FEMA search seizure: court orders release of seized currency after prolonged inaction under section 132B framework

5-Second Takeaway

The court held that the Enforcement Directorate’s continued failure to decide representations for release of seized Indian and foreign currency could not be sustained, and directed release of the assets. The release remains subject to the final outcome of the proceedings initiated against the petitioners.

The case concerned currency and other assets seized during a search by the Enforcement Directorate from persons engaged in foreign exchange business. The petitioners sought release of the seized amounts, relying on the statutory scheme governing search and seizure under FEMA.

The court noted that section 37 of FEMA gives search and seizure powers, but those powers are to be exercised subject to the limitations reflected in section 132B. That provision requires the authorities, on an application for release, to consider the source of acquisition and to release the remaining assets after adjustment of any liability.

Here, the seized books of account already recorded the source of the currency, and the authorities had neither released the assets nor rejected the representations with reasons. The court also noted that even after a show-cause notice and reply, no determination had been made for a prolonged period.

Finding the inaction contrary to the applicable statutory framework, the court partly allowed the petition and directed the respondents to pass appropriate orders for release of the seized assets within four weeks. The release was made subject to the final outcome of the proceedings pending against the petitioners.