Delhi District Court
Dgft vs . Modern Ellora & Anr. on 2 March, 2021
IN THE COURT OF SH. CHANDER MOHAN, ACMM01 (CENTRAL)
TIS HAZARI COURT, DELHI
DGFT Vs. Modern Ellora & Anr.
U/s : 120B r/w Section 5 Impex Act
Date of Institution : 19.9.1991
Date of pronouncement : 2.3.2021
JUDGMENT
Serial No. of the case : 10276/19
Name of the Complainant : Director General of Foreign Trade.
Date of incident : 19851988
Name of accused person : 1. M/s Modern & Ellora Industries Basti Sheikh Road, Manjit Nagar, Jallandhar, Punjab
2. Inderjit Singh S/o Sh. Karam Chand R/o W.G. 264, Ishlamabad, Jallandhar, Punjab Expartner and present proprietor of M/s Modern & Ellora Industries Basti Sheikh Road, Manjit Nagar, Jallandhar, Punjab Offence complained of : U/s 120B IPC & 5 Impex Act Plea of accused persons : Pleaded not guilty Final Order : Acquitted Date of such Order : 2.3.2021 DGFT Vs. Modern Ellora Page no. 1/23 BRIEF REASONS FOR SUCH DECISION:
1. Briefly stated, the present complaint was filed on behalf of Chief Controller of Import and Export U/s 120B IPC r/w Section 5 of IMPEX ACT with the allegations that between the period 198588 accused Inderjeet Singh along with Brij Mohan (since deceased) (both being partners of M/s Modern & Ellora) entered into a criminal conspiracy (along with unknown persons) to obtain an Advance Imported License under duty exemption scheme and misutilize the import material by not reexporting the finished goods as per the conditions of the Advance License issued to them.
2. It is alleged that an advance import license dated 01/10/1986 was issued to the said firm of accused for import of 55,311 kg. of brass scrap with CIF value of worth Rs. 9,40,287/ which was later enhanced to Rs. 9,91,787/. As per complainant, the firm of the accused failed to fulfilled the corresponding export obligations as stipulated in the advance license in question and thereby defrauded Govt. of India to the extent of Rs. 14,45,967/ and also caused loss of foreign exchange to the extent of Rs. 9,73,345/. On these allegations, complainant alleges offences punishable under Section 120B IPC and section 5 of the IMPEX ACT, 1947 r/w 120B IPC is committed by accused.
3. Accused Inderjeet Singh was summoned vide order dated 19/09/1991 for the said offences and thereafter, post completion of necessary formalities, matter proceeded for precharge evidence. It is relevant to mention here that the other partner of the firm i.e. Brij Mohan Singh had already expired on 07/09/1988.
4. As many as 26 witnesses were examined on behalf of complainant in pre DGFT Vs. Modern Ellora Page no. 2/23 charge evidence and after conclusion of precharge evidence, a charge was framed u/s 120B IPC & 5 of IMPEX ACT,1947 r/w 120B IPC against accused to which he pleaded not guilty and claimed trial.
5. Accused chose to recall PW4 S.P. Chibbar, PW5 Dev Kumar, PW6 T.R. Kapoor, PW7 Sh. Chander Bhan, PW8 Harbhagwan Bhatia, PW9 Amol Chindarkar, PW10 Surender Mahajan, PW11 Sanjeev Shah, PW12, R.K. Sabarwal, PW15 Sayed Ahmed Ibrahim, PW16 Srikant Prabhakar, PW17 Ram Avtar Singh, PW18 Balraj Kumar & PW22 Sanjay Bhosle for their cross examination.
6. After conclusion of postcharge evidence, statement of accused U/s 313 Cr.
PC was recorded wherein accused claimed that the allegations are totally false and the complaint is premature. Accused further pleaded that their partnership firm was being looked after by other partner Sh. Brij Mohan Singh who died on 07/09/1988 and he (accused) was forced to take over as proprietor of the said firm. As per accused, after taking over, he tried to export the imported material, but the orders that were available on that time were of different products (which could have been made out from imported material) and therefore, he wrote a letter dated 31/10/1988 to licensing authority for extending the time and for change of item to be exported from the imported material.
7. As per accused, it was only when the present case was filed against him, he came to know that his letter dated 31/10/1988 has been rejected by the concerned committee. As per accused, he was never informed about the rejection, otherwise he would have been successful before the appellate authority as he had a good case for extension of time and for change of products. Accused further pleaded DGFT Vs. Modern Ellora Page no. 3/23 that the present complaint was premature and he did not misutilize the imported material. He further pleaded that the failure on the part of concerned department to consider his extension letter dated 31/10/1998 and failure to inform about the rejection, resulting into nonutilization of imported material.
8. As mentioned above, 26 witnesses were examined on behalf of complainant in the instant case.
9. PW1 R.M. Singh was the retired Dy. CCI posted in Enforcement Division at Udyog Bhawan and has proved the letter Ex. PW1/A sent to SP CBI for registration of the instant case.
10. PW2 K.B. Roy was posted as Controller of Imports and Exports in Enforcement Division at Udyog Bhawan and has proved the handing over of the documents mentioned in Ex. PW2/A to CBI.
11. PW3 D.K. Gupta was the Chief Manager, Punjab National Bank and has proved the handing over of the documents mentioned in Ex. PW3/A to CBI.
12. PW4 S.P. Chibber was the Dy. Chief Controller of Imports & Exports and proved granting of Advance License no. 3082373 dated 11/10/1986 Ex. PW4/A vide File no. ABV 25/AM 87/LIC/ASR/EPI to M/s Modern & Ellora Industries. He further deposed that some amendment in the license was also done on 20/10/1987. He further deposed that Ex. PW4/B is the enclosure of the license containing the conditions imposed on the advance license, bearing his signature at point A. He further proved the other enclosures to license Ex. PW4/C1 to Ex. PW4/C4. He further deposed that the legal undertaking Ex. PW4/D was submitted DGFT Vs. Modern Ellora Page no. 4/23 by the party against the custom duty involved for import of material and later on the same is accepted by him. He further deposed that as per procedure and policy, one DEEC book Ex. PW4/E was issued to the complainant company which contains the details of material imported and the finished goods made out of the material exported by the party. It also contain the entry of total custom duty involved in respect of material and the entries are duly authenticated by the custom authorities. He further deposed that the accused company has not fulfilled its corresponding export obligation in relation to advance license and accused company submitted an application dated 31/10/0988 Ex. PW4/F for extension of period of fulfill its export obligation and the application was accompanied by annexures i.e. justification Ex. PW4/G and photocopy of death certificate Ex. PW4/H. The witness further identified the signature and writing of Sh. Charan Singh the then Controller of Import & Export, at point A on order dated 21/07/1989 Ex. PW4/I.
13. PW5 Dev Kumar deposed that he along with his brother and mother were partners of M/s Mayur Enterprises, that accused had contacted them for clearance of the goods, that after seeing the bill no. 1305/356 dated 07/05/1987 of M/s Modern & Ellora Industries, they cleared the goods and given the goods to M/s Rajasthan Carriers Corporation.
14. PW6 T.R. Kapoor was Assistant Collector of Custom and he deposed that after seeing the bill of entries of M/s Modern & Allora Industries in respect of import of brass scrap under advance import license no. PIL/3082373 dated 01/10/1986, allowed the clearance of goods.
15. PW7 Chander Bhan Singh was the Dock Clerk in the office of Custom DGFT Vs. Modern Ellora Page no. 5/23 House Agent M/s Jainth Shah Sanjeev Kumar at Bombay and deposed that after seeing the bill no. 3046/34 dated 29/12/1986, he took the delivery of brass scrap cleared through this bill.
16. PW8 Har Bhagwan Bhatia was posted in Group 7 Custom House Bombay as Appraiser and deposed that his duties involved passing of documents pertaining to import consignment, that he had seen the bill of entry no. 1305/356 dated 07/05/1987 submitted by CHA on behalf of importer M/s Modern and Ellora Industries.
17. PW9 Amol Govind Chindarkar was LDC in Group7 (DEC) and deposed that he had seen the licencing file of M/s Modern & Ellora Industries, that the detention notice dated 10/04/1989 Ex. PW9/A was issued by Assistant Collector Custom against the said company for not fulfilling the export obligation.
18. PW10 Surinder Mahajan was Chartered Accountant and deposed that he after checking the export document of M/s Modern & Ellora Industries, issued certificate Ex. PW10/A.
19. PW11 Sanjeev Shah was C.H.A. and partner of firm Jyanth Shah Sanjiv Kumar and deposed that he had cleared the goods on the basis of bills of entries Ex. PW11/A1 to Ex. PW11/A3. He proved on record Ex. PW11/B & Ex. PW11/C i.e. letter regarding receipt of goods by the party.
20. PW12 R.K. Sabharwal has proved the reply Ex. PW12/A and letter Ex. PW12/B which contains the information furnished by the bank to the CBI.
DGFT Vs. Modern Ellora Page no. 6/23
21. PW13 Darshan Singh was posted as Assistant Chief Controller of Imports & Exports in the office of Dy. CI & E at Amritsar. He had identified his signature on page no. 9 of the noting regarding his orders to the Section for putting up the case within one month of expiry of export obligation. He further deposed that on 06/02/1989 a show cause notice was issued to the firm M/s Modern & Ellora who failed to submit the documents regarding fulfillment of EO and the party was declared defaulter vide defaulter circular no. 3/90 dated 21/07/1989. He further deposed that as the party had not fulfilled the export obligation, the file was sent to the enforcement section for taking further appropriate action.
22. PW14 S.K. Chopra was officer in New Bank of India and deposed that the documents pertaining to import material of the firm M/s Modern & Ellora were received in the bank and entry of the same was made in FIBC register dated 15/12/1986 which is Ex. PW14/12. The documents are of the import of material and the firm M/s Modern & Ellora got released the same through their bank.
23. PW15 Syeed Ahmed Ibrahim Shikh was posted as Delivery Clerk in Sewree, Mumbai and deposed that he made delivery of goods vide delivery order Ex. PW15/A.
24. PW16 Shrikant Prabhakar was appraiser in Central Intelligence Unit, Custom House, Bombay and deposed that he had assessed bill of entry no. 3046/34 dated 29/12/1986, on the basis of which M/s Modern Ellora Industries had imported 18.437 metric tons of brass scrap. He further deposed that he had also assessed bill of entry no. 3046/35 dated 29/12/1986, on the basis of which M/s Modern Ellora Industries had imported 18.437 metric tons of brass scrap.
DGFT Vs. Modern Ellora Page no. 7/23
25. PW17 Ram Avtar Singh was the delivery clerk at Victoria Dock & House, Bombay and has proved shed delivery order no. 19 Ex. PW17/A.
26. PW18 Balraj Kumar deposed that he was working in the firm M/s Modern & Ellora and assisting his uncle regarding some purchase and sale of tools. He identified his signatures on gate pass Ex. PW18/1 & Ex. PW18/2. He also identified his signatures on legal undertaking dated 19/10/1987 Ex. PW13/H. He further deposed that partners of said firm were Lt. Sh. Brij Mohan Singh and his father Inderjeet Singh.
27. PW19 Om Prakash has deposed that he had business of transportation at Bombay. He further deposed that after seeing the photocopies of receipts no. 924 927 he can say that their company had carried the material from Bombay to Jahandhar which was booked by M/s Jayant Shah Sanjiv Kumar and the consignee was M/s Modern & Ellora Industries.
28. PW20 Abdul Latif Aziz Khan was posted as Shed Superintendent at Warehouse Victoria Dock, Bombay and deposed that he had seen the shed delivery order no. 19 and bill of entry no. 356/1305 of M/s Modern & Ellora Industries, vide which 114 cartoons were imported by the firm.
29. PW21 Vinod Verma was working as Consultant to Exporter and deposed that on the asking of Brij Mohan Singh partner of M/s Modern & Ellora, he had obtained import documents from New Bank of India.
30. PW22 Sanjay Ram Chander is UDC in the office of Commissioner of Custom has deposed that he has brought the letter Ex. PW22/1 regarding the DGFT Vs. Modern Ellora Page no. 8/23 export register.
31. PW23 Kuldeep Singh has proved the consignment note no. 1974 dated 01/01/1998 issued by M/s Rajasthan Carrier Ltd. vide which the material was delivered to M/s Modern & Ellora Industries.
32. PW24 Ratish Gupta has proved the receipts dated 12/01/1987 of Progressive Road Carrier vide which the material was booked to the consignee M/s Modern & Ellora Industries by the consigner M/s Jyant Shah Sanjeev Kumar.
33. PW25 R.K. Jain was the Dy. Govt. Examiner and deposed that he had received the documents of the present case from SP/SIU(IX) CBI, Delhi vide letter dated 30/05/1991 and 08/07/1991. He compared the said documents and prepared report Ex. PW25/42.
34. PW26 N.S. Yadav Inspector CBI EOW Mumbai was the IO and deposed about the investigation conducted by him in the matter.
35. PW27 cannot be read into evidence being incomplete.
36. Evidence led on behalf of accused is as under:
37. DW1 Gopal Kishan Aggarwal deposed that he was looking after the accounts of M/s Modern Ellora and had left the job. He further deposed that Brij Mohan used to look after the entire business of the firm and Inderjeet Singh was the sleeping partner and had no involvement with the working of the firm. He further deposed that in 1986 the firm had imported brass scrap and adhesive tape DGFT Vs. Modern Ellora Page no. 9/23 and Brij Mohan was involved in entire process of importing the same and received the material. He further deposed that the material could not be exported, as, due to extraordinary situation prevailing in Punjab, it had become difficult to procure export orders. He further deposed that the import license had been granted to the firm considering their past performance which was called production programme basis. He further deposed that when the export orders were difficult to procure, the firm applied for extension but even then, the export could not be materialized. He further deposed that the firm sought changes of item to be exported, as the imported material had lost its quality and export standard material could not be manufactured out of that. He further deposed that till 30/11/1988 the firm had not been informed anything about the fate of the application for permission to change the item to be exported. He further deposed that Mr. Brij Mohan expired on 07/09/1988 and after that Inderjeet Singh took over the firm and stopped the actual operation of the firm and initiated necessary steps to give a legal formal closing of the firm.
38. DW2 R.K. Sabharwal official of Punjab National Bank deposed that he was looking after account of the firm M/s Modern Ellora Industries, that Brij Mohan Singh used to come to bank for all work relating to foreign exchange and Inderjeet Singh never came to foreign exchange department.
39. DW3 Vinod Kumar Sondhi official of New Bank of India, Jalandhar deposed that the regular account of M/s Modern Ellora was operated by Brij Mohan Singh.
40. DW4 Vijay Kumar Babbar official of New Bank of India, Jalandhar deposed that M/s Modern Ellora was availing credit facility from the bank and never saw Inderjeet Singh.
DGFT Vs. Modern Ellora Page no. 10/23
41. Thereafter, defence evidence was closed vide order dated 17/09/2012.
42. Arguments heard. Record perused.
43. I have given my thoughtful consideration to the rival contentions and carefully perused the entire material available on record.
Reasons for decision
44. At the outset ld counsel for accused has challenged the territorial jurisdiction of the present court. As per counsel for complainant, the application for obtaining permission/licence to import was moved at Amritsar and that license was also issued in Amritsar , goods landed at Bombay and were delivered in Punjab. It is argued by the ld counsel that no transaction or even part of the transaction occurred in the jurisdiction of Delhi and therefore this court has no jurisdiction to try the present case. This court is of the opinion that the defence of lack of the jurisdiction is no longer available to the accused in view of the order of the learned predecessor of the court dt. 30.10.2020 . At the time of addressing the arguments on the point of charge accused had raised the issue of jurisdiction and a categorically finding was given on the same in the above order. The relevant extract of the order is reproduced to avoid any confusion or doubts ."Further this court has jurisdiction as the grant of license was considered at New Delhi" .
45. Hence the question of jurisdiction was settled 20 years back and has attained finality.
46. The second defence put forth is that accused Inderjeet Singh never applied DGFT Vs. Modern Ellora Page no. 11/23 for license and that application for advance license was moved by his partner Brij Mohan who is now deceased. This plea of accused also cannot come to his rescue. Application may have been moved by his partner Brij Mohan but the undertaking Ex pw13/H in the form and agreement to fulfill the export obligations has been signed by both the partners individually. Ld counsel for accused has also taken the defence that accused was a sleeping partner I.e he never participated in day to day affairs of the company and to prove this fact he examined DW 1 Gopal Krishan Aggarwal who claimed to look after the accounts of M/s Modern Ellora .He deposed that Brij Mohan Singh used to lookafter the entire business of the firm and Inderjeet Singh was a sleeping partner. He further deposed that Inderjeet Singh has absolutely no involvement with the actual working in partnership firm. Similarly ld counsel for the accused has also drawn the attention of this court towards the portion of examination in chief of PW 2 Sh R.K Sabbarwal retired official from Punjab National Bank, wherein he stated that Brij Mohan used to come to him for the work of the firm and Inderjeet Singh never came to the bank. On the strength of the testimony of these two witnesses ld counsel for the accused intends to take out the accused from the clutches of criminal liability. This court is,however, not in agreement with the above conclusions of counsel for the accused. At the outset , it would be relevant to mention that there is no legal term like sleeping partner or non sleeping partner. In fact partnership is the name given to an association of persons. As already discussed accused had personally signed the undertaking ex PW13/H to fulfill the obligations alongwith his partner Brij Mohan. The liability is therefore joint and several and the same also proves that accused Inderjeet Singh was actively involved. In fact the name of accused Inderjeet singh is on the top and that of accused Brij Mohan below the same. This arrangement of names blunts the above defence of accused. Further it is the case of accused himself that after the death of Brij Mohan in the year 1988 he became the sole proprietor.
DGFT Vs. Modern Ellora Page no. 12/23
47. Counsel for accused has further argued that the extension was not granted to the accused, and therefore, he could not fulfill the export obligation. Extension is not a matter of right and was the discretion of the department. The accused vide his legal undertaking has undertaken that he would make the corresponding export within the stipulated time and merely because extension was not granted he cannot shift the blame on the Department.
48. Ld counsel for the accused has further argued that no opportunity for hearing or notice was issued to the accused as contemplated by section 4 L of Import and Export Act 1947 before initiation of the present prosecution. This court is of the opinion that there is no such requirement for initiating the criminal prosecution. Opportunity of hearing as per the above section is only required before making an order of adjudication of confiscation or imposing penalty. Ld counsel for the accused has failed to show requirement of any prior notice before instituting a complaint u/s 5 of the above act.
49. The final defence of the accused as can be discerned from the evidence of DW1 ( Accountant of Modern Ellora) is that corresponding export obligations could not be met due to extra ordinary situation which prevailed in Punjab as a result of militancy. As per testimony of DW1, because of militancy the importers from outside country were afraid of coming to Punjab and therefore it became difficult to procure export orders. In nutshell, the defence of accused is that nonfulfilment of export obligation was not intentional but was due to the prevailing circumstances over which accused had no control. To appreciate this defence the objective of the act and agreement has to be seen. It appears from the terms of the Advance licence that the objective of putting corresponding export obligation was to earn DGFT Vs. Modern Ellora Page no. 13/23 foreign exchange and also to boost economic activity in the country. Before evaluating this defence of the accused the position of law as regards requirement of mens rea needs to looked into.
50. The following extract from the minority judgement of justice subba rao in State of Maharashtra v. Mayer Hans George, (1965) 1 SCR 123 : AIR 1965 SC 722 : (1965) 35 Comp Cas 557 : (1965) 1 Cri LJ 641 is instructive and relevant extract as under : " ......The next argument is that mens rea is an essential ingredient of the offence under Section 8 of the Act, read with Section 23(1A)(a) thereof. Under Section 8 no person shall, except with the general or special permission of the Reserve Bank of India, bring or send to India any gold. Under the notification dated November 8, 1962, and published on November 24, 1962, as interpreted by me, such gold to earn the permission shall be declared in the manifest. The section, read with the said notification, prohibits bringing or sending to India gold intended to be taken out of India unless it is declared in the manifest. If any person brings into or sends to India any gold without declaring it in such manifest, he will be doing an act in contravention of Section 8 of the Act read with the notification and, therefore, he will be contravening he provisions of the Act. Under Section 23(1A)(a) of the Act he will be liable to punishment of imprisonment which may extend to two years or with fine or with both. The question is whether the intention of the legislature is to punish persons who break the said law without a guilty mind. The doctrine of mens rea in the context of statutory crimes has been the subjectmatter of many decisions in England as well as in our country. I shall briefly consider some of the important standard textbooks and decisions cited at the Bar to ascertain its exact scope.........."
DGFT Vs. Modern Ellora Page no. 14/23
51. 16. In Russell on Crime, 11th Edn., Vol. 1, it is stated at p. 64:
"... there is a presumption that in any statutory crime the common law mental element, mens rea, is an essential ingredient."
On the question how to rebut this presumption, the learned author points out that the policy of the courts is unpredictable. I shall notice some of the decisions which appear to substantiate the author's view. In Halsbury's Laws of England, 3rd Edn., Vol. 10, in para 508, at p. 273, the following passage appears:
"A statutory crime may or may not contain an express definition of the necessary state of mind. A statute may require a specific intention, malice, knowledge, wilfulness, or recklessness.
52. On the other hand, it may be silent as to any requirement of mens rea, and in such a case in order to determine whether or not mens rea, is an essential element of the offence it is necessary to look at the objects and terms of the statute."
53. This passage also indicates that the absence of any specific mention of a state of mind as an ingredient of an offence in a statute is not decisive of the question whether mens rea, is an ingredient of the offence or not: it depends upon the object and the terms of the statute. So too, Archbold in his book on Criminal Pleading, Evidence and Practice, 35th Edn., says much to the same effect at p. 48 thus:
"It has always been a principle of the common law that mens rea, is an essential element in the commission of any criminal offence against the common law.... In the case of statutory offences it depends on the effect of the statute.... There is a DGFT Vs. Modern Ellora Page no. 15/23 presumption that mens rea, is an essential ingredient in a statutory offence, but this presumption is liable to be displaced either by the words of the statute creating the offence or by the subjectmatter with which it deals."
54. " The law on the subject relevant to the present enquiry may briefly be stated as follows. It is a well settled principle of common law that mens rea is an essential ingredient of a criminal offence. Doubtless a statute can exclude that element, but it is a sound rule of construction adopted in England and also accepted in India to construe a statutory provision creating an offence in conformity with the common law rather than against unless the statute expressly or by necessary implication excluded mens rea. To put it differently, there is a presumption that mens rea, is an essential ingredient of a statutory offence; but this may be rebutted by the express words of a statute creating the offence or by necessary implication. But the mere fact that the object of a statute is to promote welfare activities or to eradicate grave social evils is in itself not decisive of the question whether the element of guilty mind is excluded from the ingredients of the offence. It is also necessary to enquire whether a statute by putting a person under strict liability help him to assist the State in the enforcement of the law: can he do anything to promote the observance of the law?"
55. The above decision appears to lay down that where a statute is silent on the requirement of a specific intention in such case the court is permitted to look into the objects and terms of the statute to determine the guilt of accused. It further states that the absence of any specific mention of a state of mind is not decisive on the question whether mens rea is an ingredient of offence or not. It would depend upon the object and terms of the statute.
DGFT Vs. Modern Ellora Page no. 16/23
56. The decision in Chairman SEBI Vs. Shriram Mutual Funds and anothers (2006) 5 SCC 361 of the honourable supreme court has gives further guidance as how to read statutes where there are distinct liabilities ,civil and criminal,under the same act. The relevant extract is reproduced in the following paragraphs (57 to 64 ).
57. "8. It is thus the breach of a 'civil obligation' which attracts 'penalty' under Section 23(1)(a), FERA, 1947 and a finding that the delinquent has contravened the provisions of Section 10, FERA, 1947 that would immediately attract the levy of 'penalty' under Section 23, irrespective of the fact whether the contravention was made by the defaulter with any 'guilty intention' or not. Therefore, unlike in a criminal case, where it is essential for the 'prosecution' to establish that the 'accused' had the necessary guilty intention or in other words the requisite 'mens rea' to commit the alleged offence with which he is charged before recording his conviction, the obligation on the part of the Directorate of Enforcement, in cases of contravention of the provisions of Section 10 of FERA, would be discharged where it is shown that the 'blameworthy conduct' of the delinquent had been established by wilful contravention by him of the provisions of Section 10, FERA, 1947. It is the delinquency of the defaulter itself which establishes his 'blameworthy' conduct, attracting the provisions of Section 23(1)(a) of FERA, 1947 without any further proof of the existence of 'mens rea'. Even after an adjudication by the authorities and levy of penalty under Section 23(1)(a) of FERA, 1947, the defaulter can still be tried and punished for the commission of an offence under the penal law,....".
58. In Corpus Juris Secundum, Vol. 85, at p. 580, para 1023, it is stated thus:
'A penalty imposed for a tax delinquency is a civil obligation, remedial and DGFT Vs. Modern Ellora Page no. 17/23 coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws.'
59. We are in agreement with the aforesaid view and in our opinion, what applies to 'tax delinquency' equally holds good for the 'blameworthy' conduct for contravention of the provisions of FERA, 1947. We, therefore, hold that mens rea (as is understood in criminal law) is not an essential ingredient for holding a delinquent liable to pay penalty under Section 23(1)(a) of FERA, 1947 for contravention of the provisions of Section 10 of FERA, 1947 and that penalty is attracted under Section 23(1)(a) as soon as contravention of the statutory obligation contemplated by Section 10(1)(a) is established. The High Court apparently fell in error in treating the 'blameworthy conduct' under the Act as equivalent to the commission of a 'criminal offence', overlooking the position that the 'blameworthy conduct' in the adjudicatory proceedings is established by proof only of the breach of a civil obligation under the Act, for which the defaulter is obliged to make amends by payment of the penalty imposed under Section 23(1)
(a) of the Act irrespective of the fact whether he committed the breach with or without any guilty intention."
60. (emphasis in original)(b) J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers [(1996) 6 SCC 665 : 1997 SCC (L&S) 1] : (SCC p. 692, para 42) "42. The offences under the Act are not a part of general penal law but arise from the breach of a duty provided in a special beneficial social defence legislation, which creates absolute or strict liability without proof of any mens rea. The offences are strict statutory offences for which establishment of mens rea is not an essential ingredient. The omission or commission of the statutory breach is itself the DGFT Vs. Modern Ellora Page no. 18/23 offence. Similar type of offences based on the principle of strict liability, which means liability without fault or mens rea, exist in many statutes relating to economic crimes as well as in laws concerning the industry, food adulteration, prevention of pollution, etc. in India and abroad. 'Absolute offences' are not criminal offences in any real sense but acts which are prohibited in the interest of welfare of the public and the prohibition is backed by sanction of penalty.
61. (d) Gujarat Travancore Agency v. CIT [(1989) 3 SCC 52 : 1989 SCC (Cri) 509 : 1989 SCC (Tax) 389] : (SCC p. 55, para 4) "It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under Section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what is intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of Section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the legislature is that the penalty should serve as a deterrent. The creation of an offence by statute proceeds on the assumption that society suffers injury by the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of a proceeding under Section 271(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of revenue and to DGFT Vs. Modern Ellora Page no. 19/23 provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision."
62. (e) Swedish Match AB v. SEBI [(2004) 11 SCC 641] : (SCC p. 671, para
113)"The provisions of Section 15H of the Act mandate that a penalty of rupees twentyfive crores may be imposed. The Board does not have any discretion in the matter and, thus, the adjudication proceeding is a mere formality. Imposition of penalty upon the appellant would, thus, be a forgone conclusion. Only in the criminal proceedings initiated against the appellants, existence of mens rea on the part of the appellants will come up for consideration."
63. (f) SEBI v. Cabot International Capital Corpn. [(2005) 123 Comp Cas 841 (Bom)] : (Comp Cas pp. 862 & 86465, paras 47, 52 & 54)
64. "47. Thus, the following extracted principles are summarised:
(A) Mens rea is an essential or sine qua non for criminal offence. (B) A straitjacket formula of mens rea cannot be blindly followed in each and every case. The scheme of a particular statute may be diluted in a given case. (C) If, from the scheme, object and words used in the statute, it appears that the proceedings for imposition of the penalty are adjudicatory in nature, in contradistinction to criminal or quasicriminal proceedings, the determination is of the breach of the civil obligation by the offender. The word 'penalty' by itself will DGFT Vs. Modern Ellora Page no. 20/23 not be determinative to conclude the nature of proceedings being criminal or quasicriminal. The relevant considerations being the nature of the functions being discharged by the authority and the determination of the liability of the contravenor and the delinquency.
(D) Mens rea is not essential element for imposing penalty for breach of civil obligations or liabilities.
(E) There can be two distinct liabilities, civil and criminal, under the same Act.
65. The above decision clearly makes the distinction between the requirements of mens rea where statute imposes penalty in form of fine and on the other hand where imprisonment is provided for breach. It appears that there is no requirement for the prosecution to prove mens rea where there is quasi criminal liability I.e penalty is only in the form of fine or confined to monetary aspect only but prosecution needs to prove mens rea by positive evidence where the breach invite imprisonment also. Hence, prosecution needs to prove willful failure on the part of the defaulter where sentence of imprisonment is to be imposed.
66. Section 5 of import export act 1947 is as follows.
Penalty If any person contravenes or attempts to contravene, or abets a contravention of , any order made or deemed to have been made under this Act or any condition of a license granted under any such order ( or any authority under which imported goods were received from or through a recognized agency) , he shall, without prejudiced to any confiscation or penalty to which he may be liable under the provisions of the Customs Act, 1962 (52 of 1962) be punishable,
(a) where the value of the goods , in relation to which such contravention or DGFT Vs. Modern Ellora Page no. 21/23 attempted contravention or abetment of contravention has been made, exceeds ten lakhs rupees, with imprisonment for a term which may extend to seven years and also with fine, and (b) in any other case, with imprisonment for a term which may extend to three years and also with fine: Provided that in the absence of sepcial and adequate reasons to the contrary to be recorded in the judgement of the Court, such imprisonment shall not be for less than six months:) .
67. Thus, the act clearly imposes sentence of imprisonment and also minimum sentence is prescribed. It emerges from the above judgements that merely because statute does not make any reference to mens rea will not preclude the courts to ascertain the same when violation carries imprisonment also and not only penalty .
68. Now this court proceeds to the facts of the present case. The material facts of the case are not in dispute . Accused has admitted importing certain quantity of brass and also admitted his failure to meet the corresponding export obligations. He has taken the defence or tried to rebutt the presumption of mens rea by putting forth his helplessness to export on the ground that necessary production could not be manufactured due to prevailing militancy in Punjab. It is not the case of the complainant that accused had intention to cheat right from the beginning i.e while an application for import or an agreement of advance licence Ex PW13/H was signed by him. In his cross examination dated15/09/1995 PW 4 Sh S.P. Chibber, Deputy Chief Controller of imports and export has admitted that advance import licence can be given on the basis of past record of the applicant irrespective of the fact whether of not applicant has advance order of export. He further states that in the present case accused firm had no export order in hand and advance licence was granted on the past performance and prospective DGFT Vs. Modern Ellora Page no. 22/23 productive programme disclosed by the applicant. This part evidence of PW4 makes it clear that licence was granted on the basis of past record and also that it was in the knowledge of the DGFT that accused has no export order in hand when licence to import was granted an obligation of corresponding export was put upon him. Hence the subsequent events are material and burden was on the prosecution to prove mensrea. It is also not the case of the complainant that accused sold the imported brass or goods made from the same in the open market or calendenstinely disposed the same and made unlawful gains. PW 26,N.S.Yadav who was the I.O the present case has specifically stated in his cross examination that no evidence could be found for selling the material in the black market. In fact, there is no such avernment in the complaint. Broadly stated, no evidence of misappropriation or breach of trust has appeared. This fact proves absence of guilty mens rea or at least rebuts the existence of same. Nothing has come on record for the court to draw an inference that not manufacturing of export material or failure to exporting the same was intentional or deliberate. To, the contrary there is admitted correspondence on record where accused is seeking extensions to fulfill his obligations. To conclude,prosecution has failed to prove that accused is criminally liable for not fulfilling his export liabilities despite obtaining permissions and concessions in impugned imports.a fortifori, no case of criminal conspiracy is made out.
69. Hence, in view of the above said discussions and the evidence as well as the material available on the record, accused stands acquitted of all offences in the present case . Ordered accordingly. Digitally signed by CHANDER CHANDER MOHAN MOHAN Date: 2021.03.15 Pronounced in the open court (CHANDER MOHAN ) on 2.3.2021 ACMM01/CENTRAL DELHI DGFT Vs. Modern Ellora Page no. 23/23