The Assistant Director Directorate of Enforcement v. The Assistant Director Directorate of Enforcement

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 07.02.2012CORAM:THE HON'BLE MR.JUSTICE C.T. SELVAMCrl.R.C.No.1094 of 2010and M.P.No.1 of 2010A.N.Dyaneswaran ...Petitioner/Accused Vs.The Assistant DirectorDirectorate of Enforcement3rd floor, 3rd block, Shastri Bhavan, Haddows roadChennai-600 006 .. Respondent/ComplainantPrayer in 1094/2010: Criminal Revision filed against the order dated24.08.2010 made in M.P.No.11/1998 in E.O.C.C.No.252 of 1997 on the file of the Additional Chief Metropolitan Magistrate (E.O-1), Egmore, Chennai-8 seeking discharge the petitioner of alleged offences under section 8(1) of the Foreign Exchange Regulation Act, 1973 read with Section 56(1) (i) of said Act. For Petitioners: Mr.B.Kumar, Senior Counsel for Mr.B.Satish Sundar For Respondent: Mr.M.Dhandapani, Special Public Prosecutor for Enforcement Cases ORDER This revision arises against the order of of the learnedAdditional Chief Metropolitan Magistrate Egmore, Chennai passed in Crl.M.P.No. 11 of 1998 in C.C. No. 252 of 1997 on 24.08.2010. Thepetitioner, accused in the case of contravention of the provisions of Section 8(1) of the Foreign Exchange Regulation Act, 1973 (FERA)punishable under Section 56(1)(i) of such Act sought discharge in Crl.M.P.No.11 of 1998 which came to be dismissed.

The prosecution case is that on 20.01.1996, the AssistantDirector of Income tax (Investigation) informed of a search by the income tax authorities at the residence of the petitioner/accused and forwarded seized materials including US dollar 5061 Singapore dollars https://hcservices.ecourts.gov.in/hcservices/ 527 and Malaysian ringots 210 which were seized from the premises aswell as certain documents and foreign-currency of U.S. dollars 5014seized from one Sampath, who came to the said premises during the course of search. The petitioner and one Seethalakshmi Nagaraj were examined under Section 40 FERA and it was their common stand that the money seized belonged to Seethalakshmi Nagaraj and with the permission of the mother of the petitioner, the same had been left with his wife for safekeeping. Despite an opportunity notice, the petitioner had not been able to show that he had obtained any permission from the Reserve Bank of India for otherwise acquiring foreign exchange. Therefore the charge of commission of offence u/s 8(1) punishable under Section 56(1)(i) of FERA.

Before the Court below the petitioner contended that the seizure of the currencies from the premises could not be attributed to the petitioner as the same could have been kept for safe custody even with other family members residing therein and once the currencies were not taken from the possession of the petitioner the onus would lie on the prosecution to prove that foreign currencies were acquired by him without the permission of RBI. The petitioner had further contended that the currencies seized were claimed by Seethalakshmi Nagaraj as her own and as having been handed over to the wife of the petitioner for safe custody. Such contention had not been challenged or denied by the prosecution. It was further contended that mere possession of foreign exchange without there being any proprietary interest over the same would not attract the rigour of Section 8(1) FERA as such possession could not be termed as'otherwise acquired'. The petitioner placed heavy reliance of the fact that the Income Tax Appellate Tribunal had held that these monies could not be included in the assessable income of the petitioner and such finding had been confirmed by this Honourablecourt. The prosecution had contended that the contention of the accused that Seethalakshmi Nagaraj chose to leave the money with the wife of the petitioner when she had a house of her own at Chennai and when she had other immediate relatives residing therein was unbelievable. The proceedings of the Income Tax Appellate Tribunaland further orders of this court were in relation to assessment for purposes of income tax and did not deal with any violation of allied laws like FERA. The prosecution had established a prima facie case and therefore the petitioner would have to stand trial. The court below found that as the prosecution had closed its preliminary evidence and the case was at the stage of framing of charges, Section245 Cr.P.C. would not come into play as the evidence under Section244 Cr.P.C. had been completed. It informed that where the search and seizure were not disputed, the question of whether foreign currency seized belonged to the petitioner or not would have to be decided only at the trial. Informing that the probative value of material could not be gone into the stage of framing charges, the Court below dismissed the petition. https://hcservices.ecourts.gov.in/hcservices/

Sri.B.Kumar, learned senior counsel for the petitioner submitted that the Court below fell into error in dismissing the petition for discharge. The finding that a petition for discharge would not lie after initial prosecution evidence had been let in under Section 244 Cr.P.C. totally was erroneous. The charge against the petitioner was of having acquired foreign exchange without the permission of the Reserve Bank. As held by the Apex Court in Union of India Vs. Abdul Mohamed (2000 SCC(Crl.) 1223), the expression'acquire' must indicate something more than mere possession. In the instant case, there is nothing to indicate that the petitioner was so much as in possession of the foreign exchange. In proceedings under the Income Tax Act, the assessing officer had included the value of the foreign currencies as the income of the petitioner. This was challenged by the petitioner successfully before the Income TaxAppellate Tribunal. The appeal against the Appellate Tribunal'sfinding were heard in Tax case Appeal No. 150 of 2004. A DivisionBench of this Court had under orders dated 3.9.2007, in the very same facts and circumstances, where the revenue was not able to produce any material evidence to prove that the currencies seized exclusively belonged to the petitioner, found the explanation given by the petitioner probable and plausible and upheld the finding of the Appellate Tribunal deleting the value of the seized currencies from the income of the petitioner.

Learned Senior Counsel would place reliance on the decision of the Apex Court in Virupakshayya Shankarayya Vs.Neelakanta ShivacharyaPattadadevaru reported in 1995 Supp (2) SCC 531 to submit that the decision of the Division Bench of this court on the very same facts had great precedentiary value and a contrary view could not be taken on the selfsame issue. Therefore the prosecution of the petitioner was an useless exercise. Learned senior counsel drew support for his contention also from the decision of the Apex Court in Sahu Madho Dasand others Vs. Mukand Ram and another (AIR 1955 S.C. 481).

Learned special public prosecutor Mr.Dhandapani, submitted that the seizure of foreign currencies giving rise to this case were effected in the course of a search conducted in the petitioners premises by the income tax authorities. Therefore the finding of the Court below that a prima facie case was made out was proper and the petitioner would have to face trial. The case was of the year 1997and the petitioner was resorting to frivilous petitions and protracting trial.

Considered the rival submissions.

In Union of India Vs. Abdul Mohamed (2000 SCC (Cri) 1223) the apex court held that the expression 'acquire' must have a definite connotation and it must indicate something more than mere possession. It was considering the import of Section 41 of the Foreign Exchange https://hcservices.ecourts.gov.in/hcservices/ Regulation Act 1947 which was para materia the provisions of Section8(1) of the Foreign Exchange Regulation Act 1973 except in that instead of the word 'buy' the word 'purchase' was used in the subsequent Act. It has been held as follows:4. The precondition to attract Section 4(1) would be "buy or otherwise acquiring or borrowing from or sell or otherwise transfer or lend to or exchange with any person not being an authorised dealer any foreign exchange".From the fact that some foreign exchange was recovered from the cr belonging to the respondent, the only provision which may possibly get attracted is whether the respondent can be said to have "otherwise acquired",inasmuch as all other expressions in sub-Section (1) foSection 4 are totally absent. The expression "acquire"must have a definite connotation and it must indicate something more than mere possession. There is not an iota of material or indicate even that the respondent knew what the packed contained when it was delivered to him or when the packet was recovered from the car being intercepted. He has taken a plea that it was handed overto him at Bombay to be carried to Kasaragod and somebody would come to take it from him at Kasaragod. Such a plea, on the fact of it, cannot be rejected ipso facto.5. In the absence of any positive material to indicate as to how he can be said to have acquired the foreign exchange in quetion and in view of the aforesaid plea of the respondent, even applying the provisions of Section 19-J of the Act would not help the Department in establishing that in the facts and circumstances of the case, the respondent must be held to have otherwise acquired the foreign exchange in question in violation of the provisions of Section 4(1) of the Act. In the aforesaid premises, we are not inclined to interfere with the impugned orders passed by the Board and affirmed by the High Court. The appeal is, accordingly, dismissed. The amount of penalty, if deposited, may be refunded to the respondent.

There is some similarity on facts between the above case and the case on hand. There some foreign exchange was found in a packet in a car of the accused. It was his contention that he had no knowledge of the contents of the packet. Here the contention of the petitioner is that he had nothing to do with the foreign currencies seized in his residence. What is more important is that regards this very same transaction a Division Bench of this court has found that the finding of the income tax appellate Tribunal of not including the value of the seized currencies in the income of the petitioner was justified. In doing so, this court had taken into consideration the fact that Seethalakshmi Nagaraj had offered an explanation on how the money, which she claimed was hers, was brought into India that the https://hcservices.ecourts.gov.in/hcservices/ tribunals had correctly arrived at the conclusion that the explanation offered was probable and possible and that the revenue had not produced any material or evidence to prove that the currencies exclusively belonged to the petitioner. Even before us, itis not the contention of the prosecution that any freshmaterial/evidence was available to prove that the currencies exclusively belonged to the petitioner.

It is useful to reproduce paragraphs 8 to 10 of the decision in Virupakshayya Shankarayya Vs. Neelakanta ShivacharyaPatadadevaru (1995 Supp(20 SCC 531),:8. The above apart, what is more material is that the Privy Council of Jamkhandi State having held inan earlier proceeding that Shivalingayya was duly nominated and installed as Paddayya inasmuch as he had been so nominated by Shankarayya before his marriage, which is the only ground on which Shivalingayya'snomination has been held to be vitiated in the present proceedings by the High Court, we are of the firm view that the contrary conclusion arrived at in the present proceedings in favour of plaintiff does not deserve to be confirmed. It may be that principle of res judicata has no application, despite what has been stated in ExplanationVI of Section 11 CpC, inasmuch as in the earlier proceeding the present plaintiff was not a party and Andanayya (the plaintiff therein) had not claimed possession of the property as Padadayya but as Charanticontending that as the Office of Padadayya was lying vacant because of invalidity in the nomination and the installation of Shivalingayya, he had stepped into the shoes of Padadayya.