2018 (7) TMI 2075 - HC - Income Tax

Restraining the petition from transferring funds overseas - Offences under Section 277 of Income Tax Act,1961, Sections 181, 186, 191 read with Section 193 of Indian penal Code - Income Tax Settlement Commission had rejected the application of petitioner - Subsequently, the learned Magistrate directed issuance of Letter of Request requesting Foreign Country Government of Bailiwick of Guernsey to make investigation in this particular account of accused and to submit that report to Court as early as possible. - It is submitted by the counsel for the petitioner that the impugned orders were passed without affording any opportunity to the petitioner. Held that - on perusal of the Roznama, it is crystal clear that the complaint was listed before the Court on 12th February, 2018 and since the Court was on leave, the board was discharged and the proceedings were adjourned to 2nd July, 2018. In the circumstances, there was no occasion for the petitioner to appear before the trial Court on 9th April, 2018, 12th April, 2018 or 13th April, 2018. The impugned order passed by the trial Court proceeds on the basis that the accused and his advocate are found absent when repeatedly called out. It appears that the Court was under belief that the matter was due for hearing on that day or that they were put to notice and in spite of that neither the advocate nor the accused were present in the Court when the applications was heard by the Court. The application preferred by the respondent No.1 gives details about said entities. It is prayed in the application that the Letter of Request and Letter of Rogatory be issued to the Foreign Court to place restraint order restraining transfer of funds from the entities viz Banyan Tree Trust and Kinetic Holding Limited. The applicant further prayed that the Letter of Request or Letter of Rogatory be issued to the relevant foreign court to place a restraint order on Confiance Limited restraining it from executing fund asset transfer away from entities stated therein. It was further prayed that Court may issue Letter of Request / Letter of Rogatory to relevant foreign Court to issue attachment order in respect of entitles though not based in Guernsey but managed from that Country by Confiance Limited. In the circumstances stated hereinabove, it was expected that the trial Court ought to have given an opportunity to the Petitioner. However, one cannot ignore the purport of preferring the application and apprehension expressed therein. In the circumstances, the balance will have to be struck between the principle of natural justice and need for investigation into aspects as claimed in the application preferred by the respondents. - The matter is remanded back to the trial Court for hearing the application preferred by the respondent afresh.

Summary

Issues Involved:
1. Jurisdiction of the High Court under Article 227 of the Constitution and Section 482 of the Criminal Procedure Code.
2. Validity of the orders dated 12th April 2018 and 13th April 2018 passed by the Additional Chief Metropolitan Magistrate.
3. Compliance with principles of natural justice.
4. Applicability and scope of Section 166A and Section 105 of the Criminal Procedure Code.
5. Necessity of notice to the petitioner before passing orders under Section 166A of the Criminal Procedure Code.

Issue-wise Detailed Analysis:

1. Jurisdiction of the High Court:
The petitioner invoked the jurisdiction of the High Court under Article 227 of the Constitution of India and inherent powers under Section 482 of the Criminal Procedure Code. The petitioner challenged the order dated 12th April 2018 and the subsequent Letter of Request dated 13th April 2018 issued by the Additional Chief Metropolitan Magistrate.

2. Validity of the Orders:
The petitioner argued that the orders were passed without affording any opportunity to the petitioner, asserting that the trial court erred in mechanically passing the impugned orders. The respondent countered that for initiating proceedings under Section 166A of the Criminal Procedure Code, there is no necessity of giving any notice to the persons against whom such action is initiated.

3. Compliance with Principles of Natural Justice:
The petitioner contended that the trial court violated the principles of natural justice by not providing an opportunity to be heard before passing the orders. The respondent argued that the rule of audi alteram partem (right to be heard) is not attracted during the investigation under Section 166A of the Criminal Procedure Code, as supported by the Supreme Court's decision in Union of India vs. W.N. Chadha.

4. Applicability and Scope of Section 166A and Section 105 of the Criminal Procedure Code:
The petitioner argued that the court exceeded its jurisdiction under Section 166A and Section 105 of the Criminal Procedure Code. The respondent maintained that the trial court is empowered to pass such orders and that the application was rightly allowed under Section 166A, which does not require issuance of a show-cause notice.

5. Necessity of Notice to the Petitioner:
The petitioner argued that the trial court should have issued a notice before passing the orders, especially given the significant impact on the petitioner's rights. The respondent cited the Supreme Court's ruling that notice is not required for investigations under Section 166A.

Court's Conclusion:
The High Court observed that the trial court should have given an opportunity to the petitioner, balancing the principles of natural justice with the need for investigation. The court set aside the impugned orders and remanded the matter back to the trial court for fresh hearing, ensuring that the petitioner is afforded an opportunity to be heard.

Order:
(i) The Writ Petition is partly allowed.
(ii) The impugned orders dated 12th April 2018 and 13th April 2018 are set aside. The matter is remanded back to the trial court for fresh hearing.
(iii) Pending the trial court's decision, the amount in the entities mentioned in the application should not be transferred.
(iv) All points raised in the petition are kept open.
(v) The High Court made no observations on the merits of the case, and the trial court shall decide the proceedings in accordance with the law.
(vi) The parties are to appear before the trial court on 1st August 2018, and the application should be decided expeditiously.
(vii) The petition stands disposed of.

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