The infringement of the legal principles governing foreign exchange and smuggling activities have adversely affected the intensification of Indian economy  and serious threat to the security of the nation. Certain localities in India are increasingly exposed to smuggling and these activities are organized secretly by a group of persons by applying different techniques. Hence, the Central Government enacted The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA) in 1974 for the reason to provide preventive detention and to protect and augment the guidelines of foreign exchange. The Act also aims to control smuggling activities and other issues in relation to these activities.

The application of the Act extends to the entire Indian Territory including the State of Jammu and Kashmir. The Act confers power on the Central and the State Governments to issue orders for detaining a person if it is satisfied that the person has acted detrimental to the protection and intensification of foreign exchange. The Government shall also issue order of detention on the ground that the person has engaged in the activity of smuggling goods, assists any person in smuggling goods, transports or conceals such goods, harboring any person employed in the smuggling activities or does any other activity related with smuggling. Such an order shall be issued by the Joint Secretary to the Central Government or Secretary to the State Government or any senior officer authorized by the Government.

According to Article 22(5) of the Constitution of India, the detained person shall be informed regarding the grounds on which the order of detention is made. For complying with the provisions of the Constitution, the Act also provides for the communication of grounds on which the person is detained to that person within five days of arrest or within fifteen days where there is valid reason for such delay. The execution of the detention order shall be made in any part of India as per the procedure laid down in the Criminal Procedure Code. The detained person shall be lodged in a place where the appropriate Government shall have the conditions for the maintenance, interrogations or communication by specification. The detained person shall also be shifted from the current place of detention to a new place either within or outside the state where an order is issued by the appropriate Government in this regard. But a person shall be shifted to another State only after obtaining the prior permission of the State Government.

A person shall be detained on more than one ground and such order of detention cannot be called in question on the ground that it is unclear, non existent, extraneous, invalid or not concerned with the person so detained. The order of detention shall not become void or inoperative on the ground that the detained person or the place of detention does not fall under the territorial jurisdiction of authority making such order.

For the observance of the provisions of the Constitution of India, the Act entrusts power on the Central and the State Government to constitute an Advisory Board with a Chairman and two other members. Where a person is detained, the appropriate Government shall refer the details of detention within five weeks to the Advisory Board and the Board shall make a report in connection with the detention as per the provisions of the Constitution. The detention shall be confirmed by the Government when an affirmation is received from the Advisory Board.

The Central Government is empowered to issue an order to the authorized official to release a detained person temporarily with or without conditions and shall terminate the release of such person at any time.

The Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 contains elaborate provisions for the prevention of smuggling activities and protection of foreign exchange. In spite of these provisions smuggling activities are prevalent all over Indian Territory and many such cases are pending before the Supreme Court and various other Courts in the Country. The Act repealed The Maintenance of Internal Security (Amendment) Ordinance, 1974 and all the amendments made to the ordinance are also invalidated.