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Chief Enforcement Officer Enforcement Directorate Government of India v/s M/s. Tuticorin Marine Products & Others

    Crl.A.No.39 and 186 of 2004

    Decided On, 23 November 2009

    At, Before the Madurai Bench of Madras High Court

    By, THE HONOURABLE MR.JUSTICE C.T. SELVAM

    For the Appellants : C. Arulvadivelu, Spl.PP. For the Respondent : R1 to R3, K.Govi Ganesan for N. Ananth, Advocates.



Judgment Text

(Prayer : Prayer in Crl.A.No.39/2004: Criminal Appeal is filed under Section 378 of Cr.P.C. praying to allow the appeal for enhancement of sentence and modify the order passed in C.C.No.11 of 2002 dated 27.6.2003 of the Additional Chief Judicial Magistrate, Madurai in so far as for the charges under section 9(1)(b) of FERA, 1973 punishable u/s 56(1)(i) of FERA,1973 and the respondent/accused 1 to 4 may be dealt with according to law.


Prayer in Crl.A.No.186/2004: Criminal Appeal is filed under Section 378 of Cr.P.C. praying to allow the appeal and set aside the order passed in C.C.No.11 of 2002 dated 27.6.2003 of the Additional Chief Judicial Magistrate, Madurai in so far as charges under section 18(2) r/w.18(3)of FERA, 1973 punishable u/s 56(1)(i) of FERA,1973 and the respondent/accused may be dealt with according to law.)


These two criminal appeals have been preferred against the Judgment dated 27.06.2003 passed in C.C. No. 11 of 2002 by the learned Additional Chief Judicial Magistrate, Madurai.


2. There are four accused in the case. Two charges were framed. In one, accused 1 to 4 were charged of offences under section 9(1) (b) punishable u/s. 56(1)(i) of Foreign Exchange Regulations Act, 1973 (FERA) and in the other accused 1 and 3 were charged of offences u/s. 18(2)r/w 18(3) of FERA 1973 punishable u/s. 56(1)(i) of FERA. In respect of the charge u/s 9(1)(b) the accused were found guilty and the accused 1 to 4 were sentenced to pay a fine of Rs.5,000/- and as the accused 1 & 2 were partnership firms, the accused 3 & 4 were in default of payment of fine, sentenced to undergo 3 months Rigorous Imprisonment. The accused 3 & 4 were also sentenced to imprisonment till the rising of Court. As regards the charge under sections 18(2) r/w 18(3)the accused, stood acquitted. The Chief Enforcement Officer, Director, Government of India is the appellant in both the appeals. C.A. No.39 of 2004 is against the sentence passed in respect of offences u/s.9(1)(b) of FERA and the contention is that the sentence of imprisonment passed against the accused 3 & 4 is grossly wrong, as a sentence of less than six months could be passed only on adequate and special reasons and the reasons given in the Judgment under appeal did not satisfy such requirements. Crl.A.No.186 of 2004 is filed against the acquittal for offence under section 18 r/w.18(3) of FERA.


3. The prosecution case was as follows :


The complainant was the Chief Enforcement Officer, Enforcement Directorate, Government of India. Officials belonging to the Chennai and Madurai Wings of the Enforcement Directorate raided the residence of the fourth accused as also the premises of the first accused firm on 20.06.2001 and seized several incriminatory documents. The third accused gave a statement to the effect that he was the Power of Attorney of the first accused firm, a partner of the second accused firm and that he was in-charge of the business of the first and second defendant firm at the relevant time. The third accused further stated that exports were sent to Sri Lanka and export proceeds to the tune of US $ 77,314/- equivalent to Indian Rs.33,46,296/- had been effected between December 1999 and January 2000, that the proceeds had not been recovered, no Reserve Bank of India permission for non-realisation was obtained, that between 1995 and 1997 the first accused and the second accused firms had effected exports to the tune of Rs.1,88,31,103.76 and Rs.77,21,569.37 through the third accused, without Reserve Bank of India permission, to one Rex Fernando at Sri Lanka at a nominal value and the difference between such nominal value and the real value was received through accused No.4, a Sri Lankan then residing at K.K. Nagar, Madurai, who is none other than the son of the aforesaid Rex Fernando.


4. The prosecution examined 7 witnesses and marked 41 exhibits. The defence marked 2 Exhibits.


5. PW-1, who was the Chief Enforcement Officer of the Enforcement Directorate at the relevant time has deposed that on receipt of search warrant Exh.P-1 issued by the Joint Director, he conducted search of the first and second accused firms and seized Exh.P-3 a file containing 65 sheets under Exh.P-2. The same contained Partnership Deed, Power of Attorney given by the first accused firm in favour of the third accused and a document of the first defendant firm which had been given to A-3 by the said Rex Fernando and one Arputham. On 20.06.2001, PW-2, PW-4 and others seized from the residence of the 4th accused and in the presence of two independent witnesses, Exhibits P-5 to P-16, in pursuance of search warrant Exh.P-17. The Panchanama prepared was Exh.P-18. Exh.P-5 to Exh.P-16 reflected various transactions and were incriminatory in nature. Exh.P-19 to Exh.P-22 are the statements of the fourth accused. The details of the amount mentioned in Annexure-1 is Exh.P-23. Exh.P-24, Exh.P-25 and Exh.P-26 are the statements of the third accused. Annexures 2, 3 and 4 are Exh.P-27, Exh.P-28 and Exh.P-29 series. The statement of Aloy A. Kattar, the brother of the third accused is Exh.P-30. Exh.P-31 is the statement of one Maxwell, Exh.P-32 is the statement of one David and Exh.P-33 is the statement of one Muthukumaravel, PW-6, PW-7 and PW-5 respectively. Exh.P-34 was the notification No.F1/67/EC/73-3 dated 01.01.1974, as amended upto 27.09.1985, which required that the amount representing the full export value of the goods exported should be paid to the exporter within six months from the date of export of the goods and provided that the Reserve Bank may, for sufficient and reasonable causes, extend the said period of six months.


6. According to the prosecution all the incriminatory materials, as also the statements of the accused clearly reflected the commission of offences by the accused and as charged against them. The first accused to the third accused had exported goods worth US $ 77,314/ equivalent to the Indian value of Rs.33,46,296/-to parties in Sri Lanka and had not realized the full export value within the stipulated period nor had A-3 taken any steps to extend the period by obtaining the requisite permission from the Reserve Bank of India, and thereby, the provisions of Section 18(2) and 18(3) of FERA, 1973 stood violated by A1 and A3. A4, a person residing in India, received payments totaling Rs.2,23,05,000/-, from persons in India not being authorised dealers in foreign exchange by order or on behalf of Rex Fernando, a resident of Sri Lanka and thereby the provisions of Section 9(1)(b) of FERA Act stood violated. Accordingly, the accused were to be punished for both offences, under sections 56(1)(i) of the FERA 1973. The learned trial judge, based on the evidence and materials on record, found as herein above stated.


7. Heard Sri.C.Arulvadivelu, Special Public Prosecutor appearing for the appellant, Sri. K.Govi Ganesan learned counsel appearing for respondents 1 to 3 and Sri.N. Ananth for the fourth respondent.


8. The trial court has acquitted accused 1 and 3 of offence u/s.18(2) r/w 18(3) of FERA 1973 on the reasoning that it is only the custom authorities who can take action in respect thereof. This reasoning is arrived at by placing reliance on section 67 of FERA.


? 67. Application of the Customs Act, 1962. -- The restriction imposed by or under section 13, clause (a) of sub-section (1) of [Section 18, Section 18A] and clause (a) of sub-section (1) of section 19 shall be deemed to have been imposed under section 11 of the Customs Act, 1962, and all the provisions of that Act shall have effect accordingly."


9. The reasoning of the lower court in this regard is clearly erroneous. A bare reading of section 67 reflects that it is restricted to the sections referred to therein. While the restriction would apply in respect of violation of clause (a) of sub section (1) of section 18, the same would not so apply in respect of clause(2) or clause(3)of section 18 [which are the relevant provisions in the instant case]. Section 56 of the FERA, which provides for punishments, in keeping with Section 67 excludes only clause (a) of sub section (1) of section 18. In other words punishment shall extend to offences under section 18(2) and (3) of FERA. Being met with this inescapable position, the response of the respondent is, reliance upon the judgment in State by Public Prosecutor v. Palani reported in 1997 (2) LW (Crl.) 782 and The Assistant Collector of Customs v. J. Rajendra Prasad reported in 2007 (1) LW (Crl.) 149, wherein this Court while pointing out the illegality committed in findings of acquittal arrived at, by the lower court had desisted from passing sentence against the accused in the appeals in view of the long lapse of time. The judgment in the latter case reflects that this view has been consistently taken by this Court.


10. Coming to Crl.Appeal No.39 of 2004, which seeks enhancement of sentence, it is the contention of the learned Special Public Prosecutor appearing on behalf of the Chief Enforcement Officer, Government of India that the sentence imposed by the lower court is not commensurate with the finding of guilt, where economic offences have been charged and stand proved. It is his contention that the case against the accused are of offences under Section 9(1)(b) of FERA Act, 1973 and are punishable under section 56 (1)(i) thereof. Whileso, a sentence of less than six months could have been passed by the lower court only for adequate and special reasons and the reasons accorded by the lower court viz. that of acceptance of guilt by the accused, that they have not received the entire proceeds of the export, that they have stopped their business and that the offence did not appear grave, hardly justify the imposition of sentence of imprisonment until the rising of Court and a fine of Rs.5000/-.


11. Though this is an appeal by the complainant, the learned counsel for the respondents/accused rightly contends that, even so, he can submit arguments towards establishing the hollowness of the prosecution case and seek acquittal. It is his contention that a perusal of Exh. P-2 Panchanama, P-17 to P-20 and P-22 to P-26 as also P-32 and P-33 would show that they were all prepared during investigation under Foreign Exchange Management Act,1999 (FEMA) and that therefore while almost the entire investigation had been conducted under FEMA 1999, it was improper to lodge a complaint under FERA 1973. This argument at first blush, appears attractive. A perusal of the documents shows that the Exhibits referred to, are merely Panchanamas, warrants authorising search and statements of the accused. Though, on the face of it they bear reference to FEMA, there is no ambiguity whatsoever about what is under investigation and as regards what the accused are making statements. There is absolutely no prejudice caused to the accused. The offences complained of in this case earlier were offences under FERA and now are offences under FEMA. A mere error in nomenclature has done no mischief.


12. The further contention of the learned counsel for the respondent is with reference to Section 49 of FEMA, 1999;


'49. Repeal and Saving:


(1)The Foreign Exchange Regulation Act, 1973 (46 of 1973) is hereby repealed and the Appellate Board constituted under sub-section (1) of section 52 of the said Act (hereinafter referred to as the repealed Act) shall stand dissolved.


(2)On the dissolution of the said Appellate Board, the person appointed as Chairman of the Appellate Board and every other person appointed as Member and holding office as such immediately before such date shall vacate their respective offices and no such Chairman or other person shall be entitled to claim any compensation for the premature termination of the term of his office or of any contract of service.


(3)Notwithstanding anything contained in any other law for the time being in force, no court shall take cognizance of an offence under the repealed

Act and no adjudicating officer shall take notice of any contravention under section 51 of the repealed Act after the expiry of a period of two years from the date of the commencement of this Act.


(4)Subject to the provisions of sub-section (3) all offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed.


(5)Notwithstanding such repeal,--


(a) anything done or any action taken or purported to have been done or taken including any rule, notification, inspection, order or notice made or issued or any appointment, confirmation or declaration made or any licence, permission, authorisation or exemption granted or any document or instrument executed or any direction given under the Act hereby repealed shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act;


(b) any appeal preferred to the Appellate Board under subsection (2) of section 52 of the repealed Act but not disposed of before the commencement of this Act shall stand transferred to and shall be disposed of by the Appellate Tribunal constituted under this Act;


(c) every appeal from any decision or order of the Appellate Board under sub-section (3) or sub section (4) of section 52 of the repealed Act, shall if not filed before the commencement of this Act, be filed before the High Court within a period of sixty days of such commencement;


Provided that the High Court may entertain such appeal after the expiry of the said period of sixty days if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period.


(6)Save as otherwise provided in sub-section (3), the mention of particular matters in sub-sections (2), (4) and (5) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal.


13. The contention of the counsel is that Section 61 of FERA required that no complaint could be made unless the person accused of the offence had been afforded an opportunity to state his case. The FEMA 1999, while providing that the offences under FERA would continue to be governed by the provisions thereof had set a time frame by which prosecution thereunder had to be launched. It barred Courts from taking cognizance after the expiry of two years from the date of commencement of FEMA. The cut off date was 01.06.2002. As the prosecution had realised its position very late in the day, it had hurriedly in Exh.P-36 issued 'opportunity notice' dated 24.05.2002 to furnish explanation within a period of 3 days from the date of receipt of that notice. Thereafter on the next day viz., 25.05.2002 it affixed notice Exh.P-37 on the door of the premises of A1 to A3. In Exh.P-38, A3 sent a telegram to PW-4 on 29.05.2002 seeking time to reply as he had to verify the records and 'get legal consultation'. Similarly, Exh.P-39 is the 'opportunity notice' dated 24.05.2002 sent to A-4 giving 3 days time for reply from the date of receipt of said notice. Here also in Exh.P-40 PW4 affixed the notice on the door of premises of A4 on the very next day 25.05.2002. Thereafter hurriedly the prosecution filed the complaint on 30.05.2002 in order to escape the limitation prescribed under sub clause (3) of Section 49 of FEMA 1999. Therefore the opportunity notice which has been given under Section 61 of the FERA 1973 is just an empty formality which does not fulfil the requirements of the proviso to Section 61 of FERA 1973.


14. Thus, it is the contention of the learned counsel that where no proper opportunity had been given to the accused to prove their innocence, the prosecution case would fail.


15. As a final submission, learned counsel states that even if the Court is of the view that the conviction of the accused ought to be sustained, still it would not interfere with the finding of the lower court and in support of the submissions, the learned counsel falls back on the decision in State by Public Prosecutor v. Palani reported in 1997 (2) LW (Crl.) 782 and the case of The Assistant Collector of Customs v. J. Rajendra Prasad reported in 2007 (1) LW (Crl.) 149, already discussed herein above.


16. I have considered the rival submissions. This Court, following the decisions in State by Public Prosecutor v. Palani reported in 1997 (2) LW (Crl.) 782 and the case of The Assistant Collector of Customs v. J. Rajendra Prasad reported in 2007 (1) LW (Crl.) 149 and considering the fact that the offences committed and aris

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ing for consideration in C.A.No.186 of 2004 are of the period 1995 to 1997, while recording a finding that the acquittal of the lower court in this regard is unjustified, will not interfere and set aside the acquittal, so late in the day. 17. In considering C.A. No.39 of 2004, this Court is unable to ignore that the violation complained is of large scale export and of receipt of consideration therefor, other than in the manner provided by law. Though FERA 1973 stands repealed, the offences complained of even today attract the levy of penalty under section 13, FEMA 1999. At the same time, it is quite clear that the opportunity afforded to the accused to explain their case is rather inadequate. The exhibits seized in the case reflect matters of record. The statements of the accused are admissible in evidence and hence it seems apparent that there hardly can be any explanation coming forth from the accused. Such is a presumption that this Court cannot and will not make. However, the reasons for imposing the punishment of imprisonment till rising of Court, are also not tenable. 18. In the circumstances, this Court in arriving at a conclusion will balance the equities. Accordingly, this Court makes the following order. 1)The finding of the lower Court in respect of offences under Section 18(2) r/w 18(3), though erroneous, is not interfered with. 2)As regards offence under Section 9(1)(b) FERA 1973, i)The conviction of the lower court shall stand confirmed. ii)The sentence of imprisonment till rising of court is not interfered with. iii)The fine amount imposed on the accused shall be a sum of Rs.2 lakhs. The said fine amount shall be paid within a period of three months from the date of this order. The Criminal Appeals are ordered accordingly.
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