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TMI Blog2023 (6) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 19 would not be available to any person, who is not a citizen of this country. Same goes with the Division Bench judgment of Allahabad High Court where at para-14 it is clearly held that Article 19(1)(d) and (e) are unavailable to foreigners because these rights are conferred only on the citizens. Rights under Article 19 are withheld expressly to foreigners. The Division Bench also holds that it is of the opinion that foreigners enjoy some fundamental rights of this country but the same are confined to Article 21 of the Constitution of India which deals with life and liberty and does not include the rights guaranteed under Article 19 of the Constitution. The question therein was right to free trade under Article 19(1)(g) and, therefore, held that it was available only to Indian citizens and not to foreigners. On a coalesce of the judgments rendered by the Apex Court and that of different constitutional Courts what would unmistakably emerge is that Articles 14 and 21 of the Constitution of India, the nation s Grundnorm would be available to every person and they are not restricted to the citizens of the country only. However, Articles 15, 16 and 19 are restricted only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We decline to accept the submission that the order suffers from non-application of mind on perusal of the entire content in the order. Every submission of the petitioner is noted, considered threadbare and answered by the Competent Authority. The Competent Authority has not left any wood on the tree. Therefore, the order does not suffer from nonapplication of mind, as is sought to be projected and contended by the petitioner. Therefore, the only circumstance which the petitioner projects apart from challenging the constitutional validity for entertainment of the subject writ petition tumbles down, as the order of the Competent Authority does bear the stamp of application of mind through the order. Therefore, it is for the petitioner to avail of the remedy of filing an appeal before the Appellate Tribunal. SUMMARY : (i) The challenge to the constitutional validity of Section 37A of the Act by the petitioner is held to be maintainable and entertainable, on the fulcrum of the allegation that it is violative of Article 14 of the Constitution of India, as Article 14 is person centric, whereas fundamental rights under Articles 15, 16, 19 and 25 are citizen centric. Wherefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent devices, laptops, computers, television accessories and the list goes on. The petitioner operates as a re-seller/distributor of mobile phones and related products in India. It is mainly in the distribution segment. 3. The petitioner claims to be purchasing locally manufactured smart phones for re-sale from third party Indian manufacturers, import spare parts, accessories, mobile phones and other products from its group entities viz., Xiaomi H.K. Limited and Zhuhai Xiaomi Communication Company Limited. The petitioner claims to be the largest smart phone brand in India having 1,500 employees working under it. The petitioner claims to be regularly filing its income tax returns and is assessed to income tax even up to 2018- 19 and the petitioner in addition to paying income tax is also subjected to investigation by Customs Department and other entities. This does not concern the petition. 4. In the month of February, 2022 the petitioner claims to have become aware of summons dated 4-01-2022 addressed to one Mr. Nitin Ajage in the office of the petitioner. The summons was issued under Section 37(1) and 37(3) of the Act read with Section 131 (1) of the Income Tax Act, 1961. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons Co. Ltd., (China) and Xiaomi Corporation (Cayman Islands). The assignment agreement took note of the earlier assignment agreement regarding existence of SULA between Qualcomm Inc. and Xiaomi Inc./Xiaomi Technology Co. Ltd. The trail of payment of royalty moves through agreements, assignments, amendment agreements and SULA. From 2010 to 2014 till the establishment of the petitioner/Company royalty was being paid through Xiaomi Communications Co. Ltd., China. From 2013-14 onwards the royalty moved out from the nation through the petitioner company. The petitioner claims to be paying royalty to Qualcomm at the net selling price of mobile phones sold in India pursuant to the afore-mentioned agreement. 7. The petitioner is said to have access to proprietary intellectual property relating to software and hardware technologies from Beijing Xiaomi Mobile Software Co. Ltd. under the license and royalty agreement with effect from 01-04-2017 for the purpose of supplying, distributing, marketing and promoting Xiaomi products in India. Beijing Xiaomi Mobile Software Company Limited is a limited liability company established under the laws of mainland China which is involved in software a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the 6th respondent. It is the seizure order dated 29-04-2022 and the confirmation order dated 19-09-2022 of the seizure of Rs.5551,27,15,824/- is what drives the petitioner to this Court in the subject petition. While raising a challenge to the seizure order and the confirmation order, the petitioner has also challenged the constitutional validity of Section 37A of the Act, as the impugned proceedings are initiated and are sought to be continued under Section 37A of the Act. 11. Heard Sri Udaya Holla, learned senior counsel for the petitioner along with Sri Aditya Vikram Bhat, Sri Deepak Chopra, Sri Harpeet Singh, Smt. Radhika V. and Sri Mithel Reddy, learned counsel for the petitioner and Sri M.B.Nargund, learned Additional Solicitor General along with Sri Madhukar Deshpande, learned counsel for the respondents. 12. The learned senior counsel Sri Udaya Holla appearing for the petitioner would contend that Section 37A of the Act suffers from manifest arbitrariness as it gives unbridled, uncanalised and unguided power, as mere suspicion can lead to seizure order being passed and there are no guidelines to determine what could be reason to believe, which makes the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his submission, the learned senior counsel would place reliance upon the following judgments:- (i) RAMAN TECH. AND PROCESS ENGG. CO. AND ANOTHER v. SOLANKI TRADERS (2008) 2 SCC 302 and (ii) RADHA KRISHAN INDUSTRIES (supra). The learned senior counsel would emphasise on the words hold and acquire that are found in Section 37A or Section 4 of the Act. He would contend that hold would mean lawfully held and acquire would mean, to become owner of the property. He would submit that the payment of royalty is not held by the petitioner nor he has acquired any property. Therefore, the soul of Section 37A and Section 4 of the Act are inapplicable to the petitioner. Reliance is placed upon the following judgments to drive home the said contention: (i) BHUDAN SINGH AND ANOTHER v. NABI BUX AND ANOTHER (1969) 2 SCC 481; (ii) GOVERNMENT OF A.P. v. H.E.H. THE NIZAM, HYDERABAD (1996) 3 SCC 282 and (iii) DEVI DAS GOPAL KRISHNAN ETC. v. STATE OF PUNJAB AND OTHERS AIR 1967 SC 1895. 13. On the other hand, the learned Additional Solicitor General would seek to refute every one of the submissions made by the learned senior counsel to contend that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich would straight away go against the contention of the petitioner. He would contend that judicial review in economic matters is extremely limited as is held by the Apex Court in the case of PRINCIPAL DIRECTOR OF INCOME-TAX (INVESTIGATION) AND OTHERS v. LALJIBHAI KANJIBHAI MANDALIA Civil Appeal No. 4081 of 2022 decided on 13-07-2022. It is further contended that under Section 37A(4) of the Act, the seizure order is mandated till adjudication proceedings. He would contend that between 05.05.2022 and 03.10.2022 the petitioner Company has utilised Rs. 1594 crores which has to be returned back, as it was subject to confirmation proceedings, as was directed by this Court in the earlier round of litigation. He would submit that a direction for such return should be the outcome in favour of the respondents after dismissing the petition. 14. The learned senior counsel for the petitioner in reply to the submissions so made by the learned Additional Solicitor General would contend that the petitioner is a Company that is incorporated in India, though it is a subsidiary of a Company in Beijing and China and all transactions have happened in India. Income tax, as also, GST is paid and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the petitioner. The petitioner is a Company, though registered in India, it is incorporated under the provisions of the prevailing Companies Act as obtaining in the People s Republic of China. The subsidiary companies are many in number, one of them is incorporated in India under the Companies Act, 1956. Therefore, a Company which has its roots in a country outside India can maintain a petition challenging the constitutional validity of any laws of this country on the ground that it violates its fundamental rights is the question that requires to be answered. Therefore, it becomes germane to notice Articles 14, 19 and 21. They read as follows: 14. Equality before law. The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India. 19. Protection of certain rights regarding freedom of speech, etc. ( 1) All citizens shall have the right (a) to freedom of speech and expression; (b) to assemble peaceably and without arms; (c) to form associations or unions or co-operative societies; (d) to move freely throughout the territory of India; (e) to reside and settle in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise. 21. Protection of life and personal liberty. No person shall be deprived of his life or personal liberty except according to procedure established by law. Article 14 is a part of Part-III of the Constitution of India. Part-III deals with fundamental rights. Article 14 directs that the State shall not deny to any person equality before the law or equal protection of the laws within the territory of India. Article 19 deals with right to freedom. Article 19(1) mandates that all citizens shall have a right as enumerated under Articles 19(1)(a) to (g). Article 21 again directs that no person shall be deprived of his life or personal liberty except according to procedure established by law. 18. On a reading of the aforesaid Articles, the inference that could be gathered when read in tandem, is that Article 14 directs that no person shall be denied equality before the law. Article 21 directs that no person shall be deprived of his life or personal liberty. Article 19 directs that all citizens shall have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reigner or a citizen, within the territory of India, but its contention was that under Article 19(1)(g), the first and third petitioners have no fundamental right to carry on any trade, business or profession in this country and the plea of the petitioners under Article 14 of the Constitution cannot be considered by itself and they will, have to fall back upon the fundamental right guaranteed by Article 19(1)(g) of the Constitution. For this submission Mr. Venugopal sought sustenance from the decision of the Supreme Court in Indo China Steam Navigation Co. Ltd. v. Jasjit Singh, Additional Collector of Customs Calcutta AIR 1964 SC 1140 (2) and relied upon the following observations of the court: There is one more point which must be mentioned before we part with this appeal. Mr. Choudhary attempted to argue that if mens rea was not regarded as an essential element of S. 52A, the said section would be ultra vires Articles 14, 19 and 31(1) and as such, unconstitutional and invalid. We do not propose to consider the merits of this argument, because the appellant is not only a company, but also a foreign company, and as such, is not entitled to claim the benefits of Article 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as pleaded in the instant case is available to the first and third petitioners to challenge the decision of the NAA, it would be necessary to refer to the various nuances of Article 14 of the Constitution. 20. Article 14 prohibits hostile discrimination of any person by the State. It is well settled that Article 14 ensures that the State metes out just, fair and reasonable treatment within the territory of India to every individual. It inhabits the State from acting arbitrarily since arbitrariness is anti-thesis of equality and comes into play whenever the exercise of power by the State of its instrumentality is contaminated by arbitrariness and mala-fides. Absence of arbitrary exercise of power is the first essential rule upon which the foundation of Article 14 rests. Therefore, discretion when conferred on an executive authority must be contained within clearly defined limits, and the decision must not be inspired by humor, whim or caprice but is required to be informed by reason, which must proceed on the principles of equality, justice, fair play and application of known principles and rules and in general such a decision should be predictable. Besides the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latter case there is no reason why the court should not use judicial review to scrutinise the action to see whether it is inconformity with Article 14 or falls foul of it. Access to, the court in all circumstances should be available. Courts cannot tolerate a less exacting standard of judicial review in case of a contract where a foreigner is a competing party. Rights whether of a citizen or a foreigner conferred by Article 14 of the Constitution cannot be swept away except by a cataclysm. Consortium therefore can ask the Court to see whether the action of the first respondent measures up to the various dimensions of Article 14 and demolish it if it falls short of the same. The various principles referred heretofore, also form part of the administrative law and can stand independently even de hors Article 14 of the Constitution. 38. The Supreme Court in G.J. Fernandez (Supra) while dealing with this aspect observed as follows; It may be noted that this rule, though supportable also as emanation from Article 14 does not rest merely on that Article. It has an independent existence apart from Article 14. It is a rule of administrative law which has been judicially evolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it was arbitrary and, therefore, violative of Article 14. Two separate arguments were addressed under Article 14. One was that the Act in question was discriminatory and, therefore, violative of Article 14. The other was that in any case the Act was arbitrary and for that reason would also violate a separate facet of Article 14. This is clear from para 45 of the said judgment. The judgment went on to accept both these arguments. Insofar as the discrimination aspect is concerned, this Court struck down the 1986 Act on the ground that it was discriminatory in paras 46 and 47. Paras 48 to 50 are important, in that this Court struck down the 1986 Act for being arbitrary, separately, as follows: (SCC pp. 256-57) 48. We see considerable force in the contention of Mr Parasaran that the acquisition and transfer of the undertaking of the Club is arbitrary. The two Acts were amended by the 1949 Act and the definition of gaming was amended. The object of the amendment was to include horse-racing in the definition of gaming . The provisions of the 1949 Act were, however, not enforced till the 1974 Act was enacted and enforced with effect from 31-3-1975. The 1974 Act was enacted w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (emphasis supplied) The Apex Court refers to its earlier judgment in the case of K.R. LAKSHMANAN V. STATE OF T.N. AND ANOTHER reported in (1996)2 SCC 226 to hold that the validity of a statute can be examined on the touchstone of Article 14 of the Constitution of India on the ground of manifest arbitrariness and unreasonableness. On the other hand, the Apex Court in the case of INDO-CHINA STEAM NAVIGATION COMPANY LIMITED (supra) has held as follows: 35. There is one more point which must be mentioned before we part with this appeal. Mr Choudhary attempted to argue that if mens rea was not regarded as an essential element of Section 52-A, the said section would be ultra vires Articles 14, 19 and 31(1) and as such, unconstitutional and invalid. We do not propose to consider the merits of this argument, because the appellant is not only a company, but also a foreign company, and as such, is not entitled to claim the benefits of Article 19. It is only citizens of India who have been guaranteed the right to freedom enshrined in the said article. If that is so, the plea under Article 31(1) as well as under Article 14 cannot be sustained for the simple reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights are conferred only on the citizens. Certainly, the machinery of Art. 14 cannot be invoked to obtain that fundamental right. Rights under Arts. 19(1)(d) and (e) are expressly, withheld to foreigners. 15. After giving anxious consideration to the facts of the case and the submissions made by the learned counsel for the parties, we are of the opinion that the foreigners also enjoy some fundamental right under the Constitution of this country but the same is confined to Art. 21 of the Constitution i.e. life and liberty and does not include the rights guaranteed under Art. 19 of the Constitution, which are available only to the citizens of this country. Fundamental rights, which are available to the citizens of this country, cannot be extended to noncitizen through Art. 14 of the Constitution. 16. In the present case, learned counsel for the petitioner claims violation of Art. 14 in the matter of awarding bid by the respondent-Corporation. In our view, violation of Art. 14 is to be examined under the back-drop of the facts that the petitioner has applied for tender in respect of supply, installation, testing and commissioning of O. 2S Accuracy Class Static Electronic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution of India and the petition challenging the constitutional validity on the ground that it is manifestly arbitrary and violative of Article 14 or unreasonable, again being violative of Article 14, are all maintainable contentions before the constitutional Courts of the country as they are person centric and not citizen centric . Therefore the first issue that has arisen for consideration qua maintainability is answered in favour of the petitioner holding the petition to be maintainable qua the challenge. Issue No. II: Whether Section 37A of the Act gives uncanalised and unguided power on it suffering from absence of safeguards.? 20. To answer this issue it is germane to notice the genesis of Section 37A i.e., clauses of the amendment of the year 2015 which comes about on 09.09.2015. On February 28, 2015 the Finance Minister renders his Budget Speech in the Parliament. It, insofar as it is germane for the present lis as spoken, reads as follows: 3. In the last nine months, the NDA Government headed by Prime Minister Shri Narendra Modi, has undertaken several significant steps to energize the economy. The credibility of the Indian economy has been re-esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f data and more effective enforcement. 102. Tracking down and bringing back the wealth which legitimately belongs to the country is our abiding commitment to the country. Recognising the limitations under the existing legislation, we have taken a considered decision to enact a comprehensive new law on black money to specifically deal with such money stashed away abroad. To this end, I propose to introduce a Bill in the current Session of the Parliament. 103. With your permission, Madam Speaker, I would like to highlight some of the key features of the proposed new law on black money. (1) Concealment of income and assets and evasion of tax in relation to foreign assets will be prosecutable with punishment of rigorous imprisonment upto 10 years. Further, this offence will be made non-compoundable; the offenders will not be permitted to approach the Settlement Commission; and penalty for such concealment of income and assets at the rate of 300% of tax shall be levied. (2) Non filing of return or filing of return with inadequate disclosure of foreign assets will be liable for prosecution with punishment of rigorous imprisonment up to 7 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Act is also envisaged. Section 142 of the Finance Act, 2015 deals with the genesis of Section 37A which later becomes an amendment to the Act by insertion of Section 37A. Therefore, it is germane to notice Section 37A. Section 37A reads as follows: 37A. Special provisions relating to assets held outside India in contravention of Section 4. (1) Upon receipt of any information or otherwise, if the Authorised Officer prescribed by the Central Government has reason to believe that any foreign exchange, foreign security, or any immovable property, situated outside India, is suspected to have been held in contravention of section 4, he may after recording the reasons in writing, by an order, seize value equivalent, situated within India, of such foreign exchange, foreign security or immovable property: Provided that no such seizure shall be made in case where the aggregate value of such foreign exchange, foreign security or any immovable property, situated outside India, is less than the value as may be prescribed. (2) The order of seizure along with relevant material shall be placed before the Competent Authority, appointed by the Central Government, who sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts that no person resident in India shall acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable property situated outside India. Therefore, the acquisition, holding, owning, possessing or transfer of any foreign exchange from India, to outside India, would become an offence under Section 37A of the Act. Section 4 directs prohibition of any funds being transferred outside India. Sub-section (1) of Section 37A mandates that upon receipt of any information, if the Authorised Officer has reason to believe that any foreign exchange, foreign security or any immovable property situated outside India is suspected to have been held in contravention of Section 4, the Authorized Officer may after recording reasons in writing, by an order seize value equivalent of funds available in India. Sub-section (2) of Section 37A mandates that seizure along with relevant material is to be placed before the Competent Authority appointed by the Government not below the rank of Joint Secretary to Government of India by the Authorized Officer within 30 days from the date of seizure. 21. The Competent Authority has some obligation in terms of sub-sections (3) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied to legislation obviously would not involve the latter challenge but would only involve a law being disproportionate, excessive or otherwise being manifestly unreasonable. All the aforesaid grounds, therefore, do not seek to differentiate between State action in its various forms, all of which are interdicted if they fall foul of the fundamental rights guaranteed to persons and citizens in Part III of the Constitution. It was held by the Apex Court, that triple talak was manifestly arbitrary in the sense that marital tie cannot be broken capriciously and whimsically by a Muslim man without an attempt to reconciliation to save it. It was further held that form of talak was violative of fundamental rights enshrined in Article 14 of the Constitution. The Apex Court strikes down triple talak on the very specific grounds of manifest arbitrariness, unreasonableness, capricious and whimsical. Those were the parameters laid down by the Apex Court to strike down a legislation on manifest arbitrariness. The Apex Court a little earlier in INDIAN HOTEL AND RESTAURANTS ASSOCIATION (supra) has held as follows: 113. The Preamble of the Constitution of India as also Articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the State are based on any rational criteria. We fail to see how exactly the same dances can be said to be morally acceptable in the exempted establishments and lead to depravity if performed in the prohibited establishments. Rather it is evident that the same dancer can perform the same dance in the high class hotels, clubs, and gymkhanas but is prohibited of doing so in the establishments covered under Section 33-A. We see no rationale which would justify the conclusion that a dance that leads to depravity in one place would get converted to an acceptable performance by a mere change of venue. The discriminatory attitude of the State is illustrated by the fact that an infringement of Section 33-A(1) by an establishment covered under the aforesaid provision would entail the owner being liable to be imprisoned for three years by virtue of Section 33-A(2). On the other hand, no such punishment is prescribed for establishments covered under Section 33-B. Such an establishment would merely lose the licence. Such blatant discrimination cannot possibly be justified on the criteria of reasonable classification under Article 14 of the Constitution of India. ... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , wherein it was held that greater the restriction, the more the need for scrutiny. The High Court noticed that in the guise of regulation, the legislation has imposed a total ban on dancing in the establishments covered under Section 33-A. The High Court has also concluded that the legislation has failed to satisfy the doctrine of direct and inevitable effect. (See Maneka Gandhi case [(1978) 1 SCC 248].) We see no reason to differ with the conclusions recorded by the High Court. We agree with Mr Rohatgi and Dr Dhavan that there are already sufficient rules and regulations and legislation in place which, if efficiently applied, would control if not eradicate all the dangers to the society enumerated in the Preamble and the Statement of Objects and Reasons of the impugned legislation. 127. The activities of the eating houses, permit rooms and beer bars are controlled by the following regulations: (i) The Bombay Municipal Corporation Act; (ii) The Bombay Police Act, 1951; (iii) The Bombay Prohibition Act, 1949; (iv) The Rules for Licensing and Controlling Places of Public Entertainment, 1953; (v) The Rules for Licensing and Controlling Places of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed throughout the period for which the licence is granted and if there is a breach of any one of the conditions, the licence is likely to be cancelled after following the usual procedure. 130. The aforesaid list, enactments and regulations are further supplemented with the regulations protecting the dignity of women. The provisions of the Bombay Police Act, 1951 and more particularly Section 33(1)(w) of the said Act empowers the licensing authority to frame rules: licensing or controlling places of public amusement or entertainment and also for taking necessary steps to prevent inconvenience to residents or passers-by or for maintaining public safety and for taking necessary steps in the interests of public order, decency and morality. 131. Rules 122 and 123 of the Amusement Rules, 1960 also prescribe conditions for holding performances: 122. Acts prohibited by the holder of a performance licence. No person holding a performance licence under these Rules shall, in the beginning, during any interval or at the end of any performance, or during the course of any performance, exhibition, production, display or staging, permit or himself commit on the stag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authority to safeguard any perceived violation of the dignity of women through obscene dances. 133. From the objects of the impugned legislation and amendment itself, it is crystal clear that the legislation was brought about on the admission of the police that it is unable to effectively control the situation in spite of the existence of all the necessary legislation, rules and regulations. One of the submissions made on behalf of the appellants was to the effect that it is possible to control the performances which are conducted in the establishments falling within Section 33-B; the reasons advanced for the aforesaid only highlight the stereotype myths that people in upper strata of society behave in orderly and moralistic manner. There is no independent empirical material to show that propensity of immorality or depravity would be any less in these high-class establishments. On the other hand, it is the specific submission of the appellants that the activities conducted within the establishments covered under Section 33-A have the effect of vitiating the atmosphere not only within the establishments but also in the surrounding locality. According to the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shments are held to standards higher than those prescribed; the eating houses, permit rooms and dance bars operate beyond/below the control of the regulations. Another justification given is that though it may be possible to regulate these permit rooms and dance bars which are located within Mumbai, it would not be possible to regulate such establishments in the semi-urban and rural parts of the Maharashtra. If that is so, it is a sad reflection on the efficiency of the licensing/regulatory authorities in implementing the legislation. 136. The end result of the prohibition of any form of dancing in the establishments covered under Section 33-A leads to the only conclusion that these establishments have to shut down. This is evident from the fact that since 2005, most if not all the dance bar establishments have been literally closed down. This has led to the unemployment of over 75,000 women workers. It has been brought on the record that many of them have been compelled to take up prostitution out of necessity for maintenance of their families. In our opinion, the impugned legislation has proved to be totally counter-productive and cannot be sustained being ultra vires Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amental right is prohibited, the burden of proving that a total ban on the exercise of the right alone may ensure the maintenance of the general public interest, lies heavily upon the State. It was held in the said decision that a law which directly infringes the right guaranteed under Article 19(1)(g) may be upheld only if it is established that it seeks to impose reasonable restrictions in the interest of the general public and a less drastic restriction will not ensure the interest of the general public. 195. There can also be no quarrel with the proposition that banking channels provide the lifeline of any business, trade or profession. This is especially so in the light of the restrictions on cash transactions contained in Sections 269-SS and 269-T of the Income Tax Act, 1961. When currency itself has undergone a metamorphosis over the centuries, from stone to metal to paper to paperless and we have ushered into the digital age, cashless transactions (not penniless transactions) require banking channels. Therefore, the moment a person is deprived of the facility of operating a bank account, the lifeline of his trade or business is severed, resulting in the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court of United Kingdom in Bank Mellat v. Her Majesty's Treasury (No. 2) [Bank Mellat v. Her Majesty's Treasury (No. 2), 2014 AC 700 : (2013) 3 WLR 179 : 2013 UKSC 39] . VII. Climax 225.1. Therefore, in the light of the above discussion, the petitioners are entitled to succeed and the impugned Circular dated 6-4-2018 is liable to be set aside on the ground of proportionality. Accordingly, the writ petitions are allowed and the Circular dated 6-4-2018 is set aside. The Statement dated 5-4-2018, though challenged in one writ petition, is not in the nature of a statutory direction and hence the question of setting aside the same does not arise. (Emphasis supplied) What was called in question before the Apex Court was the measures taken by the Reserve Bank of India regulating its entities by directing not to deal with virtual currency or provide services for facilitating any person dealing with virtual currency. The parameters were again laid down by the Apex Court for examination and holding those circulars bad on the ground of proportionality. 24. The Apex Court in the case of RADHA KRISHAN INDUSTRIES (supra) has held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss the assessee nor should it be used in a manner which may have an irreversible detrimental effect on the business of the assessee. (6) The attachment of bank account and trading assets should be resorted to only as a last resort or measure. The provisional attachment under Section 83 of the Act should not be equated with the attachment in the course of the recovery proceedings. (7) The authority before exercising power under Section 83 of the Act for provisional attachment should take into consideration two things : (i) whether it is a revenue neutral situation, (ii) the statement of output liability or input credit . Having regard to the amount paid by reversing the input tax credit if the interest of the Revenue is sufficiently secured, then the authority may not be justified in invoking its power under Section 83 of the Act for the purpose of provisional attachment. (emphasis supplied) ... 49. Now in this backdrop, it becomes necessary to emphasise that before the Commissioner can levy a provisional attachment, there must be a formation of the opinion and that it is necessary so to do for the purpose of protecting the interest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is necessary to do so in order to protect interest of the government revenue. Necessity postulates that the interest of the Revenue can be protected only by a provisional attachment without which the interest of the Revenue would stand defeated. Necessity in other words postulates a more stringent requirement than a mere expediency. A provisional attachment under Section 83 is contemplated during the pendency of certain proceedings, meaning thereby that a final demand or liability is yet to be crystallised. An anticipatory attachment of this nature must strictly conform to the requirements, both substantive and procedural, embodied in the statute and the rules. The exercise of unguided discretion cannot be permissible because it will leave citizens and their legitimate business activities to the peril of arbitrary power. Each of these ingredients must be strictly applied before a provisional attachment on the property of an assessee can be levied. The Commissioner must be alive to the fact that such provisions are not intended to authorise Commissioners to make pre-emptive strikes on the property of the assessee, merely because property is available for being attached. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, there must be an opinion formed by the Commissioner that for the purpose of protecting the interest of the Government Revenue during the pendency of any proceedings of assessment or reassessment, it is necessary to attach provisionally any property belonging to the dealer. However, such satisfaction must be on some tangible material on objective facts with the Commissioner. In a given case, on the basis of the past conduct of the dealer and on the basis of some reliable information that the dealer is likely to defeat the claim of the Revenue in case any order is passed against the dealer under the VAT Act and/or the dealer is likely to sale his properties and/or sale and/or dispose of the properties and in case after the conclusion of the assessment/reassessment proceedings, if there is any tax liability, the Revenue may not be in a position to recover the amount thereafter, in such a case only, however, on formation of subjective satisfaction/opinion, the Commissioner may exercise the powers under Section 45 of the VAT Act. (emphasis supplied) 76.4. The power to order a provisional attachment of the property of the taxable person including a bank accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power must be strictly fulfilled. 76.5. The exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that it is necessary so to do for the purpose of protecting the interest of the government revenue. Before ordering a provisional attachment the Commissioner must form an opinion on the basis of tangible material that the assessee is likely to defeat the demand, if any, and that therefore, it is necessary so to do for the purpose of protecting the interest of the government revenue. 76.6. The expression necessary so to do for protecting the government revenue implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment. 76.7. The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue. 76.8. In the facts of the present case, there was a clear nonapplication of mind by the Joint Commissioner to the provisions of Section 83, rendering the provisional attachmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee against arbitrary State action. The pursuit of a legitimate State aim ensures that the law does not suffer from manifest arbitrariness. Legitimacy, as a postulate, involves a value judgment. Judicial review does not reappreciate or second guess the value judgment of the legislature but is for deciding whether the aim which is sought to be pursued suffers from palpable or manifest arbitrariness. The third requirement ensures that the means which are adopted by the legislature are proportional to the object and needs sought to be fulfilled by the law. Proportionality is an essential facet of the guarantee against arbitrary State action because it ensures that the nature and quality of the encroachment on the right is not disproportionate to the purpose of the law. Hence, the threefold requirement for a valid law arises out of the mutual interdependence between the fundamental guarantees against arbitrariness on the one hand and the protection of life and personal liberty, on the other. The right to privacy, which is an intrinsic part of the right to life and liberty, and the freedoms embodied in Part III is subject to the same restraints which apply to those freedoms. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y recoveries are made by the financial creditors who voted in favour of the resolution plan. Post amendment, Regulation 38 reads as follows: 38. Mandatory contents of the resolution plan. ( 1) The amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors. (1-A) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor. The aforesaid Regulation further strengthens the rights of operational creditors by statutorily incorporating the principle of fair and equitable dealing of operational creditors' rights, together with priority in payment over financial creditors. 78. For all the aforesaid reasons, we do not find that operational creditors are discriminated against or that Article 14 has been infracted either on the ground of equals being treated unequally or on the ground of manifest arbitrariness. (Emphasis supplied) The Apex Court holds that while looking into viability and feasibility of resolution, plans that are approved by the Commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e large sums of money. Debenture holders and fixed-deposit holders, unlike real estate holders, are involved in seeing that they recover the amounts that are lent and are thus not directly involved or interested in assessing the viability of the corporate debtors. Though not having the expertise or information to be in a position to evaluate feasibility and viability of resolution plans, such individuals, by virtue of being financial creditors, have a right to be on the Committee of Creditors to safeguard their interest. Also, the question that is to be asked when a debenture holder or fixed-deposit holder prefers a Section 7 application under the Code will be asked in the case of allottees of real estate developers is a debt due in fact or in law? Thus, allottees, being individual financial creditors like debenture holders and fixed-deposit holders and classified as such, show that they are within the larger class of financial creditors, there being no infraction of Article 14 on this score. 50. It was also argued that the UNCITRAL Legislative Guide, from which most of the provisions of the Code derive their succour, have also been breached. This is for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India, (2018) 18 SCC 575] and Pioneer [Pioneer Urban Land Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416 : (2019) 4 SCC (Civ) 1], he would highlight that having regard to the background in which the rights of the homebuyer were recognised as being one of that of a financial creditor, the amendment is clearly impermissible. He would also submit that having regard to the stand taken by the Government in the case before this Court, in particular, Pioneer [ Pioneer Urban Land Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416 : (2019) 4 SCC (Civ) 1] , the principles of promissory estoppel will apply and prevent enactment of the impugned provisions. He would expatiate and submit that the conditions which have been imposed render the remedy illusory. 25. Shri Piyush Singh, learned counsel pointed out that the real estate owners do not take any loan from financial institutions. They raise capital exclusively from the allottees virtually. In such circumstances, to put this threshold limit is clearly impermissible. He drew our attention to the judgment of the Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [Motilal Padampat Sug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rement in the law, at the time, when the application was filed, a new requirement is placed, even though, it is sought to be done by superimposing this condition, not at the time, when the application was filed, which really is the relevant time to determine the question of maintainability of the application, with reference to what the law provided in regard to who can move the application but at the stage of the new law. 436. However, we cannot also lose sight of the fact that the legislature has power to impair and take away vested rights. The limitation that flows, however, is from both Articles 14 and 19 read with Article 21. It flows from the doctrine that the action of the State must be fair and reasonable. The question, as to validity of the retrospective law, is a matter to be judged on a consideration of the facts, the period of time, over which the retrospective law operates, the impact of the law on the vested rights, the public interest, the nature of the right, which is the subject-matter of the law and the terms of the law. 437. The nature of the right involved in this case, is the right of the financial creditors to move an application under Section 7. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the petitioner seeking a declaration that Section 37A of the Act is unconstitutional are that the provision gives unbridled, unfettered, unguided, uncanalised, power to attach bank accounts on mere suspicion, without any reason to believe, and attachment of bank account does violate right to property under Article 300A of the Constitution of India. 29. The dominant submission is that there are no checks and balances in the power that can be exercised under Section 37A of the Act. I decline to accept the said submission on sheer examination of the said provision. Section 37A of the Act, which was given life in the year 2015, has six sub-sections. Sub-section (1) of Section 37A empowers the authorized officer prescribed by the Central Government who has reason to believe that any foreign exchange, foreign security or any immovable property, situated outside India, is suspected to have been held in contravention of Section 4, he may after recording the reasons in writing by an order, seize value equivalent, situated within India, of such foreign exchange, foreign security or immovable property. Sub-section (1) has several aspects upon receipt of information or otherwise. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks, but it is at every rung. The seizure order under sub-section (1) to become final has to pass muster through several ladders of administrative, quasi judicial and judicial review. In the considered view of this Court, Section 37A cannot be declared to be unguided, unfettered, unbridled, uncanalised, whimsical or irrational and can be acted upon only on suspicion in terms of Section 4 of the Act. Suspicion may trigger seizure. Seizure by itself is not final. There are several procedures after such seizure. Therefore, the submission that it is manifestly arbitrary is to be noted only to be rejected, as the very submission is fundamentally flawed. 32. The other submission is concerning the description that the seizure can be of value equivalent situated within India of such foreign exchange, foreign security or immovable property. This very submission is negatived by a three Judge Bench of the Apex Court in the case of VIJAY MADANLAL CHOUDHARY (supra). The Apex Court delineating value equivalent jurisprudence , on identical provisions under the Prevention of Money Laundering Act, has held as follows: 6. Mr. Kapil Sibal, learned senior counsel appearing for the private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly or indirectly, be derived as a result of any criminal activity relatable to scheduled offence does not transcend beyond the original provision. In that, the word relating to (associated with/has to do with) used in the main provision is a present participle of word relate and the word relatable is only an adjective. The thrust of the original provision itself is to indicate that any property is derived or obtained, directly or indirectly, as a result of criminal activity concerning the scheduled offence, the same be regarded as proceeds of crime. In other words, property in whatever form mentioned in Section 2(1)(v), is or can be linked to criminal activity relating to or relatable to scheduled offence, must be regarded as proceeds of crime for the purpose of the 2002 Act. It must follow that the Explanation inserted in 2019 is merely clarificatory and restatement of the position emerging from the principal provision [i.e., Section 2(1)(u)]. 299. We find force in the stand taken by the Union of India that the objectives of enacting the 2002 Act was the attachment and confiscation of proceeds of crime which is the quintessence so as to combat the evil of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icating Authority may serve a show cause notice of not less than 30 days on such person calling upon him to indicate the sources of his income, earning or assets or by means of which he has acquired the property attached under Section 5(1) of the 2002 Act. viii. The above SCN would require the noticee to produce evidence on which he relies and other relevant information and particulars to show cause why all or any of the property should not be declared to be the properties involved in money-laundering and confiscated by the Central Government . ix. Section 8(2) requires the Adjudicating Authority to consider the reply to the SCN issued under Section 8(1) of the 2002 Act. The Section further provides to hear the aggrieved person as well as the officer issuing the order of provisional attachment and also take into account all relevant materials placed on record before the Adjudicating Authority . After following the above procedure, the Adjudicating Authority will record its finding whether all the properties referred to in the SCN are involved in money-laundering or not. x. While passing order under Section 8(2) read with Section 8(3) there are two possibilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. xvi. The order passed by the Adjudicating Authority is also subject to appeal before the Appellate Tribunal which is constituted under Section 25 of the 2002 Act. Thus, the Adjudicating Authority is not the final authority under the 2002 Act as far as the attachment of proceeds of crime or property involved in money-laundering is concerned. xvii. Any person aggrieved of an order confirming the provisional attachment order can file an appeal before the Appellate Tribunal under Section 26(1) of the 2002 Act. The Appellate Tribunal on receipt of an appeal after giving the parties an opportunity of being heard will pass an order as it thinks fit either confirming or modifying or setting aside the provisional attachment order appealed against. xviii. Further, the order passed by the Appellate Tribunal is further appealable before the High Court under Section 42 of the 2002 Act on any question of fact or question of law arising out of the order passed by the Appellate Tribunal. 301. It is, thus, clear that the provision in the form of Section 5 provides for a balancing arrangement to secure the interest of the person as well as to ensure that the proceeds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voke the option available under sub-section (4) of Section 8. 367. Applying the principle underlying this decision, we have no hesitation in rejecting the challenge to Section 44 as unconstitutional being violative of Articles 14, 20(3) and 21 of the Constitution. (Emphasis supplied) Therefore, the submission that Section 37A is vague deserves to be rejected. It further becomes germane to notice the judgment of the Apex Court in the case of RAJ KUMAR SHIVHARE (supra) wherein the Apex Court has held as follows: 15. It is thus clear that Chapter V of FEMA, read with the aforesaid Rules, provides a complete network of provisions adequately structuring the rights and remedies available to a person who is aggrieved by any adjudication under FEMA. ... . 29. By referring to the aforesaid schemes under different statutes, this Court wants to underline that the right of appeal, being always a creature of a statute, its nature, ambit and width has to be determined from the statute itself. When the language of the statute regarding the nature of the order from which right of appeal has been conferred is clear, no statutory interpretation is wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory remedy available for the petitioner to approach the Appellate Tribunal under sub-section (5) of Section 37A of the Act. The petitioner was already before this Court in Writ Petition No. 9182 of 2022. This Court declined to entertain the petition and directed the petitioner to approach the Appellate Tribunal under sub-section (5) of Section 37A. It is a statutory remedy of filing an appeal against the order of the Competent Authority who confirms the seizure order passed by the Authorised Officer. Despite the statutory remedy of appeal being available, it is not the case that no writ petition would be maintainable. But, the writ petition would not become entertainable, as it is the discretionary remedy that this Court would exercise to entertain a petition or otherwise even if it is maintainable, in the light of the aforesaid reasons and the statutory mandate of filing an appeal, the petition would not merit any consideration, as any further observation by this Court qua merit of the matter would seriously prejudice the case of the petitioner before the Appellate Tribunal. 35. The only reason that is projected by the petitioners to knock at the doors of this Court despi ..... 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