Gauri Shanker vs Union Of India & Anr.
2010 Latest Caselaw 5639 Del

 IN THE HIGH COURT OF DELHI AT NEW DELHI

R-7
                   WRIT PETITION (CIVIL) 3908 of 2008


 GAURI SHANKER                       ..... Petitioner
             Through Mr. Akshay Anand with
             Ms. Sonam Nagrath and
             Mr. Deepak Kumar, Advocates

                   versus

 UNION OF INDIA & ANR                              ..... Respondents
               Through: None.


  CORAM: JUSTICE S. MURALIDHAR

                               ORDER

10.12.2010

1. Aggrieved by the non-return of 6 kgs of gold and Indian currency

amounting to Rs. 1,49,000/- seized from the business premises of the

Petitioner on 11th July 2005 by the Officers of the Enforcement

Directorate („ED‟) the Petitioner has approached this Court under

Article 226 of the Constitution.

2. The case of the Petitioner is that he is a Director of M/s. J.P. Goel &

Sons Pvt. Limited. On 11th July 2005 the business premises of the

Petitioner were searched by the Officers of the ED. During the course

of search, 6 kgs of gold and Indian currency in the sum of Rs.

1,49,000/- were seized. A copy of the panchnama dated 11th July 2005

has been enclosed. It is submitted that thereafter, despite numerous

representations of the Petitioner for release of the gold as well as the

Indian currency, there was no response from the ED. The Petitioner

contends that the seizure was illegal since Section 3 of the Foreign

Exchange Management Act, 1999 („FEMA Act‟) permits seizure only

of foreign exchange. In other words, it is submitted that officers of the

ED had no authority to seize either gold or the Indian currency. Despite

the passage of over four and half years since then not even a show

cause notice has been issued to the Petitioner.

3. It is further submitted that although search proceedings were

conducted under Section 37 of the FEMA read with Section 132 of the

Income Tax Act, 1961 („IT Act‟), there was no authority to detain

indefinitely the seized gold and Indian currency without issuing any

show cause notice to the Petitioner.

4. On 22nd July 2009 the following order was passed by this Court:

"1. On 11th July 2005 the Enforcement Directorate had conducted search under the Foreign Exchange Management Act, 1999 in the premises of the Petitioner located at 1326, 3 rd Floor, Main Road, Chandni Chowk, Delhi and seized 6 kg. Gold and Indian Currency amounting to Rs. 1,49,000/-.

2. The Petitioner was compelled to file this writ petition in 2008 as the Respondents had failed to release 6 kg. of gold and Indian Currency though no violation of Foreign Exchange Management Act, 1999 was alleged and the seized material was not subject matter of any adjudication proceedings before the Respondent- Enforcement Directorate.

3. In the counter affidavit filed by the Respondents they have admitted that 6 kg. of gold and Rs. 1,49,000/- seized from the premises of the Petitioner are not subject matter of any adjudication proceedings pending under the said Act. It is,

however, stated that they had informed Income Tax Department about the said seized vide letter date 30 th October 2007. The counter affidavit, however, does not state whether Income-Tax Department had responded to the said letter. It is stated that reminder dated 28th May 2008 was sent. It is apparent that the reminder was sent after copy of this writ petition was served on the Enforcement Directorate.

4. Learned counsel for the Enforcement Directorate states that Income-Tax Department had issued notice dated 20th July 1999 with the warrant of authorization under Section 132A of the Income-Tax Act, 1961 requisitioning 6 kg gold bars.

5. Issue notice to the Standing Counsel for the Income-Tax Department to explain why they had delayed issue of notice. The Respondent-Enforcement Directorate will also file an affidavit in this Court explaining and stating whether provisions of the Income-Tax Act, 1961 were complied with to retain the seized material in accordance with law. The Respondent-Enforcement Directorate will also explain their stand why Rs. 1,49,000/- have not been returned to the Petitioner though the said amount has not been requisitioned by the Income-Tax Department. The Respondent-Enforcement Directorate will produce original files in this Court. Affidavit will be filed by the Respondents within four weeks.

6. List on 1st September 2009."

5. On the next date learned Standing counsel for the Income-Tax

Department („IT Department‟) appeared and she was furnished a copy

of the paper book. Thereafter, the affidavit was filed by the Assistant

Director of Income Tax (Investigation), Units VI(2), New Delhi dated

3rd December 2009. It was stated that by a letter dated 30th October

2007 the ED informed the IT Department that search had been

conducted on 11th July 2005 at the business premises from where the

gold bars and cash were seized. It is then stated that due to pendency of

the investigation by the ED, and insufficiency of material, no action

under Section 132A of the IT Act was initiated at that stage. The IT

Department denied receipt of the letter dated 28th May 2008 was

received from the ED. It is stated that thereafter letters dated 21 st May

2009 and 23rd June 2009 were written by the IT Department to the ED

requesting for information for taking further action. By a letter dated

16th July 2009 the ED informed the IT Department of the pendency of

the present writ petition. It is stated that on receipt of the said letter, the

warrant of authorization under Section 132 A of the IT Act was issued

on 17th July 2009 by the Director of Income Tax (Investigation). On the

execution of warrant of authorization on 20 th July 2009, six gold bars

weighing 6 kgs were handed over to IT Department on 28th August

2008. Cash amounting to Rs. 6,99,000/- was also handed over to the IT

Department on 31st August 2009. However, the documents

requisitioned from the ED were not handed over to the IT Department.

6. However, what action is proposed to be taken by the IT Department

is not clear from the above affidavit. It must be recalled that the seizure

of both the gold and cash took place way back on 11th July 2005 and for

over five years now even no show cause notice has been issued to the

Petitioner. This Court has not been shown the legal basis on which the

said gold and cash could be detained for over five years by the

Respondents without even a show cause notice being issued to the

person or persons from whom they have been seized.

7. After the petition was admitted it was listed for final hearing first on

13th September 2010 and then on 19th October 2010 and 28th October

2010. But on none of these dates was there any appearance on behalf of

the Respondents.

8. On 22nd November 2010 the submissions of learned counsel for the

Petitioner were heard but no one appeared on behalf of the

Respondents. Notice without process fee was directed to issue to

learned counsel for the IT Department as well as learned counsel for the

ED, who had earlier appeared. They were also asked to be informed

telephonically. The next date was fixed on 6th December 2010. Despite

service of notice on learned Standing counsel and despite being

informed telephonically, none appeared for Respondents on 6th

December 2010 or the next date i.e. 7 th December 2010. In the

circumstances, this Court was constrained to conclude the hearing and

proceed on the basis of the pleadings as far as the Respondents are

concerned.

9. The panchnama dated 11th July 2005 recorded the fact that during the

course of the search, one Tulsi Ram s/o Moolgi Bhai entered the

premises and as a result of his personal search Indian currency in the

sum of Rs. 5,50,000/- and documents in five loose sheets were

recovered. This explains how a total sum of Rs. 6,99,000/- (i.e. Rs.

1,49,000/- seized from the Petitioner‟s business premises and Rs.

5,50,000/- seized from Mr. Tulsi Bhai) was handed over by the ED to

the IT Department on 31st August 2009. As regards the business

premises of the Petitioner, the presence of Shri Shankar Lal Goel as

well as the Petitioner who happens to be his brother is shown. The

Panchnama has been signed by Shri Shankar Lal Goel in the presence

of the witnesses. The panchnama also shows the seizure of the six bars

of gold and cash of Rs. 1,49,000/-. A copy of the letter dated 19th July

2006 written by the Petitioner Gauri Shankar to the Assistant Director,

ED has been placed on record in which the Petitioner claims to have

visited the office of the ED on 20th July 2005 with purchase documents

relating to the seized gold. The Assistant Director, however, was stated

to be out of station. The copy of the letter addressed to him was also not

accepted in the office. It is claimed that the copy of the letter along with

copies of purchase vouchers was also sent to the ED by speed post. In

compliance with the summons issued by the ED, the Petitioner visited

its office on 1st February 2006 and 15th February 2006. No

communication was received thereafter. A reminder was sent on 21st

August 2006. The Petitioner made a representation to the Secretary,

Department of Revenue, Ministry of Finance on 26 th September 2006

followed by a reminder dated 20th July 2007.

10. In the affidavit filed by the ED in this Court on 24 th April 2009 it

has been stated by the Assistant Director, ED that search of the

premises of one Subhash Gupta was conducted on 11 th July 2005

resulting in seizure of Rs. 40 lakhs. As far as the search of the premises

of Shri Shankar Lal Goel is concerned, the seizure of 6 kgs of gold as

well as the Indian currency has been confirmed. Shri Shankar Lal Goel

is stated to have made a statement on 11th July 2005 admitting to

making payments totaling Rs. 14,50,000/- to Shri Subhash Gupta. The

same is alleged, by the ED, to be unaccounted money. It is further

stated that a joint show cause notice dated 13th June 2008 has been

issued under the FEMA to Shri Shankar Lal Goel with regard to

making payment of Rs. 14,50,000/- to Shri Subhash Gupta. The

affidavit proceeds to state in para 5 of the affidavit as under:

"5. That no case in respect of seized six kg. of gold was made out. That during the course of the seizure Shri Gauri Shankar Goyal brother of Shri Shankar Lal Goyal was also present."

11. It is then stated in para 6 as under:

"6.That Directorate of Enforcement referred the matter of seizure of six kg gold bars to the Income Tax Department vide letter dated 30th October 2007 for taking such action as deemed fit. That the Income Tax Department was again intimated about the seizure for taking such action as deemed fit vide letter dated 28th May 2008."

12. What is clear from the above affidavit is that admittedly there was

no legal justification for seizing the 6 kgs of gold from the business

premises of the Petitioner by the ED. There was no FEMA violation

in that regard. As regards the seizure of the cash of Rs. 1,49,000/-

again no legal justification has been shown by the ED. The case was

simply referred to the IT Department for taking further action, nearly

four years after the seizure.

13. It is not understood how, despite not issuing any legal justification

for detention of the Indian currency amounting to Rs. 1,49,000/- and 6

kgs of gold, it was retained by the ED till 28th August 2009 i.e. for

over four years. The affidavit dated 19th November 2009 filed by the

ED admitted that 6 kgs of gold as well as the seized Indian currency

were handed over to the IT Department only on 28 th August 2009. On

its part the IT Department admitted to thereafter having received both

the gold as well as the Indian currency and admitted having issued the

warrant of authorization under Section 132A of the IT Act.

14. There is no indication as to what the IT Department has done after

issuing the warrant on 17th July 2009 under Section 132 A of the IT

Act. It has not placed on record any of the orders passed by it

justifying the issuance of such warrant or the steps taken by it

pursuant to the issuance of such warrant. In other words, the legal

basis for detention by the IT Department of 6 kgs gold bars and cash

of Rs. 1,49,000/-, which obviously was not requisitioned by the IT

Department, has not been shown.

15. Despite service of notice on learned standing counsel for

Respondents, none has appeared. In the circumstances, the only

conclusion that can be drawn is that the Respondents do not have a

valid explanation for continuing to detain the 6 kgs gold bars and cash

in the sum of Rs. 1,49,000/- seized from the business premises of the

Petitioner on 11th July 2005.

16. A perusal of Section 37 of the FEMA reveals that it cannot be

invoked to seize Indian currency. The ED had itself admitted before

this Court that there was no basis for seizure by the ED of the 6 kgs of

gold. As far as Section 132A of the IT Act is concerned, it does not

permit indefinite detention of the seized items by the IT Department

without even issuing show cause notice to explain the legal basis of

detention of the seized item.

17. In the circumstances, the writ petition is allowed and a direction

issued to the Respondent IT Department to immediately release the 6

kgs of gold as well as the Indian currency amounting to Rs.1,49,000/-,

which was seized from the business premises of the Petitioner and his

brother Shankar Lal Goel within eight weeks from today. The warrant

issued by the IT Department on 27th July 2009 is hereby quashed.

18. The petition is disposed of with the above terms.

S. MURALIDHAR, J.

DECEMBER 10, 2010 rk