TaxTMI 
TaxTMI 
2017 (2) TMI 518
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the companies and that the learned Magistrate faile....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 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 court proceedings and that the order of the learned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 since the company has not been added as an accused, the Managing Director alone cannot be an accused. To t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ingly, 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 [State of Maharashtra vs. Momnath Thapa & others], wherein it has been held as follows:- 32.The aforesaid shows that if on the basis of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nally. 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 Court can make a note of such objection and mark the objected document tentatively as an exhibit in the case (or record the objected part of the oral evidence) subject to such objec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 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 far as applicable shall apply to all proceedings under the Act and these rules. The Registrar may decline to accept any of the documents which is presented otherwise than in accordance with this rules of the practice and procedure ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt 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 comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so complied with, the said person shall, within a period of thirty days from the date on which he comes to know that such foreign exchange cannot be so used or the conditions cannot be complied with, sell the foreign exc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 unlawful-- (a)the making of any payment already authorised either with foreign exchange obtained from an authorised dealer or a money-changer under Section 8 or with foreign exchange retained by a person in pursuance of an authorisation granted by the Reserve Bank; (b)the making of any payment with foreign exchange received by way of salary or payment for services not arising from any business in, or anything done while in, India. (3).Save as may ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....udes 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 anything contained in section 29 of the Code of Criminal Procedure, 1973 (2 of 1974), it shall be lawful for any metropolitan magistrate and for any magistrate of the first class to pass a sentence of imprisonment for a term exceeding three years or of in exceeding five thousand rupees on any person convicted of an offence punishable under section 56. (2)No court shall taken cognizance-- (i)of any offence punishable under sub-section (2) of section 44 or sub-section (1) of Section 58,-- (a)where the offence is alleged to have been committed by an officer of Enforcement not low....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se 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 other law, or (ii)has been received from any place outside India (duly authenticated by such authority or person and in such manner as may be prescribed)in the course of investigation of any offence under this Act alleged to have been committed by any person, and such document is tendered in any proceedings under this Act in evidence against him, or against him and any other person who is proceeded against jointly with him, the court of the adjudicating office, as the case may be, shall-- (a)Presume, unless the contrary is proved, that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the court may reasonable assume to have been signed by,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iable 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 period, the appellant was a non-resident Indian or not? The reasons assigned for not deciding this issue is unsustainable and legally impermissible. The appellate authority ought to have analysed the material placed before it and given a finding on this crucial question, which is the basis for the entire proceedings. He further submitted that the appellate authority has failed to note that enough and proper opportunity for hearing had not been granted by the adjudicating authority. 9. The learned senior counsel appearing for the appellant has contended that the question of bias, put forth by the appellant was not considered by the appellate authority. He further submitted that in respect of the very same subject matter of the memorandum, a criminal complaint has been launched before the Court of Economic Offences, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ute 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 further stressed that the appellant is a Director, who only intends to become a non-resident Indian. Further, urging that the appellant is a permanent resident of Singapore, the counsel submitted that the offence relating to Income-tax Act in respect of the case on hand have nothing to do with the Foreign Exchange Regulation Act. 11. The learned senior counsel appearing for the appellant further submitted that the appellate authority is primarily concerned with the order of adjudication and if it is found to be erroneous, unreasonable and unsustainable, the only course open to the appellate court is to set aside the same and remit it for de novo enquiry. 12. The learned senior counsel for the appellant relied upon the following judgments: "(a) Judgment of the Hon'ble Supreme Court in Bhagwandas Fatechand Daswani and ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 sustained, makes the whole proceeding or order in question a nullity, same being coram non judice." 13. The learned senior counsel appearing for the respondent submitted that there are four sets of communications available with the Department and all these communications strengthen the case of the prosecution. According to the prosecution, no statement was recorded by Mr. A.P. Kala, who had investigated the case. Further nobody was examined to that effect. He further submitted that the appellant miserably failed to establish a single ground of bias. In this regard, the learned senior counsel for the respondent relied on the decision of the Hon'ble Supreme Court in State of Haryana v. Bhajan Lal reported in MANU/SC/0115/1992 : AIR 1992 SC 604 and submitted that if the allegations are bereft of truth and made maliciously, and when there are only allegations and recriminations ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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) of the FERA and the appellate authority-Board may consider the charges that could be made and sustain if any on the basis of evidence on record and give its own finding. This submission has been made in respect of the allegation that some materials not referred to in the show-cause notice have been taken into consideration by the appellate authority. With regard to delay and denial of opportunity, as alleged by the appellant, it is submitted that there is no delay as alleged by the appellant and that enough opportunities have been given to the appellant. 17. Stating so, the learned senior counsel for the respondent prayed that this appeal has to be dismissed. 18. Heard the learned counsel on either side and perused the materials available on record carefully. 19. Even though many points were raised by the appellant challenging the impugned judgment, it is suffice to answer the questions of law....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ving 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 the appellate authority has observed that the findings and conclusions arrived at by the adjudicating authority do not logically follow, on several crucial matters, and that no reasons have been stated as to how those conclusions would emerge from the evidence on record. But the appellate authority has powers under Section 52(4) of FERA for the purpose of examining the legality, propriety or correctness of any order made by the adjudicating officer. Section 52 of the FERA deals with Appeal to Appellate Board. At this juncture, it would be appropriate to extract Section 52(4) of FERA, which reads as under: "(4) The Appellate Board may, for the purpose of examining the legality, propriety or correctness of any order made by the adjudicating officer under Sec. 50 read with Sec. 51 in relation to any proceeding, on its own motion or otherwise, call for the records of such proceedings and make such order in the case as it thinks fit." 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts 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 evidence already collected. Therefore, the appellant cannot now question the authority, which even otherwise, is well protected under Section 52(3) and (4). The reason for such appreciation of the evidence was necessitated because of the failure of the adjudicating authority to give a finding on the acquisition and ownership of the drafts, though evidence was available before him, and he had presumed the same to exist based on the subsequent acts of transfer and lending. It is pertinent to mention here that the appellate authority has put the appellant on notice, heard the counsel elaborately on all the issues, perused and discussed the evidence meticulously and modified the order by which the appellant has been exonerated of the charges under Section 9(1). One of the clinching finding recorded by the appellate authority is about the so-called meeting between the Directors of M/s. Dipper Investments Limited on 25.06.1994 in Singapore, on which date, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 judgments relied on by the learned senior counsel for the appellant, in respect of bias, are not in dispute, the same will not apply to the case on hand. Further, the plea of bias looses its significance in the present case, since the appellate authority had independently examined the issues based on evidence on record, afresh. Thus, the third question of law is answered against the appellant. 24. The fourth and the final question of law is as to 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. The doctrine of lifting the corporate veil is not alien to the process of administration of law and dispensation of justice. It is a principle borne out of necessity not only to safeguard the shareholders to the extent of their liability but also to identify the miscreants shielding their illegal acts under the name of a company. In U....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 is not an absolute bar to proceed against the directors and it is to be decided on the facts of the each case put to test. In this regard, the appellate authority, after analysing the matter in detail, and also considering the evidence placed on record, came to the conclusion that the name of the company Dipper Investments Limited was used for obtaining the bank drafts, opening an account in Barclays Bank, and for crediting the amount of drafts in that account and transferring the funds so credited to the accounts of Meer Care & Desai, Westback Ltd., and Bank of Ireland. There is also a clear finding that none of these acts could be attributed to the company and that there is no evidence that these were done in the course of company's business. It has also been further held that all acts of a corporate entity are to be done in the name of that entity, but does not necessarily follow that whatever has been done in the name of a corporate entity must be held to be the acts of that entity. After a threadbare analysis of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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. 12. Further, at this juncture, it is useful to refer Section 166-A Cr.P.C, which reads as follows:- "166-A.Letter of request to competent authority for investigation in a country or place outside India.- (1) Notwithstanding anything contained in this Code, if, in the course of an investigation into an offence, an application is made by the investigating officer or any officer superior in rank to the investigating officer that evidence may be available in a country or place outside India, any Criminal Court may issue a letter of request to a Court or an authority in that country or place competent to deal with such request to examine orally any person supposed to be acquainted with the facts and circumstances of the case and to record his statement made in the course of such examination and also to require such person or any other person to produce any document or thing which may be in his possession pertaining to the case and to forward all the evidence so taken or collected or the authenticated copies thereof or the thing so collecte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he companies are incorporated outside India and they will not come under the preview of FERA, the respondent, who is a resident of India, is liable to be punished for any violation of the provisions of FERA. Hence, the argument of the learned Senior counsel appearing for the respondent that since the companies were not added as accused/respondents in the complaint preferred by the petitioner is not a valid ground to discharge the respondent from the case and accordingly, the argument of the learned Senior counsel appearing for the respondent is rejected. 15. In this case, the Enforcement authorities have every power to examine any person as per Section 39 of the FERA, who is residing in India or outside India. Further, in this case, the duly authorised officer alone has recorded the statements of persons residing outside India and placed the materials to show that the witnesses were examined outside India by the duly authorised officials. Whether the documents collected and the statements of witnesses recorded, outside India are true or not, cannot be decided in the present stage, since there are sufficient materials produced on the side of the enforcement authorities to proceed f....