2014 (10) TMI 527 - HC - FEMA

Revocation of passport ruled invalid; Fundamental rights upheld under Passports Act. Excessive restrictions overturned.

Lalit Kumar Modi Versus Union of India And Others

The court found the revocation of the appellant's passport invalid as it restricted fundamental rights without justification under the Passports Act. ... Revocation of appellant's Passport - penalty on the appellant under Section 13 of FEMA for having contravened the provisions of Section 37 of FEMA read with Section 131(1) and 272A(1) of the Income-tax Act, 1961. - Held that:- officers under the Income-tax Act have the same powers as are vested in a court under the Code of Civil Procedure, 1908 to try a suit in respect of inter alia discovery and inspection, enforcing the attendance of any person, including any officer of a bank / company and examining him on oath and compelling the production of books of accounts and other documents. Because the appellant had not appeared before the Assistant Director, Directorate of Enforcement pursuant to the said summonses, the said Assistant Director had filed a complaint under Section 16(3) of FEMA on 16.09.2010. That complaint has led to a show cause notice being issued by the Directorate of Enforcement on 20.09.2010 and adjudication in respect thereof is pending. So, this much is clear that the written complaint under Section 16(3) of FEMA with regard to the appellant's non-compliance with the summonses is pending before the Adjudicating Authority under FEMA. A show cause notice was also issued by the Adjudicating Authority on 20.09.2010 wherein the appellant was required to appear in person or through legal practitioner / chartered accountant duly authorised by the appellant. This was in consonance with the stipulation contained in Section 16(4) of FEMA which clearly enables the person against whom the complaint has been made to appear either in person or take the assistance of a legal practitioner or a chartered accountant of his choice for presenting his case before the Adjudicating Authority. On the basis of the material available on record, the complaint under Section 16(3) of FEMA which was registered on 16.09.2010 has been followed by a show cause notice dated 20.09.2010 which essentially requires the appellant to show cause as to why an inquiry should not be held. The matter has not progressed beyond that stage. In fact, nothing has been brought to our notice to indicate that the Adjudicating Authority has formed any opinion that an inquiry should be held and that an inquiry has in fact been held. In any event, it is an admitted position that no adjudication order imposing a penalty pursuant to the complaint dated 16.09.2010 has been passed by the Adjudicating Authority under FEMA as yet. Revocation of the appellant's passport was based on the letter dated 04.10.2010 received by the Regional Passport Officer from the Directorate of Enforcement to the effect that a complaint dated 16.09.2010 under Section 13 of FEMA had been filed against the appellant and that a show cause notice had been issued against the appellant by the Directorate of Enforcement on 20.09.2010 for non-compliance of summonses issued by them. We may recall that complaint dated 16.09.2010 which had been filed under Section16(3) of FEMA. At the time the revocation order was passed, the appellant was already abroad in the U.K. The direct consequence of the revocation order was that the appellant could not travel to any country outside of the U.K. He could not attend any conferences or meetings in any other country where he could have expressed his views on cricket or on the organization and administration of cricket. To that extent it can be said that the 'direct and inevitable' consequence of the revocation order was to impinge upon his freedom of speech and expression. Now, this could be legitimate if the revocation order could be said to be in the interests of the general public, of course, limited to the interests of 'public order, decency or morality'. The alleged infraction on the part of the appellant could hardly be stated to fall foul of 'public order, decency or morality'. Therefore, in our view, the revocation order was invalid. The 'public interest' allegedly involved, as evident from the appellate order dated 31.10.2011, was that cricket was the most popular sport in India and a huge public sentiment was attached to it and, therefore, it was in 'public interest' that the case against the appellant was properly investigated for which the 'interrogation' of the appellant was considered necessary. This kind of 'public interest' does not fall in the categories of 'public order, decency or morality' and, therefore, cannot be used as a shield against invalidity which would naturally follow on account of a restriction on the freedom of speech and expression. Therefore, the observations of the authorities below with regard to the allegations of FEMA violations against the appellant ought to be disregarded in the context of the revocation order. But, the matter does not end here because, in our view, these allegations had an impact on the decision making process of the Regional Passport Officer as well as the Chief Passport Officer inasmuch as they have both referred to the allegations to indicate that it was in 'public interest' that the passport of the appellant be revoked. In other words, the authorities under the Passports Act, while revoking the passport of the appellant, examined and were influenced by materials which were not relevant or germane and were not specified in the show cause notice dated 15.10.2010. The only 'subject-matter' of the show cause notice was the 'non-compliance of summons' issued by the Directorate of Enforcement, Mumbai. Since there is a specific procedure and there are specific statutory provisions for any default in non-compliance with summonses under FEMA itself read with relevant provisions of the Income-tax Act and the CPC, the revocation of the appellant's passport for that so-called default (which is yet to be adjudicated upon), on the ground that it was in the interests of the general public, was not lawful - Court set aside the impugned judgment dated 16.01.2013 and, consequently, the orders dated 31.10.2011 and 03.03.2011 passed by the respondent Nos.2 and 3. As a result, the revocation of the appellant's passport is set aside and the passport stands restored. - Decided in favour of appellant. Issues Involved:1. Validity of the revocation of the appellant's passport under Section 10(3)(c) of the Passports Act, 1967.2. Compliance with principles of natural justice.3. Impact on fundamental rights under Articles 19(1)(a) and 19(1)(g) of the Constitution.4. Relevance of non-compliance with summonses issued under FEMA.5. Extraneous considerations in the decision-making process.Issue-wise Detailed Analysis:1. Validity of the Revocation of the Appellant's Passport:The appellant's passport was revoked under Section 10(3)(c) of the Passports Act, 1967, on the grounds of 'interests of the general public.' The court examined whether this revocation was justified. The court noted that the revocation order was based on a letter from the Directorate of Enforcement regarding a complaint filed under Section 13 of FEMA for non-compliance with summonses. However, the court found that the direct and inevitable consequence of the revocation order was to restrict the appellant's freedom of speech and expression, which could only be justified if it fell under the interests of 'public order, decency, or morality.' The court concluded that the alleged infraction did not meet these criteria, rendering the revocation order invalid.2. Compliance with Principles of Natural Justice:The court acknowledged that the appellant was given a show cause notice, opportunities to file written responses, and hearings before the revocation order was passed. However, the court emphasized that mere procedural compliance does not make an order lawful if it is based on extraneous considerations and irrelevant materials. The court found that the authorities under the Passports Act considered allegations of FEMA violations that were not specified in the show cause notice, which influenced their decision-making process.3. Impact on Fundamental Rights:The court considered the impact of the revocation order on the appellant's fundamental rights under Articles 19(1)(a) and 19(1)(g) of the Constitution. The court noted that the revocation restricted the appellant's ability to travel and participate in conferences, thereby impinging on his freedom of speech and expression and his right to carry on a profession. The court held that the revocation order was far too wide, excessive, and disproportionate to the alleged non-compliance with summonses, and thus violated the appellant's fundamental rights.4. Relevance of Non-compliance with Summonses Issued under FEMA:The court examined the legal consequences of non-compliance with summonses issued under FEMA. It noted that the summonses required the appellant to appear in person to tender evidence and produce documents. The court found that the appellant had provided the required documents and was willing to be examined through video conferencing. The court emphasized that FEMA does not entail custodial interrogation, and the request for an alternative mode of examination should have been considered. The court concluded that non-compliance with summonses was not a serious issue warranting passport revocation.5. Extraneous Considerations in the Decision-making Process:The court found that the authorities under the Passports Act were influenced by allegations of FEMA violations, which were not relevant to the show cause notice for non-compliance with summonses. The court held that the authorities considered extraneous materials, which impacted their decision to revoke the passport. The court emphasized that the passport officer's jurisdiction was limited to the non-compliance of summonses and not the merits of the alleged FEMA violations.Conclusion:The court set aside the impugned judgment dated 16.01.2013 and the orders dated 31.10.2011 and 03.03.2011 revoking the appellant's passport. It restored the appellant's passport and clarified that it had not expressed any opinion on the alleged FEMA violations, which were being examined separately by the authorities under FEMA. The appeal was allowed, and there was no order as to costs.