WHETHER AN ACCUSED CAN BE ARRESTED UNDER FEMA? YES- SAYS SUPREME COURT OF INDIA IN DROPI DEVI vs UNION OF INDIA CASE

WHETHER AN ACCUSED CAN BE ARRESTED UNDER FEMA? YES- SAYS SUPREME COURT OF INDIA IN DROPI DEVI vs UNION OF INDIA CASE.

In Dropti Devi and Another vs Union of India and others case, this interesting question was raised in the Supreme Court of India. 

Learned counsel for the appellants fervently opposed that since FEMA did not regard its infringement as a criminal offence, the whole notion, essence, intent and purpose behind the enactment of preventive detention had ceased to exist and the continuation of such provision was violative of Article 21 read with Articles 14 and 19 of the Constitution. He, thus, submitted that the provision for preventive detention under COFEPOSA of the accused was wholly unsustainable and untenable.

The public prosecutor Mr. Vikram Chaudhari cited that there are cases of preventive detention existing in USA, England, Australia and Germany. He referred to the excerpts from “The Limits of Preventive Detention” by Rinat Kitai – Sangero 2009.

Hence, the important question to be answered is that — whether an accused who infringes the provisions of FEMA can be arrested under the preventive detention Act, namely, the COFEPOSA Act?

It was argued that the objective of FEMA is also promotion of orderly development and maintenance of foreign exchange market in India. Dealing in foreign exchange is regulated by the Act. For violation of foreign exchange regulations, penalty can be levied and such activity is certainly an illegal activity, which is prejudicial to conservation or augmentation of foreign exchange. 

From the objects and reasons of the COFEPOSA Act, it is apparent that the purpose of the Act is to prevent violation of foreign exchange regulations or smuggling activities which are having increasingly deleterious effect on the national economy and thereby serious effect on the security of the State. 

 Section 3 of the COFEPOSA Act, which is not amended or repealed, empowers the authority to exercise its power of detention with a view to preventing any person inter alia from acting in any manner prejudicial to the conservation or augmentation of foreign exchange. If the activity of any person is prejudicial to the conservation or augmentation of foreign exchange, the authority is empowered to make a detention order against such person and the Act does not contemplate that such activity should be an offence.

The main difference between COFEPOSA and FEMA can be illustrated as under:

COFEPOSA	FEMA
The COFEPOSA Act deals with preventive detention for violation of foreign exchange regulations	FEMA is for regulation and management of foreign exchange through authorised person and provides for penalty for contravention of the said provisions.
As held in Poonam Lata v. M.L. Wadhawan, (1987) 3 SCC 347)preventive detention law is for effectively keeping out of circulation the detenu during a prescribed period by means of preventive detention.	The object as stated above is for promoting orderly development and maintenance of foreign exchange market in India.
As held in Khudiram Das v. State of W.B., (1975) 2 SCC 8, the power of detention is clearly a preventive measure. It does not partake in any manner of the nature of punishment. It is taken by way of precaution to prevent mischief to the community

Dismissing the writ petition and the criminal miscellaneous application, the Supreme Court of India held that the importance of foreign exchange in the development of a country needs no emphasis. The Foreign Exchange Management Act, 1999 regulates the foreign exchange. The conservation and augmentation of foreign exchange continues to be its important theme. 

Although contravention of its provisions is not regarded as a criminal offence, yet it is an illegal activity jeopardizing the very economic fabric of the country. For violation of foreign exchange regulations, penalty can be levied and its non-compliance results in civil imprisonment of the defaulter