2017 (2) TMI 518 - HC - FEMA

High Court Reinstates Charges Under FERA, Validates Evidence from Abroad, and Confirms Director's Liability.

The HC overturned the trial court's decision to discharge the respondent, finding sufficient evidence to frame charges under Sections 8(1) and 9(1)(a) of ... Prosecution under FERA - Acquirng foreign exchange without previous general or special permission from RBI from persons not being authorised dealers in foreign exchange and deposited the amounts in a bank account outside India - Complaint under Sections 8(1), 9(1)(a) and 14 of the Foreign Exchange Regulation Act, 1973 - HELD THAT:- On perusal of the letter written by the respondent, the contention of the respondent that he is not the citizen of India and he will not come under the purview of FERA is not at all acceptable. In view of the above circumstances, this court is of the considered view that there are so many incriminating materials available to presume that the respondent would have committed the offences and he is liable to be charged under Sections 8(1) and 9(1)(a) of FERA, 1973. The trial court, in the considered view of this court, without considering the materials available on record, has come to the conclusion that there is no incriminating materials available in this case in prima facie for framing charges under Section 8(1) of FERA & 9(1)(a) of FERA. Hence, the impugned order passed by the trial court is liable to set aside and accordingly, the same is set aside. Issues Involved:1. Applicability of Foreign Exchange Regulation Act (FERA), 1973 to Indian citizens and companies incorporated outside India.2. Sufficiency of evidence for framing charges under FERA.3. Admissibility of evidence collected from abroad.4. Allegations of bias and violation of principles of natural justice.5. Legal status of the accused as a resident or non-resident Indian.6. Liability of the Director of a company under FERA.Issue-wise Detailed Analysis:1. Applicability of FERA to Indian Citizens and Companies Incorporated Outside India:The court emphasized that FERA, 1973 applies to all citizens of India outside India and to branches and agencies outside India of companies or bodies corporate, registered or incorporated in India. The respondent, being an Indian citizen, is liable for any contravention under FERA, even if the companies involved are incorporated outside India. The court rejected the argument that the respondent is not subject to FERA because the companies were not added as respondents in the complaint.2. Sufficiency of Evidence for Framing Charges under FERA:The trial court discharged the respondent under Section 245(2) Cr.P.C., stating that there was no sufficient material to frame charges. However, the High Court found that there were sufficient incriminating materials to presume that the respondent committed the offences and is liable to be charged under Sections 8(1) and 9(1)(a) of FERA. The court highlighted that the trial court failed to consider the materials available on record.3. Admissibility of Evidence Collected from Abroad:The court referred to Section 166-A Cr.P.C. and Sections 39 and 71 of FERA, which provide the Enforcement authorities the power to examine persons and collect evidence from abroad. The court held that the duly authorized officer recorded the statements of persons residing outside India and placed the materials before the court. The admissibility of these documents and statements cannot be decided at this stage, as there are sufficient materials produced by the enforcement authorities to proceed further.4. Allegations of Bias and Violation of Principles of Natural Justice:The respondent alleged bias, stating that the adjudicating authority was part of the investigating team. The court rejected this argument, noting that the adjudicating officer had not issued any summons, recorded any statement, or participated in any searches. The appellate authority independently examined the issues based on evidence on record, thus nullifying the plea of bias.5. Legal Status of the Accused as a Resident or Non-resident Indian:The court referred to the judgment in C.M.A.No.914 of 2000, which concluded that the respondent is a citizen of India and liable to be prosecuted under FERA. The court noted that the respondent had taken different stands regarding his residency status in various proceedings, which is not permissible under law. The appellate authority's reliance on the judgment in the Habeas Corpus Petition was deemed appropriate.6. Liability of the Director of a Company under FERA:The court discussed the doctrine of lifting the corporate veil, stating that the protection given to a company is not an absolute bar to proceed against the directors. The appellate authority found that the various acts done in the name of the company could not be attributed to the company and there was no evidence that these were done in the course of the company's business. The respondent, as a director, is legally liable for those acts.Conclusion:The High Court set aside the trial court's order discharging the respondent and allowed the revision, holding that there were sufficient materials to frame charges under Sections 8(1) and 9(1)(a) of FERA. The court confirmed the applicability of FERA to the respondent, rejected the allegations of bias, and upheld the liability of the director for the contraventions under FERA.