Calcutta High Court (Appellete Side)
Itc Limited vs Sri S.K. Mukherjee on 28 June, 2024
Author: Tirthankar Ghosh
Bench: Tirthankar Ghosh
IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
APPELLATE SIDE
PRESENT:
THE HON'BLE JUSTICE TIRTHANKAR GHOSH
CRR 1175 of 2004
ITC Limited
-vs.-
Sri S.K. Mukherjee.
Mr. Pradip Kumar Ghosh,
Mr. Sandipan Ganguly,
Mr. Kaushik Gupta,
Mr. Sourav Bhagat,
Mr. Jishnujit Roy.
...For the Petitioner.
Mr. Vipul Kundalia,
Mr. Anurag Roy.
...For the Opposite Party/ED.
Reserved on : 26.04.2024.
Judgment on : 28.06.2024.
Tirthankar Ghosh, J:-
The present revisional application has been preferred challenging the
proceedings being Case No. C-2482/2002 pending before the learned
Metropolitan Magistrate, 9th Court, Calcutta under Sections 56 and 68 of the
Foreign Exchange Regulation Act, 1973 (hereinafter referred to as "FERA,
1973").
The allegations as made in the petition of complaint, are reproduced as
follows:
2
"3. On the basis of search warrants issued by the competent authorities of the
Enforcement Directorate under Section 37 of Foreign Exchange Regulation Act,
1973 searches were conducted on 30.10.96, 31.10.96, 6.11.96, 10.11.96 and
12.11.96 at the office premises of various Divisions of M/s ITC Ltd./ITC
Bhadrachalam Paper Board Ltd. and their associated companies in and at the
residential premises of the Chairman, Ex-chairman, Directors and Executives at
the Calcutta, Delhi, Bombay, Madras, Guntur, Hyderabad and Secandrabad
covering 36 premises in execution of search warrants, a large number of
documents were seized as per Panchanama/Search lists/ Mahazar on the
respective dates.
4. That during the course of investigation, documents and information(s) were
called for and/or collected from M/s ITC Ltd. and other sources from time to time
under Section 33(2) of the Foreign Exchange Regulation Act, 1973 and
statements of Directors and Executives of M/s ITC Ltd. and/or other persons
under Section 40 of the Foreign Exchange Regulation Act, 1973 on the various
dates, were recorded.
5. It further transpired that the Chairman, Ex-chairman and directors of different
Divisions of M/s ITC Itd., such as IBD, ILTD, ITD, ITC Bhadrachalam (hereinafter
referred to as ITCBPBL) BAT nominee Directors and directors of financial
institutions were examined on various dates and their statements were recorded
under Section 40 of the Foreign Exchange Regulation Act, 1973.
6. During the course of investigation, it has been revealed that M/s ITC Ltd.
exported various Agro products commodities viz cashew and coffee to the extent
of Rs. 130 crores during the period 1991-93 against Counter Trade agreements
with and understanding between M/s. ITC Ltd. EST Group of Chitalia of USA
and various other ultimate overseas buyers, that M/s ITC Ltd would receive 3 to
4% Counter Trade Premium on the total volume of business.
7. That it transpired from the statements dated 26.10.96 of Sri G.K.P. Reddy,
Chairman of IBD, M/s ITC Itd. in which he admitted that during the period 1991-
93 in respect of export of the said commodities to the tune of Rs. 130 Crores, M/s
ITC Ltd. was to receive 3 to 4% premium on the Counter Trade Business and as
3
per instructions from Mr. K.L. Chugh, he authorised Dr. E. Rabindranath, Vice-
president (operation) of Agro Business of M/s ITC Ltd.to remit/transfer funds
generated through Counter Trade to various M/s ITC Ltd., companies in
Singapore and EST Group of Chitalias in USA and total amount of US $ 2 Million
generated out of said counter trade business was transferred directly by counter
Trade Business overseas through Chitalia group of companies in USA.
8. It further transpired from the statement of Dr. E. Rabindranath, Vice-president
(operation) of IBD, M/s ITC Ltd, that since 1990 they have been doing counter
trade business and that he was instructed by Sri G.K.P. Reddy to remit the
counter trade fund to M/s ITC Ltd Singapore and EST group of companies in USA
and EST Rotterdam A/s and that he pleaded ignorance about the purpose for
which those amounts were generated out of the counter trade premium and was
used by the Chitalia company on behalf of M/s. ITC Ltd. and that he was told by
the then M/s ITC Ltd., chairman Sri K.L. Chugh that M/s ITC Ltd. would get
premium ranging from 3% to 3.5% plus interest for 120 days post shipment credit
along with counter trade benefit and that benefits would be remitted through
overseas offices by adjusting the price and that with the knowledge of Line
Directors, the Financial Controller used to communicate the product Manager
how much premium to be added to each contract and that Mr. M.B. Rao, Export
Executive of IBD, M/s ITC Ltd. used to maintain the counter trade benefit A/c
and submitted consolidated report to Sri N. Lakshminarayan, Financial
Controller of IBD, M/s ITC Ltd.
9. That from the statement dated 25.10.96 of Mr. M.B. Rao, Export Manager of
IBD M/s ITC Ltd. it further transpired that through full filling of counter trade
obligation of various companies. M/s ITC Ltd. was able to get service charge
ranging from 5% to 11% from time to time and that counter trade business and
the profits thereof was periodically reported to Dr. E. Rabindranath, Vice-
president (operation) of IBD, M/s ITC Ltd, and that he was told that these
information were shared by him with Sri G.K.P. Reddy, the Line Director of IBD,
M/s ITC Ltd, and eventually with the chairman of M/s. ITC Ltd. that he was also
told that the aforesaid fund was to come back to IBD, M/s. ITC Ltd. through
4
pricing of products and that by the time he left M/s ITC Ltd. the counter trade
profit to the extent of US $ 1.5 Million were transferred to various account of M/s
ITC Ltd. Singapore or to the EST A/c of Chitalia.
10. It further transpired from the statements dated 14.1.97 of Sri N.
Lakshminarayan, Financial Controller of IBD, M/s ITC Ltd. that he was told by
Dr. E. Rabindranath, Vice-president (operation) that IBD Agro was getting certain
percentage of counter trade benefit of export deals but the same was not
accounted for in their books of accounts.
11. It further transpired that though in their statements Sri J.N. Sapru, Ex-
chairman of M/s ITC Ltd, Sri B. Mitter, Ex-director of M/s ITC Ltd. pleaded
ignorance of the transactions and also utilization of certain funds to the NRIs and
others for settlement of Bukhara pay of matter but the said contention cannot be
accepted in the light of admission made by Line Director Sri G.K.P. Reddy and
also Sr. Executives involving in the transaction and also in view of the documents
seized and collected by the Directorate.
12. It further transpired from the statement dated 7.11.96 of Sri R. Ranganathan,
chief Executive of ILTD, M/s ITC Ltd. before the officers of Enforcement
Directorate that IBD, M/s ITC Ltd. did counter trade of US $ 14.4 Million in
respect of sale of leaf tobacco on which no counter trade profit were realized by
ILTD from IBD and ILTD have been informed of the profit generated through the
counter trade done by IBD and that counter trade margin varied from time to time
any where from 2% to 5% depending on through when counter trade was carried
out and profit earned @4% should have been US $ 6,60,000 on a turn over of US
$ 14.4 million and ILTD, M/s ITC Ltd did not receive the trade profit amounting to
US $ 6,60,000.
13. It transpired from the statement dated 9.10.96 S/Shri Suresh Chitalia and
Devang Chitalia of USA and also the subsequent documents sent by them with
their letter dated 15.10.96 that Dr. E. Rabindranath arranged US $ 2,44,000
through EST, A/c of Chitalia for Bukhara settlement out of the counter trade
benefit and that US $1.37 million used for Bukhara settlement by M/S ITC Ltd.
appears to have been generated out of counter trade benefit as Sri G.K.P.Reddy
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viz statements dated 23.10.96 and 24.10.96 admitted to have transferred and
utilized about US $ 2 million generated out of counter trade benefit towards
Bukhara settlements in USA.
It also transpired that M/s ITC Ltd. (IBD) otherwise accounted US$ 2.66
million by way of counter trade business in respect of export of Agro-product
commodities and sale of leaf tobacco by way of counter trade business through
Chitalias and others and transferred funds generated by way of a counter trade
benefit to Chitalia companies in USA and ITC's subsidiaries in Singapore, a
portion of which used i.e. US $ 1.614 million was by them for making payment
towards Bukhara settlement to the NRIs in USA and the balance amount of US $
1 million approximately was retained with M/s ITC Ltd. subsidiaries in
Singapore and or with Chitalias instead of bringing back into India without any
general or special permission/exemption of Reserve Bank of India
14. That by otherwise acquiring and frastering of US $ 2.66 million of EST Group
of companies of Chitalias in USA and ITCs subsidiaries in Singapore and by
making payment of US $ 1.614 million to NRIs and other towards Bukhara pay
off settlement in USA and also by their failure to repatriate US $ 1.046 million
into India in the manner as aforesaid without any general or special exemption
from the Reserve Bank of India, the said M/s ITC Ltd. appeared to have
contravened the provisions of Section 8(1), 9(1)(a), and 16(1)(b) of the Foreign
Exchange Regulation Act, 1973 and thereby rendered themselves liable to be
proceeded against under Section 56 of the Foreign Exchange Regulation Act,
1973.
15. It also transpired that Shri R.K. Kutty, Director, of M/s ITC Ltd., Sri G.K.P.
Reddy, Line Director of IBD, M/s. ITC Ltd., Dr. E. Rabindranath, Vice-president
(operation), Sri K.K. Rao, Manager (Export), Sri M.B. Rao, Export Executive and
Sri N. Lakshminarayan, Finance Controller, IBD, M/s ITC Ltd. were responsible
for the control and conduct of the day to day business activities of the said
company, accused No. 1 during the relevant time and therefore appeared to have
contravened the provisions of Section 8(1), 9(1)(a) and 16(1)(b) of the Foreign
Exchange Regulation Act, 1973 and in terms of Section 68(1) and 68(2) ibid and
6
thereby rendered themselves liable to be proceeded under Section 56 of the
Foreign Exchange Regulation Act, 1973."
The revisional application was initially preferred on the grounds that
M/s. ITC Ltd being a juristic person cannot be subjected to any punishment for
imprisonment and so cannot be proceeded with under Section 4 of Foreign
Exchange Regulation Act, 1973. In order to emphasise on such issue the
judgment of the Hon'ble Supreme Court in The Assistant Commissioner,
Assessment-II, Bangalore & Ors. -Vs. - M/s. Velliappa Textiles Ltd & Anr.
reported in (2003) 11 SCC 405 was relied upon. The additional grounds which
were canvassed in the revisional application relate to the authority of the
complainant to file the complaint in terms of Section 61(2)(ii) of the FERA,
1973, as under the Act a complaint could be presented only by the Director of
Enforcement or an Officer specially authorised in writing by the Director of the
Enforcement or the Central Government. According to the petitioner the
complaint was filed without any specific permission as stipulated under
Section 61(2)(ii) of the FERA, 1973, as such the cognizance which was taken
was barred under the law. Several other issues were also canvassed in the
revisional application however at the time of final hearing petitioner filed a
supplementary affidavit which included a fresh question of law, as during the
pendency of the present revisional application a show cause memorandum
being no. T-4/18-C/97 (SCN XV) dated 2nd January, 1998 was issued by the
Enforcement Directorate upon the petitioner and others alleging contravention
of Sections 8(1), 9(1)(a) and 16(1)(b) of the Foreign Exchange Regulation Act,
7
1973. According to the petitioner the said show cause memorandum is a
replica or verbatim/representation of the allegations in the complaint filed in
the criminal proceeding which is under challenge. The Special Director,
Enforcement Directorate, FERA, after detailed hearing in the departmental
proceedings during the pendency of the application under Section 482 of the
Code of Criminal Procedure by his order dated 20th August, 2015 decided the
said proceedings on merit and dropped all the charges against the petitioner
and other persons against whom notice was issued. Petitioner as such, in
course of arguments solely emphasised on the issue, that as the petitioner has
been exonerated in the departmental/adjudication proceedings and the
allegations in the aforesaid proceedings are identical to the allegations made in
the criminal proceedings, under such circumstances as per the settled
proposition of law, exoneration from the adjudication/departmental
proceedings would enure benefit to the petitioner and further continuance of
the criminal proceedings would be an abuse of the process of the Court as such
the same should be quashed. Learned senior advocate appearing for the
petitioner has in detail dealt with the allegations in the show cause as well as
the criminal complaint by way of a comparative chart, which for convenience is
set out as follows:
Para Complaint Show Cause Memorandum (SCM) Para
Dated 31.05.2002 (SCM) XV dated 02.01.1998
Para On the basis of search warrants issued WHEREAS as a result of searches conducted Para
3 by the competent authorities of the on 30.10.96, 31.10.96, 06.11.96, 10.11.96 & 1 of
Enforcement Directorate under section 12.11.96 at the office premises of various SCM
37 of FERA 1973 searches were divisions of M/s. ITC Ltd/ ITC Bhadrachalam XV
conducted on 30.10.96, 31.10.96, Paper Board Ltd., and their associate
06.11.96, 10.11.96 & 12.11.96 at the companies and at the residential premises of
8
office premises of various divisions of the Chairman/Ex-Chairman, Directors,
accused No. 1 and ITC Bhadrachalam Executives at Calcutta, Delhi, Bombay,
paper Board Ltd., and their associate Madras, Guntur, Hyderabad and
Companies in and at the residential Secunderabad covering 36 premises in
premises of the Chairman/Ex-Chairman, execution of the search warrants issued
Directors, Executives at Calcutta, Delhi, under Section 37 of the Foreign Exchange
Bombay, Madras, Guntur, Hyderabad Regulation Act, 1973, a large number of
and Secunderabad covering 36 premises documents were seized as per
in execution of the search warrants a Panchanamas/ search lists/ Mahazars on
large number of documents were seized the respective dates details of which are
as per Panchanama/ Search Lists/ separately annexed marked as 'A' ;
Mahazar on the aforesaid respective
dates;
Para That during the course of investigation of AND WHEREAS, during the course of Para
4 documents/ information were called for investigation documents/ information were 2 of
and/ or collected from accused No. 1 called for and/ or collected from ITC Ltd., SCM
and other sources from time to time and other sources from time to time under XV
under Section 33 (2) of the Foreign Section 33 (2) of the Foreign Exchange
Exchange Regulation Act, 1973 and Regulation Act, 1973 and during the course
during the course of recording of of recording of statements of Directors and
statements of Directors and Executives Executives of ITC Ltd. and/ or other persons
of accused No. 1 and/ or other persons under Section 40 of the said Act on the
under Section 40 of the Foreign various dates;
Exchange Regulation Act, 1973 on the
various dates were recorded;
Para It further transpired that the Chairman, AND WHEREAS, it further appears that the
5 Ex-Chairman, Directors of different Chairman, Ex-Chairman, Directors of
divisions of accused No. 1 such as IBD, different divisions of ITC Ltd., such as IBD,
ILTD, ITD, ITC Bhadrachalam ILTD, ITD, ITC Bhadrachalam (hereinafter
(hereinafter referred to as ITC BPBL), referred to as ITC BPBL), BAT Nominee
BAT Nominee Directors and Directors of Directors and Directors of Financial
Financial Institutions were examined on Institutions were examined on various dates
various dates and their statements were and their statements were recorded under
recorded under section 40 of the Foreign Section 40 of the said Act; (Annexure
Exchange Regulation Act, 1973; - B);
Para During the course of investigation it has And Whereas it has been revealed during the Para
6 been revealed that M/s ITC Ltd exported course of investigation that M/s ITC Ltd 4 of
various Agro products commodities viz. exported various Agro products commodities SCM
cashew and coffee to the extent of Rs viz. cashew and coffee to the extent of Rs 130 XV
130 crores during the period 1991-93 crores during the period 1991-93 against
against Counter Trade arrangements Counter Trade arrangements with an
with an understanding between M/s ITC understanding between M/s ITC Ltd. EST
Ltd. EST Group of Chitalia of USA and Group of Chitalia of USA and various other
various other ultimate overseas buyers, ultimate overseas buyers, that M/s ITC Ltd
that M/s ITC Ltd would receive 3 to 4% would receive 3 to 4% Counter Trade
Counter Trade Premium on the total Premium on the total volume of business;
volume of business;
Para That it transpired from the statements And whereas it appears from the statement
7 dated 26.10.96 of Sri GKP Reddy, dated 26.10.96 of Sri GKP Reddy, Chairman
Chairman of IBD, M/s ITC Ltd in which of IBD, M/s ITC Ltd in which he admitted
he admitted that during the period 1991- that during the period 1991-93 in respect of
93 in respect of export of the said export of the said commodities to the tune of
commodities to the tune of Rs 130 Rs 130 crores, M/s ITC Ltd was to receive 3
crores, M/s ITC Ltd was to receive 3 to to 4% premium on the Counter Trade
9
4% premium on the Counter Trade Businesses and as per instructions from M/s
Businesses and as per instructions from K L Chugh, he authorised Dr E
M/s K L Chugh, he authorised Dr. E Ravindranath, Vice President (Operations) of
Ravindranath, Vice President Agro Business of M/s ITC Ltd to
(Operations) of Agro Business of M/s ITC remit/transfer funds generated through
Ltd to remit/transfer funds generated Counter Trade to various ITC Ltd companies
through Counter Trade to various ITC in Singapore and EST Group of Chitalias in
Ltd companies in Singapore and EST USA and the total amount of US$ 2 Million
Group of Chitalias in USA and total generated out of said counter trade business
amount of US$ 2 Million generated out was transferred directly by counter trade
of said counter trade business was beneficiaries overseas through Chitalia group
transferred directly by counter trade of companies in USA;
business overseas through Chitalia
group of companies in USA;
Para It further transpired from the statement And whereas it appears from the statement Para
8 of Dr E Ravindranath, Vice President of Dr E Ravindranath, Vice President 6 of
(Operations) of IBD, M/s ITC Ltd that (Operations) of IBD, M/s ITC Ltd that since SCM
since 1990 they have been doing counter 1990 they have been doing counter trade XV
trade business and that he was business and that he was instructed by Sri
instructed by Sri GKP Reddy to remit the GKP Reddy to remit the counter trade fund
counter trade fund to M/s ITC Ltd to M/s ITC Ltd Singapore and EST group of
Singapore and EST group of companies companies in USA and EST Rotterdam A/s
in USA and EST Rotterdam A/s and that and that he pleaded ignorance about the
he pleaded ignorance about purpose for purpose for which those amounts were
which those amounts were generated out generated out of the counter trade premium
of the counter trade premium and was and was used by the Chitalia company on
used by the Chitalia company on behalf behalf of M/s ITC Ltd. and that he was told
of M/s ITC Ltd. and that he was told by by the then M/s ITC Ltd chairman Sri K L
the then M/s ITC Ltd chairman Sri K L Chugh that M/s ITC Ltd would get premium
Chugh that M/s ITC Ltd would get ranging from 3% to 3.5% plus interest for
premium ranging from 3% to 3.5% plus 120 days post shipment credit along with
interest for 120 days post shipment counter trade benefit and that benefits would
credit along with counter trade benefit be remitted through overseas offices by
and that benefits would be remitted adjusting the price and that with the
through overseas offices by adjusting the knowledge of Line Directors, the Financial
price and that with the knowledge of Controller used to communicate the product
Line Directors, the Financial Controller Manager how much premium to be added to
used to communicate the product each contract and that Mr M B Rao Export
Manager how much premium to be Executive of IBD, M/s ITC Ltd used to
added to each contract and that Mr M B maintain the counter trade benefit A/c and
Rao Export Executive of IBD, M/s ITC submitted consolidated report to Sri N
Ltd used to maintain the counter trade Lakshminarayan, Financial Controller of
benefit A/c and submitted consolidated IBD, M/s ITC Ltd;
report to Sri N Lakshminarayan,
Financial Controller of IBD, M/s ITC Ltd;
Para That from the statement dated 25.10.96 And whereas it further appears from the Para
9 of Mr M B Rao, Export Manager of IBD statement dated 25.10.96 of Mr M B Rao, 7 of
M/s ITC Ltd it further transpired that Export Manager of IBD M/s ITC Ltd it further SCM
through fullfilling of counter trade transpired that through fulfilling of counter XV
obligation of various companies, M/s ITC trade obligation of various companies, M/s
Ltd was able to get service charge ITC Ltd was able to get service charge
ranging from 5% to 11% from time to ranging from 0.5% to 4% from time to time
time and that counter trade business and that counter trade business and the
and the profits thereof was periodically profits thereof was periodically reported to Dr
reported to Dr E Ravindranath, Vice E Ravindranath, Vice President (Operations)
10
President (Operations) of IBD, M/s ITC of IBD, M/s ITC Ltd and that he was told
Ltd and that he was told that these that these information were shared by him
information were shared by him with Sri with Sri GKP Reddy, the Line Director of IBD,
GKP Reddy, the Line Director of IBD, M/s ITC Ltd and eventually with the
M/s ITC Ltd and eventually with the chairman of M/s ITC Ltd that he was also
chairman of M/s ITC Ltd that he was told that the aforesaid fund was to come
also told that the aforesaid fund was to back to IBD, M/s ITC Ltd, through pricing of
come back to IBD, M/s ITC Ltd, through products and that by the time he left M/s
pricing of products and that by the time ITC Ltd the counter trade profit to the extent
he left M/s ITC Ltd the counter trade of US$ 1.5 Million were transferred to
profit to the extent of US$ 1.5 Million various account of M/s ITC Ltd Singapore or
were transferred to various account of to the EST A/c of Chitalia;
M/s ITC Ltd Singapore or to the EST A/c
of Chitalia;
Para It further transpired from the statements And whereas it appears from the statement Para
10 dated 14.1.97 of Sri N Laksminarayan, dated 14.1.97 of Sri N Laksminarayan, 8 of
Financial Controller of IBD M/s ITC Ltd Financial Controller of IBD M/s ITC Ltd that SCM
that he was told by Dr E Ravindranath, he was told by Dr E Ravindranath, Vice XV
Vice President (Operations) and that IBD President (Operations) and that IBD Agro
Agro was getting certain percentage of was getting certain percentage of counter
counter trade benefit of export deals but trade benefit of export deals but the same
the same was not accounted for in their was not accounted for in their books of
books of accounts; accounts;
Para It further transpired that though in their And whereas it appears that though in their Para
11 statements Sri J N Sapru, Ex chairman statements Sri J N Sapru, Ex chairman of 9 of
of M/s ITC Ltd, Sri B Mitter Ex-director M/s ITC Ltd, Sri B Mitter Ex-director of M/s SCM
of M/s ITC Ltd, pleaded ignorance of the ITC Ltd, pleaded ignorance of the XV
transactions and also utilization of transactions and also utilization of certain
certain funds to the NRIs and others for funds to the NRIs and others for settlement
settlement of Bukhara pay of matter but of Bukhara pay of matter but the said
the said contention cannot be accepted contention cannot be accepted in the light of
in the light of admission made by Line admission made by Line Director Sri GKP
Director Sri GKP Reddy and also Sr Reddy and also Sr Executives involving in the
Executives involving in the transactions transactions and also in view of the
and also in view of the documents seized documents seized and collected by the
and collected by the Directorate; Directorate;
Para It further transpired from the statement And whereas it further appears from the Para
12 dated 7.11.96 of Sri R Ranganathan statement dated 7.11.96 of Sri R 10 of
chief Executive of ILTD, M/s ITC Ltd Ranganathan chief Executive of ILTD, M/s SCM
before the officers of Enforcement ITC Ltd before the officers of Enforcement XV
Directorate that IBD, M/s ITC Ltd did Directorate that IBD, M/s ITC Ltd did
counter trade of US$ 14.4 million in counter trade of US$ 14.4 million in respect
respect of sale of leaf tobacco on which of sale of leaf tobacco on which no counter
no counter trade profit were realized by trade profit were realized by ILTD from IBD
ILTD from IBD and ILTD have been and ILTD have not been informed of the
informed of the profit generated through profit generated through the counter trade
the counter trade done by IBD and that done by IBD and that counter trade done by
counter trade margin varied from time to IBD and that counter trade margin varied
time any where from 2% to 5% from time to time any where from 2% to 5%
depending on through when counter depending on through when counter trade
trade was carried out and profit earned was carried out and profit earned @4%
@4% should have been US$ 660,000 on should have been US$ 660,000 on a turnover
a turnover of US$ 14.4 million and ILTD, of US$ 14.4 million ILTD, M/s ITC Ltd. did
M/s ITC Ltd. did not receive the trade not receive the trade profit amounting to US$
11
profit amounting to US$ 660.000; 660.000;
Para It transpired from the statement dated And whereas it appears from the statement Para
13 9.10.96 S/Shri Suresh Chitalia and Para dated 9.10.96 S/Shri Suresh Chitalia 11 of
Devang Chitalia of USA and also the and Devang Chitalia of USA and also the SCM
subsequent documents sent by them subsequent documents sent by them with XV
with their letter dated 15.10.96 and Dr E their letter dated 15.10.96 and Dr E
Ravindranath arranged US$ 244000 Ravindranath arranged US$ 244,000
through EST A/c of Chitalia for Bukhara through EST A/c of Chitalia for Bukhara
settlement out of the counter trade settlement out of the counter trade benefit
benefit and that US$ 1.37 million used and that US$ 1.37 million used for Bukhara
for Bukhara settlement by M/s ITC Ltd settlement by M/s ITC Ltd appears to have
appears to have been generated out of been generated out of counter trade benefit
counter trade benefit as Sri GKP Reddy as Sri GKP Reddy viz. statements dated
viz. statements dated 23.10.96 and 23.10.96 and 24.10.96 admitted to have
24.10.96 admitted to have transferred transferred and utilized about US$ 2 million
and utilized about US$ 2 million generated out of counter trade benefit
generated out of counter trade benefit towards Bukhara settlements in USA;
towards Bukhara settlements in USA;
It also transpired that M/s ITC Ltd (IBD) And whereas it appears that M/s ITC Ltd
otherwise accounted US$ 2.66 million by (IBD) otherwise accounted US$ 2.66 million
way of counter trade business in respect by way of counter trade business in respect
of export of Agro-product commodities of export of Agro-product commodities and
and sale of leaf tobacco by way of sale of leaf tobacco by way of counter trade Para
counter trade business through business through Chitalias and others and 12 of
Chitalias and others and transferred transferred funds generated by way of a SCM
funds generated by way of a counter counter trade benefit to Chitalia companies XV
trade benefit to Chitalia companies in in USA and ITC's subsidiaries in Singapore, a
USA and ITC's subsidiaries in Singapore, portion of which used i.e US$ 1.614 million
a portion of which used i.e US$ 1.614 was by them for making payment towards
million was by them for making payment Bukhara settlement to the NRIs in USA and
towards Bukhara settlement to the NRIs the balance amount of US$ 1 million approx.
in USA and the balance amount of US$ was retained with M/s ITC Ltd subsidiaries
1 million approx. was retained with M/s in Singapore and or with Chitalias instead of
ITC Ltd subsidiaries in Singapore and or bring back into India without any general or
with Chitalias instead of bring back into special permission/ exemption of RBI;
India without any general or special
permission/ exemption of RBI;
Para That by otherwise acquiring and And whereas by otherwise acquiring and Para
14 frastering of US$ 2.66 million of EST transferring of US$ 2.66 million of EST 16 of
Group of companies of Chitalias in USA Group of companies of Chitalias in USA and SCM
and ITC's subsidiaries in Singapore and ITC's subsidiaries in Singapore and by XV
by making payment of US$ 1.614 million making payment of US$ 1.614 million to
to NRIs and other towards Bukhara pay NRIs and other towards Bukhara pay off
off settlement in USA and also by their settlement in USA and also by their failure to
failure to repatriate US$ 1.046 million repatriate US$ 1.046 million into India in the
into India in the manner as aforesaid manner as aforesaid without any general or
without any general or special exemption special exemption from the RBI, the said M/s
from the RBI, the said M/s ITC Ltd, ITC Ltd, appeared to have contravened the
appeared to have contravened the provision of Section 8(1), 9(1) (a) and 16 (1)(b)
provision of Section 8(1), 9(1) (a) and 16 of the FERA 1973, and thereby rendered
12
(1)(b) of the FERA 1973, and thereby themselves liable to be proceeded against
rendered themselves liable to be under Section 50 of the FERA 1973;
proceeded against under Section 56 of
the FERA 1973;
Para It also transpired that Shri RK Kutty, And whereas it appears that Shri J N Sapru, Para
15 Director of M/s ITC Ltd, Sri GKP Reddy, K L Chugh Ex-Chairman, Sri Y C 17 of
Line Director of IBD, M/s ITC Ltd, Dr E Deveshwar, Chairman, GKP Reddy, Line SCM
Ravindranath, Vice President Director of IBD, ITC Ltd., Ashok Bhatia, R P XV
(Operations), Sri KK Rao, Manager Agarwal, B Mitter, N Sitaraman, Sourabh
(Export) and Sri M Rao Export Executive Mishra, RK Kutty, F R Vevaina, C C Appaya,
and Sri Lakshminarayan, Finance J Narayan, Directors, and Shri E
Controller, IBD M/s ITC Ltd were Ravindranath, Vice President (Operation) of
responsible for the control and conduct IBD, ITC, K K Rao Manager (Exports), M B
of the day to day business activities of Rao (Export Executive), K Vaidyanath Vice
the said company, accused no 1 during President (Finance), N Lakshminarayan
the relevant time and therefore appeared Financial Controller, IBD of ITC Ltd were
to have contravened the provisions of either directly involved in the aforesaid
Section 8(1), 9(1) (a) and 16(1)(b) of the transactions or the same were in their
FERA 1973, and in terms of Section knowledge and were/are responsible for
68(1) and 68(2) ibid and thereby control or conduct of the business of the said
rendered themselves liable to be company during the relevant time when this
proceeded under Section 56 of the FERA, transaction had taken place and therefore,
1973. appears to have contravened the provisions
of Section 8(1), 9(1) (a) and 16(1)(b) of the
FERA 1973, and in terms of Section 68(1)
and 68(2) ibid and thereby rendered
themselves liable to be proceeded under
Section 50 of the FERA, 1973.
Learned senior advocate in order to substantiate his argument relied
upon Radheshyam Kejriwal -Vs. --State of West Bengal & Anr. reported in
(2011) 3 SCC 581. Emphasis was laid on paragraphs 19, 32, 33, 38 and 47
which are as follows:
"19. However, in a case like the present one in which the penalty
proceeding under Section 51 of the Act and the prosecution under
Section 56 of the Act though launched together but the penalty
proceeding culminated earlier exonerating the person, the question
would arise as to whether continuance of the prosecution would be
permissible or not. In other words, the question with which we are
concerned is the impact of the findings which are recorded on the
culmination of adjudication proceedings on criminal proceeding and in
13
case in the adjudication proceedings the person concerned is
exonerated can he ask for dropping of the criminal proceeding on that
ground alone.
32. There are authorities of this Court in relation to the Income Tax Act
in this regard. The first in the series is the judgment of this Court
in Uttam Chand v. ITO [(1982) 2 SCC 543 : 1982 SCC (Tax) 150] in
which registration of the firm was cancelled on the ground that it was
not genuine and prosecution initiated for filing false return. However, in
appeal, the Income Tax Appellate Tribunal reversed the finding and
held the firm to be genuine. Relying on that, this Court quashed the
prosecution inter alia observing as follows: (Uttam Chand case [(1982)
2 SCC 543 : 1982 SCC (Tax) 150] , SCC p. 543, paras 1 & 2)
"1. Heard the counsel, special leave granted. In view of the finding
recorded by the Income Tax Appellate Tribunal that it was clear on the
appraisal of the entire material on the record and Shrimati Janak Rani
was a partner of the assessee firm and that the firm was a genuine
firm, we do not see how the assessee can be prosecuted for filing false
returns. We, accordingly, allow this appeal and quash the prosecution.
2. There will be no order as to costs."
33. In G.L. Didwania v. ITO [1995 Supp (2) SCC 724] on setting
aside the order of the assessing authority which led to the prosecution
of the assessee by the Income Tax Appellate Tribunal, this Court held
the prosecution not permissible and while doing so observed as
follows: (SCC p. 725, para 4)
"4. In the instant case, the crux of the matter is attracted and whether
the prosecution can be sustained in view of the order passed by the
Tribunal. As noted above, the assessing authority held that the
appellant assessee made a false statement in respect of income of M/s
Young India and Transport Company and that finding has been set
aside by the Income Tax Appellate Tribunal. If that is the position then
14
we are unable to see as to how criminal proceedings can be
sustained."
38. The ratio which can be culled out from these decisions can broadly
be stated as follows:
(i) Adjudication proceedings and criminal prosecution can be launched
simultaneously;
(ii) Decision in adjudication proceedings is not necessary before
initiating criminal prosecution;
(iii) Adjudication proceedings and criminal proceedings are
independent in nature to each other;
(iv) The finding against the person facing prosecution in the
adjudication proceedings is not binding on the proceeding for criminal
prosecution;
(v) Adjudication proceedings 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 proceedings in favour of the person
facing trial for identical violation will depend upon the nature of
finding. If the exoneration in adjudication proceedings is on technical
ground and not on merit, prosecution may continue; and
(vii) In case of exoneration, however, on merits where the allegation is
found to be not sustainable at all and the person held innocent,
criminal prosecution on the same set of facts and circumstances cannot
be allowed to continue, the underlying principle being the higher
standard of proof in criminal cases.
47. Bearing in mind the principles aforesaid we proceed to consider
the case of the appellant. In the adjudication proceedings on merit the
adjudicating authority has categorically held that "the charges against
Shri Radheshyam Kejriwal for contravening the provisions of Section
15
9(1)(f)(i) and Section 8(2) read with Section 64(2) of the Foreign
Exchange Regulation Act, 1973 cannot be sustained". In the face of the
aforesaid finding by the Enforcement Directorate in the adjudication
proceedings that there is no contravention of any of the provisions of
the Act, it would be unjust and an abuse of the process of the court to
permit the Enforcement Directorate to continue with the criminal
prosecution."
Learned senior advocate appearing for the petitioner by referring to
Videocon Industries Limited & Ors. -Vs. - State of Maharashtra & Ors.
reported in (2016) 12 SCC 315, drew the attention of the Court to paragraph 17
which categorically observed as follows:
"17. ......... In case it is found on merit that there is no contravention
of the provisions of the Act in the adjudication proceedings, the trial of
the person concerned shall be an abuse of the process of the court.
........."
In order to draw the attention of the Court to the changed circumstances
which took place in course of pendency of the revisional application before the
High Court, reference was made to Joseph Salvaraj A. -Vs. - State of Gujarat
& Ors., (2011) 7 SCC 59; Anand Kumar Hohatta & Anr. -Vs. - State (NCT of
Delhi), Department of Home & Anr., (2019) 11 SCC 706 and Mamta Shailesh
Chandra -Vs. - State of Uttarkhand & Ors., 2024 SCC OnLine SC 136. In the
aforesaid decisions the Hon'ble Supreme Court was consistently of the view
that even if the charge-sheet has been filed the High Court should have
examined whether the offences alleged to have been committed by the accused
16
were prima facie made out from the complainant's FIR, charge-sheet,
documents etc. or not.
Mr. Ghosh, learned senior advocate as such has prayed for quashing of
the proceedings being complaint case No. C-2482/2002 pending before the
learned Metropolitan Magistrate, 9th Court, Calcutta.
Mr. Kundalia, learned advocate appearing on behalf of the Enforcement
Directorate resisted the submissions advanced on behalf of the petitioner and
submitted that the adjudication order dated 20th August, 2015 reflects inherent
contradiction in the finding of the adjudicating authority and the adjudicating
authority failed to consider the relevant materials before arriving at its final
decision with regard to the memorandum of charges dated 2nd January, 1998.
To that effect learned advocate has referred to the relevant part of the
adjudicating order as follows:
(a) The adjudication order states that "The statement of Shri N.
Lakshminarayan mentioned at sl. No. 16 of relied upon documents in
no way shows any link of the above letters with the charges made
against ITC Ltd. in fact, Shri Lakshminarayan says that in the books of
accounts, there is no provision on account of any counter trade premium
receivable. This relied upon document would in no way substantiate the
charges in the Memorandum."
(b) The adjudication order states that "the statements of Shri N.
Lakshminarayan do not show any relation to the allegations in the
Memorandum in any manner."
17
Learned advocate then pointed out that there were contradictions in
respect of the earlier observations of the same order in the subsequent part
and to that effect drew the attention of the Court to the following paragraphs of
the order of the adjudicating authority:
(i) In the 3rd paragraph of page 14 of the adjudication order it is
stated that "In his statement, Shri Lakshminarayan stated that he
was told by Dr. E. Ravindranath, Vice-President (Operation) that IBD
Agro was getting certain percentage of counter trade benefit of
export deals but the same was not accounted for in the books of
accounts."
(ii) In the 3rd paragraph of page 14 of the adjudication order it is
stated that "On carefully going through the above relied upon
documents, the reply to the SC Memorandum submitted, the
documents furnished in defence by the Noticee, it may be seen that
as far as the cited relied upon documents are concerned, what is
relevant and directly related to the allegations in the Memorandum
are the ..." It is manifestly clear from a bare perusal of this
paragraph that the adjudicating authority did not deem the
statement of Shri N. Lakshminarayan contained in Sl. No. 16 of
relied upon documents to be "relevant and directly related to the
allegations in the Memorandum"
According to the Enforcement Directorate the adjudicating authority
committed an error in arriving at its finding that the statement of Shri N.
18
Lakshminarayan who was Financial Controller, IBD, ITC Ltd, was not relevant
or directly related to the allegations in the memorandum which is an inherent
contradiction and it is evident that Shri N. Lakshminarayan possessed relevant
information relating to counter trade premium which is basis of the criminal
proceedings against the petitioner. The adjudication authority as such erred in
analysing the version/statement of Shri N. Lakshminarayan as contained in
serial number 16 of the relied upon documents.
The criminal complaint against the petitioner according to the
complainant/opposite party is based on the statement of Shri N.
Lakshminarayan which is paragraph 10 of the complaint and as such the
criminal proceedings fall within the exception dealt with in Radheshyam
Kejriwal (supra) as distinguished in the case of Air Customs Officer -Vs. -
Pramod Kumar Dhamija reported in (2016) 4 SCC 153. According to the
complainant/opposite party in Pramod Kumar Dhamija (supra) the Hon'ble
Supreme Court of India dealt with similar circumstances and held that since
the finding returned by the adjudicating authority did not take into account
certain relevant information, being the statement of the brother of the accused,
the High Court erred in quashing the criminal proceedings based on the
judgment of Radheshyam Kejriwal (supra). It was pointed out that in Pramod
Kumar Dhamija (supra) though the adjudicating authority exonerated the
accused on merits the Hon'ble Supreme Court held that the entire relevant
materials were not considered by the adjudicating authority and thus there
was no bar in continuance of the criminal proceedings.
19
It was emphasised that the principles in Pramod Kumar Dhamija (supra)
in splitting the nature of merits, apply squarely to the facts and circumstances
of the instant case as the adjudicating authority erred in not considering the
statement of Shri N. Lakshminarayan which is relevant in respect of the
allegations against the petitioner and therefore there is no bar to proceed with
the complaint based on the judgment of Radheshyam Kejriwal (supra). The
learned advocate for the Enforcement Directorate as such, prayed for
dismissing the revisional application.
In reply to the arguments advanced on behalf of the Enforcement
Directorate petitioner reiterated its submission and further added that the plea
of the complainant that certain statement which is relevant was not considered
by the adjudicating authority in its order dated 20th August, 2015, should be
accepted and considered as an order not on merits, falling within the exception
enumerated in paragraph 38(vi) of Radheshyam Kejriwal (supra) cannot be
accepted, as the foundation of the contention is on the basis of the statement
of Mr. N. Lakshminarayan. According to the petitioner the adjudicating order
itself reflects that so far as the allegations of the investigating agency to the
extent that "M/s ITC Limited exported various agro product commodities viz,
cashew and coffee to the extent of Rs.130 crores during the period 1991-93
against counter trade agreement with an understanding between ITC Ltd., EST
Group of Chitalia of USA and various other ultimate overseas buyers that ITC
would receive 3 to 4% counter trade premium on the total volume of business"
was based upon the statement of Mr. GKP Reddy, Dr. E Ravindranath, Mr.
20
M.B. Rao and Mr. N. Lakshminarayan. The other instance where Mr. N.
Lakshminarayan's involvement was concerned were in respect of certain
documents which were letters signed by him addressed to various executives of
the petitioners. The contents of the said letters were carefully examined by the
adjudicating authority and it was held that the same could not be linked with
the charges made against the petitioner in the Show Cause Memorandum No.
XV dated 2nd January, 1998. The next observation in the adjudicating
authority's order relating to Mr. N. Lakshminarayan referred to relied upon
document 6 which were the minutes of the meeting between Dr. E.
Ravindranath, Mr. N. Lakshminarayan, Mr. A. Garg and Mr. T. Gandhi. The
adjudicating authority after considering the contents of the RUD 6, coupled
with the statement of Mr. N. Lakshminarayan was of opinion that the same do
not show any relation to the allegation made in the Show Cause Memorandum
XV. The last instance which the adjudicating authority dealt with in respect of
Mr. N. Lakshminarayan is with regard to RUD 16 which is his own statement,
"In his statement, Shri Lakshminarayan stated that he was told by Dr. E.
Ravindranath, Vice-President (Operation) that IBD Agro was getting certain
percentage of counter trade benefit of export deals but the same was not
accounted for in the books of accounts." Referring to the aforesaid instances
which were dealt with by the adjudicating authority so far as Mr. N.
Lakshminarayan is concerned it was contended that RUD 16 was duly
discussed, considered, weighed while passing the adjudicating order. According
to the adjudicating authority RUD 16 was hearsay in nature and the statement
21
of Dr. E. Ravindranath which was the very foundation of the case, was held
general and vague and could not be relied upon was a specific finding of the
adjudicating authority, thus there were cogent reasons which were recorded for
arriving at its conclusion. Accordingly the ratio laid down in Pramod Kumar
Dhamija (supra), has no manner of application so far as the present case and
the petitioner is concerned.
I have taken into account the order of the adjudicating authority dated
20th August, 2015 passed by the Special Director (ER) wherein he has taken
into account the gist of the complaint, the issues relating to the Show Cause
Memorandum along with its reply and has based his finding on 24 Relied Upon
Documents (RUDs). So far as the RUD 16 is concerned it has been categorically
recorded as follows:
"In his statement, Shri Lakshminarayan stated that he was told by Dr.
E. Ravindranath, Vice-President(Operation) that IBD Agro was getting
certain percentage of counter trade benefit of export deals but the same
was not accounted for in the books of accounts."
The adjudicating authority also took into account the statement of Dr. E.
Ravindranath, Mr. G.K.P. Reddy, Mr. Suresh Chitalia, Mr. Devang Dhitalia, Mr.
Ashutosh Garg and that there was a categorical finding by the adjudicating
authority that:
"Shri E. Ravindranath in his statement has not admitted any direct
knowledge of the counter trade premium but he has stated what was told
by Chitalias."
22
The adjudicating authority after assessing whole of the circumstances,
the relevant RBI Guidelines, arrived at its finding as follows:
"Considering all the points discussed above, it is difficult to place any
reliance on the statement of Shri G.K. P Reddy, Shri E. Ravindranath or
Shri Ashutosh Garg as they do not find support in any other documents
and the statements are also general and vague with no mention of
specific contracts and parties involved. The Noticee has also pointed
out RBI guidelines regarding limit for commission of export sales and
there is indeed logic behind the defence that if they had to make
adjustments for any losses overseas, it would have been easier to do it
through commission in export sales rather than any adjustment in
counter trade premium as alleged. The SCM is also silent on the
calculation of US$ 2 million CP allegedly not brought into India and the
contracts against the same, counter parties involved, terms of contract,
manner of execution of contract etc. which shows that the complaint
has been made in a casual manner. The Noticee company has also
produced details of all counter trade contracts and premium received,
which are duly accounted for in their Books of Accounts.
As the facts alleged in the complaint itself are not proved, I do not wish
to go into the other questions of law raised by the Noticees, which are
relevant only if atleast the facts can be reasonably established from
the evidence adduced.
Considering all the above facts, it is clear that the allegations made
against M/s. ITC Ltd., the Noticee company and other 18 Noticees in
Memorandum No. T-4/18-C/07(SCN-XV) dated 02.01.1998 that they
have violated the provisions of Sections 8(1), 9(1)(a), 16(1)(b) of Foreign
Exchange Regulation Act, 1973 are not proved."
23
I have considered the reasons arrived by the complainant/opposite party
and the principles laid down in the judgment of Pramod Kumar Dhamija
(supra) which was based on the facts stated in paragraph 6 of the said
judgment that :
"6. .............. vide his order dated 25-1-2008 set aside the penalty
imposed on the respondent. The appellate authority was of the view
that there were two persons having the same name i.e. Pramod Kumar, one in Dubai and the second being the respondent and ............" It was further held by the appellate authority in the aforesaid judgment that:
"If the investment was made by Shri Pramod Kumar of Dubai, then it cannot be linked to the appellant. The Department has not made Shri Pramod Kumar of Dubai a party in the case and nothing is on record to suggest that efforts were made to trace and identify Shri Pramod Kumar of Dubai and how the telephone number in Dubai i.e. 531228 is linked to the appellant."
The exoneration of Pramod Kumar in the judgment relied upon by the complainant/opposite party by the Commissioner of Customs (Appeal) was on a different set of parameters wherein the main issue relating to evasion of revenue was never considered. In the present case adjudicating authority decided the issue relating to the Show Cause on merits, including the statement and the materials placed before the adjudicating authority. 24
Having considered the same, I am of the view that the exception enumerated in paragraph 38 (vi) of Radheshyam Kejriwal (supra) is not application to the facts of the present case, rather the case of the petitioner falls within the ambit of paragraph 38(vii) of Radheshyam Kejriwal (supra) case which states as follows:
"38. (vii) In case of exoneration, however, on merits where the allegation is found to be not sustainable at all and the person held innocent, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue, the underlying principle being the higher standard of proof in criminal cases."
In view of the aforesaid, I am of the opinion that further continuance of the complaint case being Case No. C-2482/2002 pending before the learned Metropolitan Magistrate, 9th Court, Calcutta would be an abuse of the process of the Court and as such the same is hereby quashed.
Consequently, CRR 1175 of 2004 is allowed.
Pending connected applications, if any, are consequently disposed of. All parties shall act on the server copy of this judgment duly downloaded from the official website of this Court.
Urgent Xerox certified photocopy of this judgment, if applied for, be given to the parties upon compliance of the requisite formalities. .
(Tirthankar Ghosh, J.)