalid. The Court agreed with this contention, emphasizing the significance of the retraction as the order was solely based on the statements. The Court held that the detaining authority should have been made aware of this material circumstance, and its omission vitiated the order of detention. Consequently, the Court quashed the impugned detention order and directed the detenu's release.

In conclusion, the judgment highlighted the importance of disclosing all relevant information to the detaining authority and ensuring that vital factors, such as witness retractions, are considered before issuing a detention order under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974. Failure to do so can result in the order being deemed invalid and subsequently quashed by the Court.