2016 (4) TMI 366 - HC - FEMA

Court quashes criminal complaint due to lack of specifics, contradicting CBI, and failure to prove liability.

The High Court quashed the summoning order and criminal complaint against the petitioners, citing lack of specific allegations, contradiction with CBI ... Violation of provisions of FERA by the SBI officials - Validity of summons - making full advance payment to the tune of US$ 38 million without either obtaining any prior permission of the Reserve Bank of India (‘RBI’) or any guarantee from an International Bank of repute situated outside India to safeguard their money - Held that:- petitioners are not covered under Sub-section (ii) of Section 49 of FERA for abetting or not complying with all or any such conditions. Summoning order dated 30.05.2002 was issued just two days prior to the repealing of the FERA Act as on that day hundreds of such complaints were filed and process was to be issued in all those complaints before 01.06.2002 when new Act in the shape of Foreign Exchange Amendment Act, 1999 (FEMA) was to come into force in place of FERA, 1973. The said summoning order itself shows that the Trial Court has not considered the aspect of criminal liability of the petitioners under Section 68 of FERA having position of subordinate officers other than Managing Directors, Directors and Executive Directors as per the provisions of Section 68 of FERA. The respondents deliberately and willfully ignored the investigation conducted by CBI whereby, chargesheet at Para 2 confirmed that C.K. Ramakrishnan and D.S. Kanwar who were functioning as Managing Director and Executive Director respectively in the petitioners company were responsible having domain over the funds of the company during the year 1995-96 and they dishonestly in connivance with officials of M/s. Karsan Limited, a Turkish Company and other accused persons, directed the bank officers to remit US$ 38 million to the account of M/s. Karsan Limited. Moreover, the facts of the investigation have been concealed by the respondent before the Trial Court and since the sunset period was expired, therefore, hurriedly without going through the material on record, the Trial Court had issued the summons against the petitioners. Complains and Summons quashed - Decided in favor of petitioner. Issues Involved:1. Quashing of criminal complaint filed by the Enforcement Directorate.2. Quashing of the summoning order dated 30.05.2002.3. Liability of petitioners under Section 68 of FERA.4. Role of State Bank of India as the authorized dealer.5. Delay in filing the complaint.6. Vicarious liability of petitioners.7. Impact of CBI investigation and findings.8. Protection under Article 20(3) of the Constitution of India.Issue-wise Detailed Analysis:I. Quashing of Criminal Complaint and Summoning Order:The petitioners sought directions to quash the criminal complaint filed by the Enforcement Directorate and the summoning order dated 30.05.2002. The High Court noted that the complaint and summoning order were issued just before the repealing of FERA, indicating a rushed process. The court found that the trial court did not consider the criminal liability of petitioners under Section 68 of FERA adequately, especially given their subordinate positions.II. Liability of Petitioners under Section 68 of FERA:The court examined whether the petitioners, being officers of the company, could be held responsible for the contravention of FERA provisions. It was established that there were no specific allegations or material on record to suggest that the petitioners were involved in the said offence or were in charge of the company's affairs. The court emphasized that the allegations were vague and general, failing to meet the requirements of Section 68 of FERA, which necessitates proving that the petitioners were in charge and responsible for the conduct of the company's business.III. Role of State Bank of India as the Authorized Dealer:The court noted that the remittance of foreign exchange was made by the State Bank of India (SBI) in its capacity as the authorized dealer appointed by the Reserve Bank of India (RBI). The petitioners argued that they had no role in the remittance process, which was the responsibility of SBI. The court agreed, stating that the petitioners could not be held liable for actions that were the responsibility of SBI.IV. Delay in Filing the Complaint:The complaint was filed after a delay of seven years, during which another central investigating agency, the CBI, had already investigated the matter and filed a chargesheet. The court found that the delay and the existence of a previous investigation suggested that the complaint was an afterthought and an abuse of the process of law.V. Vicarious Liability of Petitioners:The court highlighted that vicarious liability is an exception in criminal jurisprudence and cannot be presumed. The complaint failed to demonstrate that the petitioners had any role or responsibility that would make them vicariously liable under Section 68 of FERA. The court cited Supreme Court judgments emphasizing the need for specific averments to establish vicarious liability, which were absent in this case.VI. Impact of CBI Investigation and Findings:The CBI had investigated the matter and found that the petitioners' company was the victim of a conspiracy. The chargesheet filed by the CBI did not implicate the petitioners but rather made them witnesses. The court found it incomprehensible that another investigation would contradict the CBI's findings without new evidence. The CBI's investigation had already absolved the petitioners, making the Enforcement Directorate's complaint appear baseless.VII. Protection under Article 20(3) of the Constitution of India:The petitioners argued that their prosecution would expose them to testimonial compulsion, violating Article 20(3) of the Constitution, which protects against self-incrimination. The court acknowledged this concern, noting that the petitioners were witnesses in the CBI case and prosecuting them in the present case would prejudice the CBI trial.Conclusion:The High Court quashed the summoning order dated 30.05.2002 and the criminal complaint filed against the petitioners. The court found that the complaint lacked specific allegations, was contrary to the CBI's findings, and failed to establish the petitioners' liability under Section 68 of FERA. The court emphasized the importance of preventing abuse of the legal process and protecting individuals from baseless prosecutions. The petitions were allowed, and the trial court records were sent back.