M/S Empire Fantronics (I) Ltd. & ... vs Union Of India
2012 Latest Caselaw 3208 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                        Date of decision: 14th May, 2012
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+                         LPA 138/2012

M/S EMPIRE FANTRONICS (I) LTD. & ANR.        ....Petitioners
                  Through:   Mr. Amit Gupta and Mr. Sabin
                             Rana, Advocates
     Versus

UNION OF INDIA                                       ..... Respondent
                          Through:      Mr. Rajinder Nischal, Advocate

CORAM :-
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

                                 JUDGMENT

RAJIV SAHAI ENDLAW, J.

1. This intra-court appeal impugns the order dated 11.11.2011 of the learned Single Judge dismissing the WP(C) No. 7951/2011 preferred by the appellants with costs of Rs.50,000/- payable to the Delhi Legal Services Committee and also placing the file before the PIL Bench of this Court for appropriate directions for investigation through appropriate agency.

2. The writ petition aforesaid was filed by the appellants impugning the order dated 2.11.2011 of the Directorate General of Supplies and Disposal (DGS&D) holding the appellant guilty of financial embezzlement by fraudulently raising bills and claiming payment from Chief Controller of Accounts, and consequently de-registering the appellant from the list of registered suppliers.

3. The appellants filed the writ petition pleading:

a) That during the year November-December, 2010, they made supplies of ceiling fans worth Rs. 1,52,67,902/-, on the basis of orders placed on them by the Executive Engineer, Electricity Department, Dadar and Nagar Haveli;

b) that the goods were duly inspected by the Quality Assurance Wing of the DGS&D;

c) that the goods were received by the consignee and payment realized by the appellants;

d) that the appellants paid approximately Rs.29,63,000/- towards Excise Duty and VAT on the said transaction;

e) that notice dated 27.6.2011 was served on the appellants asking them to show cause as to why they should not be de-registered for being involved in raising bills and claiming payments for the aforesaid supplies fraudulently and whereafter the order de-registering the appellants and impugned in the writ petition was issued;

f) that there was no way that the appellants could have come to know about the genuineness of the orders;

g) that the appellants never had any apprehension about the genuineness of the rate contracts placed on the appellants.

4. The learned Single Judge, in the impugned judgment has found/observed/held:

i) that the appellants in reply dated 20.7.2011 to the show cause notice, had stated that they had surrendered the total amount of the contract and since they had surrendered the amount, the show cause notice and the proceeding for de-registration be dropped and denying any involvement in the fraud;

ii) that in response to another show cause notice dated 29.9.2011

expressly inviting attention of the appellants to the 16 supply orders which were reported to be fake, the appellants vide reply dated 12.10.2011 again pleaded that they had already withheld the amount to avoid misuse of government money;

iii) that the Director of the appellant no.1 in the personal hearing pursuant to the show cause notice had taken a stand that the appellants had neither received the orders from the Indentor/Consignee, nor delivered the stores directly but had received orders and delivered the stores to some agent;

iv) that the appellants in the writ petition also had not challenged such stand taken by its Director during the course of hearing;

v) that from the replies of the appellants to the show cause notices and the stand of the appellants during the personal hearing, the fraud stood admitted;

vi) that the stand of the appellants during the hearing also amounted to admission of dealing through agents which was in any case prohibited;

vii) that the explanation offered by the appellants of the replies to the show cause notices and the stand during the hearing being not happily worded, was not acceptable;

viii) that the respondents on the basis of the aforesaid had rightly reached a conclusion of the appellants having violated the terms and conditions of registration and having been involved in fraudulently receiving moneys against fake supply orders and had been rightly de-registered;

ix) that this Court in exercise of powers of judicial review can not sit in appeal over the decision of the respondent of de-registering the appellants and which decision was based on sufficient material.

5. The aforesaid would show that the learned Single Judge dismissed

the writ petition impugning the order of de-registration, virtually on the admissions of the appellants. The learned Single Judge has further applied the correct principles on the scope of exercise of power of judicial review.

6. The counsel for the appellants before us has contended that the respondents have got the matter investigated from the Crime Branch and which had not found the appellants guilty. He thus contends that the reason for de-registering has not been established.

7. We are unable to accept the aforesaid arguments. The learned Single Judge finding the charge on which the appellants had been de-registered and which charge, besides against the appellants, had also been made against several other suppliers, all for supplies to Dadar and Nagar Haveli and further finding the same to be concerning public interest as public funds to the tune of few crores appear to have been siphoned off and further finding that no investigation having been done in the matter, has after dismissing the writ petition placed the same before us i.e. the PIL Bench for further directions. The said writ petition is also listed before us today and we have asked the counsel for the respondents to obtain instructions whether any investigation by the CBI has been directed.

8. We are further of the view that the appellants, in spite of having been given a show cause notice, did not then avail of opportunity to explain the supplies. Rather, the appellants took a stand that they were not even withdrawing money due to them under the said contracts. The appellants also unambiguously washed their hands of the responsibility to explain the transactions by setting up a case of having acted through an agent. The same clearly shows that the appellants were not in a position to explain and were not wanting to take the onus of explaining the circumstances of the supply or the receipt of payments. The respondents were thus justified in

de-registering the appellants.

9. We may notice that the appellants before us also has shied away from producing the documents, by taking the specious plea of having filed the writ petition in a hurry. The appellants have only chosen to produce the inspection notes; however once the allegations are of withdrawing monies against fake purchase orders and which necessarily has to be in connivance with the officials of DGS&D, such inspection notes are of no avail.

10. We therefore do not find any merit in this appeal and dismiss the same. We refrain from imposing further costs on the appellants.

RAJIV SAHAI ENDLAW, J

ACTING CHIEF JUSTICE MAY 14, 2012 'raj'