Supreme Court of India
UNION OF INDIA AND ANR.versusVENKATESHAN S. AND ANR.
- Citation
- 2002 INSC 216
- Decided
- 22 April 2002
- Disposal
- Appeal(s) allowed
- Bench
- M B SHAH
Holding
Preventive detention under COFEPOSA is justified by any activity prejudicial to foreign‑exchange conservation, even if that activity is only a civil wrong under FEMA, and the High Court’s view does not effect an implied repeal of Section 3 of COFEPOSA.
Summary
The Union of India detained B. Sankar under Section 3 of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA) for alleged hawala transactions involving Rs. 42.9 lakh. The Karnataka High Court set aside the detention, holding that the underlying offence under the repealed Foreign Exchange Regulation Act, 1973 (FERA) had become a civil wrong under the Foreign Exchange Management Act, 1999 (FEMA) and therefore could not justify preventive detention. On appeal, the Supreme Court examined whether COFEPOSA requires the activity to be a criminal offence and whether the High Court’s view implied a repeal of Section 3 of COFEPOSA. The Court held that COFEPOSA’s preventive detention power does not depend on the activity being a criminal offence; a violation of FEMA, though civil, is illegal and prejudicial to foreign‑exchange conservation and thus suffices for detention. It also reiterated the presumption against implied repeal, finding no repugnancy between COFEPOSA and FEMA. Consequently, the High Court’s order was set aside, but as the detention period had elapsed, no further detention was ordered.
Issues considered
- Whether a person can be preventively detained under COFEPOSA for conduct that is no longer a criminal offence after the repeal of FERA and its replacement by FEMA.
- Whether the High Court's judgment amounts to an implied repeal of Section 3 of COFEPOSA.
- Whether the activity need be an offence punishable with imprisonment to justify preventive detention under COFEPOSA.
Legislation cited
Subjects
preventive detentionCOFEPOSAFEMAFERAimplied repealforeign exchange violationstatutory interpretationhawala
Judgment
UNION OF INDIA AND ANR.
v.
VENKA TES HAN S. AND ANR.
APRIL 22, 2002
B [M.B. SHAH AND D.M. DHARMADHIKARI, JJ.] ·
Conservation of Foreign Exchange and Prevention of Smuggling
Activities Act, 1974-Section 3-'-Detention under for violation of FERA-
C Detention quashed by High Court as the preventive activity had ceased to be
criminal activity in view of repeal of FERA, the same being replaced by
FEMA-On appeal-Held, quashing of detention not justified-The view of
High Court would result in implied repeal of substantial part of Section 3-
Foreign Exchange Regulation Act, 1973-Foreign Exchange Management Act,
1999.
D
Interpretation of Statutes:
Implied repeal-Courts not to interpret implied repeal unless provisions
are plainly repugnant to each other-There is presumption against implied
repeal-Evidence-Presumption.
E
Detenu-respondent was detained under Conservation of Foreign
Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA Act)
to prevent him from acting prejudicial to the augmentation of foreign
exchange.
F The detention order was challenged and the same was set aside by High
Court as not justified since the preventive activity violative of Foreign
Exchange Regulation Act, 1973, (FERA) had ceased to be criminal activity
on repeal of the Act which was replaced by Foreign Exchange Management
Act, 1999 (FEMA). The judgment of High Court was passed after 9 months
from the date of detention orde.-.
G
In appeal to this Court appellant contended that order of High Court
was erroneous as the same was passed on wrong interpretation of COFEPOSA
Act For passing detention order, it is not necessary that the authority should
be satisfied as to indulgence of the detenu who had committed act prohibited
H under FERA or FEMA, in similar activities.
268
U.0.1. v. VENKATESHAN S. 269
- Deleon-respondent contended that since the violation of FEMA is only A
a civil wrong, a person cannot be preventively detained under COFEPOSA
Act for violation of FERA after its repeal•
. At the time of hearing the period of detention was over.
Allowing the appea~ the Court B
HELD: 1.1. The power of detention is a preventive measure. It does not
r partake in any manner of the nature of punishment. It is taken by way of
precaution to prevent mischief to the community. Hence, the order passed
by the High Court holding that what was considered to be the criminal
violation of Foreign Exchange Regulation Act, 1973 has ceased to be criminal C
offence under Foreign Exchange Management Act, 1999 the detention order
cannot be continued, is not justified. [275-C; 276-AJ
Poonam Lata v. Ml. Wadhawan and Ors., (1987) 3 SCC 347; Khudiram
Dosv. The State of West Bengal and Ors., [1975) 2 SCC 81 and Haradhan Saha D
v. The State of West Bengal and Ors., [1975) 3 SCC 198, referred to.
.;
.) 1.2. If the activity of any person is prejudicial to the conservation or
augmentation of foreign exchange, the authority is empowered to make a
detention order against such person and COFEPOSA Act does not
contemplate that such activity should be an offence. (274-E-FJ E
1.3. If the view taken by the High Court and the contentions of
respondent that he could not be detained since the preventive activity violative
of Foreign Exchange Regulation Act, 1973 had ceased to be criminal activity
on repeal of the Act, the same being replaced by Foreign Exchange
Management Act, 1999 are accepted, it would result in implied repeal of sub- F
stantial part of Section 3 of Conservation of Foreign Exchange and Prevention
of Smuggling Activities Act, 1974. One of the established principles of
interpretation of the statutory provisions is that courts as a rule lean against
implied repeal unless the provisions are plainly repugnant to each other. There
is also a presumption against repeal by implication; and the reason of this G
rule is based on the theory that the legislature while enacting a law bas
complete knowledge of the existing laws on the same subject matter, and,
therefore, when it does not provide a repealing provision it gives out an
intention not to repeal the existing legislation. (276-B-Dj
Municipal Council Palai v. T.J Joseph. AIR (1963) SC 1561 and Municipal H
270 SUPREME COURT REPORTS [2002] 3 S.C.R.
A Corporation of Delhi v. Shiv Shanker, [1971) l SCC 442, referred to.
2. In view of the facts and circumstances of the case, this would not be
a fit case for directing the detenu to surrender to undergo the remaining
period of detention. [277-A]
B CRIMINAL APPEALL TE JURISDICTION : Criminal Appeal No.
540 of 2002. ·
-y
From the Judgment and Order dated 2.11.2000 of the Karnataka High
',..
Court in W.P. (HC) No. 41 of 2000.
c P.P. Malhotra Ashok Bhan and B. Krishna Prasad for the Appellants.
Tripurari Ray, Maqsood Khan and K.K. Mani for the Respondents.
The Judgment of the Court was delivered by
SHAH, J. Leave granted.
D
By order dated 8th February 2000, the Joint Secretary, Ministry of
Finance, Department of Revenue, Government of India made a detention
order under Section 3 (I) of the Conservation of Foreign Exchange and
)...
.
Prevention of Smuggling Activities Act, 1974 (hereinafter referred to as
E "COFEPOSA Act") directing that one B. Sankar be detained and kept in
custody with a view to prevent him from acting in any manner prejudicial to
the augmentation of foreign exchange. The said order was served upon detenu
/
on 15th February, 2000 along with grounds of detention and copies of the
documents relied upon by the Detaining Authority. That order was challenged
by filing Writ Petition (HC) No. 41 of2000 before the High Court ofKamataka
y
F at Bangalore. By the impugned judgment and order dated 2nd November, '
2000, the High Court quashed and set aside the detention order on the ground
that what was considered to be criminal violation of the Foreign Exchange
Regulation Act, 1973 (hereinafter referred to as "FERA") has ceased to be so
on the repeal of FERA which is replaced by the Foreign Exchange
G Management Act, 1999 (hereinafter referred to as "FEMA"). That order is
challenged by filing this appeal.
In the detention order, it has been stated that upon receipt of information
~·
that B. Sankar was indulging in receiving and making payments in India on
behalf of a resident of Riyadh (Saudi Arabia), a search was conducted at
H detenu's residential premises and also at his office premises on 22nd and
U.0.1. v. VENKATESHAN S. [SHAH, J.] 271
23rd September, 1'}99. As a result of the search, Indian currency of about Rs. A
42,90,000 (forty tWo lakhs !ind ninety thousand) was seized. In his statement
recorded by the officers, detenu stateP that during the first week of June,
1999 one Rafeeq, who was his friend, met him ib his office and infonned that
he was doing business of collecting Saudi Riyals from Indians in Saudi
Arabia and in equivalent thereof he was making arrangements for delivery of
Indian rupees to various persons in India; that ifhe assists him in this business B
and receives Yndian rupees as per his instructions and distributes the respective
amounts to various persons as per his instructions, he would pay a commission
of Rs. 200 for every one lakh of rupees received and distributed by him. To
that proposal, detenu agreed and various transactions took place in pursuance
of the aforesaid talks. Various documents were also seized from his office C
premises. It is also stated that when asked about the seized currency, detenu
in his statement inter alia admitted that he had received it from one unknown
person in Bangalore as per instructions of his friend, Mr. Rafeek, a resident
of Riyadh. He also stated that his friend Rafeeq from Riyadh telephonically
infonned him to receive a sum of Rs. 42,90,000 in his name at Bangalore and D
deliver it to the persons, whose details were to be furnished by his friend
Rafeeq. It is alleged that in a very short span, the detenu had collected Rs.
1,67,90,000 and had distributed Rs. 1,25,00,000 and was doing hawala
transactions. On the basis of the said material, the detention order was passed.
At the time of hearing of this appeal, learned counsel for the parties E
admitted that period of detention is over. Still however, learned counsel for
--- the appellant Union of India submitted that the interpretation of eOFEPOSA
Act by the High Court is erroneous as it has not considered relevant part of
Section 3 of the COFEPOSA Act. He submitted that the language of Section
3 does not provide for any pending criminal action against the person to be
detained and the nature of detention being preventive, it is not necessary in F
law that the person sought to be detained should have committed a criminal
offence punishable with imprisonment. For passing detention order, detaining
authority should be satisfied that there is a possibility of the person who has
committed an act which is prohibited under FERA or FEMA indulging in
similar activity. He submitted that the question whether the act is punishable G
with fine or penalty of imprisonment is immaterial. For this purpose, he
relied upon the decisions in Khudiram Das v. The State of West Bengal and
Ors.. [ 1975] 2 sec 81 and Haradhan Saha v. The State of West Bengal and
Ors., [1975] 3 sec 198.
- Learned counsel for the respondent, on the other hand, submitted that H
272 SUPREME COURT REPORTS (2002] 3 S.C.R.
A in view of the fact that FERA has been repealed and in its place FEMA has
been enacted by virtue of which violations of the provisions of the FEMA are
now only civil wrongs, a person cannot be continued to be preventively
detained under COFEPOSA Act for violations of FERA after its repeal.
According to him, contravention of FEMA is not an offence and a person
B cannot be prosecuted or punished for violations of any of its provisions. He
referred to the Preamble of FEMA which provides that "i1.is an Act to
consolidate and amend the law relating to Foreign Exchange with the objective
of facilitating external trade and payments and for promoting the orderly
development and maintenance offoreign exchange in India". He also placed
reliance on certain decisions of this Court which, in our view, are not relevant
C and hence not discussed.
For appreciating these contentions, we would refer to relevant provision
of Section 3 of the COFEPOSA Act, which reads thus: - -.
"3. Power to make orders detaining certain persons. (I) The Central
D Govem~ent or the State Government or any officer of the Central
Government, not below the rank of a Joint Secretary to that
Government, specially empowered for the purposes of this section by >-..
'-
that Government, .or any officer of a State Government, not below ~e
rank of a Secretary to that Government, specially empowered for the
purposes of this section by that Government, may, if satisfied, with
E respect to any person (including a foreigner), that, with a view to
preventing him from acting in any manner prejudicial to the
conservation or augmentation of foreign exchange or with a view to
preventing him from
-
(i) smuggling goods, or ;-:-
F "
(ii) abetting the smuggling of goods, or
(iii) engaging in transporting or concealing or keeping smuggled goods,
or
G (iv) dealing in smuggled goods otherwise than by engaging in
transporting or concealing or keeping smuggled goods, or
;; ,
(v) harbouring persons engaged in smuggling goods or in abetting the '
~
smuggling of goods, it is necessary so to do, make an order directing
that such person be detained:"
H This section empowers the authority, if satisfied, with respect to any -
U.0.1. v. VENKATE SHAN S. [SHAH, 1.) 273
person (including a foreigner), that with a view to preventing him from A
acting in any manner prejudicial to the conservation or augmentation of
foreign exchange may make an order directing his detention. It is true that
FERA is repealed and is substituted by FEMA. One of the objectives of
FEMA is also for promoting orderly development and maintenance of foreign
exchange market in India. For this purpose, Chapter II provides for "Regulation B
and Management of Foreign Exchange". Section 3 specifically prohibits
dealing in foreign exchange without the general or special permission of the
Reserve Bank. It reads thus: -
"3. ~ling in foreign exchange, etc. Save as otherwise provided in
this Act, rules or regulations made thereunder, or with the general or C
special permission of the Reserve Bank, no person shaJI
(a) deal in or transfer any foreign exchange or foreign security to
any person not being an authorised person;
(b) make any payment to or for the credit of any person resident
outside India in any manner; D
(c) receive otherwise through an authorised person, any payment by
order or on behalf of any person resident outside India in any
manner;
Explanation-For the purpose of this clause, where any person in, or E
resident in, India receives any payment by order or on behalf of any
person resident outside India through any other person (including an
authorised person) without a corresponding inward remittance from
any place outside India, then, such person shall be deemed to have
received such payment otherwise than through an authorised person;
F
(d) enter into any financial transaction in India as consideration for
or in association with acquisition or creation or transfer of a right
to acquire, any asset outside India by any person.
Explanation-For the purpose of this clause, " financial transaction"
means making any payment to, or for the credit of any person, or G
receiving any payment for, by order or on behalf of any person, or
drawing, issuing or negotiating any bill of exchange or promissory
note, or transferring any security or acknowledging any debt "
Further, Section 4 specifically provides that no person resident in India shall
acquire, hold, own or possess or transfer any foreign exchange, foreign security H
274 SUPREME COURT REPORTS (2002} 3 S.C.R
A or any immovable property situated outside India, except as otherwise provided
under the Act. For the contravention of the Act, rules and regulations, penalty
is provided under Section 13 of the Act. This would certainly mean that
dealing in foreigp exchange de hors the statutory provisions, rules and ,..
regulations would be illegal. No doubt, the Act nowhere provides that such
B transactions constitute an offence. The High Court has arrived at the conclusion
that as the act of detaining ceases to be an offence after the repeal of FERA,
respondent's detention was required to be quashed.
Hence, the limited question would be whether a person who violates 1
the provisions of the FEMA to a large extent can be detained under the
C preventive detention Act, namely, COFEPOSA Act? As stated above, the
object of FEMA is also promotion of orderly development and maintenance
of foreign exchange market in India. Dealing in foreign exchange is regulated
by the Act. For violation of foreign exchange regulations, penalty can be
levied and such activity is certainly an illegal activity, which is prejudicial to
conservation or augmentation of foreign exchange. From the objects and
D reasons of the COFEPOSA Act, it is apparent that the purpose of the Act is
to prevent violation of foreign exchange regulations or smuggling activities
which are having increasingly deleterious effect on the national economy and ~
thereby serious effect on the security of the State. Section 3 of the COFEPOSA "
Act, which is not amended or repealed, empowers the authority to exercise
E its power of detention with a view to preventing any person inter alia from
acting in any manner prejudicial to the conservation or augmentation of
foreign exchange. If the activity of any person .is prejudicial to the conservation
or augmentation of foreign exchange, the authority is empowered to make a
detention order against such person and the Act does not contemplate that
such activity should be an offence.
F
COFEPOSA Act contemplates two situations for exercise of power of
preventive detention (a) to prevent violation of foreign exchange regulations; ,
and (b) to prevent smuggling activities. Under Section 2 (e) ofCOFEPOSA
Act, 'smuggling' is to be understood as defined under clause (39) of Section
2 of the Customs Act, 1962 which provides that 'smuggling' in relation to
G any act or omission will render such goods liable to confiscation under Section
111 or Section 113. Section 111 contemplates confiscation of improper
"Jiii
imported goodslllld Section 113 contemplates confiscation of goodS attempted )
to be improperly exported. This has nothing to do with the penal provisions . .,.
i.e. Sections 135 and 135A of the Customs Act which provide for punishment
H of an offence relating to smuggling activities. Hence, to contend that for
-f-
U.0.l. v. VENKATESHAN S. [SHAH, J.] 275
exercising power under COFEPOSA Act for detaining a person, he must be A
involved in criminal offence is not born out by the said provisions.
Other important aspect is that COFEPOSA Act and the FEMA occupy
different fields. COFEPOSA Act deals with preventive detention for violation
of foreign exchange regulations and FEMA is for regulation and management
of foreign exchange through authorised person and provides for penalty for B
contravention of the said provisions. The object as stated above is for
promoting orderly development and maintenance of foreign exchange market
,f in India. Preventive detention law is for effectively keeping out of circulation
the detenu during a prescribed period by means of preventive detention. {Re.
: Poonam Lata v. M. L. Wadhawan and others [ (1987) 3 SCC 347)). The C
power of detention is clearly a preventive measure. It does not partake in any
manner of the nature of punishment. It is taken by way of precaution to
prevent mischief to the community. {Re. : Khudiram Das v. The State of
West Bengal and Ors., [1975] 2 SCC 81. The Constitution Bench while
dealing with the constitutional validity of the Maintenance of Internal Security
Act, 1971 (MISA), in Haradhan Saha v. The State of West Bengal and Ors., D
[1975] 3 sec 198 held:
"32. The power of preventive detention is qualitatively different
from punitive detention. The power of preventive detention is a
precautionary power exercised in reasonable anticipation. It may or
may not relate to an offence. It is not a parallel proceeding. It does E
not overlap with prosecution even if it relies on certain facts for
which prosecution may be launched or may have been launched. An
order of preventive detention may be made before or during
prosecution. An order of preventive detention may be made with or
, '(. without prosecution and in anticipation or after discharge or even F
acquittal. The pendency of prosecution is no bar to an order of
preventive detention. An order of preventive detention is also not a
bar to prosecution.
33. Article 14 is inapplicable because preventive detention and
prosecution are not synonymous. The authorities are different. The G
nature of proceedings is different. In a prosecution an accused is
sought to be punished for a past act. In preventive detention, the past
act is merely the material for inference about the future course of
probable conduct on the part of the detenu."
Hence, in our view, the order passed by the High Court holding that H
276 SUPREME COURT REPORTS (2002] 3 S.C.R.
·.A what was considered to be the criminal violation of FERA has ceased to be ~- ~
criminal offence under FEMA, the detention order cannot be continued after I
1.6.2000, cannot be justified.
Further, if the view taken by the High Court and the contentions raised
by learned .:ounsel for the respondent are accepted, it would result in implied
B repeal of substantial part of section 3 of COFEPOSA Act. One of the
established principles of interpretation of the statutory provisions is that courts
as a rule lean against implied repeal unless the provisions are plainly repugnant
to each other. There is also a presumption against repeal by implication; and I
the reason of this rule is based on the theory that the legislature while enacting
•
c a law has complete knowledge of the existing laws on the same subject
matter and, therefore, when it does not provide a repealing provision it gives
out an intention not to repeal the existing legislation. Jn Municipal~ouncil,
Palai v. T. J. Joseph, AIR (1963) SC 1561], the Court discussed the principles
with regard to the 'implied repeal' and held thus:-
'
t"
·n "10. It must be remembered that at the basis of the doctrine of
implied repeal is the presumption that the legislature which must be
deemed to know the existing law did not intend to create any confusion ')...
I in the law by retaining conflicting provisions on the statute book and, ...
therefore, when the court applies this doctrine it does no_ more than
give effect to the intention of the legislature ascertained by it in the
E usual way i.e., by examining the scope and the object of the two
enactments, the earlier and the later. "
Similarly, in Municipal Corporation of Delhi v. Shiv Shanker, [1971] ~~
'1
l SCC 442 relevant at 446], this Court observed
F
,_
"The Courts, as a rule, lean against implying a repeal unless the I .....
two provisions are so plainly repugnant to each other that they cannot
stand together and it is not possible on any reasonable hypothesis to
give effect to b"oth at the same time. The repeal must, if not express,
flow from necessary implication as the only intendment"
G In view of the aforesaid discussion, the judgment and order passed by
the High Court cannot be sustained and is, therefore, set aside. However, next
question would be whether this would be a fit case for directing the detenu )'Ill
to surrender to undergo the remaining period of detention? In our view,
considering the fact that detention order was passed in February, 2000 and
H the fact that the impugned judgment was passed by the High Court in
U.0.1. v. VENKATESHANS. [SHAH,J.) 277
November, 2000, this would not be a fit case for directing the detenu to A
surrender to undergo the remaining period of detention.
In the result, the appeal is allowed to the aforesaid extent only.
K.K.T. Appeal allowed.
B
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "preventive detention"Sign in to search