2015 (8) TMI 187 - SC - FEMA

Supreme Court upholds summons validity under FERA, imposes exemplary costs for non-compliance.

The Supreme Court upheld the validity of the summons issued under Section 40 of FERA and the charges against the appellant for non-compliance. The Court ... Summons issued under statutory power to produce evidence and documents - offence for non-compliance with summons as independent criminal liability - maintainability of criminal prosecution despite departmental exoneration - repeal of substantive statute and its effect on pending criminal proceedings - framing of composite charge and procedural regularity of service of summonsOffence for non-compliance with summons as independent criminal liability - maintainability of criminal prosecution despite departmental exoneration - repeal of substantive statute and its effect on pending criminal proceedings - Whether criminal proceedings under Section 56 read with Section 40 of the Foreign Exchange Regulation Act, 1973 could be proceeded with notwithstanding (a) subsequent departmental dropping of proceedings and (b) repeal of the Act. - HELD THAT: - The Court held that failure to comply with a lawfully issued summon under Section 40 gives rise to an independent offence under Section 56 which is not extinguished or rendered non maintainable merely because the underlying departmental proceedings were later dropped or the statute was repealed. The decision in Roshan Lal Agarwal was confined to its facts and does not lay down a general rule that prosecution for non appearance must be quashed where the substantive inquiry later exonerates the accused. Exoneration by the adjudicating officer does not absolve criminal liability for an independent offence of evading the investigatory process; allowing otherwise would encourage deliberate evasion and could frustrate law enforcement and preservation of evidence. The pendency of an appeal against the departmental order is immaterial to the culpability for non compliance with summons. [Paras 14, 15, 16]Criminal prosecution for non compliance with summons under Section 40/56 of the Act is maintainable despite departmental dropping of proceedings and repeal of the Act; the appellant's contention on this ground is rejected.Summons issued under statutory power to produce evidence and documents - framing of composite charge and procedural regularity of service of summons - Whether defects alleged in service of summons and framing of a composite charge vitiated the criminal proceedings and entitled the appellant to quashment. - HELD THAT: - The Court examined the averments in the complaint and correspondence relied upon, noting that the complaint alleged deliberate avoidance of attendance and refusal of summons. The appellant's explanation for non appearance-seeking accommodation due to personal convenience-was found to be insufficiently persuasive in the context of serious allegations; the tenor of the appellant's letter indicated a requirement that the State adjust its timetable to his convenience, which the Court said could not be appreciated. While the High Court had indicated that one summons might be deleted, it correctly refrained from quashing the entire proceedings, leaving factual disputes to be tried by the trial court. The contention of non application of mind in framing a composite charge and procedural irregularities in service did not persuade the Court to interfere with continuation of the criminal prosecution. [Paras 4, 11, 12, 13]Alleged defects in service and framing of composite charge do not warrant quashing of the criminal proceedings; the matter may be contested at trial and the appellant's contentions on this ground are rejected.Final Conclusion: The appeal is dismissed; prosecution under Section 56 read with Section 40 of the FERA is maintainable despite departmental proceedings being dropped and the enactment's repeal, and the alleged procedural defects in summons and framing of charge do not justify quashing the criminal proceedings. Costs awarded. Issues Involved:1. Validity of the summons issued under Section 40 of the Foreign Exchange Regulation Act, 1973 (FERA).2. Alleged willful default by the appellant in responding to the summons.3. Composite charge under Section 219 of the Criminal Procedure Code.4. Impact of the repeal of FERA and subsequent exoneration by departmental authorities on the criminal proceedings.5. Interpretation of Sections 40 and 56 of FERA in the context of the appellant's non-compliance.Detailed Analysis:1. Validity of the Summons Issued under Section 40 of FERA:The appellant was summoned by the Chief Enforcement Officer under Section 40 of FERA to produce his passport and correspondence related to a transaction with M/s. Benetton Formula Ltd. The appellant failed to appear in response to multiple summonses, leading to a complaint being filed under Section 56 of the Act. The Supreme Court noted that Section 40 empowers officers to summon any person necessary for investigation and mandates compliance with such summons.2. Alleged Willful Default by the Appellant:The appellant contended that his non-appearance was not willful, citing various reasons for his absence on the specified dates. However, the Court observed that the appellant's explanations indicated a preference for his convenience over legal obligations, reflecting an attitude of non-cooperation. The Court emphasized that such conduct, especially from a person of significant commercial standing, was unacceptable and demonstrated a deliberate avoidance of legal processes.3. Composite Charge under Section 219 of the Criminal Procedure Code:The appellant argued that the composite charge for multiple defaults violated Section 219 of the Criminal Procedure Code. The High Court partially accepted this argument, deleting the charge related to the first date but upheld the charges for subsequent defaults. The Supreme Court agreed with the High Court's view, emphasizing that the appellant could contest the matter at the trial court.4. Impact of the Repeal of FERA and Subsequent Exoneration:The appellant argued that the repeal of FERA and his exoneration by departmental authorities should lead to the quashing of criminal proceedings. The Supreme Court rejected this argument, noting that the criminal liability for non-compliance with summons under Section 40 read with Section 56 is independent of the outcome of the substantive investigation. The Court distinguished this case from the precedent cited by the appellant, stating that exoneration in the substantive offense does not absolve the appellant from the criminal charge of non-compliance.5. Interpretation of Sections 40 and 56 of FERA:The Court reiterated that Sections 40 and 56 must be interpreted purposively to ensure compliance with the law. The provisions aim to facilitate effective investigation and enforcement of foreign exchange regulations. The Court highlighted that non-compliance with summons undermines the investigation process and is punishable under Section 56, irrespective of the outcome of the substantive inquiry.Conclusion:The Supreme Court dismissed the appeal, affirming the validity of the summons and the charges against the appellant. The Court imposed exemplary costs of rupees ten lakhs on the appellant, emphasizing that the appellant's approach was an abuse of the legal process. The judgment underscores the importance of compliance with legal summons and the independent nature of criminal liability for non-compliance under FERA.