Writ Petition (Civil) No. 3908/2008 Page 1 of 9 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 O R D E R 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 Writ Petition (Civil) No. 3908/2008 Page 2 of 9 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, 3rd 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, Writ Petition (Civil) No. 3908/2008 Page 3 of 9 however, stated that they had informed Income Tax Department about the said seized vide letter date 30th 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 Writ Petition (Civil) No. 3908/2008 Page 4 of 9 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 21st 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 20th 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. Writ Petition (Civil) No. 3908/2008 Page 5 of 9 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. 7th 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 Writ Petition (Civil) No. 3908/2008 Page 6 of 9 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 26th September 2006 followed by a reminder dated 20th July 2007. 10. In the affidavit filed by the ED in this Court on 24th April 2009 it has been stated by the Assistant Director, ED that search of the premises of one Subhash Gupta was conducted on 11th 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 Writ Petition (Civil) No. 3908/2008 Page 7 of 9 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 Writ Petition (Civil) No. 3908/2008 Page 8 of 9 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 28th 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 Writ Petition (Civil) No. 3908/2008 Page 9 of 9 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