Judgment

SABYASACHI MUKHARJI, J.-This is an application under Article 136 of the Constitution for leave to appeal against the judgment and order of the Division Bench of the High Court of Delhi, dated May 16, 1988. In order to appreciate the contentions urged before us, it is imperative to state a few facts.

2. M/s Gems Impex Corpn., Bombay, petitioner 3 herein, is a firm engaged in the business of diamonds and precious stones. Ramchand Udhavdas Bharvani, petitioner 2 herein, is a partner in the said firm. Indru Ramchand Bharvani, petitioner 1 herein, is his son. It is stated that both the father and the son were managing the business of the firm. The Customs Officers received a secret information that smuggled diamonds have been kept by petitioners 1 and 2 in the said premises. After obtaining necessary search warrant the Customs Officers searched the business premises on November 16, 1979. It may be mentioned that the day was not very auspicious for the firm as well as for the people of Bombay. On that day a warning had been issued by the Weather Office, Bombay, about a possible sea storm that night. The entire activities came to a halt and the public had been advised to rush back to their houses early. On searching the premises of petitioner 3, the Customs Officers found over 2800 carats of rough diamonds and over 400 carats of cut and polished diamonds in addition to a lot of other items of precious stones, pearls, gold manufactures etc. The books of accounts of the firm, claimed to be written up-to-date, however, showed a stock of 11.96 carats of cut and polished diamonds and the stock of rough diamonds and other articles was shown as nil. On being asked to produce evidence of legal acquisition, import and possession of diamonds, petitioners 1 and 2 showed their inability to produce any such documents. They replied that they had purchased the goods locally through brokers and bad already made 50 per cent cash payment. The cash book, however, revealed no such payment nor were any purchase vouchers produced before the officers. When asked to name the brokers, petitioners 1 and 2 stated that the brokers would not come forward to confirm the deal. The Customs Officers also found various documents which had been described in the initial panchanama as "various incriminating documents". In the background of the secret information and the facts and the circumstances aforesaid, the Customs Officers formed a prima facie belief under Section 110 read with Section 123 of the Customs Act, 1962, (hereinafter called the Act), that the unaccounted diamonds were smuggled goods. They seized various goods including cut and polished diamonds and rough diamonds in all valued at Rs 54,42,882,02 under Section 110 of the Act on the reasonable belief that the goods had been smuggled into India. They also seized Indian currency of Rs 1. 40 lakhs and some other incriminating documents found in the premises. The only question agitated before the High Court was regarding cut and polished diamonds and rough diamonds. In view of the climatic conditions the goods and the documents seized were put in two cartons in the presence of witnesses and the cartons were sealed with the customs seal and also with the seal provided by petitioners 1 and 2 and the signatures were also put on the label of the cartons. A detailed itemwise inventory of the seized goods and documents was prepared in the Customs House, Bombay, later on November 20, 21 and 22, 1979. Petitioners 1 and 2 were asked by the department to attend preparation of the detailed itemwise inventories but they did not attend, rather petitioner 1 replied that the job could be carried out even in his absence. Petitioners 1 and 2 were examined and their statements recorded under Section 108 of the Act.

3. In his statement recorded on November 29, 1979 Ramchand Udhavdas Bharvani gave names of the four dealers. The petitioners also produced certain notes issued by the said dealers showing that some quantity of