1994 (8) TMI 142 - HC - FEMA

Summary

Issues Involved:
1. Seizure and retention of passports under Section 38 of the Foreign Exchange Regulation Act, 1973.
2. Applicability of Section 41 of the Foreign Exchange Regulation Act, 1973.
3. Reasonableness and duration of seizure under Section 38.
4. Petitioner's cooperation with the investigation.

Issue-wise Detailed Analysis:

1. Seizure and Retention of Passports under Section 38 of the Foreign Exchange Regulation Act, 1973:
The petitioner contended that the passports were seized on 15-10-1992 under Section 38 of the Act and had not been returned. The respondent argued that the seizure was justified due to an ongoing investigation into alleged violations of the Act, specifically involving two foreign currency accounts held by the petitioner. The respondent maintained that they were entitled to retain the passports without any time limit as per Section 38.

2. Applicability of Section 41 of the Foreign Exchange Regulation Act, 1973:
The petitioner argued that under Section 41, documents seized should be returned within one year (before the 1993 amendment) or within six months (post-amendment), unless proceedings under Section 51 or Section 56 were initiated. The petitioner cited a ruling (AIR 1986 Mad. 140) supporting this interpretation. However, the respondent contended that Section 38 does not fall under the purview of Section 41, and thus, there is no specified time limit for returning the seized documents.

3. Reasonableness and Duration of Seizure under Section 38:
The respondent cited a ruling (AIR 1987 Gujarat 176) indicating that the custody of documents seized under Section 38 should be relevant to the investigation and cannot be indefinite. The court noted that although Section 41 does not apply directly to Section 38, the retention of documents must be reasonable and relevant to the investigation. The court referenced the Supreme Court's observations in Maneka Gandhi v. Union of India, emphasizing that indefinite retention of documents could be unreasonable.

4. Petitioner's Cooperation with the Investigation:
The petitioner claimed that the investigation was prolonged, while the respondent alleged non-cooperation from the petitioner. The petitioner filed a supplementary affidavit, undertaking to cooperate with the investigation. The court directed the respondent to complete the investigation within four months and return the passports to the petitioner in accordance with the law.

Conclusion:
The court concluded that while Section 41 does not directly apply to Section 38, the retention of documents must be relevant to the investigation and should not be indefinite. The court directed the respondent to complete the investigation within four months and return the seized passports to the petitioner. The writ petition was ordered accordingly.