TaxTMI 
TaxTMI 
2017 (2) TMI 518
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed dealers in foreign exchange and deposited the amounts in a bank account outside India. 3. The trial court, after considering the evidences adduced on both sides and documents produced on the side of the complainant, passed an order on 18.05.2015 on the application filed by the respondent under Section 245(2) Cr.P.C. by discharging him stating that there is no sufficient material before this court in prima facie for framing charges against the accused under Section 8(1) & 9(1)(a) and 14 of FERA, 1973. Aggrieved by the order, the petitioner stands before this court by way of this revision. 4. The learned Additional Solicitor General appearing for the petitioner would submit that the learned Magistrate failed to note that the accused is a person of Indian Citizen and the Foreign Exchange Regulation Act, 1973 applies to all citizens of India, outside India and that learned Magistrate erred in coming to the conclusion that the funds were of M/s.Dipper Investments Ltd., U.K., and failed to note that M/s.Dipper Investments Ltd., U.K, M/s.Banyan Tree Enterprises Ltd and M/s.Turnkey Industries Ltd, which were only shell companies, wherein the accused is only the sole Director of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and had transferred and deposited amounts of #44,37, 242/- to M/s. Meer, Care & Desai, West Back Ltd and the Bank of Ireland, persons other than authorised dealers in foreign exchange, without the previous general or special permission of the Reserve Bank of India and thereby had contravened the provisions of Section 8(1) and 9(1)(a) of FERA. The learned Magistrate, without considering the above facts, discharged the accused from the case. Hence, the order passed by the learned Magistrate has to be set aside and the revision has to be allowed. 6. Per contra, the learned Senior counsel appearing for the respondent would submit that the learned Magistrate, after considering entire case records, has come to the conclusion that the companies were registered outside India and it will not attract the provisions of the FERA and the relevant provisions stated in the complaint alleged to have been violated outside India and and it will not attract the provisions of FERA and the relevant provisions stated in the complaint and that the statements recorded by the Enforcement Officer are not admissible in evidence, since the statements made by living persons cannot be used as evidence in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing ordered before the recording of evidence and the consideration as to whether charge has to be framed or not is required to be made on the basis of the record of the case, including documents and oral hearing of the accused and the prosecution or the police report, the documents sent along with it and examination of the accused and after affording an opportunity to the two parties to be heard. The stage for discharge under Section 245, on the other hand, is reached only after the evidence referred to in Section 244 has been taken. Notwithstanding this difference in the position there is no scope for doubt that the stage at which the magistrate is required to consider the question of framing of charge under Section 245(1) is a preliminary one and the test of prima facie case has to be applied. In spite of the difference in the language of the three sections, the legal position is that if the Trial court is satisfied that a prima facie case is made out, charge has to be framed. 2. 2002 SCC On Line Mad 913 [Karam Chand Thaper and Brothers (Coal Sales) Ltd. vs. T.G.Vasanth Gupta], wherein, it has been held as follows:- 7. The counsel for the respondent argued that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Magistrate to weigh or assess the evidence. Therefore, the order of discharge is liable to be set aside and accordingly, it is set aside. Revision Petition is allowed. 3. (2008)2 SCC 561 [Onkar Nath Mishra and others vs. State (NCT of Delhi and another], wherein it has been held as follows:- 11.It is trite that at the stage of framing of charge the court is required to evaluate the material and documents on record with a view to finding out if the facts emerging therefrom, taken at their face value, discharged the existence of all the ingredients constituting the alleged offence. At that stage, the court is not expected to go deep into the probative value of the materials on record. What needs to be considered is whether there is a ground for presuming that the offence has been committed and not a ground for convicting the accused has been made out. At that stage, even strong suspicion found on material which leads the court to form a presumptive opinion as to the existence of the factual ingredients constituting the offence alleged would justify the framing of charge against the accused in respect of the commission of that offence. 4.(1996)4 SCC 659....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial Court, in a case, upholds a particular objection and excludes the material from being admitted in evidence and then proceeds with the trial and disposes of the case finally. If the Appellate or Revisional Court, when the same question is recanvassed, could take a different view on the admissibility of that material in such cases the Appellate Court would be deprived of the benefit of that evidence, because that was not put on record by the trial Court. In such a situation the higher Court may have to send the case back to the trial Court for recording that evidence and then to dispose of the case afresh. Why should the trial prolong like that unnecessarily on account of practices created by ourselves? Such practices, when realised through the course of long period to be hindrances which impede steady and swift progress of trial proceedings, must be recast or remoulded to give way for better substitutes which would help acceleration of trial proceedings. 14. When so recast, the practice which can be a better substitute is this : Whenever an objection is raised during evidence taking stage regarding the admissibility of any material or item of oral evidence the trial Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....done by or before any lawful authority in a State. (2)Any document purporting to have affixed, impressed or subscribed thereon or thereto the seal and signature of any person authorised by this Act to administer an oath in testimony of any oath, affidavit or act, being administered, taken or done by or before him, shall be admitted in evidence without proof of the seal or signature being the seal or signature of that person, of the official character of that persons. 32.Now that being the express statute in India, there is no difficulty here. The Notarial Act of Elizabeth Levy has not only been certified under the seal of the County Clerk and Clerk of Supreme Court, New York, but has also been forwarded under the certificate of the Consulate General of India in New York for legislation of the seal of the Clerk of the County of New York. In that context, I see no difficulty whatever, legal or otherwise, in admitting this affidavit on the records of the court I need hardly quote R.6 of the Company Rules, 1959 of this Court which says' Save as provided by the Act or by these Rules, the practice and procedure of the Court and the provisions of the Code so....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ised dealer, any foreign exchange: Provided that nothing in this sub section shall apply to any purchase or sale of foreign currency effected in India between any person and a money changer. Explanation: For the purposes of this sub section, a person who deposits foreign exchange with another person or opens an account in foreign exchange with another person, shall be deemed to lend foreign exchange to such other person. 2)Except with the previous general or special permission of the Reserve Bank, no person, whether an authorised dealer a money changer or otherwise, shall enter into any transaction which provides for the conversion of Indian currency into foreign currency or foreign currency into Indian currency at rates of exchange other than the rates for the time being authorised by the Reserve Bank. 3)Where any foreign exchange is acquired by any person, other than any authorised dealer or a money changer, for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, failed to c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r acknowledge any debt, so that a right (whether actually or contingent) to receive a payment is created or transferred in favour of any person resident outside India: d)make any payment to or for the credit of any person by order or on behalf of any person resident outside India. e)place any sum to the credit of any person resident outside India. f)make any payment to, or for the credit of, any person or receive any payment for, or by order or on behalf of, any person as consideration for or in association with-- (i)to receipt by any person of a payment or the acquisition by any person of property outside India. (ii)the creation or transfer in favour of any person of a right (whether actual or continent) to receive payment or acquire property outside India . (g)draw, issue or negotiate any bill of exchange or promissory note, transfer any security or acknowledgment any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person as consideration for or in association with any matter referred to in clause(f) (2).Nothing in sub-section(1) shall render unlawfu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hree years with fine or with both . Sec.59 of FERA, 1973, deals with Presumption of culpable mental state Sec.59 of FERA, 1973, (1)In any prosecution of any offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution. Explanation In this section, culpable mental state includes intention, motive, knowledge of a fact and belief in, or reason to believe, a fact. (2)For the purposes of this section, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability. (3)The provisions of this section shall, so far as may be, apply in relation to any proceeding before an adjudicating officer as they apply in relation to any prosecution for an offence under this Act. Sec.61 of FERA, 1973, deals with Cognizable of offences Sec.61 FERA, 1973, (1)Notwithstanding....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t he exercise all due diligence to prevent such contraventions. 2)Notwithstanding anything contained in sub section 1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation For the purpose of this section-- (i) Company means any body corporate and includes a firm or other association of individuals; and (ii) director in relation to a firm, means a partner in the firm . Sec.72 of FERA, 1973, deals with Presumption as to documents in certain cases . Sec.72 of FERA, 1973, Where any document-- (i)is produced or furnished by any person or has been seized from the custody or control of any person, in either case, under this Act or under any o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hether new evidence can be accepted by the Tribunal? (c) Whether the order of the adjudicating authority is vitiated on account of bias, violations of principles of natural justice and fair play as he was a part of the investigating team and a witness in the criminal case initiated by the Department? (d) Whether Section 3(1) of the Companies Act, which confers a separate legal entity to the company, absolutely dissolves the liability of the Director of a company under every circumstances?" 7. Mr. B. Kumar, learned senior counsel appearing for the appellant submitted that the order passed by the appellate authority is against law and materially irregular and the same has resulted in serious miscarriage of justice. He submitted that the order passed by the appellate authority is liable to be set aside solely on the ground that the judgment had been delayed by one year and two months after the arguments were over and hence the order under appeal is not valid in the eye of law. 8. The learned senior counsel appearing for the appellant further submitted that the appellate authority has not decided the main question, i.e., whether at the relevant perio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso his submission that the appellate authority had failed to see that the judgment given in the habeas corpus proceedings could never ever be relied upon in an adjudication proceedings which requires decision on objective standards and on evaluation of the evidence before it. Thus, according to the learned senior counsel appearing for the appellant, the order passed in a habeas corpus proceedings will not form part of the case on hand, and that with regard to preventive detention, no adjudication had happened so far. In other words, it is his contention that for a case relating to violation of Foreign Exchange Regulation Act, placing reliance upon a preventive detention order will not be sufficient and proper. With regard to the finding that M/s. Dipper Investments Limited is in no way connected to the appellant and the dispute raised with regard to the registration of the company and the further allegation that for claiming non-resident Indian, no application was filed, the learned senior counsel for the appellant submitted that it is a jurisdictional fact and it is in no way connected to the offence framed under the Foreign Exchange Regulation Act. The learned senior counsel fur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nother, reported in MANU/TN/0049/1987 : 1988 (33) ELT 279 Mad, in support of his contention that the proceedings initiated by the authorities is purely a bias and it violates the principles of natural justice, since the person who was the investigating authority, later turned to be the person adjudicating the issue on hand. (d) Judgment of the Hon'ble Supreme Court in State of U.P. v. Mohammad Nooh, reported in MANU/SC/0125/1957 : AIR 1958 SC 86, in support of his contention that two roles could not obviously be played by one and the same person. In the present case, the 14th witness before the investigating authority, later turned to be the adjudicating authority. Therefore, according to the learned senior counsel, it violates the principle of "unconnected persons cannot be permitted to participate in the adjudication proceedings". (e) Judgment of the Hon'ble Supreme Court in Union of India and others v. Sanjay Jethi and another, reported in (2013) 16 SCC 116, in which it has been held that rational approach has to be adopted by the Court keeping in view the basic concept of legitimacy of interdiction in such matters, since challenge of bias, when sustain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stigation, considering the nature of the powers conferred on the Authority under Foreign Exchange Regulation Act and the manner it has been done, the same does not require any interference. 15. In respect of the issue as to whether the appellant is an Indian citizen or not, it is submitted by the learned senior counsel for the respondent that the appellate authority had correctly relied upon the judgment of the Division Bench of this Court in HCP No. 240 of 1996, wherein it was held that the appellant is a resident Indian. With regard to the so-called transactions referred to in the show-cause notice, and the contention that the said transactions were done only as a Director of M/s. Dipper Investments Limited and not as individual capacity, it is submitted that only after examining the entire evidence on record, the adjudicating authority came to the conclusion that the monies belonged to the appellant and therefore, the argument of the appellant in this respect, is without any substance. 16. The learned senior counsel appearing for the respondent further submitted that the appellate authority being the first forum of appeal, has suo motu powers under Section 52(4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing authority as well as by this Court in the Habeas Corpus Petition, remains one and the same, that too when the judgment passed in the Habeas Corpus Petition has not been taken into account by the adjudicating authority. It is also seen from the records that the appellant claimed not a citizen before the Division Bench of this Court in the Habeas Corpus Petition. In the election petition filed by him, he claimed as an Indian citizen. But before the Foreign Exchange Regulation authorities, he claimed as if he is a non-resident Indian. Thus, the appellant has taken different stands, which are not permissible under law. In such view of the matter, this Court deems it fit only to hold that the order passed by the appellate authority in this respect does not require any interference. Accordingly the first question of law is answered against the appellant. 21. The second question of law is as to whether the appellate authority, having found that on evidence, the charges held to be not proved, can exercise the suo motu powers under Section 52 and re-frame the charges sitting in appeal and whether new evidence can be accepted by the appellate authority. It is no doubt true that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsidered. It is also not the case of the appellant that the appellate authority has based its findings on some evidence, alien to the adjudication proceedings, without granting any opportunity. In the case on hand, the appellate authority had to proceed with the examination of the evidence in accordance with Section 52, as the findings and conclusions arrived at by the adjudicating authority did not logically follow. The appellate authority has also held that the primary burden of the findings rendered by the adjudicating authority would appear to be to deal with the points taken in defence and not to examine the evidence so as to find out as to how the charges can be substantiated on that evidence, and that the adjudicating officer assumed the allegations in the show-cause notice as self-evident of the charges. Hence, on that score, it became necessitated for the appellate authority to deal with the evidence for corroborating the same with the points taken in defence. It is also evident from Page-96 of the order of the appellate authority that the learned counsel for the appellant also rightly admitted that the Board has the authority to consider the matter afresh based on the evi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dice would be caused. In such a case, the action would be hit by the cardinal principle enunciated in the latin maxim "Nemo judex in cause sua". But in the present case, Mr. A.P. Kala, who was the adjudicating officer, had not issued any summons nor recorded any statement or participated in any searches. He only monitored the investigation and exchanged correspondences, as is evident from the records. It also cannot be said that the adjudicating authority had some vested interest against the interest of the appellant so as to divert himself from the evidence to decide against the appellant. There is nothing on record to show that the adjudicating officer was prejudiced on the subject matter, which reflected in the adjudication process or in the decision. Upon perusal of the records, we find that the appellant was given a fair opportunity. As found by the appellate authority, the guilt of the appellant was culled out only from the documentary evidence, and the entire statements of the other witnesses were discarded. Thus the plea of bias put forth by the learned senior counsel appearing for the appellant, will not hold any water. Though the principles enunciated in the other judgmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tatute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern." 45. In Vodafone International Holdings BV v. Union of India [MANU/SC/0051/2012 : (2012) 6 SCC 613)], this Court has taken the view that: "277.... Once the transaction is shown to be fraudulent, sham, circuitous or a device designed to defeat the interests of the shareholders, investors, parties to the contract and also for tax evasion, the court can always lift the corporate veil and examine the substance of the transaction." This Court further held: "280. Lifting the corporate veil doctrine can, therefore, be applied in tax matters even in the absence of any statutory authorisation to that effect." FERA (Amendment) Act 29 of 1993 has no effect on the principle of lifting the corporate veil and the question as to whether it was established so as to circumvent the provision of Section 29(1)(a) can always be examined." Therefore, the protection given to a company i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at these were done in the course of company's business, it is clear that the appellant is legally liable for those acts. Accordingly, the fourth and final question of law is answered against the appellant. 25. In the result, all the questions of law are answered against the appellant and in favour of the revenue. The impugned order passed by the Foreign Exchange Regulation Appellate Board in Appeal No. 51/98 dated 05.05.2000 is confirmed and the Civil Miscellaneous Appeal stands dismissed. No costs. 10. From the perusal of the above judgment, the Hon'ble 1st Division Bench of this court has answered the questions of law raised holding that present respondent is a citizen of India and he is liable to be prosecuted under FERA, if any contravention made by him. 11. Further, it is seen from the records that the case was registered in India under Sections 2(g) and 2(p) of FERA. Since the respondent is a resident of India, he is liable to be prosecuted for any contravention or violation made by him under FERA. Hence, the contention of the respondent that the respondent is not a citizen of India and the order of the trial court has to be confirmed has no merit. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... burden of proving that he had the requisite permission shall be on him. (2) Where any person is prosecuted or proceeded against for contravening the provisions of sub-section (3) of section 8, the burden of proving that the foreign exchange acquired by such person has been used for the purpose for which the permission to acquire it was granted shall be on him. (3) If any person is found or is proved to have been in possession of any foreign exchange exceeding in value 1[fifteen thousand rupees], the burden of proving that the foreign exchange came into his possession lawfully shall be on him. 14. The learned Senior counsel appearing for the respondent has contended that the companies are not added as respondents and hence, the complaint made by the authorities against the respondent is not at all maintainable and the trial court has correctly come to the conclusion that no charge can be framed against the respondent. Admittedly, the present respondent is a citizen of India and the alleged companies mentioned in the investigation are not registered in India and only incorporated outside India. Though the companies are incorporated outside India and they will no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntended to migrate to Singapore and obtained permanent residency status. The dispute in my case devolves around a bank account in U.K. With Barclaya Bank. It is my contention that monies in the bank belong to the clients of a Solicitor in London. By operation of the account on his behalf I have not violated the provisions of FERA since I happened to be a non-resident Indian. A show cause notice had been issued in respect of this occurrence in the adjudication proceedings and I had replied to the same and explained my stand. I have suffered deeply on account of detention under COFEPOSA. Unable to stand the mental strain caused by there detention proceedings against he, my wife who was then in the advanced stage of pregnancy had an abortion and the dead child was taken out of the womb. My mother has also become seriously ill on account of my incarceration and the consequent mental strain caused to the whole of the family. In view of these, I must humbly project that the loss of foreign exchange mentioned in the grounds of detention as well as in the show cause notice would be brought to India to that loss of foreign exchange would no longer be a factor. It is my adm....