Kiran Shailen Jhaveri vs State Of Maharashtra And Ors.
2002 Latest Caselaw 406 Bom

JUDGMENT

A.B. Palkar, J.

1. Petitioner has challenged the order dated 9-10-2000 passed by the Chief Metropolitan Magistrate, Esplanade, Mumbai in Criminal Case No. 349/W/1997 Ex. L rejecting her application for discharge.

2. Petitioner claims for discharge by quashing and setting aside the aforesaid prosecution and especially order of taking cognizance on following facts and material.

3. Petitioner got married to one Mr. Shailen Jhaveri who wanted to start business with his friend by name Mr. Parag Trivedi. The marriage took place in December, 1985 and thereafter petitioner's husband entered into partnership business in the firm name M/s Kini Corporation. Petitioner was also one of the partner and it is not disputed before me that she was a sleeping partner and as such was not taking any active part in the business of the firm. The firm started business of exporting diamonds to different parties. One Mr. Jayantilal Jhaveri who was Manager of the firm siphoned of certain monies belonging to the firm. On 26-4-1991 Shailen Jhaveri committed suicide.

4. On 12-10-1987 Hirachand Jhaveri was inducted into the firm M/s Kini Corporation as a partner whereas on 1-11-1987 the other partner retired. On 9-11-1995 Mr. Hirachand Jhaveri expired and the petitioner informed by a letter through her advocate to the Registrar of firms that firm stood dissolved due to the death of Hirachand Jhaveri. There is also a letter dated 15-6-1996 addressed by the Union Bank of India to Kini Corporation stating that the petitioner had never handled any of the bank accounts of business of firm. On 19-12-1989 petitioner was given show cause notice as to why she should not be held responsible for the non realisation of the export proceeds of the said firm.

5. On 30-7-1998 the Special Enforcement Director passed an order holding that petitioner Kiran Jhaveri and Shri Parag Trivedi can obviously be not held responsible for the non-realisation of the export dues as they do not seem to fall in the criteria of persons responsible under Section 68(i) of the Foreign Exchange Regulation Act and are therefore not to be held liable for contravention of Section 18(2) and 18(3) of the said Act.

6. Complaint was filed to the Magistrate against the petitioner for offences punishable under Section 18(2) and 18(3) of the FERA and the learned Magistrate issued process. Discharge application of the petitioner was rejected.

7. In this Court arguments were heard. Shri A.Y. Sakhare, Senior counsel appearing for the petitioner drew my attention to the order of Special Director, Enforcement Directorate (Foreign Exchange Regulation Act, 1973) dated 30-7-1998 wherein entire history of the business of the firm has been taken into and it is also observed that during his life time Shri Shailen Jhaveri had over all control of the business of firm in Bombay and in Hongkong. He only utilized the names of his wife Kiran Jhaveri and his best friend Mr. Parag Trivedi. They are not responsible for non payment of dues as they were not managing the affairs of the firm and therefore cannot be held liable for contravention of Section 18(2) read with Section 18(3) of the Act.

8. Complaint before the Magistrate is also for offence under Section 18(2) and 18(3) read with 56 of Foreign Exchange Regulation Act, 1973. The learned counsel for the petitioner contended that when department has in the departmental proceeding come to the conclusion that the petitioner has not taken any active part in business of the partnership firm and she was a sleeping, partner and was not having necessary knowledge of the business and accounts of the company, the charges against her is liable to be quashed. It is inconceivable how the same authority can lodge complaint to the Magistrate for the offences under Section 18(2) and 18(3) of the FERA when it is already concluded by the department that she can not be held liable for the contravention of the said provisions. In this connection learned counsel placed reliance on the Judgment of this Court reported in 1998(6) L.I 394 in the matter of Ramniklal Premchand Mehta v. Union of India and Ors. as under:

9. The learned advocate for the petitioner also placed reliance on the Judgment reported in 1999(1) Mh.LJ. 65 = 1999 Cri.LJ. 2970 of this Court in the matter of ANZ Grindlays Bank, Bombay and Ors, v. Directorate of Enforcement.

"Head Note (A)

Foreign Exchange Regulation Act (46 of 1973), Section 68 -- Offences by Companies -- Person in charge of and responsible at relevant time for conduct of business -- Are alone deemed to be guilty for Contravention -- Entire procedure and scheme under Section 68 is just reasonable and fair and do not violate 'due process' doctrine.

9-A. In view of this legal position petitioner who was taken as a partner in the business by her husband and who was never in charge of the management or the affairs of the firm and was not taking active part in business cannot be said to be responsible for the transaction and the learned Magistrate should have discharged the petitioner, when these facts were brought to his notice. The Law laid down in this judgment was not properly appreciated by the learned Magistrate. Once the department comes to conclusion that petitioner was not actively involved in the business of the firm and she was sleeping partner and she not responsible for business of the firm, the charges against her are liable to be dropped. The department cannot maintain a complaint in complete contradiction of its own stand in the proceedings before the Directorate for the same contravention.

10. In view of this petition succeeds. Petition is allowed. Order of the learned Magistrate rejecting the discharge application is set aside. Petitioner is discharged from Criminal Case No. 349AV/1997 pending in the Court of Chief Metropolitan Magistrate, Esplanade, Bombay. Rule is made absolute.