The gold case that escaped prosecution

Created On: 22 Feb 2026 10:15 AM IST

In1964/1965, I was posted in the Marine and Preventive Division in the Bombay Central Excise Collectorate (now called Commissionerate) having a vast jurisdiction that not only covered Bombay but also the entire coast from Kolak in Gujarat to Bhatkal in Karnataka, with 63 minor ports. In addition, I was also entrusted with enforcing gold control in Bombay and to prevent evasion of excise duty within the city.

We were able to get a resourceful informer who volunteered to work in the houses of very rich persons to get information about the hoarding of smuggled/primary gold.

The informer was able to secure the job of a cook in the residence of a prominent industrialist, who was also the president of the Indian Sugar Mills Association, at that point of time. After working for a few months, the informer was able to secure accurate information that gold was concealed in the basement built under the puja room. Further, he mentioned that in the drawing room there will be a carpet, under which would be detachable tiles, which when removed would lead to a door. Once the door is opened there will be a staircase leading to the room in the basement. He further mentioned that an iron safe is embedded to the floor and another iron safe fixed to the wall in the basement.

This information was provided to Gehani, who at that time was the chief inspector of Customs in the Bombay Custom House. [The post of Chief Inspector of Customs and that of the Principal Appraiser were abolished and re-designated as Asst. Commissioner of Customs (Preventive) and Asst. Commissioner of Customs (Appraising)].

Based on this information a raid was conducted, and a large quantity of gold bars were found in the iron safe embedded in the floor of the basement and some quantity of gold and silver slabs were found in the iron safe fixed to the wall of the basement. They were all wrapped in newspapers. The contraband was seized under a panchnama.

After the seizure of the gold, prosecution was launched against the industrialist under the Defence of India Rules (Gold Control Act, 1962). The Gold Control Act of 1962 (originally implemented via Defence of India Rules, 1962) and was an emergency measure introduced by the then Finance Minister Morarji Desai to curb surging gold demand, reduce smuggling, and conserve foreign exchange during the Sino-Indian war. It banned private possession of gold bars/coins, restricted jewellery fineness to 14 carats, and mandated declaration of gold holdings.

Since the industrialist had not declared the gold in his possession a charge sheet was filed against the industrialist in the Court of the Metropolitan Magistrate, which was presided by Gehani. He was a ‘no nonsense’ type and very strict while dealing with offenders involved in economic offences.

Since it was a very important case, I was trying to secure the services of a senior counsel to conduct the prosecution. To my dismay, I found that the accused had sent Rs 30 (equivalent to a guinea) with a folded paper as a retainer. Eventually, I was able to meet B M Mistry, an eminent senior counsel, who very kindly accepted the brief and agreed to conduct the prosecution. He also mentioned that he had also received a request to take the retainer from the industrialist, but he refused.

Before the matter came up before the Metropolitan Magistrate, an agitated Mistry rang me up and informed me that a close ‘Parsi’ friend had come to his house with a request on behalf of a ‘Hindu’ friend to ‘go slow’ while conducting the prosecution. Mistry asked his friend to get out of the house and told him that he could have been very nasty but for the fact that he happened to be his friend. He requested me to record the same in the prosecution file.

While this was going on, we received information that the industrialist was trying to get help from ‘highest sources’ in Delhi to stall the prosecution.

During investigation, the statement of the industrialist was recorded. He stated that the said gold was acquired by him before 1947 and as such it would not come within the mischief of the Gold Control Act, 1962.

However, the newspapers in which the gold bars were wrapped were of a much later date. Further investigation was taken up with the Municipal Corporation of Bombay to ascertain the date on which permission was granted to build the basement, which indicated that it was given a few years back and much after 1947.

The matter came up for trial before Gehani, the Metropolitan Magistrate, and Mistry commenced his arguments with the additional evidence secured during the investigation. When the arguments were in progress, an inspector of Customs came with a telex message from Delhi. It indicated that ‘the Department should not proceed with the prosecution for the time being’. I quietly kept the telex in my pocket. The defence advocate seeing the arrival of the inspector informed the court that they were expecting that a message would be coming from Delhi not to proceed with the prosecution. When our counsel asked, I did mention that a telex has come to that effect, but I requested him to proceed with the proceedings.

Then he informed me that he is appearing on behalf of the Central Government and he cannot ignore instructions. Accordingly, he informed the court. After hearing our counsel, Gehani was furious and he shouted that the matter is in his court and it is for him to decide whether the proceedings should continue or not. After exchanging some arguments, the Judge angrily said that the case shall be put in the call book.

The prosecution never came up. However, in the departmental adjudication proceedings, the gold was confiscated with penalties on the industrialist.

The same informer took up a job as a cook in the house of a prominent manufacturer of aluminum vessels in Rajasthan. He informed me that gold has been buried below the foundation of the house. Acting on this information, a digging operation was taken up. A large quantity of gold bars was found. However, the provisions of the Gold Control Act could not be invoked since the provisions of the Treasure Trove Act, 1878 would apply and it would become the property of the State Government.

(The writer is a former DG of DRI and NCB)