State, By Nilratan Sircar, Enforcement Officer vs Lakshmi Naran Ram Niwas

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Criminal Appeal No. 83 of 1961

Decision Date: 14 April 1964

Coram: Raghubar Dayal, M. Hidayatullah

The Court recorded that on 14 April 1964 the case titled State, By Nilratan Sircar, Enforcement Officer versus Lakshmi Naran Ram Niwas was decided by the Supreme Court of India. The judgment was authored by Justice Raghubar Dayal, with Justice M. Hidayatullah sitting on the bench. The citation of the decision was reported as 1965 AIR 1 and also as 1964 SCR (7) 724. The matter concerned provisions of the Criminal Trial‑Documents seized‑Period provided by the statute for retention of seized documents, and whether a Magistrate could extend that period. It also examined the power of a Magistrate concerning the retention of documents seized under a special Act, the applicability of Code of Criminal Procedure provisions to a seizure made under the Foreign Exchange Regulation Act, 1947, and specific sections of that Act, namely sub‑section (3) of section 19, section 19‑A, and sections 5(2), 96, 98, 101, 102, 103 of the Code of Criminal Procedure, 1898.

The factual background narrated that on 14 May 1959 the Enforcement Officer, acting under a search warrant issued by the Chief Presidency Magistrate pursuant to sub‑section (3) of section 19 of the Foreign Exchange Regulation Act, 1947, seized a number of documents from the respondent. The Director of Enforcement, with the permission of the Chief Presidency Magistrate, retained those seized documents for a period that exceeded four months. On 5 October 1959 the respondent filed an application before the Chief Presidency Magistrate seeking the return of the seized documents on the basis of section 19‑A of the Act. The Magistrate ordered the return of all the documents except those identified as items 2 and 7 in the search list. Dissatisfied with the partial return, the respondent appealed against the order of the Magistrate. The High Court, on revision, set aside the Magistrate’s order and directed that the two remaining documents also be returned to the respondent. The State then appealed this High Court order to the Supreme Court.

The Court held several points. First, it ruled that the Magistrate possessed no jurisdiction over articles seized pursuant to a warrant issued under section 19(3) of the Foreign Exchange Regulation Act, and therefore could not authorize the Director of Enforcement to retain such documents beyond the period allowed by section 19‑A. The Enforcement Officer was entitled, under section 19‑A, to retain seized articles for a period not exceeding four months without requiring any further permission from the Magistrate; consequently the Magistrate who issued the warrant had no authority to decide on retention or disposal of the seized documents either during the statutory period or after its expiry. The Court distinguished the earlier decision in Mohammad Serajuddin v. R. C. Mishra [1962] 1 Supp. S.C.R. 545. Second, the Court observed that because the search warrant was issued under the specific provision of sub‑section (3) of section 19, the general provisions of sections 96, 98 and Form No. 8 of Schedule V of the Code of Criminal Procedure did not apply to such warrants. Third, it held that sections 101, 102, 103 of the Code would apply to searches under sub‑section (3) of section 19, as the Act did not contain a specific provision governing the conduct of the search. Fourth, the Court stated that section 5(2) of the Code was inapplicable to investigations conducted under the special Act because the Act itself provided, in section 19‑A, for the necessary investigation by the Director of Enforcement. Finally, the Court concluded that no express statutory provision was required for the return of documents after the statutory retention period had expired; the statute only needed to provide for the retention of documents belonging to others, not for their return to persons entitled to them, and therefore the seized documents had to be returned to the

In the matter before the Court, it was held that the provisions of sections 96 and 98 together with Form No 8 of Schedule V of the Code of Criminal Procedure were not applicable to search warrants issued under sub‑section (3) of section 19 of the Foreign Exchange Regulation Act. Because the Act contains no specific rule governing the manner of conducting a search, the Court applied sections 101, 102 and 103 of the Code to searches carried out under that sub‑section. The Court further observed that section 5(2) of the Code could not be invoked in investigations conducted under the Act, since the Act is a special legislation that already provides, in section 19‑A, for the investigation of suspected offences by the Director of Enforcement. The Court noted that the statute did not need to contain an explicit provision dealing with the return of seized documents after the expiry of the four‑month period, because the law only requires provisions for the retention of documents belonging to others and not for their return. Consequently, once the statutory period had elapsed, the seized documents had to be returned to the person from whose possession they were taken. Under section 19‑A, the Director of Enforcement could lawfully retain seized documents until the final disposal of proceedings instituted under section 23, provided that such proceedings had been commenced within the four‑month retention period. In the present case, no proceeding under section 23 had been started within the allowed four months, so the Director could not retain the documents beyond that time. Although proceedings under section 23 did commence before the order directing the return of the documents, the Court concluded that the Magistrate’s direction regarding retention merely gave effect to the spirit of section 19‑A. The judgment concerned Criminal Appeal No 83 of 1961, arising from a reversal by the Calcutta High Court of an order of the Chief Presidency Magistrate that had directed the return of certain documents to the respondent. The appeal arose from events on 6 April 1959, when the Chief Presidency Magistrate ordered the issue of search warrants on the application of the Enforcement Officer of the Enforcement Directorate, Ministry of Finance, under sub‑section (3) of section 19 of the Foreign Exchange Regulation Act, 1947 (Act VII of 1947), with the warrant being issued on 6 May 1959 and requiring the production of the seized documents before the Magistrate.

In this case, the Court recorded that after the search warrant was issued, the Enforcement Officer executed the warrant on 14 May 1959 and seized a number of documents from the respondent’s possession. On that same day the Enforcement Officer reported that a particular room could not be searched and therefore further action under the warrant would be required. He also placed on record, in an application to the Chief Presidency Magistrate, that the seized documents listed in the accompanying Seizure Memo had been retained by his office for examination and would be kept until the enquiry or any adjudication proceedings were completed, after which a report would be submitted to the Magistrate. On 28 May 1959 the Enforcement Officer applied to the Chief Presidency Magistrate for permission to retain the seized documents for an additional two‑month period in order to enable the preparation of a further report. The Magistrate granted that permission. The same magistrate subsequently granted similar extensions on applications filed on 28 July 1959 and 28 September 1959. On 5 October 1959 the respondent filed an application before the Chief Presidency Magistrate seeking an order for the return of the seized documents, contending that the statutory period of four months during which the Director of Enforcement was authorised to retain the documents had elapsed and that no proceedings had been commenced against the respondent under section 23 of the Act. The respondent relied on the provisions of section 19‑A for the return of the documents. On 20 October 1959 the Magistrate initially ordered that the seized files be returned to the respondent. However, on the same day the Magistrate recalled his earlier order dated 28 September 1959, which had permitted the Enforcement Officer to retain the documents until 28 November 1959, and consequently modified the order. He set a date for hearing the matter on 26 October 1959, but because the Investigating Officer was on leave, the hearing was adjourned and the matter was slated for decision on 10 November 1959. In an application filed on 10 November 1959, the Enforcement Officer informed the Magistrate that the Director of Enforcement had commenced adjudication proceedings against the respondent for an alleged violation of section 4(1) of the Act and had issued a notice requiring the respondent to show cause. He further explained that, in connection with those adjudication proceedings, the seized files identified as items number 2 and number 7 in the Seizure Memo would be required, but that he had no objection to the return of the remaining seized files even though they might have some remote relevance to the proceedings. On 10 November 1959 the Chief Presidency Magistrate ordered the return of all the seized documents except those identified as items 2 and 7. The respondent challenged this order by filing a revision seeking the return of the two retained documents. The High Court allowed the revision and directed that the two documents also be returned to the respondent. The present appeal was filed against that High Court order.

The Court first examined the relevant provisions of sections nineteen and nineteen‑A of the Act, and then turned to certain provisions of the Code of Criminal Procedure, hereinafter referred to as the Code, in order to understand the arguments presented by the parties. Section nineteen, clause one, empowered the Central Government, by way of a notification published in the Official Gazette, to direct owners of foreign exchange or foreign securities, subject to any exceptions specified in that notification, to return the specified foreign exchange or securities to the Reserve Bank within a prescribed period and to furnish such particulars as were specified. The provision further authorised the Government or the Reserve Bank, whenever they considered it necessary or expedient to obtain and examine any information, book or other document in the possession of any person, or that a person could obtain and furnish, to issue a written order requiring the named person to furnish, or to obtain and furnish, the requested information, book or document to the Government, the Reserve Bank, or any person specifically named in that order. Section nineteen, clause three, provided that when a written representation was made by a person authorised by the Central Government or the Reserve Bank, a District Magistrate, Sub‑Divisional Magistrate, Presidency Magistrate or a first‑class Magistrate, having reason to believe that a breach of any provision of the Act had been committed, was being committed, or was about to be committed in any place, could, where the required information, book or document was not already in the magistrate’s possession, where its production could not be obtained, or where a general search or inspection would further the investigation, issue a search warrant. The person to whom such a warrant was directed was authorised to search or inspect in accordance with the warrant and to seize any book or other document. The Code of Criminal Procedure, 1898, provisions relating to searches were held to apply to such searches to the extent that they were relevant, with the condition that no police officer below the rank of sub‑inspector could be issued such a warrant. An explanatory note clarified that the term “place” encompassed a house, building, tent, vehicle, vessel or aircraft. Section nineteen‑A stipulated that where, pursuant to an order made under subsection two of section nineteen or a search warrant issued under subsection three of the same section, any book or other document was furnished or seized, and the Director of Enforcement had reasons to believe that the document would constitute evidence of a contravention of any provision of the Act or of any rule, direction or order made thereunder, the Director could retain the document in his custody.

According to the provision, when a document is seized under the authority mentioned and it is necessary for the Director of Enforcement to keep the document in his custody, the Director may retain that document for a period not exceeding four months. However, if before the expiration of the four‑month period any proceedings under section twenty‑three are commenced, the Director may continue to retain the document until those proceedings are finally disposed of. This continuation applies whether the proceedings are before the Director himself, including any appeal before an Appellate Board, or whether the proceedings are before a Court, in which case the document must remain in the Director’s custody until it is formally filed in that Court.

Chapter VII of the Code of Criminal Procedure contains the mechanisms for compelling the production of documents. Section ninety‑four authorises a Court to issue a summons to any person who possesses a document, or whose production is considered necessary or desirable, for the purpose of any investigation, inquiry, trial or other proceeding conducted under the Code. Under certain circumstances specified in section ninety‑six, the Court may also issue a search warrant to search for the documents or articles described in section ninety‑four. The combined operation of these two sections requires that any articles seized pursuant to the execution of a search warrant be produced before the Magistrate, who then issues appropriate orders concerning the custody or return of those seized items. Form Eight of Schedule V of the Code prescribes the format of a search warrant and expressly directs that the seized articles be produced immediately before the Court. Sections ninety‑eight and ninety‑nine‑A address the issuance of search warrants in special circumstances, while sections one hundred‑one to one hundred‑three provide the general provisions applicable to searches. The appellant raised several principal arguments. First, the appellant contended that while section nineteen‑A limits the Director of Enforcement to retain seized documents for a maximum of four months, the provision does not restrict the Court that issued the search warrant from making any order concerning the retention or disposal of those documents. Second, the appellant argued that in the absence of a specific procedure for issuing a search warrant under section nineteen, the provisions of sections ninety‑six, ninety‑eight and Form Eight of Schedule V of the Code should be read as applicable to warrants issued under section nineteen. Third, the appellant submitted that the Court possesses an inherent power to issue appropriate orders regarding the retention of documents seized for investigative purposes and for subsequent proceedings.

The statute embodied in sections nineteen and nineteen‑A creates special procedural rules for investigating the offences defined by the legislation. These provisions were enacted to overcome difficulties that had previously resulted in the prolonged detention of citizens’ documents, which caused inconvenience and harassment. Moreover, the special provisions were intended to relieve the Magistrate from the repetitive task of reviewing police reports to obtain permission for retaining documents. Consequently, when section nineteen‑A sets the maximum period for the Director of Enforcement to retain seized documents at four months, the provision aims to prevent any further detention of the documents except in the limited circumstances specified, thereby ensuring that the Magistrate cannot lawfully permit the Director to retain the documents beyond the prescribed four‑month period.

In this case, the Court observed that the statutory limit of four months for retaining seized documents, as set out in section 19‑A, prevents any further detention except in circumstances specifically permitted to the officer concerned. Consequently, the Magistrate does not have authority to permit the Director of Enforcement to retain the documents beyond the four‑month period. The Court further noted that the Act contains no provision granting the Court power to extend the period of detention for documents, and that allowing a Magistrate to do so would undermine the purpose of the legislation.

The Court then examined the relationship between the Code of Criminal Procedure and the provisions of the Act dealing with searches. It held that the provisions of the Code concerning searches apply only to the extent that they are relevant to searches conducted under sub‑section (3) of section 19 of the Act. Accordingly, the Code provision that gives a Magistrate jurisdiction over property seized in execution of a search warrant issued by that Magistrate does not fully apply to property seized under a warrant issued pursuant to sub‑section (3) of section 19. The first issue, therefore, was whether a Magistrate who issues a search warrant under that sub‑section has control over the disposal of the articles seized.

The Court clarified that while the Code’s search provisions do apply to warrants issued under sub‑section (3) of section 19, they do so only insofar as they are applicable. The specific rules governing the circumstances and authorities for issuing search warrants under the Code cannot be applied because the Act contains a dedicated provision for issuing a warrant under sub‑section (3) of section 19. Consequently, sections 96, 98 and Form 8 of Schedule V of the Code do not operate in connection with searches carried out under sub‑section (3) of section 19.

The Court explained that the provisions which address the steps to be taken after a search warrant is issued are the ones that have been extended to searches under the Act. These are the provisions that relate to the mode of conducting searches. The object of the sub‑section (3) provision of section 19 is to prescribe how searches are to be conducted, as it deals specifically with the issuance of a search warrant under that sub‑section. The Act, however, does not contain a specific provision dealing with the intervening stage of the actual search itself.

Therefore, the Court held that the provisions governing searches under sub‑section (3) of section 19 are essentially the provisions relating to the conduct of searches, namely sections 101, 102 and 103 of the Code. The disposition of the seized articles does not fall within the literal meaning of “searches” and is instead regulated by section 19‑A. Accordingly, the Court rejected the appellant’s contention that the Magistrate could exercise powers under the Code concerning property seized under sub‑section (3) of section 19. It followed that any reference by the Enforcement Officer to the Magistrate for permission to retain the seized documents was unnecessary, as the Enforcement Officer possesses the right under section 19‑A to retain the seized articles.

In this case the Court observed that the procedure to be followed by a person who is aggrieved when the Enforcement Officer breaches the provisions of section 19‑A is a separate issue from the question of who may be approached for redress. The Court noted that the mere possibility that an Enforcement Officer might act contrary to section 19‑A does not imply that the Magistrate who issued the search warrant is the appropriate authority to approach, nor that the Magistrate is competent to consider the grievance. Moreover, the Court held that this possibility is insufficient to support a finding that the Magistrate who issued the warrant possesses either control or possession of the documents seized, and therefore cannot issue any orders regarding their disposal. The Court further explained that the Magistrate has no power to dispose of the seized material at any time until the period prescribed in section 19‑A has elapsed, and that the Act contains no provision granting him any authority to act after that period has expired. While the Court presumed that the Director of Enforcement would not act in contravention of section 19, it explained that section 19‑A governs the custody of documents that come into the Director’s possession in two distinct manners. First, documents may be delivered to the Director of Enforcement pursuant to an order made under subsection (2) of section 19 on the directions of the Central Government or the Reserve Bank; in such circumstances no Magistrate has jurisdiction over the disposal of those documents. Second, the Director of Enforcement may also acquire documents by executing search warrants issued under subsection (3) of section 19. The Court stressed that the rules concerning the Director’s retention of documents are identical regardless of whether the documents arrive via the first or the second method. Consequently, even in the latter situation, the Magistrate who issued the search warrant has no role in retaining or disposing of the seized documents. The Court also rejected the contention raised on behalf of the appellant that the provisions of section 5(2) of the Code of Criminal Procedure should apply where the Act is silent. The Court pointed out that section 5 merely provides that offences under any law other than the Indian Penal Code shall be investigated, inquired into, tried and otherwise dealt with according to the Code, subject to any specific enactment governing the manner or place of investigation. Since the Act is a special enactment and expressly provides in section 19‑A for the investigation of alleged offences by the Director of Enforcement, the Court held that the Code of Criminal Procedure does not govern such investigations, including the retention of documents for investigative purposes.

In support of its claim, the appellant relied on the decision reported as Moliammad Serajuddin v. R. C. Mishra (1). The appellant argued that this precedent showed that a Magistrate retained control over the disposal of articles seized pursuant to a search warrant that the Magistrate himself had issued. In that earlier case, the Court examined the issue of disposing of documents that had been seized in execution of a search warrant issued under section 172 of the Sea Customs Act. The statutory provisions governing that situation were different from those applicable under sub‑section (3) of section 19 of the present Act. A warrant issued by a Magistrate under section 172 of the Sea Customs Act carried the same force as a warrant issued under the Code of Criminal Procedure and therefore was treated as a Code warrant. The same equivalence did not apply to a warrant issued under sub‑section (3) of section 19 of the present Act. Moreover, the Sea Customs Act contained no provision corresponding to section 19‑A of the present Act. Consequently, the earlier decision did not assist the appellant’s position. On this basis, the Court held that the Magistrate’s order concerning the disposal of the seized documents exceeded his jurisdiction, and the High Court was correct in setting aside that order which had directed the Director of Enforcement to retain certain documents. The matter then turned to whether the High Court’s direction that two documents be returned to the respondent was proper. The appellant contended that neither section 19‑A nor any other provision of the Act authorised the return of seized documents to the party from whose custody they had been taken without an order from the Magistrate, and therefore no authority existed for any other authority to order the return. The Court observed that an express provision for such a return was not required. When the law specified that documents could not be retained after a particular period, that statutory direction alone sufficed as justification and authority for the custodian to return the documents to the person from whom they had been seized. The statutes provide mechanisms for retaining the documents of others, but they do not need to prescribe a separate rule for returning them to the rightful owner. Section 19‑A empowers the Director of Enforcement to retain a seized document for a period not exceeding four months, or, if proceedings under section 23(1) have been commenced before the expiry of that period, until the completion of those proceedings, including any proceedings before the Appellate Board, or, alternatively, until the document is filed in a Court where such proceedings have been initiated. This authorisation means that the Director may lawfully keep the seized document until the final resolution of the proceedings brought under section 23 of the Act, provided those proceedings had been initiated within the stipulated time.

In the present case the Director of Enforcement did not commence proceedings under section 23 within the four‑month period that authorises him to retain seized documents, and therefore he could not lawfully keep those documents after the expiry of that fourth month without further authority. The Director could have sought legal measures to retain the documents, but he did not rely on his own power alone. From the time of seizure he repeatedly sought permission from the Chief Presidency Magistrate, apparently believing that the magistrate possessed the power to order the continued retention of the documents, an assumption that arose because the search warrant had instructed the production of the seized documents before the magistrate.

Although the director ultimately obtained the magistrate’s permission, the proceedings under section 23 of the Act had already begun before any order for the return of the documents was issued. The Court observed that the true purpose of section 19‑A is to allow the Director of Enforcement to retain seized documents until the final disposal of the proceedings contemplated in section 23. Consequently, even if the magistrate lacked explicit authority to direct the Director’s retention, the magistrate’s order nonetheless reflected the spirit of section 19‑A by enabling the Director to keep the documents until the conclusion of the statutory proceedings. The Court therefore found the High Court’s directive ordering the return of the documents to the respondent to be unjustified given the special circumstances of the case. The Court further noted that it was unnecessary to examine the various legal avenues the Director might pursue after the four‑month period, such as applying to the Central Government for an order under sub‑section (2) of section 19, which would lawfully compel the owner to furnish the documents to the Director and provide a legitimate basis for retaining them beyond the period in which they would otherwise revert to the owner. In light of these considerations, the Court held that the magistrate possessed no jurisdiction over the articles seized pursuant to the search warrant issued under section 19(3), and thus could not permit the Director to retain the documents after the permitted period in accordance with section 19‑A. Accordingly, the Court allowed the appeal, set aside the High Court’s order, and directed that the documents enumerated in items 2 and 7 of the Seizure Memo may be retained by the Director of Enforcement until the final determination of the proceedings under section 23.

In this case the Court observed that the documents identified as items number two and number seven in the seizure memorandum were authorised to remain in the custody of the Director of Enforcement. The Court held that such retention could continue uninterrupted until the proceedings that had been launched under section 23 of the Act reached their final conclusion. By allowing the Director of Enforcement to keep those specific documents for the duration of the pending proceedings, the Court ensured that the enforcement authority would retain necessary material while the matter was still before the tribunal. The Court therefore concluded that the appeal was allowed, setting aside any contrary direction and confirming that the Director could retain the documents until the ultimate determination of the case.