2009 (11) TMI 568 - HC - FEMA

Foreign exchange violation summons - Act has deliberately chosen not to apply the concept of summons used either under the Code of Civil Procedure or under the Code of Criminal Procedure, but has chosen to apply analogous provisions found in the Income Tax Act - while interpreting the scope and width of Section 37 of FEMA, one cannot apply the concept of summons as available to a Civil Court under the Code of Civil Procedure, only because the power of a Civil Court was conferred on the authorities Apex court has held that in respect of Section 40 of the FERA, held that when a person is summoned and examined under Section 40, it cannot be presumed that a statement will be obtained under pressure or duress. In fact it was held in that case that such a statement obtained does not infringe the constitutional guarantee of protection against self-incrimination under Article 20(3) of the Constitution. The petitioner in essence seeks for a writ of prohibition against the department for having issued the summons by the exercise of the powers vested on them under Section 37 read with Section 131 of the Income Tax Act. In Standard Chartered Bank and Others v. Directorate of Enforcement and Others which arose out of the FERA violation, the Supreme Court spelt out the parameters in entertaining a writ petition against initiation of adjudication proceedings. - the attempt by the petitioner to stall the summons issued by the respondent has to be necessarily rejected

Issues Involved:
1. Validity of summons issued under Section 37 of FEMA.
2. Application of mind and relevance of documents requested in the summons.
3. Right to privacy and constitutional safeguards under Article 21.
4. Comparison with analogous provisions in other statutes and judicial precedents.

Issue-wise Detailed Analysis:

1. Validity of Summons Issued Under Section 37 of FEMA:
The primary question was whether the summons issued by the respondent under Section 37 of the Foreign Exchange Management Act, 1999 (FEMA) should be interdicted on the grounds of lack of application of mind and the documents sought amounting to a roving enquiry. The court noted that Section 37 of FEMA confers powers similar to those of an Income Tax Officer under Section 131 of the Income Tax Act, 1961, for the purpose of investigating contraventions related to foreign exchange violations. The court emphasized that the summons was for preliminary investigation and did not infringe on the petitioner's rights.

2. Application of Mind and Relevance of Documents Requested in the Summons:
The petitioner argued that the summons lacked specificity and was issued without proper application of mind, thus amounting to a fishing expedition. The court referred to judicial precedents, including the Supreme Court's decision in Barium Chemicals Ltd. v. A.J. Rana, which emphasized the necessity of deliberate and careful thinking before issuing such orders. Despite these arguments, the court found that the Enforcement Directorate had sufficient material to justify the issuance of the summons and that the documents requested (passport, bank passbook, and details of immovable properties) were relevant to the investigation.

3. Right to Privacy and Constitutional Safeguards Under Article 21:
The petitioner contended that the summons violated his right to privacy and was unconstitutional under Article 21 of the Constitution. The court, however, held that the right to privacy and other constitutional safeguards do not preclude the authorities from conducting preliminary investigations under FEMA. The court cited the Supreme Court's ruling in Poolpandi v. Superintendent, Central Excise, which stated that the protection against self-incrimination under Article 20(3) does not apply to preliminary investigations under economic statutes like the Customs Act.

4. Comparison with Analogous Provisions in Other Statutes and Judicial Precedents:
The court examined various judicial precedents, including decisions from the Calcutta High Court and the Supreme Court, which dealt with the scope and application of powers under Section 131 of the Income Tax Act. The court noted that while these precedents emphasized the need for application of mind and relevance of documents, they also recognized the broad investigative powers granted to authorities under economic statutes. The court referred to the judgment in V. Datchinamurthy v. Assistant Director of Inspection (Intelligence), which upheld the wide latitude given to tax authorities in collecting evidence.

Conclusion:
The court dismissed the writ petition, holding that the summons issued by the Enforcement Directorate under Section 37 of FEMA was valid and justified. The court found that the summons did not violate the petitioner's constitutional rights and that the documents requested were relevant to the investigation. The court emphasized that the petitioner could not challenge the summons at the preliminary stage of the investigation and that the authorities were acting within their jurisdiction. The writ petition was dismissed with no order as to costs, and the connected miscellaneous petition was also dismissed.

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