DR. PARTA!' SINGH AND ANR. v. DIRECTOR OF ENFORCEMENT, FOREIGN EXCHANGE REGULATION ACT AND ORS.

The judgment of the Court was delivered by

DESAI, J. Appellants who are husband and wife respectively moved Civil Writ Petition No. 2163 of 1980 in the High Court of Punjab and Haryana praying for quashing of a search warrant issued by res-ponde~t No. 2 - Assistant Director, Enforcement on E August 24, 1979 as also the warrant of authorisation' issued byres- pondent No. 5 - Coinmissioner oflncome Tax, Julhmdur on April 9~ 1980 and for a direction to return articles seized during the search of h!s house on August 24, 1979 and for relief incidental and ancil- lary thereto. F Briefly stated, the allegations were that respondent No. · 6 - Shri J. S. Ahuluwalia, ·Assistant Commissioner of Income-tax at • Jullundur bore personal malice towards the appellants, amongst others, attributable to an incident concerning the servant of the appellants and an application for transfer of appeals pending before G him made to the Chairman, Central Board of Direct Taxes by the first appellant. Actuated by this personal malice, respondent No. 6 first instigated respondent No. 2 to issue a search warrant under the authority of which a raid was carried out at the residence of the appellants on August 24, 1979 which led to the seizure of cer\ai.n I documents including some foreign currency. Thereafter, when the H

SUPREME COURT REPORTs (19SS] 3 s.c.R. A appellants made various representations for return of documents, again instigated by respondent No. (i,. respondent No. 5 issued a warrant of authorisation under sec. 132A of the Income .Tax Act on April 9, 1984 by which respondent No. ·2 was directed to deliver such t>ooks of accounts and other documents' and go'ods seized during the search to the requisitioning officer. As the documents B and material seized during the search had not been returned, the writ petition as afore-mentioned was filed for the reliefs hereinabove set out.

When the writ petition came up before a Division Bench of the c Punjab and Haryana High Court, Mr. Kuldeep Singh, learned counsel who appeared on behalf of the Directorate of Enforcement (

Department made a statement that the Directorate has closed the proceedings and does not want to take any action against tho appel- lants on account of the search. The High Court observed that in view of this statement, the Directorate of Enforcement would nor- D mally be required to return the seized material to the appellants but it was noticed that as the same was sealed under a warrant of autho- risation issued under Sec. 1 32A of the Income Tax Act, an order for return of the same cannot be made. The High Court also took note of the statement made by Mr. D.N. Avathy that the Income Tax Department was still scrutinising the seized documents: The E High Court was of the opinion that there was nothing illegal in the issuance of search warrant, the consequent search, the seizure during the s.earch and taking over of the documents ~'Y the Income Tax D~partment under sec. 132A. The High Court ;ccordingly dismissed the petition. Hence this appeal by special leave. F .. Dr. Partap Singh, the first appellant who appeared in person submitted that respondent No. 2 acted in a manner contrary to law in i·ssuing a search warrant when there was no material before him on which he could entertain a reasonable beliei· that any. documents which in his opinion will be useful for, or relevant to, in investi- G gation .or proceedings under Foreign Exchange Regulation Act, 1973 (Act for short) are secreted in any place, whereupon alone he may authorise any officer of Enforcement to search for and seize or may himself search for and seize such documents. It was also con- tened that as the second respondent did not record his reasons in writing on which reasonable bel{ef was entertained, the search war- H r~~iissued by him was illegal. . i

' PAR:i'AP SINGH v. BNFORCBMBNT, FORBiGN EXCllANGB (Desai, J.) 915

Sec. 37 of the Act confers power on any officer of Enforce- A. ment not below the rank of Assistant Director of Enforcement to search premises. This power can. be exercised if the officer has reason to believe that any documents which ·in his opinion will be useful for, or relevant to, any investigation .or proceedings under the Act, arc secreted in any place. The appellant contended that no material was placea on record which may permit an inference that ll the second respondent had reason to believe that any documents which in his opinion would be useful for or relevant to any investi- gation or proceeding under the Act were secreted in the house of the appellants. It was urged that respondent No. 6 who was actuated by personal malice towards the appellants and who being a friend of respondent No. 2 instigated and provoked him to exercise this c power of search and seizure not to effectuate any purpose for which power is conferred but with a view to humiliating arid harassing the appellants.

A little while after, we will examine the allegation of personal D malice. Suffice it to say that the.re is no substance in the allegation.

Respondent No. 2 is a responsible officer being the Assistant Director, Enforcement, Foreign Exchange Regulation Act stationed at Jullundur. He issued the impugned search warrant ·which led to J~ the seizure. In the affidavit in reply on behalf -of the respondents Nos. 1 to 4, it was clearly stated that search was authorised by the second respondent after he was fully satisfied on the basis of the · information available in the official record and also on the basis of the information collected by the officers of the Enforcement Directo- rate after making enquiries. It was repeated in para 14 of the affi- F davit-in-reply, that on the basis of the official record and reliable. information in possession of respondent No. 2, he entertained a reasonable belief for issuing the search warrant against the. appel- lants. Respondent No. 2, it was said, on the basis of the informa- tion available on the file hadre asons to believe that incriminating documents were secreted in the residential premises of the first appel- G lant and the documents which were seized by Enforcement Directo- rate wero useful for the investigation undertaken by the office. He undertook to produce the relevant r_ecords for the inspection of the court at the time of the hearing of the petition. Relying on this statement in the affidavit in reply, the appellant contended that no . record was shown to the court as promised therein. We therefore, H ·,

916 SUPREME COURT REPORTS [198 5) 3 S.C.R

A adjourned the matter to· a later date and directed the learned counsel for respondents Nos. -1 to 4 to produce the file. Origina papers were shown to us and typed copies were furnished to the ·court. We have minutely gone through the file and we are fully satisfied that there was material before the second respondent which would furnish him grounds for entertaining a reasonable belief that some documents which v.ould be useful in the investigation or pro· ceeding under the Act were secreted in the house of the appellants. He was therefore, fully justified in issuing the search warrant.

The appellant contended that in order to justify that the power c of search was exercised in a fair and just manner and to effectuate the purpose for which it is conferred as is evident from the language employed in sec. 37, the officer issuing the search warrant must disclose what material was before him on which he entertained a reasonable belief to move into the matter. Proceeding along it was submitted that neither in the search warrant nor in the affidavit in ll opposition in the High Court, the material on which reasonable belief was entertained was disclosed. It was submitted that the affi· davit merely recites in a mechanical manner the language of the section which cannot be held sufficient for discharging the burden on the party which has exercised this power of search and seizure. In this connection, lastly it was submitted that if the court is going to look into the file, produced on behalf of the second respondent, the same must be disclosed to the appellants so that they can contra· vert any false or wholly unsustainable material set out in ·the file.

When an officer of the Enforcement Department proposes to act under Sec. 37 undoubtedly, he must have reason to believe that the documents useful for investigation or proceeding under the Act are secreted. The material on which the belief is grounded may be secret, may be obtained through Intelligence or occasionally may be conveyed orally by informants. It is not obligatory upon the officer .., to. disclose his material on the mere allegation that there was no material before him on which his reason to believe can be grounded~ The exprerssion 'reason to believe' is to be found in various statutes. We may take note of one such. Sec. 34 of the Income Tax. Act, 192: inter a/ia provides that the Income Tax officer must have 'reason to believe' that the incomes, profits or gains chargeable to income-tax have been under-assessed, then alone he can take action R' 11nder sec. 34. In S. Narayanappa v. Commissioner of Income Tax,

PA.RTAP SJ:NGH v. ENFORCEMllNt, FOREIGN EXCHANGE (Desai J.) 97t Bangalore(') the assessee challenged the action taken under sec. 34 A and amongst others it was contended on his behalf that the reasons which induced the Income-tax Officer to initiate proceedings under sec .. 34 were justiciable, and therefore, these reasons should have been communicated by the Income Tax Officer to the assessee before the assessment can be re·opened. It was also submitted that the reasons must be .sufficient for a prudent man to come to the conclu- B sion that the income escaped assessment and that the court can exa- mine the sufficiency or adequacy of the reasons on which the Income Tax Officer has acted. Negativing all the limbs of the contention, .this Court held that 'if there are in fact some reasonable grounds for the Income Tax Officer to believe that there had been any non-dis~losure as regards any fact, which could have a material bearing on the c question of under-assessment, that would be sufficient to give jurisdic- tion to the Income Tax Officer to issue notice under sec. 34. The Court in terms held that whether these ·grounds are adequate or not is not a matter for the court to investigate'.'

The expression 'reason to believe' is not synonymous with subjective satisfaction of the' Officer. The belief must be held in good faith; it cannot be merely be a pretence. In the same case, it was held that it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent the action of the Income Tax Officer in starting proceedings under Sec. 24 is open to challenge in a court of law. (See Calcutta Discount Co. Ltd. v. Income Tax Officer Companies District I, Calcutta & Anr.)(') In· R. S. Seth Gopikrishan Agarwal v. R. N. Sen, Assistant Collector of Customs ii Ors.,(3 ) this Court repelled the challenge to the validity of the search of the premises of the appellant and the seizure of the documents found therein. The search was carried out under the authority of an authorisation issued under Sec. 126 (L) (2) of the Pefence of India (Amendment) Rules, 1963 (Gold Control Rules) for search of the premises of the appellant. The validity of the authorisation was. challenged on the ground of mala fides as also on G the ground that the authorisation did not expressly employ the

(I) (1967] I SCR 590. (2) 41 !TR 191. , (3) (1967] 2 SCR 3-40 u

918 SUPllBMB COU!lt llBPORTS [19SS] 3 S.C.ll.

A phrase 'reason to believe' occurring in Sec. 105 of the Customs Act. Negativing both the contentions, Subba Rao, C. J. speaking for the court observed that the subject underlying Sec. !05 of the Customs Act which confers power for issuing authorisation for search of the premises and seizure of incriminating articles was to search for goods liable to be confiscated or documents secreted in any place, B which are 'elevant to any proceeding under the Act. The legislative policy reftected in the section is that the search must be in regard to the two categories mentioned in the section. The ·court further ob· served that though under the section, the officer concerned need not give reasons if the existence of belief is questioned in any collateral proceedings he has to produce relevant evidence to sustain his belief. c A shield against the abuse of power was found in the provision that the officer authorised to search has to send forthwith to the Collector of customs a copy of any record made by him. Sub-sec. (2) of Sec. 37 of the Act takes care for this position inasmuch as that where an officer below. the rank of the Director of Enforcement carried out the search, he must send a report to the Director of D Enforcement. The last part of the submission does not commend to us because the file was produced before us and as stated earlier, the Officer issuing the search warrant had material which he. rightly claimed to be adequate for forming the reasonable belief to issue the search warrant. E It was however contended that when sub-sec. (2) of Sec. 37 is read in juxtaposition with sub-sec. (I), the legislative mandate clearly manifests itself that before issuing a search warrant in exer· cise of the power conferred by Sec. 37 (1), it is obligatory upon the officer issuing the search warrant to record in writing the grounds of F his belief and specifying in such writing, so far as possible, the thing for which search is to be made because Sec. 37 (2) proviaes that the provisions of the Code of Criminal Procedure, 1898 (now 1973) relating to searches, shall, so far as may be, apply to searches nuder this section subject to the modification that sub-sec. (5) of Sec. 165 of the said Code shall have effect as if for the word 'Magistrate', G wherever it occurs, the words "Director of Enforcement or other officer exercising his power" is substituted. It was submitted that if the power to search premises is conferred on the officer therein men- tioned it is hedged in with a condition that in exercise of the power ' . - . he is bound by the requirements of Sec. 165 of the Code. Jn ll other wotds, it was said that by sub-sec. (2) of Sec. 37, Sec. 165 of

PARTAP SINGH v. ENFORCEMENT, FORBiGN EXCHANGE (Desai, J.) 979

the Code is incorporated in pen and ink in Sec. 37. It was urged that the seCtion should be re~read as Sec·. 37 (I) as it is and Sec. 165 A (I) of the Code be read as Sec. 37 (2). Continuing along this line, it was submitted that read thus; the necessary intendment of the Legislature becomes revealed in that such drastic power of search and seizure· without notice to the person affected, can be exercised, if the officer has reason to believe which must have its foundation B on some material· or grounds which must be stated in the search warrant itself or in a record anterior to the issuance of the search warrant so that when questioned the contemporaneous record would be available to the court. to examine the conte.ntion whether there was material for taking such a drastic action or that the action was taken for extraneous and irrelevant reasons. In support of this c submission ' reliance was placed on a decision. of the ' . Punjab and Haryana High Court in H.L. Sibal v. Commissioner. of Income Tax, Punjab & Ors.(l) The court was examining the expression 'in con- sequence of information in his possession, has reason to believe' in Sec. 132 of the Income Tax Act, 1961. The Court after referring to the decision of this Court in Com,,,issioner of Commercial Taxes v. D Ramkishan Shrlkishan Jhaver(2) held that 'the obligation to record in writing, the· grounds of the be~ief as enjoined by Sec. 165 (I), if not complied with would vitiate the issuance of search warrant and the seizure of the articles'. It was then submitted that if the search is illegal, anything seized during such an illegal search has to be returned as held by a learned Single Judge of the Calcutta High Court in New Central Jute Mills Co. Ltd. v; T. N. Kaul & Ors.<8)

Sec. 37 (2) provides that 'the provisions of the Code relating to searches, shall so far as may he, ·apply .to searches directed under Sec. 37 (I). Reading the two sections together it merely means that the methodology prescribed for carrying out the search provided in Sec. 165 has to be generally followed. The expression 'so far as may be' has always been construed to mean that those provisions may be generally followed to the extent possible. The submission that Sec. 165 (1) has been incorporated by pen arid ink in Sec. 37 (2) has to be negatived in view of the positive language employed in the section that the provisions relating to searches shall so far as may be apply

(I) [1975] 101 ITR 112. (2) [1966] ITR 664. (3) AIR 1976 Cal. 178. a

980 SUPREME COURT REPORTS [ ! 985] 3 s.c.R.

A to searches under Sec. 37 (I). If Sec. 165 (ll was to be incorpora- ted by pen and ink as sub-sec. (2) of Sec. 37, the legislative drafts- manship will leave no room for doubt by providing that the provi- sions of the Code of Criminal Procedure relating to searches shall apply to the searches directed or ordered under Sec. 37 (I) except that the power will be ·exercised by the Director of Enforcement or B other officer exercising his power and he will be substituted in place nf the Magistrate. The provisions of sub-sec. (2) of Sec. 37 has not been ca't in any such language. 1t merely provides that the search may he carried out accordin~ to the method prescribed in Sec. 165 (I). If the duty to record reuo"' which furni'h grounds for enter- talnin~ a reasonable belief were to be recorded in advance, the same c could have been incorf,orated in Sec. 37 (I), otherwise~ simple one line section would have been sufficient that all searches as required for the purpose of this Act shall be carried out in the maimer pres- cribed in . Sec. 165 of the C0de by the officer to be set out in the section. In order to· give full meaning to the expression 'so far as may be'. sub-sec. (2) of Sec. 37 should be interpreted to mean that broadly the procedure relating to search as enacted in Sec. 165 shall be followed. But ifa deviation becomes necessary to carry out the purposes of the Act in which Sec. 37 (!)is incorporated, it would be permissible except that when challenged before a court of law, justi- fication will have to be offered for the deviation. This view will give full play to the expression 'so far as may be'.

The view which we are taking is in accord with the view· taken in Gopikrishan A!!arwal's case. The grounds which induced reason- able belief therefore need not be stated in the search warrant.

F Assuming that it was obligatory to record reasons in writing prior to directing the search, the file submitted to the court unmis- takably shows that there was mat erial enough before the officer to form a reasonable belief which prompted him to diroct the search. That the documents seized during the search did not provide suffi- cient material to the officer for further action cannot be a ground G for holding that the grounds which induced the reasonable belief were either imaginary of fictitious or mala fide conjured up.

Assuming that it is obligatory upon the officer proceeding to take search or directing a search to record in writing the grounds of his belief and also to specify in such writing, s.o far as possible, the H , thing for which the search is to be made, is mandatory and that non-

PARTAP SiNGH v. ENFORCEMENT FOREiGN ~CHANGB (Desai, J.) 981.,

recording of his reasons would result in the search be.ing condemned as illegal, .what consequence. it would have on the seizure of the documents during such illegal search. The view taken by a learned Single Judge of the Calcutta High .Court in New Central Jute MillsCo •. Ltd. case that once the authorisation for carrying out the search is found to be illegal on account of the absence of recording reasons in the formation of a reasonable belief, the officer who has seized documents during such search must return the documents seized as a result of the illegal search is against the weight ·of judicial opinion • on the subject and does not commend to us. In fact this decision should not detain us at aUbecause virtually for all practical pur- poses,· it can be said to heve been overruled by the decision of the Constitution Bench in Pooran Mal etc. v Directo.r of Inspection (In- vestigation) of Income Tax Mayur Bhavan, New Delhi & Ors.( 1) This Court held that 'courts in India and even in England have consis- tently refused to exclude rele~ant evidence merely on the ground, that itis obtained by illegal search or seizure.' If therefore, the 'view of the learned Single Judge of the Calcutta were to be accepted meaning thereby that if the search is shown to be illegal, anything seized during such illegal search will have to be returned to the per- D son from whose premises the same was seized. It would tantamount to saying that evidence collected during illegal search must be excluded on that ground alone. This was lri terms negatived by the Constitution Bench. It has beeri often held I.hat the legality in the E method, manner or initiation of a search does not necessarily me.an that anything seized during the search has to be returned. After all in the course of a search, things or documents are required to be seized and such things and documents when seized may furnish evidence. Illegality of the search does not vitiate the · evidence collected during such illegal search. The only requirement is that the court or the authority before which such material or evidence ·seized during the search shown to be illegal, is placed has to be cau- tious and circumspect in dealing with such evidence or material. .) This is too well-established to necessitate its substantiation by a precedent. However, one can profitably refer to Radhakishan v. G State of U.P.<'l wherein the court held that assuming that the search was illegal the seizure of the articles is not vitiated. It may be that because of the illegality of the search the court may be inclined to

(I) [1974] 2 SCR 705. (2) [1963) Supp I S.C.R. 408 at 411

"

982 SUPR8M8 COURT REPORTS [198 5] 3 s.c.R.

A examine carefully the evidence regarding seizure, but no other con-

sequence ensues. (See State of Maharashtra v. Natwarlal Damodardas' Soni.(')

In this behalf, the appellant further contended that if the • B se·arch was genuine or bona fide for carrying out the purposes of the Act, it is surprising that when the matter was before the High Court the Enforcement Directorate submitted that it does not wish to take • any further action in respect of the material seized during the search. There is no warrant for the assertion that every search must result in seizure of incriminating material. Such an approach would be c a sad commentary on human, ingenuity. There can be cases in which search may fail or a reasonable explanation in respect of the. docu- ments may be forthcoming. In Income Tax officer, Special Investi· Ratio• Circle.B,-Meerut v. M/s Seth Brothers& Ors.,(2) it was in terms held that 'from amongst the documents seized during the search, if some are found not to be useful for or relevant to the proceeding, that by itself will not vitiate the search. Nor can an inference be made that the power was initially exercised mala fide.' The Cour . in Pur m Mal's case held that if the books of account and other documents collected during the search were afterwords found to be not relevant that by itself does not make the search and seizure illegal. Ju this case, however as the documents and other materials have been sealed under the warrant of authorisation issued under Sec. 132 A of the Income Tax Act, the Enforcement Directorate may legitimately close the proceedings. We cannot move back- ward and conclude that if no further proceedings are taken, at the inception the search was malafide or for reasons irrelevant or extra- · F ·neous·to the exercise of power. The contention. therefore, must be rejected. Having examined all the limbs of the submissoin, we J find no merit in the contention that the issuance of search warrant was illegal or the search was illegal and inval.id.

It was next urged that if there was no justification for issuing a search warrant, the search i:nder the authority of such a warrant G would be illegal and the respondents I to 4 are bound to return the documents. If the officer who issued the search warrant had materi- · al for forming a reasonable belief to exercise the power, the search

(I) (1980] 4 s,E,C. 669 H (2) [1970) l S.C.R. 601,

•

PARTAP SINGH v. ENFORCEMHNT FOREiGN EXCRANGE (Desai, J.) 983 • cannot be styled as illegal and therefore, no case is made out for A directing return of the document~ on the supposition that the search and seizure were illegal. ·

The next submission was that respondent No. 6 was actuated by a personal malice and with a view to harassing and humiliating the ,B appellants instigated and provoked his friend, the second respondent to issue the search warrant and to carry out the search. In the petition filed in the High Court the allegations of mala fides are so scanty that the High Court was Justified in not examining the contention on merits. In para 6 of the petition, it is Stated 'that the petitioners own house No.. 531 in New Jawahar Nagar, JuUundur while respon- c dent No. 6 occupies the adjoining house, 'His attitude towards ·the petitioners was inimical and has ever been so. · Some appeals filed by the appellants against their assessments under the Wealth Tax were pending before· the sixth resp'on- 0

dent and that 'on May 29, 1979, the first appeUant subniitted a representations to the Chairman, Central Board of Direct taxes D '" complaining about the animosity of the sixth respondenf towards •• the first appellant and requested that those appeals pending before the sixth respondei,lt be transferred to another appellate court'. These are all the relevant averments on the al.legation of mala tides. When attention of the first appeUant was' drawn to this ·scanty material, he drew our attention to the averments in para .6 of the E petition for special leave wherein it is alleged 'that ·when the peti- tioners were·away from Jullundur leaving their servant Gyari 'Chand to look after their house, the servant of respondent ·No. 6 left his job whereupon respondent No. 6 nursed a "feeling that his servant had left the job on being tutored by the petitioner's F servant. Thereupon. respondent No. 6 got ' . Gyan Chand detained and ' )-

maltreated by the police. When the petitioners learnt about it at ·Bombay, they requested a common friend to get Gyan Chand released and in fact Gyan Chand was released. It was then stated . that the friend contacted the Police Officer who ·had detained Gyan Chand and before him, the Police Officer admitted that Gyan Chand G was detained at the instance of the sixth respondent.' Could there , be more vague and completely misleading averments to support serious allegation of personal mala fide against the officer discharging his duties ? We are not inclined .to dilate any m'ore on this aspect save ahd except saying that' the affidavit of Gyan Charid is not forth-coming, that the name~of the. friend is not 'mentioned and H

·. 984 SUPREME COURT REPORTS [198 5] 3 S.C.R.

A the Police Officer cannot be identified from the material disclosed in the petition. One can only say that a nefarious attempt has been made to cook up a wholly imaginary allegation for attributing personal mala fides to the sixth respondent. The contention must be 1d negatived without further examination. '

B It was lastly urged that there has been tampering with the . documents by the officers of the Enforcement Directorate while-the Income Tax Officer scaled and took possession of the documents under the authority of warrant of authorisation issued by the fifth respondent .under Sec. 132A of the Income Tax Act It was submit· ted that the documents with which the appellants were not concer- c ned have been foisted upon him and some documents -have been removed. Though the submission was made at some length, .Mr. Desai, learned counsel appearing for some of the ·. respondents dispell~d whatever little doubt was generated in our mind by ,the 1 submissions -of the first appellant. He referred to Pass Book Account . Nos. 132269 ~nd 159431, both issue_d by the Bank oflndia and,u~ged that what was mentioned was not the account number but. the Pass Book numbers and the Account Nos. SB 6731 and SB 7626 b~th tally and therefore, the submission in this behalf is misconceiyed. We accept the same. It was then urged that there were some erasures in some of the loose sheets. We found none. After referring :to pages 148, 149 and 150 of the diary. an argument was attempted to be built up that there is some tin<ering with the same. We found the submission wholly imaginary. Therefore, there is abso.lutely no merit in the contention that there has been some tampering with the documents .when they were sealed under the authority of the. wammt of authorisation issued by the Commissioner of Income Tax. · F · These were all. the contention.s raised in this appeal and as . there is no merit in any ofthem, the appeal fails and is dismissed but with no order as to costs.

G

A.P.J. Appeal dismissed.

H

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