TaxTMI 
TaxTMI 
2014 (6) TMI 577
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....nd 4th May 1991 under FIR No. RC 5(S)/91-SIU(V) dated 20th April 1991. Besides, recovery of some Indian and foreign currencies, some documents were recovered. The documents included two spiral note books (marked MR 68/91 and MR 71/91), two small spiral pads (marked MR 69/91 and MR 70/91) and two files, each containing some loose sheets of papers (marked MR 72/91 and MR 73/91). MR-71/91 was considered to be the main 'mother' diary as far as the criminal proceedings were concerned. In the FERA proceedings MR 71/91 was marked as MR 209/93 and MR 77/91 was marked as MR 207/93. 4. The CBI registered FIR No. RC 1(A)/95 ACU (VI) on 4th March 1995 against Mr. S.K. Jain and Mr. J.K. Jain, the Appellants herein and certain others for the offence both under the Prevention of Corruption Act, 1988 ('PCA') as well as FERA. The FIR stated that the entries in the diaries revealed that payments to 119 persons through hawala channels "were partly explained by the accused S.K. Jain who is the master of the said documents and the employer of the accused J.K. Jain who had maintained the documents in his own handwriting in the coded words and figures." The total amount disbursed was est....
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....9/93 seized by the CBI on 3rd May 1991 contained the details regarding conversion of foreign exchange into Indian rupees at hawala rates. He replied: "I am already an accused and I have the protection of Article 20 (3). Since this question incriminates me I will not answer the question." 8. Mr. S.K. Jain stated that Mr. J.K. Jain was still his employee and that he had never cheated or misappropriated the funds. On 20th and 25th April 1995 Mr. S.K. Jain declined to make any statement invoking the protection under Article 20 (3) of the Constitution. 9. Chargesheet No. 4 was filed by the CBI in the criminal court on 16th January 1996 and Chargesheet No. 8 on 23rd January 1996. The subject matter of both chargesheets was the offence under the PCA and not FERA. Effectively therefore, the FERA proceedings got separated. 10. Mr. S.K. Jain was again questioned on 4th October 1996. This time he did not invoke Article 20 (3) of the Constitution. On that date he was shown the photocopy of the planner diary (Ex.M-207/93) stated to be containing 20 conversion details. When he was asked to explain, he stated: "I have no knowledge about these calculations. These are not written by me." He was ....
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....me. These are written in my hand. At present I do not recollect in what context the said calculations were written by me since I used to write many things in the diary as per instructions of my employer (Mr. S.K. Jain)." 14. Mr. J.K. Jain stated that he could not confirm whether it was the same Mr. V.K. Beri whose name appeared allegedly in the diary who was his landlord but he confirmed that the said house was purchased by him and his wife from one Mr. V.K. Beri in the year 1992-93. When asked about the entries thereunder, he stated that he himself wrote as per the instruction of the employer and also "I do not recollect the nature of the calculation and why it has been written." When he was shown another specific entry, he reiterated that "I have no knowledge of the above calculations and it relates to what I am not able to recollect. I used to write many things as per instruction of my employer in the diary. This I might have written as per instruction of Sh. S.K. Jain." Show Cause Notice No. IX 15. SCN No. IX dated 14th February 1996 issued by the ED to Mr. S.K. Jain and Mr. J.K. Jain pertained to one entry on the reverse of page 1 of the mother diary which reads: 'At Du....
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....documents included the statements recorded under Section 40 FERA of both Mr. S.K. Jain and Mr. J.K. Jain. The V.C. Shukla Case 19.1 An important development that took place even while the adjudication on the above SCNs were pending, was that on 8th April 1997 the Delhi High Court reversed the order of the trial Court which held that a prima facie case had been made against the accused in the two charge sheets after holding that documents relied upon by the prosecution were admissible in evidence under Section 34 of the Indian Evidence Act, 1872 ('IEA'). 19.2 The above order was taken up in appeal by the CBI to the Supreme Court. In the judgment dated 2nd March 1998 in the V.C. Shukla case, the order of the High Court was affirmed by the Supreme Court. It was held that two spiral notebooks Ex. MR 68/91 and MR 71/91 (marked M-209 of 2013 under FERA proceedings) and two spiral pads Ex.MR-69/91 and Ex.MR 70/91 were 'books of account' within the meaning of Section 34 IEA, but not the loose sheets of papers contained in the two files. It was further held that "the activities of the Jain brothers, as sought to be projected by the prosecution now on the basis of the mate....
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.... by Mr. J.K. Jain. If one looked into the diary, "there remains no doubt that this diary contained details of monetary transactions." (b) Since neither Mr. J.K. Jain nor Mr. S.K. Jain could be considered legally as being accused of the offences mentioned in FERA as at the relevant time the ED had not filed any complaint under Section 56 of FERA, neither of them were entitled to the protection under Article 20 (3) of the Constitution. The mere erroneous judgment of the CBI in mentioning the FERA proceedings in the FIR would not entitle Mr. S.K. Jain and Mr. J.K. Jain to protection under Article 20 (3) of the Constitution. (c) Neither noticee cooperated in the investigation and thus it was open to the "Investigating Officer of the competent agency to make allegations as per their interpretation of the documents under Section 72 of FERA, 1973". (d) Although it was not proved that the amount as alleged in the SCN had been paid to Mr. V.K. Beri, it was clear that Mr. S.K. Jain "had paid in 1984, 10,000 US$ to somebody". Since no explanation had been given by him and as he had not produced any general or special permission of RBI, it was held that S.K. Jain had contravened the provisi....
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.... refusing to answer the question put to him regarding the entries in the diaries on a date when charge sheet had not been filed by the CBI. Mr. Bhullar pointed out to the SCN in which a specific reference was made to the FERA provisions in respect of which proceedings were not started by the ED at the time of registration of the FIR. 24. Mr. Bhullar pointed out that as far as SCN IX was concerned, it was confined to a single entry in the column of the first page of the mother dairy. He took the Court through the relevant documents and the statements under Section 40 FERA and submitted that since the entries had not been made by Mr. S.K. Jain, he was justified in not offering any explanation. He submitted that in the circumstances an adverse inference could not be drawn against Mr. S.K. Jain. He referred to the criminal proceeding under Section 56 FERA whereby the Additional Chief Metropolitan Magistrate had discharged Mr. S.K. Jain in Complaint Case No. 75/1/1996. The said order was upheld by this Court by its order dated 26th February 2013 in Criminal Miscellaneous Case No. 2011 of 2007 (M.G. Attri v. S.K. Jain). 25. Apart from relying on several passages of the V.C. Shukla case....
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.... (9) SCC 735 to emphasize that the CBI had no jurisdiction as far as FERA was concerned. He submitted that Section 40 read with Section 39 FERA mandated that the noticee spoke the truth. He submitted that there were several occasions for the noticee to do so. The first was when statements were recorded under Section 40 FERA. The next was in reply to the SCN. The third occasion was the adjudication proceedings in terms of Rule 3 of the Adjudication Proceedings and Appeal Rules, 1974. Referring to the decision in Directorate of Enforcement v. Deepak Mahajan AIR 1994 SC 1775 and Poolpandi v. Superintendent, Central Excise 1992 (3) SCC 259 he submitted that the noticee under FERA could not be treated as an accused for the purpose of Article 20 (3) of the Constitution. Since the chargesheets filed by the CBI made no reference to FERA, there was no occasion for the Appellant to decline to answer the questions put to him while recording the statement under Section 40 FERA. 29. Mr. Panda also referred to the decision in Issardas Daulat Ram v. Union of India 1962 Supp (1) SCR 358 and Shah Guman Mal v. State of Andhra Pradesh 1980 (2) SCC 262 to urge that in the present case since the diari....
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....nged once the chargesheets were filed by the CBI. After the filing of the chargesheets Mr. J.K. Jain stated that he was unable to recall what the entries were about. He merely stated that he had written many entries on the instructions of Mr. S.K. Jain. As regards Mr. S.K. Jain, he maintained that he would not be able to explain entries since they were not made by him. 34. There are two strands of litigation that emanate under FERA. One is the adjudicatory proceedings and the other the criminal proceedings under Section 56 FERA. In Ramanlal Bhogilal Shah v. D.K. Guha, the Supreme Court explained that a person served with the summons under the FERA is an accused within the meaning of Article 20 (3) of the Constitution. It was held that this did not mean that he need not give information regarding matters which do not tend to incriminate him. In other words, it was open to a noticee not to answer such questions as would tend to incriminate him. 35. It is, therefore, clear that for the purpose of FERA, the noticee can, to the extent that he is required by the ED officers to give answers that might tend to incriminate him in the criminal proceedings under FERA, decline to do so. The ....
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....' under Section 35 of FERA or Section 104 of the Customs Act also as the case may be and the 'person arrested' can be detained by the Magistrate in exercise of his power under Section 167(2) of the Code. In other words, the 'person arrested' under FERA or Customs Act is assimilated with the characteristics of an 'accused' within the range of Section 167(1) and as such liable to be detained under Section 167(2) by a Magistrate when produced before him." 38. While it is true, as explained in Enforcement Directorate v. M. Samba Siva Rao and K.T.M.S. Mohd. v. Union of India, that FERA is a complete code in itself and every proceeding under FERA is deemed to be a judicial proceeding, it does not straightway follow that a refusal by a noticee to answer a question which would incriminate him should be taken to be a contravention of FERA. 39. The decisions in Issardas Daulat Ram v. Union of India and M/s. Kanungo & Company v. Collector of Customs (1973) 2 SCC 438 were given in a context very different from that of the present case. In each of those cases the imported goods had been seized and therefore, the burden was on the person who was found in possession ....
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....9'. However, this entry does not find mention in the SCN. 42. In the V.C. Shukla case, the Supreme Court discussed the mother diary MR 71/91 (M-209/93) in some detail. The said discussion in para 9 reads as under: "Since according to the prosecution MR 71/91 is the main (mother) book we first take the same for scrutiny. Page 1 of the book begins with the heading "A/C given upto 31st January on 31.1.1998;" and then follows serially numbered entries of various figures multiplied by `some other figures on the left hand column and the product thereof on the next column for each month commencing from January, 1990 to April, 1991. The overleaf ('o' for short ) of the page contains similar entries for the period from April, 1988 to December, 1989 and it ends with the words "2.77' we have to receive". In the subsequent pages the book records monthly receipts of monies/funds from inconspicuous persons/entities during the period commencing from the month of February, 1988 to April 1991 maintained on '2 columns' basis. The left hand column represents the receipts and the right hand column disbursements. In the column of receipts the source is indicated in abbreviated....
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....n the absence of any other evidence to explain what is exactly meant by the above entries, it is not possible to conclude that the said entry No. 5 indicates that Mr. S.K. Jain received foreign exchange worth Rs. 1,90,000 in Dubai from a person other than an authorised dealer or that he had failed to sell the said foreign exchange to an authorized dealer in India within three months from the date he acquired it in Dubai. Likewise it is not possible to draw any such inference as regards the solitary entry of 32,000 sterling pounds. From who was such foreign exchange obtained if at all and when? At the cost of repetition it must be noted that the SCN does not reflect any credible evidence having been gathered by the ED through independent investigations at Dubai or any place outside India to substantiate the allegations in the SCNs. The above entries by themselves cannot constitute substantive evidence of such allegations. 44. What is significant is that this is not a case where a confession was initially made under Section 40 FERA which thereafter was retracted. Here the noticee either declined to answer or gave an answer which did not help the ED since he claimed that had no knowl....