Delhi District Court
Deepak Gupta vs R.K. Rawal on 7 February, 2012
1
IN THE COURT OF MS. NEENA BANSAL KRISHNA
ADDITIONAL SESSIONS JUDGE-01 : NEW DELHI
In re :
CR No. 49A/02
Deepak Gupta
son of Shri Sham Lal
Resident of A-28, Gulmohar Park
New Delhi-49 ..... Petitioner
versus
R.K. Rawal
Chief Enforcement Officer
Enforcement Directorate
Ministry of Finance
Jamnagar House, Akbar Road,
New Delhi ..... Respondent
Date of institution of the revision : 01.10.2002
Date of reserving judgment/order: 24.01.2012
Date of judgment / order : 07.02.2012
ORDER :
1. The present revision petition under Section 397/399 Cr.P.C. has been filed against the order dated 27.05.2002 passed by the ld. Additional Chief Metropolitan Magistrate vide which the revisionist Deepak Gupta has been summoned in the complaint case no. 880/1 dated Deepak Gupta Vs R.K.Rawal, Page No. 1of 17 CR No. 49A/02 2 27.05.2002 under Section 56 of FERA,1973 read with Section 49(3) and (4) of FEMA, 1999, filed by the respondent against the present revisionist Deepak Gupta and five other accused persons.
2. The brief back ground of the present complaint is that on the complaint of M.T.N.L. alleging misuse of ISDN telephone lines which caused loss to the exchequer and FIR No. 136/2000 was registered at police station Greater Kailash under Section 4 and 20 of Indian Telegraph Act and under Section 420/120B IPC. The petitioner Deepak Gupta has claimed that he was an I.I.T. Graduate in Engineering, and was providing freelance consultancy services to various companies and had visited the office of M/s. Intergroup C. & E. Limited at Greater Kailash, New Delhi, on 03.05.2000 on which date the M.T.N.L. Officials conducted raid in the premises of this Company and arrested the petitioner alongwith other persons. The petitioner was granted bail by Hon'ble High Court after 20 days of judicial custody. While the petitioner was in judicial custody, the officers of Enforcement Directorate interrogated the petitioner on 12.05.2000 in Delhi and recorded his statement. Suddenly after a gap of 02 years, the Enforcement Directorate served him with a opportunity notice which was received by him on Deepak Gupta Vs R.K.Rawal, Page No. 2of 17 CR No. 49A/02 3 18.05.2002 which he was asked to submit his reply within three days. Similarly other accused persons namely Sanjay Malviya and Devashis Bhattacharya, Directors of the said Company were also served with the opportunity notices on 23.05.2002 and 24.05.2002. The petitioner filed his reply to the opportunity notice on 22.05.2002 while the other accused submitted their reply on 27.05.2002. Thereafter, the present complaint had been filed before ld. Additional Chief Metropolitan Magistrate in great haste since the sunset period deadline was 31.05.2002 after which new Act i.e FEMA was to become effective.
3. It was submitted that the reply filed by the petitioner was not considered in the complaint which was filed before the ld. Additional Chief Metropolitan Magistrate; infact the said complaint had already been drafted even before preparation of opportunity notice and for this reason there was no mention of the date of service of notice or about the reply of the petitioner in the said complaint. It was submitted that the said notice had given three days time for reply out of which two days were holidays and the time given could, by no stretch of imagination, be treated as sufficient notice in law, to the accused. More over, it was admitted case of Deepak Gupta Vs R.K.Rawal, Page No. 3of 17 CR No. 49A/02 4 the respondent/ Enforcement Directorate that petitioner was neither holding any office nor actively taking part in the activities of the Companies i.e. M/s. Value Tech Services Pvt. Ltd, M/s. Internet Source Pvt Ltd, Arul International and M/s. Intergroup C&E Limited. Also, Rule 3 of Adjudicating Proceedings Appeal Rules, 1974 read with Section 49( 3&4) to hold the adjudication the actual loss of foreign exchange, if any, has to be determined which Rule has not been complied in the present complaint viz.a.viz petitioner. It is submitted that after the said complaint was filed in the court, the present petitioner has been summoned vide order dated 27.05.2002 by the ld. Additional Chief Metropolitan Magistrate without considering the afore mentioned grounds. It is, therefore, prayed that the summoning order dated 27.05.2002 may be set aside as against the petitioner.
4. The ld. counsel on behalf of the petitioner has submitted that the FIR No. 136/2000 which has been registered against the petitioner and other accused persons has already been decided. The petitioner were discharged for the offences under Sections 406/420/120B IPC vide order dated 24.07.2004. In the said order it had been observed by the ld. Metropolitan Magistrate that Deepak Gupta Vs R.K.Rawal, Page No. 4of 17 CR No. 49A/02 5 there was no loss caused to the Government and no appeal against the order of discharge has been filed by the department. The Petitioner, however, pleaded guilty for the offence under Section 4 Indian Telegraph Act.
5. It is further submitted that the order of summoning is bad on two accounts; firstly, the opportunity notice had not given him sufficient effective time for giving a reply and the complaint under Section 56 FERA had been filed under doubt without even considering the reply which was submitted by him. Secondly, under Section 68 of the FERA, it is only such officers who were incharge and responsible for day to day conduct of the affairs of the Company who can be held liable for the offence committed by the company. However, the Enforcement Directorate itself has not made any such averments in respect of the petitioner. Infact, petitioner was only a consultant and ,therefore, cannot be held liable for the affairs of the Company by virtue of Section 68 FERA. It is, therefore, submitted that the petitioner is liable to be discharged.
6. On the other hand, the respondent has explained that the accused firm had taken 24 ISDN lines and same were found busy day and night which indicated that the said lines were being misused. One ISDN line had been Deepak Gupta Vs R.K.Rawal, Page No. 5of 17 CR No. 49A/02 6 made permanent channel at each of the two premises where the 24 ISDN lines were provided and by using the sophisticated equipment international calls were being distributed to Delhi and nearby areas illegally through one ISDN lines by using some compression decompression equipment at both ends, this band width was misused to make 24 voice calls into one single ISDN call and the said call was distributed to multiple local lines illegally obtained from M.T.N.L. In the said process huge financial loss was caused to Government of India in terms of foreign exchange which was calculated to the tune of Rs. 5 crore by M.T.N.L. It is claimed that switching of calls through MTNL network was not permitted without a licence from Central Government as per provision of Section 4 Telegraph Act and such act of the accused persons were in violation of law.
7. It is argued on behalf of the Department that the present petitioner was acting as consultant and had accompanied the Managing Director of the Company to Hongkong and other places for purchased of equipment and has, therefore, conspired with the accused persons in compressing decompressing and for committing the offence under FERA. It is submitted that the accused has been rightly summoned by the ld. Additional Chief Deepak Gupta Vs R.K.Rawal, Page No. 6of 17 CR No. 49A/02 7 Metropolitan Magistrate and the present petition is without merit.
8. I have heard the arguments and have perused the record. My observations are as under:
9. The petitioner by way of present revision petition has challanged the order dated27.05.2002 by which the ld. Additional Chief Metropolitan Magistrate has summoned the petitioner to face the complaint under Section 56 of FERA,1973. The first main ground on which the summoning order has been challanged is that it is a mandatory requirement under Section 61(2) of FERA to serve a petitioner an opportunity notice before the complaint is filed. It was argued that the opportunity notice was served upon him on 18.05.2000 in which he was given three days time to submit his reply. Out of these three days, two days were holidays and practically there was only one day for giving reply. The petitioner had submitted his reply on 22.05.2000 and the complaint had been filed against him along with other accused persons on 27.05.2000. It was argued that no effective time was given to petitioner for reply and it was infact no compliance of the mandatory provision of Section 61 FERA. Therefore, complaint against him is liable to be quashed.
Deepak Gupta Vs R.K.Rawal, Page No. 7of 17CR No. 49A/02 8
10. The scope of opportunity notice has been discussed at length by the Hon'ble Supreme Court in Standard Chartered Bank Vs Directorate Enforcement 2006(4) SCC 278; wherein it was noted that the scope of the ambit of the notice is trial as section 61 of the Act and on receipt of such notice it was for the appellant to show that they had necessary permission from the concerned authority under the Act. Therefore, if the notice sets out the alleged contravention calls upon the person accused for the offences whether he had the requisite permission for the transaction, that will satisfy the requirement of the Section.
11. Delhi High Court in Crl. M.C. 5138/2006 in the matter of Ranjit Raj and others Vs Sanjay Mishra and another decided on 27.11.2009 made a reference to the case of Standard Chartered Bank( supra) that section 61(2) of the Act would show that the notice envisaged under this provisio is not a show cause notice. It is not based on the principles of audi altrem partem. The principle of audi altrem partem normally does not apply to criminal prosecutions, at pre-prosecution stage. It, therefore, does not require the complainant to give a notice to the accused persons, giving them an opportunity to show cause as to why he be not Deepak Gupta Vs R.K.Rawal, Page No. 8of 17 CR No. 49A/02 9 prosecuted. This provision applies only to such offences which are committed by contravening any provision of the Act or of any rule, direction or order whereby doing of an act is prohibited without permission. If requisite permission is obtained, the impugned act would not constitute an offence. Therefore, the purpose of the notice is to enable the accused to show that he had the requisite permission with him and ,therefore, the act committed by him does not constitute an offence. The person served with opportunity notice cannot seek to justify the act complained of. The limited purpose of this notice is to show the permission, if any, available with him.
12. In the said case, while the opportunity notice was challanged on the ground that he was given only three days time to reply to the said notice and also that his reply was not considered before filing of the complaint, it was observed that only reply which was required to be furnished was to show the requisite permission. The petitioner had no where stated so in his reply. Therefore, it could be said that there was no compliance of section 61(2) of the Act before filing of the complaint.
13. The facts of the present case are almost similar to those considered in the case of Ranjit Raj and Deepak Gupta Vs R.K.Rawal, Page No. 9of 17 CR No. 49A/02 10 others( supra), The petitioner has no where asserted that he had the requisite permission as required under the Act and thus this plea that not enough time was given to him under the opportunity notice is of no assistance and cannot be accepted.
14. The second ground on which the present order of summoning has been challanged is that he was merely a Technical Consultant to one of the accused namely M/s. Intergroup C & E Limited and was neither the Managing Director nor the Director concerned with the conduct of the day to day affairs of the Company and thus, he could not be made an accused in the present complaint.
15. The Company though legal entity can act only through its Board of Directors; Managing Director is prima facie incharge and responsible for the company business and affairs and can be prosecuted for offences by the company but in so far as other Directors are concerned, they can be prosecuted only if they were incharge and responsible for the conduct of the Company's business. The combined reading of Section 5 and 291 of the Company Act 1956 would show that the persons considered responsible to the Company for the conduct of the business are; (a) Managing Director,
(b)whole time Director,(c) Manager, Secretary or(d) any Deepak Gupta Vs R.K.Rawal, Page No. 10of 17 CR No. 49A/02 11 other persons in accordance with whose direction or instructions the Board of Director is to act or(e) any other officers who may be specified by the Board.
16. In the case of V.S. Gupta Vs Punjab National Bank 2010(1) JCC (NI) 17 Delhi High Court had noted that the criminal liability for the offences committed by a company fasten vicariously on the persons referred to in sub section (1) of section 141 Negotiable Instruments Act. It was further observed that the provision of Section 141 were in para materia with the provision of section 68 of FERA, both of which deals with the offence by the company.
17. In S.M.S. Pharmaceuticals Limited Vs Neeta Bhalla (2005) 8 SCC 90, the Hon'ble Supreme Court has held that to make an officer of company liable there are two mandatory requirement to be fulfilled:
1. it should be stated that the person sought to be arrayed as accused apart from the company is a person incharge of and responsible for the conduct of the company;
2. such a person was in that capacity at the time of commission of the offence.
18. The said observation were reiterated in the case of Deepak Gupta Vs R.K.Rawal, Page No. 11of 17 CR No. 49A/02 12 Shailendra Swarup Vs The Director, Enforcement Directorate 2010(1) JCC 119( DHC). In K.K. Ahuja Vs V.K. Vora and another,2009(3) JCC(NI)194, the Hon'ble Supreme Court after making an reference to S.M.S. Pharmaceuticals case(supra) observed that there was provision to require the complainant to state how a Director who is sought to be made an accused, was incharge of the business of the company, as every Director need not be and is not incharge of the business of the Company. If this is the position in regard to the Director, it is needless to emphasis that in the case of non Director officers, there is all the more the need to state his part with regard to conduct of business of the Company and how and in what manner he is liable. It was further noted that if a person who is responsible to the Company for the conduct of the business of the company and who is incharge of the business of the company, then he can be made liable only if the offence was committed with his consent or connivance or as a result of his negligence.
19. It was pointed out that in the case of K. Srikanth Singh Vs North East Securities Ltd 2007(12) SCC 788 that mere fact that at some point of time, an officer of the Company had played some role in the financial Deepak Gupta Vs R.K.Rawal, Page No. 12of 17 CR No. 49A/02 13 affairs of the company, will not be sufficient to attract the constructive liability under Section 141 of the Negotiable Instruments Act. In the case of V.S. Gupta( supra) it was clearly observed that consultant cannot be to be a person incharge of and responsible to the Company for the conduct of the business of the Company.
20. In the present case, perusal of the complaint under Section 56 FERA would show that the allegations made against the petitioner are that Deepak Gupta who was an B. Tech in Engineering from IIT, Delhi had been retained by M/s. Asian Internet Inc. of Hongkong, a multinational company for providing network software services and consultancy and he was reporting to one Mr. T. Johura CEO, a Japanese National based in Tokyo and was getting remuneration of US dollars 3880 per month. In association with the Company, accused Sanjay Malviya and Devashis Bhattacharya and he made tours to Dubai, Hongkong and USA for importation of equipments for the purpose of establishing a call centre at the said premises and that their current client was Asian Datanet Inc. Hongkong. It is further mentioned in the complaint that co accused Sanjay Malviya in his statement recorded on 12.05.2000 under Section 39 of FERA had also stated Deepak Gupta Vs R.K.Rawal, Page No. 13of 17 CR No. 49A/02 14 that he made tours to Hongknog and Dubai along with Deepak Gupta during which hardware and software were finalized and imported. There are no other averments contained in the complaint viz a viz petitioner Deepak Gupta.
21. What allegations thus emerge to have been made against the petitioner are that he was consultant and had accompanied Sanjay Malviya to Hongkong and Dubai for purchase of hardware and software for the purpose of setting up a call centre. There is also reference made to the statement of the petitioner dated 12.05.2000 under Section 39 FERA that he was aware of international calls were being made through computer and explained that this technique was called VIOP.
22. The petitioner is thus claimed to be a consultant to one of the co accused person and in that capacity neither it is alleged nor it is shown that he was responsible for the conduct of the affairs of the company. That being so, he cannot be made vicariously liable for any offence by virtue of section 68 of FERA. More over, merely being a consultant and helping the accused companies to set up a call centre and in purchase of hardware and software, cannot be considered to be an offence. The petitioner being technical consultant was Deepak Gupta Vs R.K.Rawal, Page No. 14of 17 CR No. 49A/02 15 aware that the international calls were to be made through the computer by the technique which was called VIOP; again, no criminal intent can be imputed on the petitioner. This also does not in any way show that the petitioner had connivanced or conspired with the co accused for committing the offence.
23. It is also significant to note that on a similar complaint of MTNL an FIR No. 136/2000 had been registered against the petitioner along with other accused under Sections 420/406/120B IPC and Section 4/20 of Indian Telegraph Act. The accused persons had been discharged by the ld. Metropolitan Magistrate for the offences under Sections 420/406/120B IPC vide order dated 24.07.2004 which has not been challanged. In the said order it was noted that the prosecution alleged that number of sophisticated instruments which were not permitted under the Indian Telegraph Rules,1951 were being used for decompressing the date received from USA through ISDN lines and distributed to the clients in Delhi and its nearby area. The telephone lines were duly obtained from MTNL. It was observed that decompression of data was inherent during the transmission through ISDN lines and , therefore, it cannot be said that they illegally compressed or decompressed Deepak Gupta Vs R.K.Rawal, Page No. 15of 17 CR No. 49A/02 16 the calls received from USA for transmission to the clients in Delhi. More over, it cannot be said that the accused persons had misused the ISDN lines as they were doing the business for which they had got sanctioned the ISDN lines on lease by the MTNL. Further more, there was no specific way of calculation of wrongful loss to the Government of India and wrongful gain to the accused. In order to attract provision of Section 120B IPC there must be some evidence on record to show the meeting of mind of the accused persons resulting in ultimate decision taken by them to commit the offence under Section 420/406 IPC. It was thus concluded that no offence under section 420/406 IPC/120B IPC was made out and the only offence prima facie made out was for the offence under section 4 of Indian Telegraph Act,1885 for not having sought the permission under the act in respect of ISDN lines to be used for compressing or de-compressing the data. This order of the ld. Additional Chief Metropolitan Magistrate further clarified that there was no conspiracy amongst the accused persons in regard to the commission of the entire offence of illegal transmission.
24. The accused/petitioner was not the Manager or an employee or Secretary of the co accused company and Deepak Gupta Vs R.K.Rawal, Page No. 16of 17 CR No. 49A/02 17 was merely a consultant. Also, there was no connivance, negligence or consent of the petitioner shown in the alleged offence. It is also not shown that he had benefited anything on account of transaction carried out by the other accused persons.
25. In view of the discussion, it cannot be said that petitioner who was neither the Director nor responsible for conduct of the affairs of the business of the Company, but was merely a consultant and cannot be made responsible for the alleged acts of accused company by virtue of Section 68(2) FERA. The summoning order dated 27.05.2002 is hereby set-aside and petitioner is hereby discharged. The copy of this order be sent the trial court.
Revision file be consigned to record room.
Announced in the open Court on this 07th day of Feburary, 2012.
(Neena Bansal Krishna) ASJ-01/PHC/New Delhi Deepak Gupta Vs R.K.Rawal, Page No. 17of 17 CR No. 49A/02