Delhi District Court
Digitally Signed vs Director Of Enforcement on 31 March, 2022
IN THE COURT OF SH. AKASH JAIN
ADDITIONAL CHIEF METROPOLITAN MAGISTRATE-01
PATIALA HOUSE COURTS, NEW DELHI DISTRICT:
NEW DELHI
CC No:- 19062/16
Enforcement Directorate v. M/s House of Services & Ors.
Sh. S. C. Adlakha
Chief Enforcement Officer
Enforcement Directorate
Ministry of Finance
Government of India
10A, Jamnagar House, Akbar Road
New Delhi-110001
...... Complainant
v.
1. M/s House of Services
B-6, Nizamuddin East
New Delhi-110013
2. Smt. Maya Sanyal
Partner of M/s House of Services
B-6, Nizamuddin East
New Delhi-110013
3. Smt. Indrani Sanyal
Partner of M/s House of Services
B-6, Nizamuddin East
New Delhi-110013
...... Accused persons
Date of Institution : 22.02.2002
Date of reserving judgement : 31.03.2022
Date of pronouncement : 31.03.2022
JUDGMENT
Brief History of Proceedings
1. This is a complaint under Section 56 of Foreign Exchange Digitally signed AKASH by AKASH JAIN JAIN Date: 2022.03.31 17:12:59 +0530 CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 1 of 36 Regulation Act, 1973 (hereinafter referred to as 'FERA') and in terms of Sub-Section (3) and (4) of Section 49 of the Foreign Exchange Management Act, 1999 (hereinafter referred to as 'FEMA') to the effect that during the years 1989 to 1995 the accused no. 1 effected shipments valued at Rs. 1,32,53,844/- under the cover of 27 GR-1 Forms. The accused no. 2 and accused no. 3 are the partners of accused no. 1 during the relevant period and were incharge and responsible for the conduct of business of accused no. 1. It is alleged that export proceeds against above 27 GR-1 Forms remained pending for realization as all the accused persons, without any permission from the Reserve Bank of India (hereinafter referred to as 'RBI') refrained from taking such action which had the effect of securing the receipt of export proceeds within the prescribed period or the period extended by RBI in the prescribed manner and thereby contravened Section 18(2) r/w Section 18(3) and Section 68(1) of FERA punishable under Section 56 of FERA.
2. It is alleged that in pursuance of Section 61(2) of FERA r/w Section 49(3) and (4) of FEMA, an opportunity notice no. T- 4/12-E/2001/OPN/SCA dated 16.07.2001 was duly served upon the accused persons to state in writing within 10 days of receipt of the notice, whether they had obtained any general or special permission of RBI in respect of the outstanding export value to the tune of Rs. 1,32,53,844/-. However, the accused persons failed to produce any such permission and did not care to reply to the said notice CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 2 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:13:08 +0530 rendering themselves liable to be punished under Section 56 of the FERA.
3. On completion of investigation the present complaint was filed before this Court on 22.02.2002.
4. Cognizance of the offences in question was duly taken by Ld. Predecessor Court and accused persons were summoned. Accused no. 2 and accused no. 3 duly appeared before the Court and were admitted to bail vide order 16.12.2004. Copy of complaint and documents were supplied to the accused and matter proceeded for pre-charge evidence. The complainant Department examined 5 witnesses in support of its case.
Complainant Evidence
5. PW-1 is complainant/S. C. Adlakha, Chief Enforcement Officer, who deposed on the lines of complaint. PW-1 deposed that accused persons did not take effective steps to realize the outstanding export proceeds and vide communication dated 01.07.1997, 06.09.1997 and 02.06.1999, the authorized dealer i.e. Syndicate Bank submitted details along with documents in respect of outstanding export proceeds along with names and addresses of two partners of accused no. 1 i.e. accused no. 2 and accused no. 3. Letter dated 01.07.1997 is Ex. PW 1/A. Letter dated 06.09.1997, vide which Syndicate Bank submitted the details of outstanding export bills along with photocopies of duly certified GRs, is Ex. PW 1/B. CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 3 of 36 Digitally signed by AKASH JAIN AKASH Date:
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Statement of particular of outstanding export bills running into three pages is Ex. PW 1/C. Outstanding 27 GR-1 Forms are Ex. PW 1/D-1 to Ex. PW 1/D-27 (colly). Communication dated 02.06.1999 is Ex. PW 1/E and its enclosures i.e. outstanding GR Forms photocopies are Ex. PW 1/F-1 Ex. PW 1/F-27 (colly). Opportunity notice is Ex. PW 1/G and postal acknowledgment of the same is Ex. PW 1/H to Ex. PW 1/K. The complaint in question is Ex. PW 1/L. The notification vide which the complaint is filed is Ex. PW 1/M. During cross-examination, PW-1 stated that he was not aware about letter dated 24.04.2003 of RBI and that he also did not know if accused had approached the Department for refund of duty drawback. PW-1 stated that in case export proceeds are not realized then RBI is competent to allow set off/write off against the unrealized export proceeds. He further added that the accused persons while acknowledging the opportunity notice, did not send any reply which shows that they had no requisite permission from the RBI till date. PW-1 further stated that he was not required to confirm from RBI as to whether any request of exporter was pending with them for allowing set off/write off against unrealized export proceeds as it is for the exporter to bring forward such matter to the notice of Department.
6. PW-2 is Varun Sharma, Assistant Manager, Syndicate Bank, International Business Branch, Connaught Place. He deposed that the aforesaid branch is an authorized dealer in CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 4 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:13:25 +0530 foreign exchange and looks after the payments or remittances in respect of import and export deals. He brought 13 outstanding GR-1 Forms in original in Court, copies of which had already been exhibited as Ex. PW 1/F-1, Ex. PW 1/F-2, Ex. PW 1/F-3, Ex. PW 1/F-7, Ex. PW 1/F-16, Ex. PW 1/F-17, Ex. PW 1/F-18, Ex. PW 1/F-19, Ex. PW 1/F- 20, Ex. PW 1/F-21, Ex. PW 1/F-23, Ex. PW 1/F-26, Ex. PW 1/F-27, which shows that the concerned party failed to realize the outstanding export proceeds as mentioned in aforesaid GR-1 Forms. PW-2 added that RBI had issued the permission to their bank i.e. Syndicate Bank to write off these bills subject to the condition that the party first refund the duty drawback claimed by them from the Customs Department. He further stated that till date the concerned party did not pay back the said duty drawback to the Department which is the mandatory condition, as such, the aforesaid GR-I Forms are still outstanding. During cross- examination PW-2 was shown letter Mark DX-A dated 05.12.2008 and Mark DX-B dated 24.12.2003, to which PW-2 expressed ignorance.
7. PW-3 is K. R. Thaper, who got retired as Assistant Director, Enforcement Directorate. He deposed that in the year 1997, he was posted as a Chief Enforcement Officer in Delhi Zonal Office, Directorate of Enforcement and in the present case Mr. D. N. Nistane issued a letter on 18.12.1997 to the concerned party for furnishing certain information regarding export proceeds which were pending for realization. Since, CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 5 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:13:33 +0530 no reply was received, PW-3 issued a reminder to the party on 23.04.1998 under Section 33(2) of FERA. Copy of letter dated 18.12.1997 is Ex. PW 3/A and copy of letter dated 23.04.1998 is Ex. PW 3/B. During cross-examination, PW- 3 stated that except issuance of reminder Ex. PW 3/B, he did not conduct any further investigation in this matter.
8. PW-4 is Suresh Kumar, Dispatch Clerk, Delhi Zone, Directorate of Enforcement. He brought dispatch register for the period w.e.f. 01.08.1997 to 17.10.1997 containing entries from serial number 3237 to 4396. The entry regarding dispatch of communication to authorized dealer i.e. Syndicate Bank is at serial no. 3300 dated 08.08.1997, copy of which is Ex. PW 4/A (original dispatch register was seen and returned). Further examination-in-chief of the witness was deferred on 28.05.2015.
9. PW-5 is Lovlesh Arora, Assistant Manager, Foreign Exchange Department, RBI. He deposed that he was duly authorized to make statement in the Court qua present case and his authority letter is Ex. PW 5/A. He further stated that he had no records pertaining to the present case. During cross-examination, PW-5 stated that he had no personal knowledge of this case and did not know the date or year in which this case had been filed.
10. It is not out of place to mention that during course of pre-
charge evidence, an application for discharge under Section 245 (2) Cr.P.C. had been moved on behalf of accused CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 6 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:13:41 +0530 persons which was dismissed by Ld. Predecessor Court vide order dated 06.01.2017. Thereafter, the accused persons preferred a revision petition against said order before Ld. Additional Sessions Judge, New Delhi District, Patiala House Courts, New Delhi which also got dismissed vide order dated 25.07.2017.
11. After conclusion of pre-charge evidence on 26.03.2018, the matter proceeded for arguments on the point of charge. Vide order dated 31.08.2018, it was held by Ld. Predecessor Court that there was sufficient evidence to frame charges against all the accused persons for contravention of Section 18(2) r/w Section 18(3) and Section 68 of FERA, punishable under Section 56 of FERA. The charge was duly framed upon accused no. 1 (through its CEO Sh. Surajit Sanyal) and accused no.3 on 17.09.2018. Since, accused no. 2 was 92 years old at the relevant time, bed ridden and unable to come to the Court, as such, the charge was framed against her through her Counsel Sh. Dilip Gupta in terms of judgment passed by Hon'ble Delhi High Court in Nihal Singh & Ors. v. Arjan Das, dated 20.09.1984.
12. During post-charge evidence, PW-4 was recalled whose examination-in-chief during pre charge evidence was not concluded. PW-4 adopted his previous deposition as recorded on 28.05.2015 and stated that opportunity notice Ex. PW 1/G was duly served upon the accused persons vide CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 7 of 36 Digitally signed by AKASH JAIN AKASH Date:
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registered post and post acknowledgment i.e. Ex. PW 4/B-1 to Ex. PW 4/B-3 (OSR). PW-4 was duly cross-examined by Ld. Counsel for the accused persons.
13. Ld. Counsel for accused did not wish to examine any other witness during post charge evidence, as such, the same got closed on 13.03.2019. Thereafter, statement of all the accused persons got recorded under Section 313 Cr.P.C. wherein AR of accused no. 1 stated that he was incharge and responsible for conduct of business of accused no. 1 during the relevant period and that accused no. 2 and 3 are merely sleeping partners. While admitting the fact of receipt of opportunity notice Ex. PW 1/G, AR of accused no. 1 stated that the accused no. 1 only replied to notice given by Adjudicating Authority as they believed that their reply would be shared with Enforcement Directorate. It was further added by AR of accused no. 1 that RBI had already written off and set off all the outstanding dues of accused persons and that the accused persons were exonerated by the Adjudicating Authority vide order dated 30.09.2014, as such, no offence under Section 56 of FERA is made out against them. Accused no. 3 and accused no. 2 also stated on similar lines under Section 313 Cr.P.C. as AR of accused no. 1, while adding that both of them are merely sleeping partners of accused no. 1 and not responsible or incharge of day-to-day affairs of the firm. Thereafter, the matter proceeded for final arguments as accused persons did not wish to lead any defence evidence.
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14. During course of final arguments, an application under Section 313 Cr.P.C. had been moved on behalf of accused persons for examining Sh. Surajit Sanyal i.e. AR of accused no. 1. The said application was allowed by Ld. Predecessor Court and AR of accused no. 1 got examined as DW-1.
Defence Evidence
15. DW-1 deposed that M/s House of Services i.e. accused no. 1 was set up by him with his mother (accused no. 2) and his wife (accused no. 3) as the partners. Their firm undertook exports worth around Rs. 25 crores between 1989 to 1995 and as of 1997-1998, out of the said exports, there were unrealized dues to the tune of approximately Rs. 1.32 crores under 27 outstanding GR Forms which were awaiting RBI approval. The authorized dealer for all the transactions was Syndicate Bank, Foreign Exchange Branch, Connaught Place, New Delhi. DW-1 stated that they had submitted a statement to Syndicate Bank, setting the explanation in respect of unrealized dues against each of the GR-Forms, which were outstanding as on 31.12.1998. Same is Ex.DW- 1/A1. He further added that over a period of time, the extent of outstanding dues stood reduced to around Rs. 1.10 crores and the number of outstanding GR Forms got reduced from 27 to 13. The same was acknowledged by way of a letter sent by Syndicate Bank to M/s House of Services dated 09.09.2002, photocopy of which is Mark- DW-1/A2. The said position was also acknowledged by RBI which sent a letter to accused no. 1 dated 16.10.2002 seeking an CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 9 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:14:05 +0530 explanation with respect to the said 13 outstanding GR Forms. The same is Ex.DW-1/B (OSR). Thereafter, RBI by way of its letter dated 24.04.2003 granted permission allowing set off/write off of entire unrealized export proceeds under all outstanding GR-Forms. The same is Ex.DW-1/C(OSR).
16. DW-1 further deposed that the accused no. 1 time and again sent representations to RBI through Syndicate Bank to set off against imports and write off the remaining unrealized export proceeds. However, Syndicate Bank did not forward the same to RBI for more than two years. The said letters dated 15.09.1997, 06.02.1998, Letter no. LB/034, LB/035, LB/036 & LB/037 all dated 12.06.1998, letter dated 16.07.1998, 28.08.1998, 08.10.1998, 29.01.1999 and 26.03.1999 are Ex.DW-1/D(colly) (objected to by Ld. SPP for Complainant). DW-1 stated that the accused persons made several efforts to realize all export dues and also found an alternate buyer but owing to delay on the part of Syndicate Bank for obtaining necessary approval from RBI, the customer was lost and the goods were auctioned by the warehouse, resulting in loss to the accused persons. DW-1 further stated that with respect to around Rs. 56 lakhs out of the unrealized dues, there was set off against remittances towards import made by accused no. 1 from Favorit Lederwaren GMBH and Toja Lederwaren GMBH to whom exports of around Rs. 56 lakhs were made. In this regard, several representations were made to RBI through CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 10 of 36 Digitally signed by AKASH AKASH JAIN Date:
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authorized dealer to approve such set off. The letters dated 14.05.1996, 07.05.1997, 12.07.1997, 30.01.1996, 05.02.1996, 19.02.1996, 27.06.1996, 11.07.1996, 01.08.1996, 17.09.1996 are Ex. DW-1/E(colly) (objected to by Ld. SPP for Complainant).
17. DW-1 deposed that approval of set off of Rs. 56 lakhs out of the unrealized dues against remittances towards import made by House of Services from Favorit Lederwaren GMBH and Toja Lederwaren GMBH, was duly granted by RBI vide letter dated 24.04.2003 (already exhibited as Ex. DW-1/C). Another Rs. 32 lakhs remained unrealized due to inability to recover dues against export made to Kidderminster Footwear owing to negligence and delay on the part of Syndicate Bank to obtain the necessary approvals from the RBI. Remaining Rs. 22 lakhs, also remained unrealized despite best efforts of the exporter. DW-1 stated that the accused remained constantly in touch with the RBI and Syndicate Bank, elaborating upon reasons for requesting set off and write off. The relevant letters of communication dated 07.10.2002, 28.11.2002 enclosing letter dated 18.11.2002 and 27.12.2002 are Mark DW-1/F(colly). Further, letters dated 08.05.2003, 01.11.2004 and 05.12.2008 are Mark-DW-1/G (colly). Letter dated 11.11.2013 is Ex. DW-1/H(OSR).
18. DW-1 further stated that accused duly paid the entire duty drawback through Bank Draft and relevant bank drafts dated CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 11 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:14:18 +0530 08.01.2014 and 07.01.2014, letter dated 27.03.2014 and certificate dated 19.04.2014 are Mark DW-1/I (colly). DW- 1 added that, the Adjudicating Authority i.e. the Enforcement Directorate, vide order dated 30.09.2014 dropped all proceedings against the accused persons and the certified copy of said order is Ex. DW-1/K (OSR). DW-1 further stated that he is the duly constituted Attorney of DW- 1 vide Power of Attorney dated 21.10.1987 which is Mark DW-1/L. During cross-examination, DW-1 admitted that as on 31.12.1998, there were outstanding export proceeds to the tune of Rs. 1,30,44,354.00/- against the 27 outstanding GR-I Forms. The outstanding got later on reduced to Rs 1.1 Crore comprising of 13 outstanding GR-1 Forms which ultimately were written off/set off by Reserve Bank of India vide approval dated 24.04.2003 (Ex DW-1/3). DW-1 denied the suggestion of Ld. SPP for complainant that the accused persons intentionally did not produce the original documents of letters written to RBI/Syndicate Bank.
19. Thereafter, defence evidence was closed and matter was fixed for final arguments.
Final Arguments
20. During final arguments, Ld. SPP for the complainant argued that under Section 71 of FERA, the burden of proving that the accused had requisite permission shall be on him. Moreover, under Section 18(3) of FERA, it is presumed that unless the contrary is proved by the person who has sold or CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 12 of 36 Digitally signed by AKASH JAIN AKASH Date:
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is entitled to sell the goods or to procure the sale thereof, that such person has not taken all reasonable steps to receive or recover the payment for the goods as aforesaid and he shall accordingly be presumed to have contravened the provision of sub Section (2). Similarly Rule 8 of The Foreign Exchange Regulation Rules, 1974 states that the amount representing the full export value of the goods exported shall be realized and be paid to the authorized dealer on the due date of payment or within six months from the date of shipment of the goods whichever is earlier. It is argued that in the present case the payments towards export proceeds were not received within the stipulated period of six months from the date of shipment or within the time extended by the RBI from foreign buyer and the accused failed to show any such permission or discharged their burden.
21. Ld. SPP for the complainant further argued that accused persons relied upon letter dated 24.04.2003 of RBI vide which outstanding GR-1 Forms qua accused persons were set off/write off subject to surrendering of amount of export incentives by the accused persons, however, the said write off was clearly without prejudice to the investigation conducted by the Enforcement Directorate and present Court case.
22. Ld. SPP for the complainant further argued that the Adjudicating Order dated 30.09.2014 (Ex. DW 1/K) passed CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 13 of 36 Digitally signed by AKASH JAIN AKASH Date:
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by Joint Director, Directorate of Enforcement was on technical grounds and does not have the effect of absolving accused persons from criminal liability under Section 56 of FERA. Additionally, it was argued that vide order dated 06.01.2017, Ld. ACMM-01, New Delhi District, Patiala House Courts, New Delhi rejected the application of discharge of accused persons on same grounds, which order attained finality before Ld. Revision Court vide order dated 25.07.2017, as the same was never challenged before higher Courts by the accused persons. In support of his arguments, Ld. SPP for the complainant relied upon the following judgments as under:-
(i) Ram Krishna Bedu Rane v. State of Maharashtra, (1973) 1 SCC 366;
(ii) M/s Bharat Carpets v. Director, Enforcement Directorate 2008 [3] JCC 1770;
(iii) Standard Chartered Bank and others v. Directorate of Enforcement and others Case No. Appeal (civil) 1748 of 1999.
23. Ld. Counsel for accused persons, on the other hand argued that accused persons had been charged for contravention of Section 18(2) of FERA, which stipulates permission of the RBI. Since, RBI had granted permission to set off/write off the outstanding GR-1 Forms qua accused persons vide letter dated 24.04.2003 Ex. DW 1/C (OSR), it is prayed that no offence under Section 56 of FERA is made out. While relying upon the judgments of LIC v. Escorts Ltd., (1986) 1 CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 14 of 36 Digitally signed by AKASH JAIN AKASH Date:
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SCC 264 and Hindustan Lever Ltd. v. Special Director, Directorate of Enforcement and Anr., 2019 SCC Online ATFEMA 2, Ld. Counsel for accused persons argued that permission under Section 18(2) of FERA can be granted by RBI ex post facto and that no contravention of Section 18(2) of FERA remains if RBI has granted permission to the exporter by writing off the outstanding proceeds and treated the matter as closed.
24. Ld. Counsel for accused persons further contended that the accused persons duly refunded the duty drawback, which fact finds mention in the order passed by Adjudicating Authority dated 30.09.2014 (Ex. DW 1/K), vide which the charges against the accused persons were dropped and accused persons were exonerated. In view of exoneration by Adjudicating Authority, criminal prosecution on similar facts and allegations ought not to be allowed to continue. Ld. Counsel placed reliance upon the judgments of Radheshyam Kejriwal v. State of West Bengal & Anr., (2011) 3 SCC, Sunil Gulati v. R. K. Vohra & Ors., (2007) 145 DLT 612 and Kamal Suri v. Dy. Director, Enforcement Directorate, 2008 SCC Online Del 22.
25. It is argued by Ld. Counsel for accused persons that during defence evidence, DW-1 brought on record multiple letters to demonstrate efforts taken by accused persons for recovery of outstanding export dues. The accused no. 1 further made numerous representations to RBI as well as Syndicate Bank CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 15 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:14:48 +0530 for extension, write off, approval of adjustment of export proceeds against import remittances in respect of outstanding GR-1 Forms.
26. It is further argued that no mens rea could be attributed against accused persons for commission of alleged offences as they made sincere efforts to realize the outstanding export proceeds and successfully got exonerated from all the charges vide order dated 30.09.2014 (Ex. DW 1/K). While relying upon the judgment of Rajasthan Udhyog v. Assistant Director (Enforcement) Agr. & Anr., 2011 SCC Online Raj 2813, it is contended that the mere fact that proceeds remained unrealized does not automatically render the accused punishable under Section 56 of FERA, if the events occurred were beyond the ordinary control of the exporter.
27. It is finally contended by Ld. Counsel for accused persons that no loss had been caused to the Revenue Department as entire duty drawback availed had been refunded by the accused persons and even otherwise, accused no. 2 and accused no. 3 were only the sleeping partners in accused no. 1 firm and no credible evidence is produced on record to prove their individual role in running the accused no. 1 firm.
Analysis and Findings
28. Final arguments were heard on behalf of both the parties and record perused carefully.
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29. Before examining the rival contentions of both the parties and returning findings on each of them, it is imperative to discuss the relevant legal provisions applicable on the facts of the present case.
(a) Section 18(1)(2) & (3) of FERA reads as under
18. Payment for exported goods:-
(1) (a) The Central Government may, by notification in the Official Gazette, prohibit the taking or sending out by land, sea or air (hereafter in this section referred to as export) of all goods or of any goods or class of goods specified in the notification from India directly or indirectly to any place so specified unless the exporter furnishes to the prescribed authority a declaration in the prescribed form supported by such evidence as may be prescribed or so specified and true in all material particulars which, among others, shall include the amount representing-(i) the full export value of the goods; or (ii) if the full export value of the goods is not ascertainable at the time of export the value which the exporter, having regard to the prevailing market conditions, expects to receive on the sale of the goods in the overseas market, and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time of export or not) has been, or will within the prescribed period be, paid in the prescribed manner.
(b) If the Central Government is of opinion that it is necessary or expedient in the public interest so to do, it may, by notification in the Official Gazette specified any goods, from among those goods to which a notification under clause (a) applies, and direct that in respect of the goods so specified, where an exporter makes a declaration under sub-
clause (ii) of clause (a) of the value which he having regard to the prevailing market conditions expect to receive on the sale of such goods in the overseas market, he shall not, except with the permission of the Reserve Bank on an application made to the Reserve Bank by the exporter in this behalf, authorise or permit or allow or in any manner be a party to, the sale of such goods for a value less than CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 17 of 36 Digitally signed by AKASH JAIN AKASH Date:
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that declared: Provided that no permission shall be refused by the Reserve Bank under this clause unless the exporter has been given a reasonable opportunity for making a representation in the matter: Provided further that where the exporter makes an application to the Reserve Bank for permission under this clause and the Reserve Bank does not, within a period of twenty days from the date of receipt of the application communicate to the exporter that permission applied for has been refused, it shall be presumed that the Reserve Bank has granted such permission. Explanation.--In computing the period of twenty days for the purposes of the second proviso, the period, if any, taken by the Reserve Bank for giving an opportunity to the exporter for making a representation under the first proviso shall be excluded.
2. Where any export of goods, to which a notification under clause (a) of sub-section (1) applies, has been made, no person shall, except with the permission of the Reserve Bank, do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing-- (A) in a case falling under sub-clause (i) or sub- clause (ii) of clause (a) of sub-section (1),--
(a) that payment for the goods--
(i) is made otherwise than in the prescribed manner, or
(ii) is delayed beyond the period prescribed under clause (a) of subsection (1), or
(b) that the proceeds of sale of the goods exported do not represent the full export value of the goods subject to such deductions, if any, as may be allowed by the Reserve Bank; and (B) in a case falling under sub-clause (ii) of clause
(a) of sub-section (1), also that the sale of the goods is delayed to an extent which is unreasonable having regard to the ordinary course of trade: Provided that no proceedings in respect of any contravention of the provisions of this sub-section shall be instituted unless the prescribed period has expired and payment for the goods representing the full export value has not been made in the prescribed manner within the prescribed period.
3. Where in relation to any goods to which a notification under clause (a) of sub-section (1) CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 18 of 36 Digitally signed by AKASH JAIN AKASH Date:
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applies the prescribed period has expired and payment therefor has not been made as aforesaid, it shall be presumed, unless the contrary is proved by the person who has sold or is entitled to sell the goods or to procure the sale thereof, that such person has not taken all reasonable steps to receive or recover the payment for the goods as aforesaid and he shall accordingly be presumed to have contravened the provisions of sub-section (2).
(b) Section 56(1) of FERA,1973 reads as under:-
56. Offences and prosecutions -
(1) Without prejudice to any award of penalty by the adjudicating officer under this Act, if any person contravenes any of the provisions of this Act. [other than section 13, clause (a) of sub-section (1) of 1[section 18, section 18A], clause (a) of sub-section (1) of section 19, sub-section (2) of section 44 and sections 57 and 58], or of any rule, direction or order made thereunder he shall, upon conviction by a court, be punishable,--
(i) in the case of an offence the amount or value involved in which exceeds one lakh of rupees, with imprisonment for a term which shall not be less than six months, but which may extend to seven years and with fine: Provided that the court may, for any adequate and special reasons to be mentioned in the judgment, impose a sentence of imprisonment for a term of less than six months;
(ii) in any other case, with imprisonment for a term which may extend to three years or with fine or with both.
(c) Section 61 of FERA reads as under:-
61. Cognizance of offences -
(1) Notwithstanding anything contained in section 29 of the Code of Criminal Procedure, it shall be lawful for any metropolitan magistrate and for any magistrate of the first class to pass a sentence of imprisonment for a term exceeding three years or of fine exceeding five thousand rupees on any person convicted of an offence punishable under section
56.] CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 19 of 36 Digitally signed AKASH by AKASH JAIN JAIN Date: 2022.03.31 17:15:18 +0530 (2) No court shall take cognizance--
(i) of any offence punishable under sub-section (2) of section 44 or sub-section (1) of section 58,-
(a) where the offence is alleged to have been committed by an officer of Enforcement not lower in rank than an Assistant Director of Enforcement, except with the previous sanction of the Central Government;
(b) where the offence is alleged to have been committed by an officer of Enforcement lower in rank than an Assistant Director of Enforcement, except with the previous sanction of the Director of Enforcement; or
(ii) of any offence punishable under section 56 or section 57, except upon complaint in writing made by--
(a) the Director of Enforcement; or
(b) any officer authorised in writing in this behalf by the Director of Enforcement or the Central Government; or
(c) any officer of the Reserve Bank authorised by the Reserve Bank by a general or special order:
Provided that where any such offence is the contravention of any of the provisions of this Act or of any rule, direction or order made thereunder which prohibits the doing of an act without permission, no such complaint shall be made unless the person accused of the offence has been given an opportunity of showing that he had such permission.
(d) Section 68(1) of FERA reads as under:-
68. Offences by companies-
(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time of the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 20 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:15:25 +0530 shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.
(e) Section 71(1) of FERA reads as under:-
71. Burden of proof in certain cases.
(1) Where any person is prosecuted or proceeded against for contravening any of the provisions of this Act or of any rule, direction or order made thereunder which prohibits him from doing an act without permission, the burden of proving that he had the requisite permission shall be on him.
(f) Rule 8 of The Foreign Exchange Regulation Rules, 1974 reads as under:-
8. Period within which export value of goods to be realized:-
The amount representing the full export value of the goods exported shall be realized and be paid to the authorized dealer on the due date for payment or within six months from the date of shipment of the goods whichever is earlier.
Provided that, where the goods are exported to a warehouse established outside India with the permission of the Reserve Bank, the amount representing full export value of the goods exported shall be paid to the authorized dealer as soon as it is realised and in any case within fifteen months from the date of shipment of goods.
Provided further that the Reserve Bank may, for sufficient and reasonable case shown, extend the said period.
30. Suffice it to say, the fact that during years 1989-1995, the accused no. 1 firm effected shipments valued at Rs.
1,32,53,844/- under the cover of 27 GR-1 Forms is not in dispute. It is further not in dispute that the said 27 GR-1 Forms remained unrealized till 31.12.1998, which fact is CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 21 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:15:32 +0530 admitted by DW-1 during his cross-examination. The details of above-mentioned GR-1 Forms are mentioned as under:-
S. No. G. R. Number Amount
Outstanding
1. G. K. 687214 Rs. 1,75,160/-
2. G. K. 687215 Rs. 1,98,720/-
3. G. K. 069491 Rs. 1,22,760/-
4. A. E. 800663 Rs. 9,83,067/-
5. A. E. 800646 Rs. 10,03,000/-
6. A. E. 800611 Rs. 1,74,960/-
7. A. D. 800700 Rs. 23,100/-
8. A. E. 806624 Rs. 2,764/-
9. A. E. 800623 Rs. 8,978/-
10. A. E. 531551 Rs. 2,27,256/-
11. A. E. 531552 Rs. 15,48,234/-
12. A. E. 886017 Rs. 4,62,000/-
13. A. E. 531574 Rs. 14,07,320/-
14. A. E. 531590 Rs. 7,24,230/-
15. A. E. 531584 Rs. 7,53,564/-
16. A. E. 537599 Rs. 16,93,605/-
17. A. E. 531594 Rs. 2,99,219/-
18. A. G. 288799 Rs. 81,486/-
19. A. F. 531596 Rs. 8,17,509/-
20. A. G. 290589 Rs. 6,53,548/-
21. A. G. 290579 Rs. 1,86,070/-
22. A. F. 040402 Rs. 90,797/-
23. A. F. 531597 Rs. 18,02,514/-
24. A. G. 290585 Rs. 1,50,724/-
25. A. J. 692405 Rs. 37,240/-
26. A. J. 692404 Rs. 3,43,044/-
27. A. C. 78912 Rs. 1,82,885/-
Total :- Rs. 1,32,53,844/-
31. It is admitted position of facts that RBI had set off/written off the unrealized amount in respect of outstanding GR Forms qua accused persons vide letter dated 24.04.2003 (Ex.
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DW 1/C). It is further not in dispute that Opportunity Notice no. T-4/12-E/2001/OPN/SCA dated 16.07.2001 was duly served upon the accused persons prior to filing of the present complaint on 22.02.2002. The factum of receipt of the Opportunity Notice is admitted by the accused persons during recording of statement under Section 313 Cr.P.C. as well.
32. It is though contended by Ld. Counsel for accused persons that accused could not be charged for contravention of Section 18(2) of FERA as pre-requisite for an offence under Section 18(2) of FERA is permission from RBI, which is missing in the present case. It is contended that vide order dated 24.04.2003 Ex. DW 1/C (OSR), RBI set off/written off the unrealized amount in respect of outstanding GR Forms qua accused persons, as such, no offence under Section 56 of FERA is made out.
33. The aforesaid argument of Ld. Counsel for accused persons is though not tenable in as much as prior to filing of complaint in question, the complainant admittedly served Opportunity Notice Ex. PW 1/G upon the accused persons in terms of Section 61(2) of FERA to state in writing within 10 days after receipt of the notice as to whether they had obtained any general or special permission of RBI in respect of outstanding export proceeds failing which a complaint under Section 56 of the Act would be filed against them. Since, the accused persons did not file any reply to the CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 23 of 36 Digitally signed by AKASH JAIN AKASH Date:
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aforesaid Opportunity notice within stipulated period of time, the offence in question got completed and complaint in question had been filed. Nothing substantial is brought on record on behalf of accused persons to show that they had requisite permission from RBI to extend the period of realization of outstanding dues, prior to filing of present complaint.
34. At this stage, Ld. Counsel for accused persons relied upon the judgment of LIC v. Escorts Ltd. (supra), wherein it was held that the RBI is sole authority to decide whether conditions under FERA, Rules and Regulations thereunder have been met and whether permission should be granted. It was also held that permission can also be granted by RBI ex post facto. The relevant excerpt of the judgment is reproduced as under :-
"... The Foreign Exchange Regulation Act is, therefore, clearly a statute enacted in the national economic interest. When construing statutes enacted in the national interest, we have necessarily to take the broad factual situations contemplated by the Act and interpret its provisions so as to advance and not to thwart the particular national interest whose advancement is proposed by the legislation. Traditional norms of statutory interpretation must yield to broader notions of the national interest. If the legislation is viewed and construed from that perspective, as indeed it is imperative that we do, we find no difficulty in interpreting 'permission' to mean 'permission', previous or subsequent, and we find no justification whatsoever for limiting the expression 'permission' to 'previous permission' only. In our view what is necessary is that the permission of the Reserve Bank of India should be obtained at some stage for the purchase of shares by non- resident companies..."
35. Ld. Counsel for accused persons further relied upon the CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 24 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:15:51 +0530 judgment of Appellate Tribunal under FEMA i.e. Hindustan Lever Ltd. v. Special Director, Directorate of Enforcement and Anr.(supra) wherein it was held that there would be no contravention of Section 18(2) of FERA, if RBI grants permission to the exporter by writing off the outstanding proceeds. The relevant excerpt is reproduced as under:-
"... To put, it in similar language what section 18(2) provides, insofar as relevant for the purposes of these appeals, is that if the full export value of the goods has not been realised within the prescribed period or if the realisation of full export value of the goods has been delayed beyond the prescribed period, it would amount to contravention of section 18(2) unless the exporter proves that he has taken all reasonable steps to realise the outstanding export proceeds. However, there will be no contravention, even if the export proceeds, in full or in part, have not been realised, if the prescribed period of 6 months or the period extended by the Reserve Bank has not expired. Similarly, there will be no contravention of section 18(2) if the Reserve Bank has granted permission to the exporter by writing off the outstanding proceeds and treated the matter as closed or as in order by directing the release of the concerned GR Forms. It is now judicially settled after the Supreme Court's judgment in Life Insurance Corporation of India v. Escorts Ltd. AIR 1986 SC 1370 that the Reserve Bank is empowered to grant an ex post facto permission under section 18(2) or extension of time under the second proviso to rule 8. It would thus be noted that a mere non- realisation of export proceeds or realisation or export proceeds after the expiry of the prescribed period, by itself, would not amount to contravention of section 18(2), unless the Reserve Bank, if approached, has refused to grant the permission contemplated Section 18(2) or has refused to extend the period as contemplated under Rule 8 of the Foreign Exchange Regulation Rules, 1974. It would therefore follow that if an application seeking extension of time or for permission for writing off the outstanding export proceeds is pending consideration of the Reserve Bank, the question whether there has been a contravention of CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 25 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:15:57 +0530 the provisions of Section 18(2) cannot be determined unless and until the Reserve Bank has refused extension of time or the permission for writing off, as the case may be. If any adjudication proceedings are initiated during the pendency of such applications before the RBI, such proceedings would be pre-mature and without jurisdiction..."
36. The aforesaid judgments are though distinguishable with the facts of the present case as the outstanding dues of accused persons were not set off/written off by RBI unconditionally but without prejudice to the findings in the present Court case. The relevant extract of approval letter of RBI dated 24.04.2003 (Ex. DW 1/C) (OSR) is reproduced as under:-
"...2. In view of the clarifications/comments contained in the above mentioned letters and the documents now made available, we are agreeable to allow the set off/write off the unrealized amounts in respect of the outstanding GR Forms, as requested vide your aforementioned letter.
3. Please note that the above approval is without prejudice to the findings if any of the investigation being conducted by the Enforcement Directorate and the Court case filed by them.
4. Please note that the above approval is subject to the above exporter surrendering the amount of export incentives availed off, proportionate to the amount being written off, and submitting to you appropriate documentary evidence for the same..."
37. The language of the approval letter of RBI is thus, conspicuous to exclude criminal prosecution of accused persons qua unrealized export proceeds. RBI merely allowed writing off with respect to unrealized GR Forms subject to deposition of export proceeds. Section 50 of CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 26 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:16:13 +0530 FERA provides for imposition of monetary penalty by Directorate of Enforcement in contravention of Section 18. Deposition of export incentive would make good the loss caused to the Government and may be a valid defence for the purpose of proceedings under Section 50 of FERA. However, Section 56 of FERA is independent of Section 50 and provides for jail term as well. Thus, in view of specific rider in the approval letter by RBI, the defence raised on behalf of accused persons regarding non contravention of Section 18(2) of FERA is without any merit.
38. The other contention raised by Ld. Counsel for accused persons is that vide order dated 30.09.2014 (Ex. DW 1/K), Adjudicating Authority dropped all the charges against the accused persons under Section 18(2), 18(3) r/w Section 68 of FERA. It is argued that the Adjudicating Authority took note of the fact that the accused persons refunded the entire duty drawback and also considered the correspondences and efforts taken by the accused no. 1 firm to recover the export proceeds and on the basis of same exonerated all the accused persons of all the violations under FERA. It is argued that the aforesaid order is a reasoned order where all relevant statements, documents and facts had been examined and appreciated by the Adjudicating Authority, as such, the same is clearly on merits.
39. In support of his arguments, Ld. Counsel for accused persons relied upon the judgment of Radheshyam Kejriwal CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 27 of 36 Digitally signed by AKASH JAIN AKASH Date:
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v. State of West Bengal & Anr. (supra), wherein it was held by Hon'ble Supreme Court that:-
"... 38. The ratio which can be culled out from these decisions can broadly be stated as follows:-
(i) Adjudication proceeding and criminal prosecution can be launched simultaneously;
(ii) Decision in adjudication proceeding is not necessary before initiating criminal prosecution;
(iii) Adjudication proceeding and criminal proceeding are independent in nature to each other;
(iv) The finding against the person facing prosecution in the adjudication proceeding is not binding on the proceeding for criminal prosecution;
(v) Adjudication proceeding by the Enforcement Directorate is not prosecution by a competent court of law to attract the provisions of Article 20 (2) of the Constitution or Section 300 of the Code of Criminal Procedure;
(vi) The finding in the adjudication proceeding in favour of the person facing trial for identical violation will depend upon the nature of finding. If the exoneration in adjudication proceeding is on technical ground and not on merit, prosecution may continue; and
(vii) In case of exoneration, however, on merits where allegation is found to be not sustainable at all and person held innocent, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue underlying principle being the higher standard of proof in criminal cases.
39. In our opinion, therefore, the yardstick would be to judge as to whether allegation in the adjudication proceeding as well as proceeding for prosecution is identical and the exoneration of the person concerned in the adjudication proceeding is on merits. In case it is found on merit that there is no contravention of the provisions of the Act in the adjudication proceeding, the CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 28 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:16:41 +0530 trial of the person concerned shall be in abuse of the process of the court..."
40. Ld. Counsel for accused persons further placed reliance upon the judgments of Videocon Industries Limited & Anr. v. State of Maharashtra & Ors. reported at (2016) 12 SCC 315 and Ashoo Surendranth Tewari v. Deputy Superintendent of Police, EOW, CBI. And Anr., reported at 2020 SCC Online SC 739, wherein principles laid down in Radheshyam Kejriwal v. State of West Bengal & Anr. (supra) got reaffirmed.
41. Ld. Counsel for accused persons further relied upon the judgment of Sunil Gulati v. R. K. Vohra & Ors. (supra), wherein Hon'ble Delhi High Court held as under:-
"... It is clear from the above that the departmental proceedings were initiated alleging violation of the same provisions of FERA in respect of same shipments of same amount with same allegations which are in the complaint namely non-realisation of the export proceeds and not taking effective steps. Therefore, the adjudicating authority, being convinced and satisfied with the explanation of the petitioners, dropped the proceedings. It is also recorded that the Reserve Bank of India has itself granted write off to the petitioner no. 1 company. Once the Reserve Bank of India has accepted the explanation and has granted permission to write off and on that basis adjudication proceedings are also dropped, I fail to understand as to how prosecution alleging the violation of same provisions can continue. Special Directorate of Enforcement itself has satisfied himself there is no violation. Chief Enforcement Officer in the Enforcement Directorate, in these circumstances, cannot maintain the proceedings alleging same violation and continue with the complaint. It would be of interest to note that Section 18(2) of the Act spells out the circumstances under which the contravention can be said to have been committed so as to attract the penal provisions in addition to proving that export proceeds have not been realised. It is also to CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 29 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:16:48 +0530 be shows that needful is not done with the prescribed period of time or extended period of time granted by the Reserve Bank of India. Rule 8 of the aforesaid Regulation Rules empowers Reserve Bank of India to extend the period of time as prescribed in the Act for realising the export proceeds. Further proviso to Sub-Section 2 of the Section 18 in no uncertain terms stipulates that no proceedings in respect of any contravention of the provisions of the said Sub-Section shall be instituted unless the prescribed period has expired and payment for the goods representing the full export value has not been made in the prescribed manner within the prescribed period. Thus, if the RBI itself has granted the extension or has ultimately waived the requirement, there cannot be any infraction of the said proceedings...".
42. Ld. Counsel for accused persons also relied upon the judgment of Kamal Suri v. Dy. Director, Enforcement Directorate (supra), wherein the ratio of judgment of Sunil Gulati v. R K.. Vohra & Ors. (supra) got reaffirmed.
43. In response to the aforesaid contentions, Ld. SPP for the complainant argued that the Adjudicating Order dated 30.09.2014 (Ex. DW1/K) passed by Joint Director, Directorate of Enforcement was on technical grounds and does not have the effect of absolving accused persons from criminal liability under Section 56 of FERA. Ld. SPP for the complainant further argued that vide order dated 06.01.2017, Ld. ACMM-01, New Delhi District, Patiala House Courts, New Delhi rejected the application of discharge of accused persons on same grounds while discussing all the judgments cited above by Ld. Counsel for accused persons, which order attained finality before Ld. Revision Court vide order dated 25.07.2017, as the CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 30 of 36 Digitally signed by AKASH JAIN AKASH Date:
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same was never challenged before Higher Courts by the accused persons.
44. In the case of Standard Chartered Bank and others v.
Directorate of Enforcement and others (supra), Hon'ble Supreme Court of India was pleased to hold that the Act in question was enacted for conservation of Foreign Exchange resources of the country and that its subserves twin purpose i.e. (i) to ensure that no economic loss is caused by alleged contravention by imposing appropriate penalty and (ii) to ensure that tendency to violate is curbed by imposing appropriate punishment in terms of Section 56 of the Act. It was held that proceedings under Section 51 and Section 56 of the Act are independent and can be conducted simultaneously. Moreover, it was held that prosecution contemplated under Section 56 of the Act is not dependent upon adverse finding by Adjudicating Authority in proceedings under Section 51 of the Act. The relevant excerpts of the judgment are reproduced as under:-
"... 22 The Act was enacted, as indicated by its preamble, for the conservation of foreign exchange resources of the country and the proper utilization thereof in the economic development of the country. When interpreting such a law, in the absence of any provision in that regard in the Act itself, we see no reason to restrict the scope of any of the provisions of the Act, especially in the context of the presence of the "without prejudice" clause in Section 56 of the Act dealing with offences and prosecutions. We find substance in the contention of the learned Additional Solicitor General that the Act subserves a twin purpose. One, to ensure that no economic loss is caused by the alleged contravention by the imposition of an appropriate CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 31 of 36 Digitally signed by AKASH JAIN AKASH Date:
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penalty after an adjudication under Section 51 of the Act and two, to ensure that the tendency to violate is curbed by imposing an appropriate punishment after a due prosecution in terms of Section 56 of the Act. The contention that as a matter of construction -- since the provisions could not be attacked as violative of the rights under Part III of the Constitution ---- we should interpret the provisions of the Act and hold that an adjudication has to precede a prosecution cannot be accepted as we see nothing in the provisions of the Act justifying such a construction. On the scheme of the Act, the two proceedings are seen to be independent and the launching of the one or the other or both is seen to be controlled by the respective provisions themselves. In the context of the inclusion of this Act in the Ninth Schedule, the reliance placed on the decision in Rayala Corporation (P) Ltd. & Ors. Vs. Director of Enforcement, New Delhi (1969 (2) SCC 412) cannot enable this Court to deem the provisions as arbitrary and to read them down or understood them in the manner suggested by the learned senior counsel. The very purpose of the Act and the very object of inclusion of the Act in the Ninth Schedule justifies an interpretation of the provisions as they stand on the basis that there is nothing arbitrary or unreasonable in the provisions and in the scheme as enacted. We may also notice that Section 23D of the Foreign Exchange Regulation Act, 1947, which was considered in Rayala Corporation (P) Ltd. & Ors. had a proviso, which indicated that the adjudication for the imposition of penalty should precede the making of a complaint in writing to the concerned court for prosecuting the offender. The absence of a similar proviso to Section 56 or to Section 51 of the present Act, is also a clear indication that the legislature intended to treat the two proceedings as independent of each other. Obviously, the legislature must be taken to have been conscious of the interpretation placed on the corresponding provisions by this Court in the decisions above referred to when the 1973 Act was enacted and it was also included in the Ninth Schedule to ward off any challenge on the ground that it would be violative of Article 14 of the Constitution, unless understood or read in a particular fashion....
... 35. This appeal challenges the decision of the High Court of Andhra Pradesh refusing to interfere with an order of the Special Judge of Economic Offences at Hyderabad refusing to discharge the appellant. The argument before the High Court was that the prosecution contemplated by Section 56 of the Act could take place CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 32 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:17:19 +0530 only if an adverse finding is recorded by the Adjudicating Officer in the proceedings under Section 51 of the Act and that no crime or offence can be said to have been committed by the appellant unless the proceedings under Section 51 of the Act culminates in a finding adverse to him. The High Court rejected this contention. In view of our conclusions recorded earlier, the said argument which is reiterated before us in support of this appeal, has only to be rejected. The order of the High Court does not call for interference and this appeal deserves to be dismissed..."
45. After careful perusal of all the judgments relied upon on behalf of accused persons and complainant, an inference can be drawn that if an accused is exonerated in departmental/adjudication proceedings on merits, criminal prosecution can be closed. However, if the exoneration of accused is on technical grounds, the criminal proceedings will not be affected.
46. It is pertinent to note that vide order dated 06.01.2017, Ld. Predecessor Court rejected the application of discharge of accused persons on same grounds by holding that the order of Adjudicating Authority was not on merits but on technical grounds as it did not deal with the evidence led against the accused persons. It was further held that there were no findings in the Adjudicating order to the effect that accused persons did not contravene the provisions of FERA. It was further held that there was no finding to the effect that evidence led by the complainant to prove its case was inadequate. Digitally signed by AKASH AKASH JAIN Date:
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47. The aforesaid order of Ld. Predecessor Court was challenged by accused persons before Ld. Revision Court. Vide order dated 25.07.2017, Ld. Revision Court held that the decision of the Adjudicating Authority was not on merits as the writing off by RBI was without prejudice to criminal prosecution. The said order attained finality as the same was not challenged by accused persons before Higher Courts. As such, the accused persons cannot be permitted to raise the same contention at this stage as well.
48. With respect to the other contentions of Ld. Counsel for the accused persons regarding efforts taken by them to realize export proceeds and absence of mens rea on their part, it is pertinent to note that the letters/representations purported to be written by accused no. 1 to RBI and Syndicate Bank on various occasions from 15.09.1997 have been brought on record by DW-1 vide Ex. DW 1/D (colly) and Ex. DW 1/E (colly). However, the exhibition of these documents was objected by Ld. SPP for the complainant during examination-in-chief of DW-1 as all these letters are photocopied documents. No suitable explanation could be given by DW-1 regarding absence of originals of these documents during his cross-examination, as such, same cannot be read in evidence.
49. In order to avail the benefit of provision of Section 18(3) of FERA, accused persons had to show what reasonable steps were taken by them within stipulated period of six months CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 34 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:18:43 +0530 from the date of shipment to realize the outstanding export proceeds. However, except the approval letter dated 24.04.2003 Ex. DW 1/C (OSR) vide which unrealized amount in respect of outstanding GR Forms of accused persons were set off by RBI, no original documents or letters could be placed on record by the accused persons to evince that they took all reasonable steps to receive or recover the payment for the exported goods. Thus, the presumption under Section 18(3) of FERA could not be successfully rebutted by the accused persons.
50. Finally, with respect to contention of Ld. Counsel for accused persons that accused no. 2 and accused no. 3 were merely the sleeping partners of accused no. 1 and were not in-charge of day-to-day affairs of the said firm, it is relevant to note that nothing credible is brought on record by the accused persons to show that they were not aware of the transactions of accused no. 1. In the Adjudicating order dated 30.09.2014 Ex. DW 1/K, it has been specifically noted in paragraph 5.5 that on 19.12.2001 Sh. Ravi Mehrotra, Advocate submitted that accused no. 2 was in- charge and responsible for conduct of export business of the accused no. 1 firm. Moreover, there are documents on record to the effect that specific correspondences were made on behalf of accused no. 1 firm to RBI and Syndicate Bank by accused no. 2/accused no. 3. Thus, the defence that they were not in-charge and were not responsible for the affairs of accused no. 1 firm is without any CC No:- 19062/16 Enforcement Directorate v. M/s House of Services & Ors. Page No:- 35 of 36 Digitally signed AKASH by AKASH JAIN Date: JAIN 2022.03.31 17:18:56 +0530 consequence.
Conclusion
51. Keeping in view totality of facts, circumstances and findings as above, it is held that the offence for violation under Section 18(2) r/w Section 18(3) and Section 68 of FERA punishable under Section 56 of FERA has been proved beyond reasonable doubt in the present case.
52. M/s House of Services i.e. accused no. 1, Maya Sanyal i.e. accused no. 2 and Indrani Sanyal i.e. accused no. 3 are hereby convicted for the offence punishable under Section 56 of FERA, 1973.
53. Ordered accordingly.
ANNOUNCED IN THE OPEN COURT Digitally
signed by
DATED: 31.03.2022 AKASH AKASH JAIN
Date:
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(AKASH JAIN)
ACMM-01, NEW DELHI DISTRICT
PATIALA HOUSE COURTS, NEW DELHI
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