By TIOL News Service

NEW DELHI, JULY 13, 2015: THE issue before the Apex Court is - Whether culpability under section 56 is not vitiated by dropping of charges under other sections of FERA. YES is the verdict.

Facts of the case

The appellant, Mr. Vijay Mallya Chairman of United Breweries Ltd had an agreement in 1995 with an English company Flavio Briatore of M/s. Benetton Formula Ltd., for advertisement of ‘Kingfisher’ brand name on racing cars during Formula-I World Championships for the years 1996, 1997 and 1998 providing for fee payable. The transaction was entered into violation of Sections 47(1) & (2), 9(1)(c) and 8(1) of the Foreign Exchange Regulation Act Act (FERA) because requisite permission of the RBI was not taken. When later approval was sought from Finance Ministry for such payment the same was rejected. Since the appellant failed to appear on four occasions in response to summons issued more than once, a complaint in dated 8th March, 2000 under Section 56 of the Act was filed before the Additional Chief Metropolitan Magistrate, New Delhi. The Trial Court after considering the material on record summoned the appellant and framed charges against him. This order was challenged by the appellant before the High Court by filing a Criminal Revision Petition on the ground that willful default of the appellant could not have been inferred because the procedure given in Section 219 of the Criminal Procedure Code was not followed in the issuance of summons. The High Court rejected the contention because it was merely technical in nature which could not have vitiated the proceedings.

The Senior Counsel Fali S Nariman contended on behalf of the appeallant that there was no wilful intention on the part of the appellant which could be punishable u/s 56 of the FERA. Further, it was contended that the complaint was filed on 8th March, 2000 and during pendency of the complaint, FERA was repealed on 1st June, 2000. Still, show cause notice dated 13th March, 2001 was issued to which reply was given and the adjudicating officer in 2002 dropped the proceedings on merits. The Appellate Board dismissed the Revision Petition filed by the Department in 2004 and against the said order, Criminal Appeal was pending in the High Court.

On the other hand, the Department of Enforcement strongly contended that the summons were deliberately not complied with and even refused to be accepted by the appellant which was in blatant violation of the provisions of the FERA. It was contented that the appellant did not even care to appear before the Department through any authorized agent, which was an option under Section 40 of the FERA.

Having heard the parties, the Supreme Court held that,

+ the observations in Enforcement Directorate vs. M. Samba Siva Rao clearly shows that a complaint is maintainable if there is default in not carrying out summons lawfully issued. The averments in the complaint show that the summons dated 21st December, 1999 were refused by the appellant and earlier summons were not carried out deliberately. The averements in the complaint shows that summons dated 21.12.1999 under Section 40 of FERA, 1973 in connection with the impending investigations for the appearance of the accused on 3.1.2000 have been returned back by the postal authorities with the remarks “refused";

+ the appellant had written a letter dated November 22, 2009 requesting the Department to change the date of apperance because he was travelling out of India and had prior engagements since he was heading several companies. The Court took serious cognizance of this letter and observed that from the tenor of the letter, it appears that it was not a case of mere seeking accommodation by the appellant but requiring date to be fixed by his convenience. Such stand by a person facing allegation of serious nature could hardly be appreciated. Obviously, the enormous money power makes him believe that the State should adjust its affairs to suit his commercial convenience;

+ the appeal is required to be dismissed for more than one reason. The fact that the adjudicating officer chose to drop the proceedings against the appellant herein does not absolve the appellant of the criminal liability incurred by him by virtue of the operation of Section 40 read with Section 56 of the Act. The offence under Section 56 read with Section 40 of the Act is an independent offence. If the factual allegations contained in the charge are to be proved eventually at the trial of the criminal case, the appellant is still liable for the punishment notwithstanding the fact that the presence of the appellant was required by the adjudicating officer in connection with an enquiry into certain alleged violations of the various provisions of the Act, but at a subsequent stage the adjudicating officer opined that there was either insufficient or no material to proceed against the appellant for the alleged violations of the Act, is immaterial. Exonerating such an accused, who successfully evades the process of law and thereby commits an independent offence on the ground that he is found to be not guilty of the substantive offence would be destructive of law and order, apart from being against public interest. Such an exposition of law would only encourage unscrupulous elements in the society to defy the authority conferred upon the public servants to enforce the law with impunity. It is also possible, in certain cases that the time gained by such evasive tactics adopted by a person summoned itself would result in the destruction of the material which might otherwise constitute valuable evidence for establishing the commission of a substantive offence by such a recalcitrant accused;

+ secondly, an appeal against the conclusion of the adjudicating officer that the proceedings against the appellant herein for the alleged violation of the various provisions of the FERA Act are required to be dropped has not even attained finality. Admittedly, such an order of the adjudicating officer confirmed by the statutory appellate authority is pending consideration in an appeal before the High Court.

(See 2015-TIOL-148-SC-FEMA)