1. Seizure and confiscation of gold under the Sea Customs Act and Foreign Exchange Regulation Act — dispute over jurisdiction and validity of conditions for release. (Para 3 , 4 )
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1958 Supreme(SC) 75
SUPREME COURT OF INDIA
9th May, 1958
S.R. DAS, C.J.I., N.H. BHAGWATI, S.K. DAS, K. SUBBA RAO AND VIVIAN BOSE, JJ.
Sewpujanrai Indrasanarai Ltd., Appellant
Versus
Collector of Customs and others, Respondents.
Civil Appeal No. 256 of 1954.
Advocates appeared
Mr. N. C. Chatterjee, Sr. Advocate, (M/s. S. K. Kapur and I. N. Shroff, Advocates with him) for Appellant; Mr. C. K. Daphtary, Solicitor-General of India (M/s. H. J. Umrigar and R. H. Dhebar, Advocates, with him) for Respondents 1 to 3; Mr. B. Sen, Sr. Advocate, (M/s. S. N. Mukherjee and B. N. Ghosh Advocates with him) for Respondent 4; Mr. Veda Vyasa, Sr. Advocate, (Mr. B. P. Maheshwari, Advocate, with him) for Respondent 5.
Advocates:
B.N.GHOSH, B.P.MAHESHVARI, B.SEN, C.K.DAFTARY, H.J.Umrigar, I.M.SHROFF, N.C.CHATTERJI, R.H.Dhebar, S.K.KAPOOR, S.N.MUKHERJEE, Veda Vyasa
B.N.GHOSH, B.P.MAHESHVARI, B.SEN, C.K.DAFTARY, H.J.Umrigar, I.M.SHROFF, N.C.CHATTERJI, R.H.Dhebar, S.K.KAPOOR, S.N.MUKHERJEE, Veda Vyasa
Confiscation proceedings under the Sea Customs Act are actions in rem and quasi-judicial, which do not prejudice in personam penal proceedings under the Foreign Exchange Act. Invalid conditions imposed for the release of confiscated goods are severable from the valid order of confiscation.
Headnote:(A) Sea Customs Act, 1878 - Sections 167(8), 182, 183 - Foreign Exchange Regulation Act, 1947 - Sections 8(3) and 23 - Confiscation of smuggled gold - Nature of proceedings - Proceeding in rem vs. in personam - Whether action under the Sea Customs Act prejudices proceedings under the Foreign Exchange Act - Order of confiscation is quasi-judicial, not administrative - Writ of certiorari applicable. (Paras 9, 15, 16)
(B) Sea Customs Act, 1878 - Section 183 - Conditions for release of confiscated goods - Imposition of conditions not warranted by statute - Severability of invalid conditions from a composite order - Principles of severability applied - Invalid conditions can be expunged without striking down the entire order. (Paras 18, 19)
(C) Constitution of India - Article 19(1)(f) - Rights of a pledgee - Action in rem operates directly on the status of property - Pledgee cannot have rights higher than the pledgor. (Paras 24-26)
Facts of the case:
A bullion merchant's gold, deposited as security with banks and sent for assaying, was seized by customs authorities. The authorities ordered confiscation under the Sea Customs Act for violating the Foreign Exchange Act, allowing a fine in lieu of confiscation subject to producing a permit from the central bank and paying customs duties. The High Court initially quashed the order, but the Division Bench reversed it.
Findings of Court:
The order of confiscation is quasi-judicial. The proceeding under the Sea Customs Act is in rem and does not prejudice the in personam proceedings under the Foreign Exchange Act. The conditions requiring a central bank permit and customs duty were unauthorized and severable from the valid order of confiscation and fine.
Issues: (1) Whether confiscation orders under the Sea Customs Act are administrative or quasi-judicial; (2) Whether such proceedings prejudice the penal provisions of the Foreign Exchange Act; (3) Whether unauthorized conditions for the release of goods render the entire confiscation order void.
Ratio Decidendi: A proceeding for confiscation of goods is an action in rem targeting the property regardless of the offender's identity, whereas penal proceedings under the Foreign Exchange Act are in personam. Therefore, the former does not prejudice the latter. Furthermore, invalid conditions in a composite order are severable if they are not inextricably linked to the valid part and the order would have been passed without them.
Result: Appeal partly allowed.
Legal Category Hierarchy
- customs law
- administrative law
- constitutional law
- foreign exchange law
Table of Contents
2. Whether proceedings under the Sea Customs Act prejudice the Foreign Exchange Act — severability of invalid conditions in a composite order — pledgee's fundamental rights. (Para 12 , 13 , 18 , 19 , 24 )
3. Distinction between in rem and in personam proceedings — quasi-judicial nature of customs confiscation — severability of invalid conditions from a valid main order. (Para 9 , 15 , 16 , 19 , 20 )
4. Confiscation in rem under the Sea Customs Act does not prejudice in personam penalties under the Foreign Exchange Act; invalid conditions are severable if not inextricably linked. (Para 15 , 16 , 19 )
5. Confiscation and fine upheld; conditions requiring a Reserve Bank permit and payment of customs duties struck down as without jurisdiction. (Para 27 , 28 )
6. Is an order of confiscation or penalty under the Sea Customs Act an administrative act or a quasi-judicial act?
It is a quasi-judicial act. The Collector acts judicially when imposing confiscation and penalties under the Sea Customs Act, making such orders subject to the supervisory jurisdiction of the High Court via a writ of certiorari. (Para 9 )
7. Does a proceeding for confiscation under the Sea Customs Act prejudice a penal proceeding under the Foreign Exchange Act?
No. Confiscation under the Sea Customs Act is a proceeding in rem against the goods, whereas Section 23 of the Foreign Exchange Act is a proceeding in personam against the offender. An action in rem does not prejudice the in personam remedy. (Para 15 , 16 )
8. Can invalid conditions imposed in a composite order of confiscation be severed from the main order?
Yes, if the invalid conditions are not inextricably mixed with the valid order, the main order remains viable, and the conditions do not form part of a single integrated scheme that can only operate as a whole. (Para 19 )
9. Can a superior court use writs to remove specific invalid conditions from an inferior tribunal's order without quashing the entire order?
Yes. While certiorari typically quashes an order, a writ of prohibition can be used to prevent the enforcement of specific parts of an order that are found to be in excess of the tribunal's jurisdiction. (Para 20 , 22 )
Judgment
S. K. Das, J. : This appeal has come to us on a certificate granted by the High Court of Judicature at Calcutta that the case is a fit one for appeal to this Court.
2. The appellant is Shewpujanrai Indrasanrai Ltd., a private limited company incorporated under the Indian Companies Act, 1913, and carrying on business at 69, Manohar Das Street, Calcutta. Respondents 1 and 3 are the Customs authorities concerned; respondent 2 is the Union of India and respondents 4 and 5 are two banks, called respectively Nationable Handels Bank N. V., a foreign company carrying on business at 1, Royal Exchange Place, Calcutta and Bharat Bank Ltd., a company incorporated under the Indian Companies Act, 1913, and having its registered office at 143, Cotton Street Calcutta.
3. The material facts are these. The appellant Company carries on business as a bullion merchant and in that capacity used to buy gold and silver in the Calcutta and Bombay markets and sell the same either direct or through bankers at the aforesaid two places. It is stated that between November 14, 1950, and November 20, 1950, the appellant Company., in the usual course of its business, purchased about 9478 tolas of gold, and in respect of the said purchases, borrowed money from Respondents 4 and 5. The gold so purchased was deposited with the respondent banks as security for the loans taken, 7044 tolas being deposited with Respondent 4 and about 2437 tolas with respondent No. 5. With the consent of the appellant Company, the two Banks, Respondents 4 and 5, sent the gold to the Calcutta Mint for the purpose of assaying. On November 20, 1950, the Collector of Customs, Calcutta, asked the Mint authorities not to part with the gold, and on November 21, 1950, the gold was seized at the instance of the Customs authorities, Calcutta, in pursuance of a search warrant issued by the Chief Presidency Magistrate, Calcutta. On the same day, certain books of account of the appellant Company were also seized from its place of business at 69, Manohar Das Street. On 22-11-1950, the appellant Company received a letter signed by one Jasjit Singh of the Customs Department, requesting the presence of the appellant at the Customs House on November 27, 1950, for opening and checking the bags of bullion which had been seized from the Mint. Thereafter followed some correspondence, details whereof are not necessary for our purpose, between the Customs Authorities and Messrs. Sawday and co., acting on behalf of the appellant Company. On December 19, 1950, the appellant Company made an application in the High Court of Calcutta under Article 226 of the Constitution in which it asked for the issue of appropriate writs or orders quashing the orders of seizure and detention of its gold and books of account, and for a further direction that the Customs authorities be prohibited from giving effect to the said orders of detention and seizure or from taking any steps in connection with the gold or the books of account seized. This writ application was heard and disposed of by an order made by Bose, J., of the Calcutta High Court on April 23, 1951, the result of which was that the rule was made absolute to this extent only that the seizure of the books of account was declared to be illegal and a direction was made that the books be returned forthwith to the appellant Company. No order was made about the gold seized and detained.
4. On June 20, 1951, the Customs authorities sent a notice to the appellant Company which was in these terms:
"Subject: Seizure of 9,478.19 tolas of gold at the Government of India Mint, Strand Road, Calcutta.
I have been directed by the Collector of Customs to inform you that the above case has been placed before him for adjudication by the Superintendent, Preventive Service. A copy of the note submitted by the latter together with copies of the assay reports therein referred to are enclosed herewith.
2. You are requested to show cause in writing within fourteen days from date hereof w
