Union Of India (Enforcement ... vs Amarjeet Singh
2009 Latest Caselaw 1534 Del

     IN THE HIGH COURT OF DELHI AT NEW DELHI

               CRL.A. 209/2002 & CRL.M.A.770/2002

                                              Reserved on : 5th March 2009
                                              Decision on : 21st April 2009

       UNION OF INDIA                              ..... Appellant
                Through Mr. Navin K. Matta, Advocate.

                      versus

       AMARJEET SINGH @ BILLA & ANR.             ..... Respondents
               Through Mr. Navin Malhotra, Advocate.

               CRL.A. 210/2002 & CRL.M.A.772/2002

       UNION OF INDIA                              ..... Appellant
                Through Mr. Navin K. Matta, Advocate.

                      versus

       PRITPAL SINGH @ GOGI & ANR.                ..... Respondent
                 Through Mr. Navin Malhotra, Advocate.

       CORAM:
       HON'BLE DR. JUSTICE S. MURALIDHAR

        1. Whether Reporters of local papers may be
           allowed to see the judgment?                         No
       2. To be referred to the Reporter or not?                Yes
       3. Whether the judgment should be reported in Digest? Yes

                               JUDGMENT

21.04.2009

Dr. S. Muralidhar, J.

1. These two appeals under Section 54 of the Foreign Exchange Regulation

Act, 1973 (FERA) read with Sections 35 and 49 (5) of the Foreign

Exchange Management Act, 1999 (FEMA) are directed against the

impugned order dated 8th December 2001, passed by the Appellate Tribunal

for Foreign Exchange (Tribunal), allowing Criminal Appeal Nos. 304/2000

and 305/2000, filed by Shri Amarjeet Singh @ Billa and Shri Pritpal Singh

@ Gogi, respondents in Criminal Appeal Nos. 209 and 210 of 2002 herein

respectively.

2. By the impugned order dated 8th December 2001, the Tribunal set aside

an order dated 25th February 2000 passed by the Deputy Director,

Enforcement Directorate, New Delhi (`Adjudicating Authority‟), holding

the respondents guilty of contravention of Sections 8 (1) and 8 (2) of the

FERA for purchasing US $ 67,951 and selling US $ 45,000 illegally for

which penalties of Rs.3,00,000/- on Respondent Amarjeet Singh and Rs.

2,00,000/- on Respondent Pritpal Singh were imposed. US $ 12951/- and

US $ 10,000/- respectively seized and recovered from Amarjeet Singh and

Pritpal Singh, were ordered to be confiscated. Indian currency of

Rs.87,600/- was, however, not found to be involved in the contravention of

Sections 8 (1) and 8 (2) and was directed to be adjusted against the amount

of penalty imposed on Amarjeet Singh if it was not paid by him within the

stipulated time.

Objection as to maintainability

3. The first issue that arises for consideration is the maintainability of the

appeals. Mr. Naveen Malhotra, the learned counsel, appearing for the

respondents raised a preliminary objection as to the maintainability of these

appeals when they were heard on 23rd January 2009. He pointed out that in

Mohtesham Mohd. Ismail v. Special Director, Enforcement Directorate

2007(11) SCALE 741, it had been held by the Supreme Court that the

Enforcement Directorate could not have filed an appeal before the Tribunal

against the order of the Adjudicating Authority. It was only the Central

Government which could have filed an appeal before the High Court in

terms of Section 54 FERA.

4. Mr. P.P. Malhotra, the learned Additional Solicitor General of India,

appearing on behalf of the appellant sought an adjournment on that date for

making submissions. The case was then listed on 4th February 2009 on

which date a further adjournment was sought on behalf of the learned ASG

stating that he needed further time. As a last opportunity, the case was

adjourned to 5th March 2009. On that date, none appeared on behalf of the

appellant despite a pass-over. However, this Court while reserving orders

permitted the appellant to file a written note of submissions within one

week. A fifteen page written note of submissions on both maintainability as

well as merits was filed by the appellant on 25th March 2009. The written

submissions have been considered by the Court.

5. In Mohtesham Mohd. Ismail, the Special Director, Enforcement

Directorate had by the order dated 6th October 1993 imposed a penalty of

Rs. 2,50,000/- on the appellant Mohtesham Mohd. Ismail („Ismail‟) after

holding him guilty of contravening Sections 9(1) (b), 9 (1) (d) and 9 (3)

FERA. The appeal preferred by Ismail was allowed by the Appellate Board

(Board). Aggrieved by the decision of the Board, the Special Director,

Enforcement Directorate filed an appeal before the High Court. The Central

Government was not impleaded as party to the said appeal. However, the

Board was impleaded as party "although it should not have been." Before

the High Court, Ismail raised a question in regard to the maintainability of

the appeal on the premise that it was the Central Government and not the

Adjudicating Authority that should have preferred an appeal. Reliance was

placed on the decision in Director of Enforcement, Madras v. Rama

Arangannal AIR 1981 Madras 80 as well as the decision of the Punjab and

Haryana High Court in Director of Enforcement v. Lal Chand (1985) 6

ECC 55. The High Court negatived the contention holding that the appeal

could be filed by the Directorate of Enforcement "as instrumentality of the

Central Government in matters covered by the Foreign Exchange

Regulation Act, 1973, in cases decided against the Department..." On

merits also, the High Court found the order of the Appellate Board to be

erroneous and it was accordingly set aside. Ismail then appealed to the

Supreme Court.

6. Before the Supreme Court, the Special Director placed reliance upon the

notification dated 22nd September 1989 by which the Special Director of

Enforcement was appointed by the Central Government under Section 4(1)

read with 3(e) FERA. Further under the said notification, the Central

Government conferred upon the Special Director the power under Section

51 FERA to adjudicate cases of contravention of the provisions thereof. It

was accordingly submitted that the Special Director as a delegatee of the

Central Government, could have filed the appeal before the High Court.

However, the Supreme Court found that "First Respondent did not file the

appeal on behalf of or representing the Central Government. It was filed in

its official capacity as the adjudicating authority and not as a delegate of the

Central Government." It was accordingly held that the appeal in the said

case could not have been filed by the Special Director, Enforcement

Directorate.

7. It is pointed out in the written submissions of the appellant that there is a

distinction in the wording of Section 54 of FERA 1973 and Section 35 of

FEMA 1999. While Section 54 FERA reads: "An appeal shall lie to the

High Court only on question of law from any decision or order of the

Appellate Board.....", Section 35 FEMA 1999 reads: "Any person

aggrieved by any decision or order of the Appellate Tribunal may file an

appeal to the High Court........" It is not in dispute that the present appeal

is relatable to Section 35 FEMA 1999.However, as pointed out by the

Supreme Court in Mohtesham Mohd. Ismail, even under Section 35

FEMA, the Adjudicating Authority cannot itself file the appeal although

provision begins with the words "any person aggrieved......." An

Adjudicating Authority cannot be said to be an aggrieved party if its order

is reversed by the Appellate Tribunal. It is a quasi-judicial authority. It

cannot itself become a party to the proceedings at any stage. Therefore,

where the noticee succeeds before the Appellate Tribunal, it is only the

Central Government which can file an appeal under Section 35 FEMA and

not the Adjudicating Authority whose order has been set aside.

8. As far as the present case is concerned, the cause title reads "Union of

India through Directorate of Enforcement" as appellant. The memorandum

of appeal is supported by the affidavit of Shri S.K. Poddar, Assistant

Director, Enforcement Directorate. Nevertheless, unlike the appeal before

the High Court in Mohtesham Mohd. Ismail which was not filed by the

Enforcement Directorate on behalf of the Central Government, it is plain

that the present appeal has been filed by the Central Government

represented by the Directorate of Enforcement. Merely because it is filed

through the Enforcement Directorate, it cannot be said that the Central

Government has itself not filed the appeal. The decision in Mohtesham

Mohd. Ismail does not suggest that that on the facts of the present case, the

appeal is not maintainable at the behest of the Central Government.

9. The preliminary objection as to the maintainability of the appeal is

accordingly overruled.

Decision on merits

10. Turning to the merits of the present appeals, according to the

Enforcement Directorate, its Delhi Zonal Office received an information on

8th December 1993 that Amarjeet Singh @ Billa and Pritpal Singh @ Gogi

both residents of N-51, Kirti Nagar, New Delhi were engaged in

unauthorized transactions of foreign exchange from their shop situated at

4569 Main Bazaar, Pahar Ganj, New Delhi. On the basis of the said

information a team of officers was deputed for taking search under Section

37 FERA 1973. It is alleged that both residents did not cooperate in the

search and in fact attacked the officers and threatened them with a saw and

a sword. However, they were overpowered by the officers and personal

search was undertaken on both persons under Section 34 FERA. The

searches resulted in the recovery and seizure of the following currencies:

(i) US$ 10,000/- from Pritpal Singh @ Gogi.

(ii) US$ 3,000/- and Indian currency of Rs.10,000/-

from Shri Amarjeet Singh @ Billa.

(iii) US$ 9,951/- and Indian currency of Rs.87,600/-, one pay

order of United Western Bank Ltd. Karol Bagh, New Delhi

in the sum of Rs.5 lakhs and certain documents from the

briefcase in the hands of the Amarjeet Singh @ Billa.

11. It is alleged that some of the officers received injuries due to the assault

on them by the two respondents. When Pritpal Singh made an attempt to

flee after the recoveries had been made, a scuffle ensued wherein he

received injuries. An FIR No. 574 of 1993 was registered against both the

respondents.

12. It is stated that both Amarjeet Singh @ Billa and Pritpal Singh @ Goga

made statements before the Enforcement Officer on 8th December 1993

corroborating the panchnama drawn on that date in respect of the recovery

and seizure. They allegedly admitted to their illegal dealings in foreign

exchange and seizures effected from them. Amarjeet Singh is supposed to

have stated that the disposal of foreign exchange collected was mainly

looked after by him and that Pritpal Singh helped him in the deal with

Russian buyers for making delivery of foreign exchange to Afghans. The

seized foreign exchange was accepted by them from their buyers @

Rs.33.00 per US dollar.

13. Amarjeet Singh is stated to have confessed that he had been doing the

business of illegal dealings in foreign exchange from one month and that

the turnover was around US$ 45,000/-. Pritpal Singh is also supposed to

have confessed that US$ 10,000/- recovered from him was received from

Russian buyers. He confessed that Amarjeet Singh mainly handled the job

of handing over/selling the dollars to Afghans and that around US$ 45,000/-

to US$ 50,000/- were received by them at their shop from buyers and sold

Afghans.

14. On the basis of the investigations, a Memorandum dated 3rd June 1994

was issued to Amarjeet Singh and Pritpal Singh by the Special Director,

Enforcement Directorate for contravention under Sections 8(1) and 8(2)

FERA 1973 and for acquiring foreign exchange in the sum of US$ 67,951/-

and sale of foreign exchange to the tune of US$ 45,000/- without any

previous permission, general or special, of the Reserve Bank of India (RBI)

and at the rates other than those authorised rates for the time being by the

RBI. They were also asked to show cause why the foreign exchange of

US$22,951/- and Indian currency of Rs.97,600/- should not be confiscated

to the Central Government account under Section 63 FERA 1973.

15. Both respondents replied by separate letters dated 8th July 1994 denying

the allegations and asserting that they had not contravened the provisions of

Section 8(1) and 8(2) FERA 1973. It was pointed out that they had not been

shown the search warrant and identity cards by the officers who were in

plain clothes and search was not in accordance with the provisions of

Section 37 and Section 165(4) CrPC and that some heated exchange took

place between the respondents and the officers on that score. It was

submitted that Amarjeet Singh was an exporter who was authorized to

receive payments in foreign exchange from foreign buyers to take export

orders as mentioned in the Foreign Exchange Manual. It was contended that

the seized foreign currency was the proceeds received from foreign buyers

from 8th December 1993. Since the relevant documents exchanged in this

case thereto were already with the Enforcement Directorate, they were not

being placed along with the reply. The respondents stated that they would

like to cross-examine all the witnesses and also produce defence witnesses.

16. The Deputy Director, Enforcement passed an order on 25th February

2000 holding the respondents guilty of the contravention of Section 8(1)

and 8(2) FERA 1973. It is seen from the said order that the case had been

fixed on 17th January 2000 when the advocate for the noticees had stated

that "he would give specific lists for the purpose of cross-examination at the

earliest." On the next date, i.e., 25th February 2000 no such list was given

and instead written submissions were filed pointing out that the right to

cross-examine the witnesses of the Enforcement Directorate had been

declined to them by the Adjudicating Authority.

17. The Adjudicating Authority in the order dated 25th February 2000 held

that the countries of final destination for the exports were Poland and

Ukraine and therefore the receipt of US dollars for those exports was not

"through an account appropriate to the country of final destination of

goods". It was held that the affidavits of the firms in Poland and the

encashment certificate did not support the tendering and accepting of

foreign exchange. It was held to be inconceivable that the Polish

businessman brought only US$ 10,000/- in cash with him and therefore did

not declare the port country from which he give US$ 9984 to Amarjeet

Singh and was surviving in India only with US$ 16 left with him. The

statement of other Polish national was also disbelieved. The receipts did not

contain printed serial numbers and instead were manually numbered. For

the aforementioned reasons, the explanation offered by the respondents was

rejected by the Adjudicating Authority who proceeded to impose penalty on

them in the manner indicated hereinbefore.

18. Aggrieved by the said order, the respondents approached the Appellate

Tribunal. After discussing the evidence in great detail, the Tribunal held

that the order of the adjudicating authority was not sustainable in law and

accordingly set it aside. The authorities were directed to return forthwith the

seized foreign and Indian currencies to the firm Blaze Exports of which the

respondents were partners and in turn the appellants were directed to

deposit the foreign exchange with their authorized dealers as per the law.

19. One of the contentions raised by the appellant is that the Section 59

states that the culpable state of the offender should be presumed. Likewise

under Section 72 FERA, truth of the contents of the documents seized

would also have to be presumed unless the contrary is proved. Under

Section 71(3) any person found to be in possession of any foreign exchange

in excess of Rs. 15,000/- had to prove that the foreign exchange came to his

possession lawfully. It is submitted that inasmuch as the respondents had to

"prove" that they had lawfully acquired the foreign exchange, unless

evidence is led by them in the manner known to law, the burden on them to

rebut the presumption could not be stated to have been discharged. Reliance

is placed upon the judgments in Asst. Director, Enforcement Directorate,

Madras v. NPV Ramasamy Udayar 1997 Cri LJ 412, Prem Singh Chawla

v. Directorate of Enforcement 1987 Cri LJ 1579, Ram Krishna Bedu

Rane v. State of Maharashtra (1973) 1 SCC 366, Collector of Customs,

Madras v. D. Bhoormul (1974) 3 SCR 833, Kanungo & Co. v. Collector of

Customs (1973) 2 SCC 438 and Kollatra Abbas Haji v. Govt. of India 1984

(15) ELT 129 (Ker).

20. As far as the above submission is concerned, a perusal of the impugned

order of the Tribunal shows that the explanation offered by the respondents

was found by the Tribunal to be sufficient and trustworthy. The material

produced by the respondents is adverted to in para 24 of the order of the

Tribunal which requires to be set out in full as under:

"24. The appellants have furnished a copy of the form No.CNX dated 12.2.93 for allotment of code number to them by the RBI as an exporter to their firm, namely, Blaze Exports. On 5.3.93, the RBI had allotted code No. DB 002983 to Blaze Exports. The appellants have further submitted copies of their contract No.B/E/93 dated 7.12.93 with M/s Andrej Kurowski Warsaw, Poland for 1280 woollen pullovers @ 7.80 US dollar for the total value of 9,984 US dollar. The appellants have also filed a copy of receipt dated 8.12.93 evidencing receipt of 9984 US dollar from M/s Andrej Kuowski. They have filed an affidavit of Shri Andrej Kurowski dated 13.12.93 wherein it has been confirmed by the

deponent that he came to India on 29.11.93 and his Passport No. is AA0878740 and he is Polish national. The deponent further confirmed that he entered into a contract with M/s Blaze Exports for the purchase of 1280 pieces of woolen pullovers for US $ 9984/- a copy of which contract is enclosed and further he paid US $ 9984 to M/s Blaze Exports on 8.12.93 against receipt No.3 dated 8.12.93. The appellants have filed copies of their contract No. B/E/93 dated 8.12.93 with M/s Carmen Import-Export, Warsaw, Poland and M/s Patiana Ponomarenko, Ukraine respectively. These two contracts are respectively for 1240 pieces of woolen pullovers and 506 pullovers for US $ 9796 and US $ 3171. Copies of buyers passports are also filed. Copies of receipt dated 8.12.93 evidencing receipt of US $ 3171. Copies of buyers passports are also filed. Copies of receipt dated 8.12.93 evidencing receipt of US $ 3171 from the Ukraine buyer have been filed and affidavit of Shri Judzinska Zofia dated 14.12.93 confirming payment of US $ 9796 to M/s Blaze Exports has also been filed. The appellants have also filed copies of statement of their bank account with Bank of Madura Ltd. as well as copies of 8 credit notes showing deposit of US $ 34128 equivalent value in Indian currency being Rs.7,33,934/- after deductions of bank commission during the period commencing from 18.1.94 to 4.10.95. The appellants have also filed copies of Foreign Exchange Regulation Rules, 1994. The learned counsel for the appellants has drawn our special attention to Rule 9 dealing with Manner of Payment of export value of goods and extracts from Nabhi‟s Book on `permitted currencies and methods of payment‟ and text of Exchange Control Regulations relating to Permitted Currencies and Methods of Payment. The appellants have relied on Notice to Exporter No.1 of 1990 and Notice to Exporter No.2 of 1992. It would be expedient to reproduce these notices as

hereunder:

Notice to Exporters No.1 of 1990 At present, all transactions of commercial and non-

commercial nature between India and Poland are settled in non convertible Indian rupees. The Government of India and Poland have recently concluded a new trade and payments agreement in terms of which all transactions of commercial and non- commercial nature will be settled in free foreign exchange with effect from 1st January, 1991. Exporters are, therefore, advised that they should ensure that payments in respect of contracts for export of goods from India to Poland entered into on or after 1 st January, 1991 are received by them in one of the permitted currencies such as US Dollar, Poland Sterling etc. For contracts entered into prior to 31st December, 1990, payments will continue to be received in non-convertible Indian rupees, as heitherto (sic hitherto).

Notice to Exporters No.2 of 1992 As a sequel to formation of independent States in the erstwhile USSR, the Government of India and Government of Kazakhastan, Kyrghystan and Ukraine have recently concluded new trade agreements in terms of which all transactions of commercial and non- commercial nature with these countries will be settled in free foreign exchange with effect from 22.2.92, 18.3.92 and 27.3.92 respectively. Exporters are, therefore, advised that they should ensure that payments in respect of contracts for export of goods from India to these countries entered into on or after

the above dates are received by them in one of the permitted currencies such as US Dollar, Pound Sterling, etc. Intending exports may approach authorized dealers in India to whom suitable instructions have been issued by the Reserve Bank of India."

21. It was also noticed that in terms of Para 6A.6 of the Exchange Control

Manual, the RBI had granted permission for export proceeds to be received

directly by the exporter from the buyers in the form of foreign exchange

currency notes. It was held, therefore, that the seized foreign exchange had

been lawfully acquired by the respondents. It was held that the presumption

drawn by the Adjudicating Officer that the currency received in US dollar,

was based on conjectures and surmises. As far as the respondents were

concerned they had filed their affidavits to discharge their onus that they

had acquired the foreign exchange through the valid foreign exchange

export deals and that the proceeds in their possession were received from

the buyers.

22. The Tribunal also found no merit in the contention that the US$

45,000/- earned through exports was in illegal possession of the

respondents. It was held that if indeed the appellant had prior information of

the clandestine activities of the respondents, they may have kept a

surveillance to catch the respondents red handed while selling any foreign

exchange to Afghans or any other person. It was held that the initial burden

of showing that the possession of the said amount in the hands of the

respondents is illegal, was on the appellant. In the instant case, the said

burden had not been sufficiently discharged.

23. This court does not find anything perverse in the findings, reasoning

and the conclusions of the Tribunal. This court is in agreement with the

Tribunal that the respondents had in fact offered a satisfactory explanation

for possessing the foreign exchange in their hands. This is a matter of pure

appreciation of evidence. It cannot be said to raise any question of law.

When the invoice and other documents produced by the respondents were

found to be genuine, it cannot be said that the respondents have to

nevertheless "prove" such documents by way of defence. The presumption

of the culpable mental state under Section 59 FERA and the presumption

under Section 72 of the genuineness of the documents relied upon by the

Directorate of Enforcement are rebuttable. Once the respondents have been

able to rebut the presumption, the burden shifted to the Enforcement

Directorate to show that the defence was not plausible or credible.

24. In this context, having examined the order of the Adjudicating

Authority, this Court is of the view that the manner of dealing with the

affidavits filed by the buyers themselves is not satisfactory. It is based on

conjectures. The deponents of the affidavits were not sought to be cross-

examined by the Directorate of Enforcement. The Appellate Tribunal has

rightly observed that once those affidavits were filed it was for the

Directorate of Enforcement to rebut the same which it had not done. As

regards the alleged sales of US$ 45,000/- to Afghans, the Tribunal found

that the Adjudicating Officer had not dealt with the issue. The above

conclusions of the Tribunal are consistent with the law explained by the

Supreme Court in Ram Krishna Bedu Rane v. State of Maharashtra

(supra), D.Bhoormul (supra) and M/s. Kanungo & Co. (supra).

25. It was then contended that the respondents had themselves made

voluntary statements to the officers which were not hit by Sections 25 of the

Evidence Act as explained by the Supreme Court in K.I. Pavunny v. Asst.

Collector (HQ), Central Excise Collectorate, Cochin 1997 SCC (Cri) 444.

While this may be correct as a proposition of law, on the facts of the present

case it is not possible to sustain a finding as to the contravention of the

provisions of the FERA only on the basis of the confessional statements

made by the respondents soon after their arrest. The Adjudicating Authority

noticed in para 2 of its order that before the court of the learned Additional

Chief Metropolitan Magistrate (ACMM) the respondents retracted their

statements made to the officers of the Enforcement Directorate. The

Tribunal has held that the medical certificates produced by the respondents

as well as the officers showing that both had received injuries at the hands

of each other took away the voluntary nature of the statements made by the

respondents before the officers of the Enforcement Directorate. This finding

of the Tribunal which is based on an appreciation of the evidence cannot

again held to be perverse calling for any interference. Unless the statements

made by the respondents satisfy the tests of voluntariness, it cannot

constitute the sole basis on which a finding of contravention of the

provisions of the FERA can be sustained. In its recent judgment in Noor

Aga v. State of Punjab III (2008) DLT (CRL.) 795 (SC), the Supreme

Court has interpreted Section 67 of the Narcotic Drugs and Psychotropic

Substances Act 1985 (NDPS Act) and held that notwithstanding the

position that such statements are not hit by Section 25 Evidence Act 1872,

the statements made by an accused to the Customs Officer would be

admissible only if they survived the test of voluntariness. By analogy, the

statements made to the officers of the Directorate of Enforcement recorded

under Section 40 FERA would also have to be shown to be voluntary if

they are sought to be relied upon as evidence. In the circumstances of the

present case, the respondents had shown prima facie that the statements

made by them under Section 40 FERA, which were subsequently retracted,

were not voluntary and the Directorate of Enforcement had not discharged

the burden of showing that they were.

26. In Mohtesham Mohd. Ismail, the Supreme Court held that in an appeal

under Section 54 FERA, the High Court should exercise its appellate power

only "when there existed a question of law and not a question of fact." Even

under Section 35 FEMA, an appeal will lie only in regard to a "question of

law arising out of such order appealed against." In the present case, the

appellant has been unable to point out any such question of law that arises

for determination from the impugned order of the Tribunal. What has been

pointed out are essentially questions of fact, involving the appreciation of

evidence.

27. Viewed from any angle, therefore, this Court does not find any error in

the impugned judgment of the Tribunal. Consequently these appeals are

without merit and are dismissed as such.

S. MURALIDHAR, J.

APRIL 21, 2009

ak