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2021 (12) TMI 431
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....wever, be referred to as first, second and third writ petitions. 2.1. The first writ petition viz., WP No. 20224 of 2021 has been filed praying to issue a Writ of (i)Declaration to declare the entire search operation held in the premises of the petitioner on 02.09.2021 and 03.09.2021 as null and void being violative of Article 21 of The Constitution of India and further declare all statements recorded on 02.09.2021 and 03.09.2021 as null and void; (ii)Mandamus directing the respondents not to cause any physical, mental or verbal harassment to the petitioner during the pendency of investigation relating to the proceedings in File No.T-3/CEZO-1/24/2021 dated 03.09.2021, to furnish copies of statements given earlier by him under Section 37 of the Foreign Exchange Management Act, 1999 and to conduct the said proceedings in the presence of the Advocate appointed by him; and (iii)Mandamus directing the first respondent to transfer the investigation in File No.T-3/CEZO-1/24/2021 dated 03.09.2021 to any other officer other than the third respondent so as to conduct the investigation in a free, fair and impartial manner. 2.2. The second and third writ petiti....
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....n-line for two days nor they were allowed to be sent to their grandmother's place. The search went on for 36 hours, during the course of which, the petitioner in the first writ petition was harassed, humiliated and made to comply with the taunts of the officials of the Enforcement Directorate. Such horrific events, according to the petitioners, unfolded in front of their children and family members, which has caused permanent scar in the lives of all the family members. Even a request made by the petitioner in the first writ petition to spare his wife, who is suffering from osteoporosis and who has nothing to do with the affairs of the company, has not been heeded to and she was not allowed to leave the house. 4.3. During the course of search, there were various restrictions imposed. The petitioner in the first writ petition was not even allowed to drink water nor allowed to attend to his natural call without the permission of the officials. He was asked to stand and forced to sit on the floor while answering the queries raised to him in front of his family members. The Panchanama drawn was silent with regard to the time of visit by the officers and the time of their leaving....
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....ted manner in which he was treated by the officials under the guise of investigation. Notwithstanding the search held on 02.09.2021 and 03.09.2021, the petitioner was also directed to appear for enquiry on 14.09.2021. Therefore, he is before this court with this writ petition viz., WP.No.20224 of 2021. 5. The averments made in the second and third writ petitions are verbatim the same as those contained in the first writ petition with respect to the manner in which the search was conducted and the petitioners were treated by the officials and the constant threat and intimidation exercised on them. Thus, according to the petitioners, the statements of the petitioners were obtained by threat and coercion during the course of search conducted on 02.09.2021 and 03.09.2021 and hence, the same will have no binding effect in any manner. It is also stated by the petitioner in the second writ petition that he was issued with summons dated 08.09.2021, to which, he filed his reply on 09.09.2021. 6. The main grievance projected by the petitioners in these three writ petitions is that the motive behind the search of their premises is to implicate them in some false case under the provision....
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....quently, sold to Emerging Markets Investment Fund IA (EMIF 1A) a company incorporated in Mauritius through share agreements dated 25.03.2015, 21.05.2015, 07.09.2021 and 16.09.2021 by the petitioner in his capacity as Director of GI Retail Pvt Ltd. for a paltry sum; immediately within few days of the completion of sale of shares of Hermes i-tickets Pvt.Ltd to EMIF 1A, Mauritius by the petitioner and his brother, EMIF 1A, Mauritius has invested EUR 1,000,000/- (Euro one million) in M/s.GI Technology Pvt. Ltd, through subscription agreement dated 24.09.2015; thereafter, within a few weeks of acquisition of Hermes i-tickets Pvt Ltd. by EMIF 1A, Mauritius, the said shares were sold by EMIF 1A, Mauritius to Wirecard AG, Germany group for a huge consideration and the petitioner also transferred the remaining shares of Hermes i-tickets Pvt Ltd. held in GI Retail Pvt Ltd. directly to Wirecard AG, Germany Group; subsequently, a subsidiary / group company of Wirecard AG Germany viz., Wirecard Acquiring and Issuing GMBH, entered into an agreement dated 27.10.2015 with GI Technology Pvt.Ltd for investment of 14 million Euro. Therefore, there was a serious suspicion and cloud over the acquisitio....
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....him. Therefore, the allegation of violating the principles of natural justice and fundamental rights, is not sustainable. It is further submitted that during the entire search procedure dated 02.09.2021 and 03.09.2021, the officials had maintained requisite dignity and decorum, not amounting to any kind of humiliation or violation of the human rights and fundamental rights as guaranteed to the petitioner under the Constitution of India. The respondent department thus exercised their duties and powers in a fair manner as conferred under the provisions of FEMA Act and other relevant laws. 7.2. Similar averments have been made by the same respondents in the counter affidavit filed in the second and third writ petitions. 8.1.1. The learned counsel for the petitioner in the first writ petition submitted that the proceedings under Section 37 of the FEMA Act is akin to the powers traceable under the Income Tax Act, 1961 and shall be exercisable subject to the limitations as laid down under sub section 3 of Section 37 of the FEMA Act and hence, the petitioner has not challenged the summons issued to him. 8.1.2. The learned counsel further submitted that as found under Section 136 ....
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....s were frozen by the respondents with the sole intention to harass the petitioner. Therefore, the learned counsel sought for declaration, declaring the search and seizure actions resorted to by the respondents as invalid and ultra vires the Constitution of India. 8.1.4. The learned counsel appearing for the petitioner also submitted that the power of the respondents to investigate into the matter, does not confer any right to harass the petitioner and at the stage of enquiry, the petitioner cannot be treated as accused and inflicted with mental and physical injury. It is further submitted that the fundamental right provided to the petitioner under Articles 20 and 22 of the Constitution of India, cannot be allowed to be thwarted by the respondents under the garb of investigation. According to the learned counsel, investigation must be free, fair and absolutely impartial, without any sort of harassment as adumbrated under Article 21 of The Constitution of India. Whereas in the present case, the officials of the Enforcement Directorate abused and misused their power at all stage of the investigation and subjected the petitioner to acute mental agony and harassment. The third respon....
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....r's wife, wherein her seethanam jewels alone are there. Therefore, the learned counsel sought to quash the summons issued against the petitioner, call for the materials collected during the search on 02.09.2021 and 03.09.2021 and expunge the same and treat him in a fair manner as envisaged under the FEMA Act. 8.3. That apart, the learned counsel for the petitioner in the third writ petition submitted that the petitioner is the wife of the petitioner in the first writ petition and her husband was treated as accused in the criminal case and was subjected to ill-treatment and harassment in front of their family members, which would cause damage to his personal as well as professional life. The learned counsel further submitted that during the search operation, the officials have obtained statements from her husband by exercising threat, coercion and undue pressure and hence, the same cannot be used as evidence in the proceedings initiated against him. Thus, the learned counsel sought a similar relief as in the second writ petition viz., to quash the proceedings and call for the entire materials collected during the course of search and expunge the same and treat the petitioner ....
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.... the concept of summons used either under the Code of Civil procedure or under the Code of Criminal Procedure, but has chosen to apply analogous provisions found in the Income Tax Act and therefore, assistance of a lawyer of the choice of the petitioner cannot be permitted. In this context, the learned Special Public Prosecutor placed reliance on the decisions of the Supreme Court in Suborno Bose v. Enforcement Directorate and another [(2020) (2) MLJ 646]; and Poolpandi and others v. Superintendent, Central Excise and others [CDJ 1992 SC 149] and this court in P.Giribabu and another v. The Deputy Director of Enforcement, Directorate of Enforcement, Chennai [CDJ 2010 MHC 2832]. 9.4. The learned Special Public Prosecutor further contended that on the basis of credible information, summons were issued to the petitioners, which was followed by search of their premises; and the petitioners were neither arrested nor taken into custody by the respondents. While so, the question of infringement of their fundamental rights will not arise. To substantiate the same, the learned counsel referred to the decision of the Supreme Court in Justice K.S. Puttaswamy (Retired) vs. Union of India and....
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....ion 37 of the FEMA Act and consequential action of investigation conducted by the third respondent. Therefore, it would be more appropriate to reproduce section 37 of the FEMA Act, which reads as under:- ''37. Power of search, seizure, etc. - (1) the Director of Enforcement and other officers of Enforcement, not below the rank of an Assistant Director, shall take up for investigation the contravention referred to in section 13. (2) Without prejudice to the provisions of sub-section (1), the Central Government may also, by notification, authorise any officer or class of officers in the Central Government, State Government or the Reserve Bank, not below the rank of an Under Secretary to the Government of India to investigate any contravention referred to in section 13. (3) The officers referred to in sub-section (1) shall exercise the like powers which are conferred on income-tax authorities under the Income-tax Act, 1961 (43 of 1961) and shall exercise such powers, subject to such limitations laid down under that Act." 11.2. Since section 37(3) of FEMA Act applies the provisions of Section 131 of the Income Tax Act, it is necessary to extract th....
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....the petitioners in all the three writ petitions that during the search operations on 02.09.2021 and 03.09.2021, the officials of the Enforcement Directorate obtained statements from the petitioners under threat and coercion; and such copies of statements recorded from them, were not furnished to the petitioners. The panchnama was silent about the visit of the third respondent and his officers, which creates suspicion about the motive behind the entire search operations and the same does not depict the true picture of the activities that had taken place at that time. The illtreatment meted out by the family of the petitioners more particularly petitioners, is in total violation of Article 21 of the constitution of India. The officials of the Enforcement Directorate behaved rude and they were handling the petitioners as criminals, harassed and humiliated with third degree methods in front of their family members and all the officials present. Thus, according to the petitioners, the act of the third respondent in the dramatized search operations and making detention of the petitioners and their family for about 36 hours thereby causing mental agony, is illegal and unconstitutional; an....
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....the subject of the summons. Such authority is also empowered to impound records. Therefore, there is no quarrel about the competency and power conferred on such authority to summon a person and enquiry. Sub-section 4 of Section 50 specifically indicates that every proceedings under sub-section 4 of section 50 specifically indicates that every proceedings under subsections 2 and 3 shall be deemed to be a judicial proceedings within the meaning of Section 193 and 228 of the Indian Penal Code. Therefore, it is apparent that summoning a person and enquiring him under Section 50 of the said Act is in the nature of a judicial proceedings, within the meaning of Section 193 and 228 of the Indian Penal Code. 15. .......... 16. Perusal of Explanation 2 to Section 193 IPC would clearly indicate that an investigation directed by law is a stage of judicial proceedings before a Court of Justice though that investigation may not take place before the Court of Justice. In other words, as per Explanation 2, it is to be presumed that such investigation is taking place before the Court of Justice. Consequently, it is apparent that the proceedings under sub-sections 2 and 3 of Sectio....
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....pertaining to the said proceedings, expunge the same and treat the petitioners in a fair manner as envisaged under the FEMA Act. 13.1. Repudiating the averments made in these writ petitions, it is the stand of the respondents that though the petitioner in the first writ petition appeared on three occasions before the third respondent and rendered his statements, he was very evasive and non-cooperative and failed to furnish true facts and relevant documents pertaining to sale of shares of Hermes i-tickets Pvt Ltd to EMIF 1A. Stoutly denying the allegations raised by the petitioners that their statements were recorded by exercising coercion and undue influence, it is stated that the petitioners and their family members were treated in a dignified and humanitarian manner and neither the petitioners nor their family members were ill-treated and harassed at any point of time during the course of search. In fact, the petitioners have given their statements voluntarily. Hence, the present writ petitions have been filed, only with an intent to stall the investigation into the financial irregularities / contravention committed by the petitioners under the provisions of the FEMA Act. 1....
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....oss of revenue and to provide a remedy for such loss, although element of coercion is present is the penalty. In Securities and Exchange Board of India vs. Cabot International Capital Corporation, (2005) 123 Comp Cases 841 Bom), the Court delineated principles as follows:- 47. Thus, the following extracted principles are summarised; (A) Mens rea is an essential or sine quo non for criminal offence (B) A straitjacket formula of mens rea cannot be blindly followed in each and every case. The scheme of a particular statute may be diluted in a given case. (C) If, from the scheme, object and words used in the statute, it appears that the proceedings for imposition of the penalty are adjudicatory in nature, in contradistinction to criminal or quasi-criminal proceedings, the determination is of the breach of the civil obligation by the offender. The words 'penalty' by itself will not be determinative to conclude the nature of proceedings being criminal or quasi-criminal. The relevant consideration being the nature of the functions being discharged by the authority and the determination of the liability of the contravenor and the delinquency. ....
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....ne for the offences under the Act. The said case has no application in the present case, which relates to imposition of civil liabilities under the SEBI Act and the Regulations and is not a criminal/quasi criminal proceedings." 13.3.1. With regard to the claim of the petitioners for presence of the Advocate during investigation, the respondents denied the same, relying on the decision in Poolpandi (supra), in which, the supreme court held as follows: "11. We do not find any force in the arguments of Mr.Salve and Mr.Lalit that if a person is called away from his own house and questioned in the atmosphere of the customs office without the assistance of his lawyer or his friends his constitutional right under Article 21 is violated. The argument proceeds thus: if the person who is used to certain comforts and convenience is asked to come by himself to the Department for answering question, it amounts to mental torture. We are unable to agree. It is true that large majority of persons connected with illegal trade and evasion of taxes and duties are in a position to afford luxuries on lavish scale of which an honest ordinary citizen of this country cannot dream of and they a....
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....nder Section 37 of The Foreign Exchange Management Act, 1999 (FEMA) and recording of statement in the presence of an Advocate who will be present beyond the hearing distance, does not require any consideration". 13.4. As regards the allegation of violating the fundamental rights, etc, it is the categorical stand of the respondents that on the basis of credible information, summons were issued to the petitioners and the same were followed by search of their premises. The petitioners were neither arrested nor taken into custody by the respondents. Therefore, the question of infringement of their rights under any provision of law, will not arise. The decision of the Supreme Court in Justice K.S. Puttaswamy (Retired) (supra), will come to aid the said stand. The relevant portion of the said decision is extracted below: ".........A power of search and seizure is in any system of jurisprudence an overriding power of the State for the protection of social security and that power is necessarily regulated by law. When the Constitution makers have thought fit not to subject such regulation to constitutional limitations by recognition of a fundamental right to privacy, analogous t....
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....ion to the respondent authorities and they were evasive; one of the petitioners made an attempt to flee away, which was thwarted by the respondent authorities; and they have done transactions with the foreign company involving several crores of rupees in contravention of the provisions of the FEMA Act. Therefore, according to the respondents, the petitioners are not entitled for any relief and these writ petitions are liable to be dismissed. 14.1. There cannot be any dispute that the Enforcement Directorate has power to issue summons under Section 37, if it is satisfied that the purpose has relevance to the issue in which the summons was issued. Such power given to them under Section 37 is the same as that of an Income Tax Officer under the Income Tax Act in terms of Section 131 and the same is available to deal with the discovery of materials in contravention of foreign exchange violations. The provisions of the Income Tax Act giving power of summons, search and seizure etc., for the purpose of investigation to the relevant authorities will apply analogously to the Enforcement Directorate under the FEMA Act. There is no necessity to disclose the particulars even at the time of ....
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.... and which had not been brought on record may not be available to him. In contrast, it was observed that there was fullest right of inspection under ordinary law and the Civil Procedure Code available to an assessee in order to meet the case made against him. We cannot assume that the ITO is not likely to act in accordance with law and give directions to him. Therefore, the apprehension of the Federation at this stage appears to be absolutely misconceived." 15. In the context of what has been indicated above, this court is now required to examine the issues involved herein. Though the petitioner in the first writ petition has at the first instance stated in the affidavit that he has not challenged the summons issued under section 37 of FEMA Act, he differently couched the prayer to declare the search operations pursuant to the summons issued and the statements obtained from him, as null and void. On the other hand, the petitioners in the second and third writ petitions have sought to quash the summons issued by the respondent department. Such prayers cannot be countenanced by this Court. 16. In Standard Chartered Bank and others v. Directorate of Enforcement and others [(2006....
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....itutional guarantee of protection against self-incrimination under Article 20(3) of the Constitution. Therefore, the concept of applying the theory of self-incrimination even at the stage of investigation in case of violation of FEMA Act cannot be raised to the level of an investigation of a criminal offence protected by Articles 20(3) and 21 of the Constitution. 18. In T.T.V.Dinakaran -vs- Enforcement Officer, Enforcement Directorate [1995 (80) ELT 745 (Mad)], the attempt to challenge the summons served under section 40 was repelled by this Court. In paragraph 11, it was stated as follows:- 11. .'.... ... Moreover, if the summons is taken into consideration it is stated therein that the petitioner's attendance is necessary to give evidence and/or to produce documents in an investigation being made by the respondent under the FERA Act. So far as the documents mentioned are concerned, it is mentioned the petitioner's passport, petitioner's account books relating to his accounts in India and abroad and his property details. If we take into consideration the required documents mentioned in the schedule, the enquiry relates only to the petitioner in respect ....
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....ned by the petitioners on the grounds raised herein. At the same time, it cannot be lost sight that a person who is summoned to appear before the Enforcement Directorate, is not an accused of the criminal case and hence, he/she should be treated in a dignified and humanitarian manner; and the authorities should act strictly as per the provisions of the relevant statute. 20. As mentioned earlier, based on the credible information received, the respondent authorities initiated the proceedings under the provisions of the FEMA Act against the petitioners for the alleged foreign transactions done by them involving several crores of rupees. Pursuant to the same, summons were issued under section 37 of the FEMA Act to the petitioners, calling upon them to appear for preliminary enquiry and for submission of documents mentioned in the schedule thereunder. Consequently, search was conducted in their premises. During the course of search, the officers of the third respondent obtained statements from the petitioners and seized materials from the premises. According to the petitioners, they were ill-treated and humiliated an subjected to harassment; and the statements obtained from them dur....