D.K. Modi vs K.C. Abraham, Enforcement ...
2006 Latest Caselaw 2313 Del

JUDGMENT

A.K. Sikri, J.

1. Sh. K.C. Abraham, Chief Enforcement Officer of the Enforcement Directorate (FERA), New Delhi, has filed complaint under Section 56 of the Foreign Exchange Regulation Act, 1973 which is pending in the Court of Learned Additional Chief Metropolitan Magistrate, Patiala House Courts, New Delhi. Petitioner herein is arraigned as accused No. 2. Other accused person is M/s. Modi Champion. Taking cognizance of this complaint, the company and the petitioner were summoned by the learned ACMM. In these circumstances, petitioner has approached this Court for dismissal of the said complaint.

2. The brief facts, which can be noticed on reading of the complaint filed by the complainant, are the following:

3. Investigation was initiated on the basis of the information that the petitioner/accused No. 2 had made payment of US $1,00,000/- to their collaborators M/s. Champion Spark Plug in February 1994. The said figures had however not been mentioned in the books of the Indian company nor were they shown in the personal tax return by the accused No. 2 during the accounting year 1994 and 1995. This information further revealed that the outstanding payment statement was issued by Champion Spark Plug to Modi Champion Spark Plug which were duly certified and attested by Mahajan and Associates, Solicitors and Advocates representing Champion Spark Plug in India. It was further revealed from the information that the said report was submitted by Champion Spark Plug to the International Court of Arbitration.

4. The information on record revealed that the solicitors and advocates of Champion Spark Plug supplied copy of statement of account of outstanding dues payable by Modi Champion to Champion Spark Plug Company. The said copy of claim of Champion Spark Plug Company dated 4.8.1995 as filed before the International Court of Arbitration at London, U.K., showed cash deposit of US $1,00,000/- from Modi Champions on 24.2.1994. The accused No. 1, M/s. Modi Champion had filed writ petition in 1996 before this Court seeking stay of Arbitration proceedings.

5. The petitioner/accused No. 2, who was summoned, deposed under Section 40 Foreign Exchange Regulation Act, 1973 and inter-alia stated that on 24.2.1994, he visited Toledo, the Headquarter of Champion, USA, for a courtesy visit on his way to California to consult and get treatment from his physician. The accused had denied making any payment in cash to Champion USA, whereas the passport of the accused has confirmed the visit of accused No. 2 to USA during the period.

6. It is further alleged that on enquiry through the Indian Embassy in Washington D.C., USA, it was revealed that M/s. Cooper Industries Champion Spark Plug Company, Toledo vide letter dated 7.4.2001, had informed that in February, 1994, a meeting was held in USA and the petitioner had arranged payment of US $1,00,000/- as per settlement of indebtedness of Modi Champion Ltd., vide bank draft No. 404946/276816 dated 22.2.1994, drawn on ABN Amro Bank, Hongkong, and payable at ABN Amro Bank, New York and the amount US $1,00,000/- was placed in credit of Modi Champion paid being part recovery of outstanding dues.

7. In the complaint it is also averred that during the investigation, the documents on record had confirmed the statement of account of Modi Champion, notice claim filed by M/s. Champion Spark Plug Company before International Court of Arbitration and petition filed by M/s. Modi Champion before this Court. The letter of M/s. Champion, USA dated 7.4.1997, received through the Embassy confirmed payment of US $1,00,000/- made by the petitioner/accused No. 2 on behalf of accused No. 1 to Champion, USA in part settlement of account.

8. The petitioner challenged the prosecution by respondents by way of writ petition No. 755/2002, in which proceedings were stayed in light of the challenge to the vires of Section 68 of FERA, 1973 before the Supreme Court. The Supreme Court decided the issue in favor of the department in the case Standard Chartered Bank v. Union of India reported as and thus on 03.08.2006 the writ petition was withdrawn with liberty to initiate appropriate proceedings. In the meanwhile the petitioner joined the adjudication proceedings initiated against the petitioner and others. The company, on the basis of the memorandum No. T-4/73/DZ/2001 dated 31.07.2001, filed replies and written submissions. In the adjudication proceedings the allegations against the petitioner and others were dropped by the learned Adjudicating Authority beyond doubt that allegations against the petitioner were false and frivolous.

9. One of the contentions of the petitioner is that the allegations leveled against him in the complaint are the same as those in the adjudication proceedings initiated by the department in which he has been exonerated on merits. On this basis it is the contention of the petitioner that the criminal proceedings cannot continue and it would be a futile exercise and abuse of the process of Court. It is pleaded that when the departmental authority has not imposed any penalty against the petitioner, the prosecution cannot be allowed to continue on the same allegations. In support of this proposition, the petitioner has referred to the judgment of the Supreme Court in the case reported in 2005 Cr.L.J. 372 and in the case of Sadhana Jain v. P. Sudhir 2004 [1] JCC 71 wherein this Court has held that where the department has no good case for the purpose of adjudication it will be unjust to require the petitioner to go through the entire prosecution proceedings against the accused were quashed. The petitioner has also placed reliance on the judgments of this Court in Surkhi Lal v. Union of India Criminal M.C. No. 560/99 delivered on 31.5.05 and of the Mumbai High Court in the case of Raichard C. Jain v. Surender Prasad in Criminal Application No. 1792 of 2003 in which the same view is taken.

10. It is the submission of the petitioner that the criminal complaint filed against the petitioner by the respondents are against the law laid down in the case of P.S. Rajya v. State of Bihar 1996 SCC (Cri.) 897 by the Hon'ble Supreme Court where it quashed the prosecution when the appellant had been exonerated in the departmental inquiry.

11. In today's date I have pronounced a judgment in Crl. M.C. No. 2173/2004 & Crl. M. No. 7187/2004, Crl. M. C. No. 991/2004 & Crl. M. No. 3209/2004, Crl. M.C. No. 1183/2004 & Crl. M. No. 3550/2004 and Crl. M. C. No. 2274-76/2005 discussing the entire law on the point. I am, therefore, not restating the legal position in detail again. Suffice it to reproduce the various principles that are culled out from the judgments of this Court, other High Courts as well as of the Supreme Court:

(a) On the same violation alleged against a person, if adjudication proceedings as well as criminal proceedings are permissible, both can be initiated simultaneously. For initiating criminal proceedings one does not have to wait for the outcome of the adjudication proceedings as the two proceedings are independent in nature.

(b) The findings in the departmental proceedings would not amount to res judicata and initiation of criminal proceedings in these circumstances cannot be treated as double jeopardy as they are not in the nature of "prosecution".

(c) In case adjudication proceedings are decided against a person who is facing prosecution as well and the Tribunal has also upheld the findings of the adjudicators/assessing authority, that would have no bearing on the criminal proceedings and the criminal proceedings are to be determined on its own merits in accordance with law, uninhibited by the findings of the Tribunal. It is because of the reason that in so far as criminal action is concerned, it has to be proved as per the strict standards fixed for criminal cases before the criminal court by producing necessary evidence.

(d) In case of converse situation namely where the accused persons are exonerated by the competent authorities/Tribunal in adjudication proceedings, one will have to see the reasons for such exoneration to determine whether these criminal proceedings could still continue. If the exoneration in departmental adjudication is on technical ground or by giving benefit of doubt and not on merits or the adjudication proceedings were on different facts, it would have no bearing on criminal proceedings. If, on the other hand, the exoneration in the adjudication proceedings is on merits and it is found that allegations are not substantiated at all and the concerned person(s) is/are innocent, and the criminal prosecution is also on the same set of facts and circumstances, the criminal prosecution cannot be allowed to continue. The reason is obvious : criminal complaint is filed by the departmental authorities alleging violation/contravention of the provisions of the Act on the part of the accused persons. However, if the departmental authorities themselves, in adjudication proceedings, record a categorical and unambiguous finding that there is no such contravention of the provisions of the Act, it would be unjust for such departmental authorities to continue with the criminal complaint and say that there is sufficient evidence to foist the accused person(s) with criminal liability when it is stated in the departmental proceedings that ex-facie there is no such violation. The yardstick would, therefore, be to see as to whether charges in the departmental proceedings as well as criminal complaint are identical and the exoneration of the concerned person in the departmental proceedings is on merits holding that there is no contravention of the provisions of any Act.

12. The present case is covered by principle (d) above. It is clear from the narration of facts given above that the petitioner is given exoneration on merits in so far as departmental proceedings are concerned. The adjudicating authority has held on merits that the allegations against the petitioner were false and frivolous. It is on same allegation that criminal proceedings are initiated. Therefore, such criminal proceedings cannot be allowed to continue when the allegations are same as in the departmental proceedings where the petitioner is exonerated on merits holding that there is no contravention of the provisions of the Act.

13. The petition is hereby allowed. The complaint filed by the respondent is hereby quashed.

14. No costs.