2015 (1) TMI 883 - SC - FEMA

Credit of Non-convertible Rupee Funds into the Non-Resident (External) Account of the person concerned - contravention of Section 6(4), 6(5) read with S.49 of FERA - Act done by consent, connivance of and attributable to the negligence on the part of the Officials - Held that - The crediting of Non-Convertible Rupee Funds in the Non-Resident (External) Account of Dr. P.K.Ramakrishnan happened during the period August to December, 1991. Three officials of ANZ Grindlays Bank were involved in it and Show Cause Notice was issued by Respondent No.1 on 21.1.1994 to the Bank as well as the Officials for contravention of Section 6(4), 6(5) read with Section 49 of FERA, alleging that it had taken place with the consent, connivance of and attributable to the negligence on the part of the Officials. It is true that the respondent by letter dated 10.7.2001 ordered that the charges relating to consent and connivance shall stand deleted from the Show Cause Notice. Though FEMA came into force on 1.6.2000, Sunset clause under Section 49 of the said Act provided for filing of complaints under the FERA, 1973 till 31.5.2002. Taking advantage of it, the Respondent No.1 issued Opportunity Notice to all the three officials on 12.5.2002 and lodged the complaint on 29.5.2002. The Additional Chief Metropolitan Magistrate, New Delhi, on the same day took cognizance of the complaint for the offence under Section 56 of FERA and issued summons. In spite of having dropped the allegations of consent and connivance , the respondent in their complaint levelled allegations of all the three components, namely, consent, connivance and negligence. The contention of the appellant that the cognizance was taken on irrelevant consideration, is to be countenanced. There was suppression and also material omission in nonmentioning of reply sent by the appellant to the Opportunity Notice, in the complaint. Further, to substantiate the averments in the complaint, not even a single original document was enclosed. It is not known as to, on what material the Additional Chief Metropolitan Magistrate applied his mind, while taking cognizance of the statutory offence. Though the allegation of negligence can be independently looked into, considering the standard of proof in criminal prosecution, we are of the view that, in the present case, the continuance of prosecution against the appellant is not tenable in law and the proceedings are liable to be quashed. - Decided in favour of appellants.

Summary

Issues:
Appeal against dismissal of petition seeking to quash complaint under FERA for crediting Non-convertible Rupee Funds into NR (E) Account; Allegations of consent, connivance, and negligence; Sunset clause under Section 49 of FEMA; Continuation of prosecution based on negligence only.

Analysis:
The judgment involves an appeal against the dismissal of a petition seeking to quash a complaint under the Foreign Exchange Regulation Act (FERA) for crediting Non-convertible Rupee Funds into a Non-Resident (External) Account. The first respondent issued a Show Cause Notice against a bank and officials for contravention of FERA, alleging consent, connivance, and negligence. Despite dropping consent and connivance allegations, a complaint was filed based on all three components. The respondent utilized the Sunset clause under Section 49 of the Foreign Exchange Management Act, 1999, to file the complaint. The Additional Chief Metropolitan Magistrate took cognizance of the complaint and issued summons. The appellant argued that the complaint should be quashed due to suppression of facts and the complaint being composite and inseparable. The respondent contended that prosecution could continue based on negligence.

The court examined the documents and found that the allegations dated back to 1991, with a Show Cause Notice issued in 1994. The respondent later dropped consent and connivance charges. Despite the introduction of FEMA in 2000, complaints under FERA were allowed until 2002. The respondent issued an Opportunity Notice in 2002 and filed the complaint. The court noted that the complaint included all three components despite dropping consent and connivance. It criticized the lack of original documents and the failure to mention the appellant's reply to the Opportunity Notice. The court concluded that the prosecution based on negligence alone was not tenable due to the lack of proper material and suppression of relevant information.

In the final decision, the court allowed the appeal, setting aside the impugned order and quashing the proceedings in the Criminal Complaint against the appellant. The judgment highlighted the importance of proper evidence and adherence to legal procedures in prosecuting individuals under FERA, emphasizing the need for transparency and accuracy in legal proceedings.