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Synopsis

A division bench of the Bombay High Court, consisting of Justice GS Kulkarni and Justice Rajesh S Patil, has ordered the Enforcement Directorate to refund Rs. 1,48,000 along with 6% interest to a cloth store owner, 35 years after the money was seized. The court observed that the cloth store owner was deprived of the money on a completely baseless and unjustifiable ground.

“This is a clear case where the Petitioner appears to have been deprived of his amount of Rs.1,48,000/- without authority of law on a totally untenable basis. The Petitioner could have utilized the said amount, the value of which at the relevant time was substantial. Considered from all angles, the Respondents could not have retained the said amount depriving the Petitioner from his legitimate entitlement. We would, hence be justified in allowing interest to the Petitioner in allowing this Writ Petition,” the bench observed.

The officers of the Enforcement Directorate conducted a raid on cloth stores and seized an amount of Rs. 1,78,000 in Indian currency from the cash box, along with several documents. Subsequently, a Show Cause Notice was issued on 5th May 1989, alleging contravention of Section 9(1)(b) and Section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 (FERA).

The Notice accused the petitioner of receiving Rs. 45,000 from individuals residing outside India and making payments on behalf of a person residing outside India. The cloth store owner refuted the allegations made in the Show Cause Notice and provided an explanation regarding the Indian currency found in the stores.

Despite this, the Assistant Director of Enforcement passed an order finding the petitioner guilty of the offences under Section 9(1)(b) and Section 9(1)(d) of FERA, imposing a penalty of Rs. 15,000 on each count. Consequently, the Enforcement Officer deducted Rs. 30,000 from the seized amount of Rs. 1,78,000, forwarding the remaining balance of Rs. 1,48,000 to the Income Tax Department.

The cloth store owner filed an appeal with the FERA Appellate Board, which allowed the appeal on 25th February 1992 after hearing the parties.

Meanwhile, the Assistant Director of Enforcement sent another Show Cause Notice to the petitioner, alleging that he had received Rs. 1,78,000 from a person in India on behalf of a person residing outside India and was supposed to make a payment of Rs. 2,89,000 to various individuals on the instructions of a certain individual residing outside India.

The petitioner replied to the notice; however, the Deputy Director of Enforcement Directorate passed an order holding the petitioner guilty under Section 9(1)(d) and Section 64(2) of FERA, imposing a penalty of Rs. 22,000 on the petitioner.

In separate proceedings under the Income Tax Act, the tribunal found that the seized cash of Rs. 1,78,000 was reflected in the cash book and Balance Sheet of the firm M/s. Zaibash Cloth Stores.

The petitioner wrote a letter to the Appellate Tribunal explaining his poor financial condition, which prevented him from attending the hearing before the FEMA Appellate Tribunal in Delhi. He requested for the hearing to be held in Mumbai instead. Despite his request, the hearing was conducted in his absence in Delhi, and in 2004, the FEMA Appellate Tribunal dismissed his appeal.

Following the dismissal, the petitioner approached the Bombay High Court seeking a refund of Rs. 1,48,000.

The high court while allowing the petition observed that there was nothing on record to prove that the Petitioner had committed an offence under Section 9 (1) (d) of the FERA Act.

“In fact, there is nothing on record to prove that the Petitioner had committed an offence under Section 9 (1) (d) of the FERA Act. No case is made out for holding the Petitioner guilty for violation of Section 9(1)(d) r/w Section 64(2) of the Customs Act. The seized documents do not corroborate the fact of receipt and distribution of said amount by the Petitioner” the court observed. 

Case title: Shri Abdul Aziz Ahmed Ansari vs UOI