Mumbai: Thirty-five years after the Enforcement Directorate (ED) raided a cloth store in Madanpura and seized Rs1.78 lakh, the Bombay High Court has directed the agency to return the amount with 6% interest.
The raid was conducted on May 12, 1988 at Abdul Aziz Ahmed Ansari’s store in Madanpura and the cash box containing the aforementioned amount was seized along with a few documents. Almost a year later, on May 5, 1989, the ED issued a show cause notice alleging contravention of several provisions of the Foreign Exchange Regulation Act, 1973 (FERA). It said that Ansari had received money from persons residing outside India and made payment on their behalf.
Ruling by Appellate Tribunal for Foreign Exchange
On April 24, 2004, the Appellate Tribunal for Foreign Exchange upheld the seizure and the penalty of Rs15,000 on two counts imposed by the Assistant Director of Enforcement. The officer deducted the total penalty of Rs30,000 from Rs 1.78 lakh and forwarded the balance amount of Rs1.48 lakh to the Income Tax Department.
Ansari challenged the tribunal’s order in the HC on July 21 and denied the allegations, furnishing an explanation regarding money found in his store.
Ansari then appealed before the FERA Appellate Board on February 25, 1992, and received a favourable ruling but the agency official issued a fresh notice under FERA on May 25, 1990. The Deputy Director of ED, on 16 May, 1995, held Ansari guilty and imposed a penalty of Rs22,000.
Meanwhile, Ansari’s appeal filed in 1993 under the Income Tax Act was allowed by the IT commissioner on July 16, 2004. It was held that the seized cash reflected in the cash book and balance sheet of the firm M/s. Zaibash Cloth Stores.
On June 11, 2000, the Foreign Exchange Management Act (FEMA) was enacted, thereby replacing the FERA. On dissolution of the FERA Board, and on constitution of FEMA Appellate Tribunal, the appeal was transferred to the FEMA Appellate Tribunal. However, the FEMA tribunal dismissed Ansari’s appeal which he challenged before the HC.
The HC noted that the ED had returned the money to the IT department, “proving that the agency had not held the petitioner liable to have committed offence under the FERA Act”. Moreover, after being unsuccessful in the first round, the ED issued a second show cause notice. The HC bench said that there is nothing on record to prove that Ansari committed an offence under provisions of the FERA Act.
The court said that this is a clear case where the petitioner appears to have been deprived of his money without authority of law on a totally untenable basis. “The petitioner could have utilised the said amount, the value of which at the relevant time was substantial,” the bench said. The ED will now have to return within four weeks the seized amount with simple interestfrom May 1988, which totals to Rs3,10,000.