M/s.Trimex Minerals Private Ltd v. The Union of India, rep.by its Secretary, Ministry of Commerce

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 11.3.2009C O R A M :THE HONOURABLE MR. JUSTICE K. CHANDRUW.P.Nos.4398 of 1998 and13814 of 1999M/s.Trimex Minerals Private Ltd.No.42, Moore Street, Chennai-1,rep.by Director. .. Petitioner in W.P. No.4398 of 1998S.RamadossEx-Managing Director,M/s.Trimex Industries Limited,Chennai-1... Petitioner in W.P. No.13814 of 1999-vs-1.The Union of India, rep.by itsSecretary, Ministry of Commerce,Udyog Bhavan, New Delhi.2.The Additional Director Generalof Foreign Trade, Udhyog Bhavan,New Delhi. .. Respondents 1 and 2 in both the WPs.3.The Under Secretary to Governmentof India, Ministry of Commerce,(Appellate Committee Cell),Udhyog Bhavan, New Delhi-11.4.State Bank of India,Overseas Branch,No.39, Rajaji Salai,Chennai-1.... Respondents 3 & 4 in WP.No.13814 of 1999PRAYER in WP.4398 of 1998 : Petition filed under Article 226 of theConstitution of India praying for the issuance of a writ of https://hcservices.ecourts.gov.in/hcservices/ certiorari calling for the records of the first respondent in orderbearing No.12013/17/96-ADJ/AC, dated 27.1.1998 as confirming theproceedings of the second respondent in order bearing No.3/2/94-95/ECA.II/1304, dated 19.1.1996 and quash the same.PRAYER in WP.13814 of 1999 : Petition filed under Article 226 of theConstitution of India praying for the issuance of a writ ofcertiorari calling for the records of the proceedings of theAdditional Director General of Foreign Trade, Udyog Bhavan, NewDelhi bearing No.3/34/93-94/ECA-II/508, dated 20.3.1998 and that ofthe Appellate Committee Cell dated 29.12.1998 in F.No.12013/25/98-ADJ/AC and quash the same. For petitioner: Mr.R.Thiagarajan, SC for Mr.M.MuthappanFor respondents: Mr.M.Ravindran, Addl.Solicitor General of India asstd.by Mr.K.Ravindranath*****O R D E R In W.P.No.4398 of 1998, the petitioner is a Private LimitedCompany. In that writ petition, the challenge is to the order dated27.1.1998 passed by the first respondent confirming the order of thesecond respondent dated 19.1.1996. The writ petition was admitted on27.3.1998. An interim-stay for four weeks was granted on thecondition that the petitioner furnishes bank guarantee to the extentof Rs.2 lakhs in favour of the second respondent within a period oftwo weeks. Thereafter on the petitioner furnishing a bank guarantee,the interim-stay was made absolute on 28.8.1998.2. In W.P.No.13814 of 1999, the petitioner challenges the orderdated 20.3.1998 passed by the second respondent as well as theAppellate Committee's order of the third respondent dated 29.12.1998.In this writ petition, notice of motion was ordered returnable byfour weeks on 13.8.1999. On the application for interim stay, noorders were passed by this Court. It was merely directed to be postedalong with main writ petition. Since both sides have agreed thatthese matters to be dealt with together, they were posted togetherand a common order is being passed.3. It is stated that the petitioner in W.P.No.4398 of 1998 was aregistered Merchant Exporter of slates, granites with chemical andallied products. By the Export and Import Policy (for short 'EXIMPolicy') for the year 1992-1997, exporters were issued Exim Scripsagainst the export of any product during June 1991 and for subsequent https://hcservices.ecourts.gov.in/hcservices/ period. The petitioner Company availed the service of one MuraliKrishna for expediting the issue of Exim Scrips. It was stated bythem that they never authorised the said Murali Krishna to deal withthe office of Joint Director General of Foreign Trade either atChennai or at Puducherry or to apply for obtaining any licence foravailing Exim Scrips. According to the petitioner, the said personwas informally handling the cases of the petitioner for expeditiousissue of Exim Scrips. It was stated by them that the said MuraliKrishna had fabricated certain documents. After forging the signatureof the Director of the Company, he had obtained Exim Scrips from theDeputy Director General of Foreign Trade at Puducherry. 4. Three Exim Scrips were obtained by the said Murali Krishna.It was also stated that those Scrips were neither received by thepetitioner Company nor they issued any transfer letter attested bythe concerned bank to anyone. These Scrips were issued in the name ofthe petitioner Company purchased by the brokers directly from thesaid Murali Krishna. It appears that the Licensing Authority hadissued a show-cause notice to the petitioner dated 18.8.1994 askingthem to show cause as to why action should not be taken to impose afiscal penalty on the Company or its Directors. The adjudicatingauthority found that the fraud was committed by a person who wasacting as a liaison agent and the petitioner Company cannotwhitewash its involvement in the fraud. Accordingly, by an orderdated 19.1.1996, a penalty of Rs.2 crores was imposed on the Company.5. Aggrieved by the said order of the Additional DirectorGeneral of Foreign Trade, the petitioner filed an appeal to theappellate committee. The appellate committee gave a personal hearingon 21.1.1998. Thereafter by an order dated 27.1.1998, the impositionof penalty was confirmed and the appeal filed by the petitioner wasdismissed. After the dismissal of the appeal, the Director Generalof Foreign Trade, New Delhi by a communication dated 18.3.1998 hadcalled upon the petitioner to pay the penalty failing which they werethreatened with Revenue Recovery Proceedings for releasing thepenalty amounts. It was against these two orders, the first writpetition was filed. 6. It was contended by the petitioner that the Exim Scrips weredated 03.7.1992 and they were issued after the Foreign Trade(Development & Regulation) Act, 1992 (for short 'the Act') came intoforce i.e. with effect from 19.6.1992. Sections 11(2) and 13 of theAct reads as follows:-''S.11(2)Where any person makes or abets or attempts to makeany export or import in contravention of any provisionof this Act or any rules or orders made thereunder orthe export and import policy, he shall be liable to apenalty not exceeding one thousand rupees or five times https://hcservices.ecourts.gov.in/hcservices/ the value of the goods in respect of which anycontravention is made or attempted to be made, whicheveris more."''S.13.Any penalty may be imposed or any confiscation maybe adjudged under this Act by the Director General orsubject to such limits as may be specified, by suchother officer as the Central Government may, bynotification in the Official Gazette, authorise in thisbehalf".7. In the light of the above provisions, it was contended thatas per the amended Act, the penalty for contravening the provisionsof the Act was not exceeding Rs.1000/- or five times the value of thegoods over which any contravention has been made. The limit ofpenalty has to be specified by the Central Government by anotification in the gazette in terms of Section 13 of the Act. It wasalso contended that the petitioner had not committed any offence andit was the action of the intermediary who was not authorised by them.8. On notice from this court, a counter affidavit dated ''nil"(June 2008) was filed. In paragraph 4, it was averred as follows:-''Para 4..... Further the petitioner has himself admittedthat they had availed the services of one Shri.MuraliKrishna for expediting the issue of Exim Scrip.Therefore, it cannot be assumed that the petitionerswere unaware of issue of Exim Scrip on the basis ofbogus documents submitted by his said liaison man to theOffice of Asst.Chief Controller of Imports & Exports,Pondicherry. In this connection adjudicating authorityin his order has mentioned that one of the firms to whomthe Exim Scrip was transferred viz. M/s.KalpanaCorporation, Madras has confirmed that they had paidconsideration for the Exim Scrip No.P/K/2439869 dated03.7.1992 to the petitioner and thereby showing beyondreasonable doubt the involvement of the petitioner'sfirm. Their contention that the said Shri.Muralikrishnanwas not authorised by them for collecting the documentsfrom the Government Officer or other statutory bodiesare on the face of it incorrect and misleading as themoment the said liaison man handed over the licences aswell as cheques to them, they could have enquired fromhim as well as concerned licensing officer as to how theman was allowed to receive the documents from thelicensing office. But instead of taking above action,they willingly accepted the licenses and sold those onpremium to other parties. They could have also informedall the other concerned Government Department etc. notto allow the above liaison man to represent on their https://hcservices.ecourts.gov.in/hcservices/ behalf for any such work. However, only after entirematter came to the notice of the Department, thepetitioner took the plea of ignorance that the abovelicenses were obtained by the said liaison man withouttheir knowledge. The petitioner said that their officedoes not exist at Pondicherry but this does seem to berelevant in the overall context as the liaison man wasduly authorised and instructed to act on their behalf toliaise with the said office for expediting the issue ofsaid licenses."9. But, with reference to which Act (either old or new Act) willapply to the case, the following averments have been made inparagraph 5, which is as follows:-''Para 5..... In accordance with the Section 11(4) of theForeign Trade (Development and Regulation) Act, 1992(Earlier Section 4(1)(3) of the Imports and Exports(Control) Act, 1947), the penalty imposed under thisAct, may, if it is not paid, be recovered as an arrearof land revenue and the Importer and Exporter Codenumber of the person concerned, may have failure to paythe penalty by him, be suspended by the AdjudicatingAuthority till the penalty is paid. ..."10. W.P.No.13814 of 1999 is filed by the former ManagingDirector of M/s.Trimex Industries Limited with the very similarallegation. In this case, it was stated that the very same MuraliKrishna who was the intermediary fabricated certain documents andafter forging the Director's signature obtained seven replenishmentlicences fraudulently for import of raw materials by showing a falseaddress at Puducherry. On coming to know about the same, a showcausenotice dated 22.9.1994 was issued under section 4(1) of the Importand Export Control Act, 1947 and after explanation, they weredebarred from carrying out any import activity for the licensingperiod 1992-1993 to 1996-1997. It was also stated that the firmrepresented by him after obtaining Exim Scrips, refunded the premiumby sale of Exim Scrips to the State Bank of India, Overseas Branch,Chennai. By an order dated 19.1.1996, a penalty of Rs.1 crore wasimposed on the Managing Director of the firm. Their subsequent appealto the appellate committee dated 19.1.1996 was allowed and the matterwas sent back for fresh consideration by the adjudicating authority.After the remand, the adjudicating authority found that the monetarybenefit obtained by the firm was paid back, the Government took alenient view and imposed a fiscal penalty of Rs.10 lakhs on the firmand a further sum of Rs.25 lakhs on the petitioner. Once again anappeal was filed before the appellate committee. The appellatecommittee reduced the penalty from Rs.25 lakhs to Rs.10 lakhs. It isthis order which is under challenge in the second writ petition. https://hcservices.ecourts.gov.in/hcservices/

11. In this case also, the very same legal contentions as wereraised in the other writ petition, have been raised. On behalf of therespondents a counter affidavit dated 05.9.2008 was filed. Inparagraphs 3 and 6, it was averred as follows:-''Para 3.I humbly submit that M/s.Trimex Agencies Pvt.Ltd.Madras were issued a SCN dated 22.9.1994 under Section4-I of the Imports and Exports (Control) Act,1947 asamended read with Sec.20(2) of the FT (D&R) Act, 1992for obtaining 7 REP Licence fraudulent as per thedetails given under for import of Raw Materials byshowing their address falsely and by producing fake,forged documents and declarations:-1.P/K/3529863 dated03.7.9268,52,000/-2.P/K/3529864 " 03.7.9269,06,000/-3.P/K/3529855 " 25.6.9250,23,000/-4.P/K/3529861 " 03.7.9252,32,000/-5.P/K/3529857 " 25.6.9240,07,000/-6.P/K/3529856 " 25.6.9234,88,000/-7.P/K/3529854 " 25.6.9257,79,000/-Para 6. I humbly submit that the petitioner was directlyinvolved in the fraud in connivance with Mr.MuraliKrishna as he confirmed to concerned Bank about transferof Exim Scrips to other parties and also executedIndemnity Bond in respect of Exim Scrip, obtainedfraudulently. Addl. DGFT had imposed a penalty ofRs.1.00 Crore each on Shri.S.Ramadas (stated to beManaging Director of the M/s.Trimex Agencies) and onM/s.Trimex Agencies Pvt.Ltd. Chennai for violation ofSection 4-I of the Imports & Exports (Control) Act,1947vide Order in Original No.3/34/93-94/ECA-II/1303, dated19.1.1996".12. Mr.R.Thiagarajan, learned Senior Counsel appearing for thepetitioner submitted that in the Foreign Trade (Development andRegulation) Act, 1992 (Central Act 22 of 1992) sections 11 to 14came into force w.e.f. 07.8.1992 whereas other provisions werebrought into force w.e.f. 19.6.1992. It must be stated that beforethe Central Act 22 of 1992 was brought into force, the earlier lawwas occupying the field of Imports and Exports (Control) Act 1947.That was repealed by the Foreign Trade (Development and Regulation)Ordinance 1992 (Ordinance No.11 of 1992) (hereinafter will bereferred to as 'the new Act') which was brought into effect from19.6.1992. Section 4 of the Act reads as follows:- https://hcservices.ecourts.gov.in/hcservices/ ''S.4. Continuance of existing OrdersAll orders made under the Import and Export (Control) Act,1992 (3 of 1947) and in force immediately before thecommencement of this Act shall, so far as they are notinconsistent with the provisions of this Act, continue tobe on force and shall be deemed to have been made underthis Act."13. The learned Senior Counsel appearing for the petitionerstated by placing reliance upon Section 11(2) that the new Act hasdrastically reduced the penalty. Under Section 19 of the Act, thepower to frame rules have been prescribed and what is saved bySection 20 was any right, privilege, obligation or liabilityacquired, accrued or incurred under the old Act which was repealedand also any penalty, confiscation or punishment incurred in respectof any contravention of the Act so repealed. Under the rules farmedunder the new Act, Rule 10 deals with cancellation of licence by theDirector General or licensing authority and it is listed out thatsuch licence can be cancelled if they were obtained by fraud,suppression of facts or misrepresentation.14. The learned Senior Counsel after referring to para 5 of thecounter affidavit stated that the respondents are confusing the issueby relying upon both the provisions of the old Act as well as the newAct. Since 1947 Act has been repealed, any action can be takenagainst the petitioners only in terms of the new Act, whereas, theoriginal show-cause notice dated 19.1.1996 was issued both under theold Act as well as under the new Act. Since the show-cause noticeitself came to be issued only after coming into force of the new Act,the reference made to the old Act is not available to therespondents. The learned counsel in this context referred to Section20, which is the repealing and saving provision and more particularlyreferred to section 20(2)(c) and contended that in the present caseit was not the case of penalty, confiscation or punishment alreadyimposed on the petitioner. It is only in such of those cases, where apenalty, confiscation or punishment proceedings are initiated, it canbe continued as if the 1947 Act has not been repealed. On the basisof this factual and legal matrix, the learned counsel submitted thatthe show-cause notice issued as well as the punishment imposed interms of the old Act were not valid. If at all the petitioner isguilty of any contravention of the illegal obtaining of ReplenishmentLicence or fraudulent sale of Exim Scrips, they will have to beproceeded only under the new Act wherein special procedure has beengranted and penalties have also been prescribed.15. Reliance was placed upon the judgment of the Supreme Courtin Bharat Barrel and Drum Manufacturing Company -vs- The Collector ofCustoms reported in (1971) 3 SCC 170. This is for the proposition https://hcservices.ecourts.gov.in/hcservices/ that if the departmental authorities impose fine on a licenseewithout proper investigation, whether goods imported did not complywith terms of licence, the Central Government in the exercise ofrevisional power should consider the case on merits and give anadequate opportunity to the licensee to prove his case.16. The learned Senior Counsel also placed reliance upon thejudgment of this Court in Ranjit Export Private Limited -vs-Collector of Customs reported in 1985 (21) ELT 353 (Mad.). Since thepetitioner was accused of making an attempt to import goods, theprecise meaning of the term ''attempt" came to be dealt with in thesaid judgment of this Court as found in paragraph 24 and the samemay be usefully extracted below:-''Para 24. In the language of the Supreme Court, attempt defiesa precise and exact definition. Section 511 of theIndian Penal Code punishes 'attempt', but it does notdefine 'attempt'. All said, the question is really oneof fact depending upon the peculiar features andcircumstances of each case and the provisions of law,the attempted breach of which is complained of. In thecontext of the present case, we cannot lost sight ofthe definition of 'export' found in section 2(18) ofthe Act. The essential ingredient of export is thetaking out of India. The acts complained of must fallin the course of movement of the goods with anintention to take them out of India. All other actsdone anterior to this step, namely, movement wouldonly partake the character of preparations. If thepetitioner has done any act towards the exportation,namely, taking of the goods out of India and if theact or acts could be fitted in the course of suchmovement of the goods, or, in other words, the actcould fall in the course of progress towards theactual physical taking of the goods out of India, themischief of Section 113(d) would be attracted. Thereshould be a direct physical movement towards thetaking of the goods out of India after all thepreparations are made and which preparations may alsofall within the satisfaction of the provisions andcompletion of the formalities under the Act. Theremust be an act or acts done towards the actualphysical movement of the goods with an intention totake them out of India. That alone, in my view, wouldconstitute an attempt to export the goods, that toodepending on the facts and circumstances of the case.As stated above, I am not expressing any opinion withreference to the violation of any of the provisions ofthe Act which would involve penal consequences, since https://hcservices.ecourts.gov.in/hcservices/ such a stand is not expressed before me by therespondent. The essential feature to be taken note offor assessing this question is as to whether the actof the person did reach a point which constituted anactus reus. This question is one of law depending uponthe facts and circumstances of the case to be decidedby the Court. If there is no taking of the goods outof India, there is no exportation. Hence, ''attempt''must also have relevance to the taking of the goodsout of India.We are not concerned with the actualcompletion of the exportation. We are concerned onlywith the attempt. But, if no feature which wouldconstitute actus reus or physical element towardstaking of the goods out of India is made out on thefacts and circumstances of the case, it will be farfetched to invoke the first limb of section 113(d) ofthe Act. That is the point on facts in the presentcase. The definition of ''Export" as found in Section2(18) and the concept of 'attempt" as I could evolvewith reference to the export, as defined in the Act,being what they are, I am of the view that therespondent is not in order to detain the goods on theground that section 113(d) of the Act is attracted andthe goods are liable to confiscation on that ground".17. The learned Senior Counsel also further placed reliance uponthe decision of the Supreme Court in S.B.International Ltd. -vs-Assistant Director General of Foreign Trade reported in (1996) 2 SCC439. This is for the purpose of proving that the norms obtaining onthe date of licence alone would apply. For this purpose, thefollowing passage found in paragraph 10 may be usefully extractedbelow:- ''Para 10. We are, therefore, of the opinion that thecontention that a vested right accrues to an applicantfor issuance of advance licence on the basis of thenorm obtaining on the date of application isunacceptable. The scheme and the context militateagainst the contention. The fact that the policy isstatutory in nature (delegated legislation) has norelevance on the question at issue. It would be wrongto equate the filing of an application for advancelicence with the filing of a suit where it is held thatappeal being a substantive right, the right of appealinhering in the party on the date of filing of the suitcannot be taken away by a subsequent change in law." Therefore, the learned Senior Counsel contended that the impugnedorders must be set aside. https://hcservices.ecourts.gov.in/hcservices/

18. Per contra, Mr.M.Ravindran, learned Additional SolicitorGeneral submitted that whether under the old Act or under the newAct, the petitioners have committed fraudulent transactions andobtained undue pecuniary benefit. Their theory of some intermediaryagent had independently committed such acts is not born out byrecords. In any event, both the adjudicating authority and theappellate committee have dealt with the issue and such finding offact cannot be interfered with by this Court. He also submitted thatthe fraud committed by the petitioner was referred to the CBI for aninvestigation during October 2003. Having committed criminal acts offorgery and fraudulent transaction, the petitioner cannot escape thepenal consequences.19. The learned Additional Solicitor General of India alsoreferred to Section 6 of the General Clauses Act, 1897 and submittedthat the old Act viz., 1947 Act being repealed by the new Act, viz.,1992 Act, it will not affect the previous operation of any enactmentso repealed and therefore the impugned adjudication proceedingsmerely referring to the old Act will not invalidate the same. In thiscontext, he placed reliance upon the judgment of the Supreme Court inJayantilal Amrathlal -vs- Union of India reported in (1972) 4 SCC174. The following passage found in paragraph 8 is relevant, whichreads as follows:- '' Para 8. The above contention is untenable. There are noprovisions in the Gold (Control) Act, 1968 which areinconsistent with Rule 126(I)(10) of the “Rules”. Thatbeing so, action taken under that rule must be deemedto be continuing in view of Section 6 of the GeneralClauses Act, 1897. It is true that Gold (Control) Act,1968 does not purport to incorporate into that Act theprovisions of Section 6 of the General Clauses Act. Butthe provisions therein are not inconsistent with theprovisions in Section 6 of the General Clauses Act.Hence the provisions of Section 6 of the GeneralClauses Act are attracted in view of the repeal of theGold (Control) Ordinance, 1968. As the Gold (Control)Act does not exhibit a different or contrary intention,proceedings initiated under the repealed law must beheld to continue. We must also remember that by Gold(Control) Ordinance, the “Rules” were deemed as an actof Parliament. Hence on the repeal of the “Rules” andthe Gold (Control) Ordinance, 1968 the consequencesmentioned in Section 6 of the General Clauses Act,follow. For ascertaining whether there is a contraryintention, one has to look to the provisions of theGold (Control) Act, 1968. In order to see whether therights and liabilities under the repealed law have been https://hcservices.ecourts.gov.in/hcservices/ put an end to by the new enactment, the proper approachis not to enquire if the new enactment has by its newprovisions kept alive the rights and liabilities underthe repealed law but whether it has taken away thoserights and liabilities. The absence of a saving clausein a new enactment preserving the rights andliabilities under the repealed law is neither materialnor decisive of the question — see State of Punjab v.Mohar Singh AIR 1955 SC 84 and T.S. Baliah v. IncomeTax Officer, Central Circle VI, Madras AIR 1969 SC 701.20. Basing reliance upon the above extracted passage, thelearned Additional Solicitor General submitted that it is not a caseof the rights and liabilities under the repealed law have been put anend to by the new enactment and that the new Act kept alive therights and liabilities under the repealed law. 21. There can be no quarrel over the proposition of law laiddown in the Jayantilal Amrathlal's case (cited supra) relied on bythe learned Additional Solicitor General of India. What is contendedbefore this Court by the learned Senior Counsel for the petitioner isthat under the new Act, the procedure in dealing with the allegedoffence committed by the petitioner is entirely different. Even ifthe petitioners were found guilty, they are liable to pay the penaltyin terms of the new Act. He also submitted that even assuming withoutadmitting that the petitioner has committed offences punishable underthe Foreign Trade Act in so far as the actions have been initiatedonly under the new enactment, the penalty also has to be in terms ofthe new enactment. For this purpose, the learned counsel referred tosection 20 providing for repeal and saving clause. A furthersubmission was also made that since no statutory proceedings wereinitiated before new Act and what is saved was only the penalty,confiscation, punishment in respect of any contravention under theold Act. It is not the case of the respondents that there were anyproceedings pending before the new Act came into force. 22. This argument of the petitioner merits acceptance. Since therespondents have imposed penalties as per the old Act, the impugnedorder of the third respondent appellate committee is hereby setaside. The matter is remitted back to the Secretary, Ministry ofCommerce, Union of India, New Delhi for fresh disposal in accordancewith the provisions of the Central Act 22 of 1992. This exerciseshall be done by the Union of India within a period of three monthsfrom the date of receipt of a copy of this order after due notice tothe petitioner.23. However, the bank guarantee created by the petitionerpursuant to the order passed by this Court dated 27.3.1998 shall be https://hcservices.ecourts.gov.in/hcservices/ kept alive pending the outcome of the orders to be passed on theappeals filed by the petitioner.24. The writ petitions are allowed to the extent indicatedabove. There will be no order as to costs.Sd/Asst.Registrar/true copy/Sub Asst.Registrarjs To1.The Secretary to Government of India, Ministry of Commerce,Udyog Bhavan, New Delhi.2.The Additional Director Generalof Foreign Trade, Udhyog Bhavan,New Delhi. 3. The Under Secretary to Governmentof India, Ministry of Commerce,(Appellate Committee Cell),Udhyog Bhavan, New Delhi-11.4. The State Bank of India,Overseas Branch,No.39, Rajaji Salai, Chennai-1.+1cc to Mr.M.Muthappan, Advocate Sr 7523GV (CO)km/13.3.W.P.Nos.4398 of 1998 and13814 of 1999