2015 (8) TMI 187 - SC - FEMA

Violation of provisions of Sections 47(1) & (2), 9(1)(c) and 8(1) - Permission from RBI for advertisement of Kingfisher brand name on racing cars during Formula-I World Championships - Failure to appear against the summon issued - Held that - Complaint is maintainable if there is default in not carrying out summons lawfully issued. The averments in the complaint show that the summons dated 21st December, 1999 were refused by the appellant and earlier summons were not carried out deliberately. - From the tenor of the letter, it appears that it was not a case of mere seeking accommodation by the appellant but requiring date to be fixed by his convenience. Such stand by a person facing allegation of serious nature could hardly be appreciated. Obviously, the enormous money power makes him believe that the State should adjust its affairs to suit his commercial convenience. The fact that the adjudicating officer chose to drop the proceedings against the appellant herein does not absolve the appellant of the criminal liability incurred by him by virtue of the operation of Section 40 read with Section 56 of the Act. The offence under Section 56 read with Section 40 of the Act is an independent offence. If the factual allegations contained in the charge are to be proved eventually at the trial of the criminal case, the appellant is still liable for the punishment notwithstanding the fact that the presence of the appellant was required by the adjudicating officer in connection with an enquiry into certain alleged violations of the various provisions of the Act, but at a subsequent stage the adjudicating officer opined that there was either insufficient or no material to proceed against the appellant for the alleged violations of the Act, is immaterial. An appeal against the conclusion of the adjudicating officer that the proceedings against the appellant herein for the alleged violation of the various provisions of the FERA Act are required to be dropped has not even attained finality. Admittedly, such an order of the adjudicating officer confirmed by the statutory appellate authority is pending consideration in an appeal before the High Court. Though, in our opinion, the result of such an appeal is immaterial for determining the culpability of the appellant for the alleged violation of Section 40 read with Section 56 - entire approach adopted by the appellant is a sheer abuse of the process of law - Decided against Appellant.

Issues Involved:
1. Validity of the summons issued under Section 40 of the Foreign Exchange Regulation Act, 1973 (FERA).
2. Alleged willful default by the appellant in responding to the summons.
3. Composite charge under Section 219 of the Criminal Procedure Code.
4. Impact of the repeal of FERA and subsequent exoneration by departmental authorities on the criminal proceedings.
5. Interpretation of Sections 40 and 56 of FERA in the context of the appellant's non-compliance.

Detailed Analysis:

1. Validity of the Summons Issued under Section 40 of FERA:
The appellant was summoned by the Chief Enforcement Officer under Section 40 of FERA to produce his passport and correspondence related to a transaction with M/s. Benetton Formula Ltd. The appellant failed to appear in response to multiple summonses, leading to a complaint being filed under Section 56 of the Act. The Supreme Court noted that Section 40 empowers officers to summon any person necessary for investigation and mandates compliance with such summons.

2. Alleged Willful Default by the Appellant:
The appellant contended that his non-appearance was not willful, citing various reasons for his absence on the specified dates. However, the Court observed that the appellant's explanations indicated a preference for his convenience over legal obligations, reflecting an attitude of non-cooperation. The Court emphasized that such conduct, especially from a person of significant commercial standing, was unacceptable and demonstrated a deliberate avoidance of legal processes.

3. Composite Charge under Section 219 of the Criminal Procedure Code:
The appellant argued that the composite charge for multiple defaults violated Section 219 of the Criminal Procedure Code. The High Court partially accepted this argument, deleting the charge related to the first date but upheld the charges for subsequent defaults. The Supreme Court agreed with the High Court's view, emphasizing that the appellant could contest the matter at the trial court.

4. Impact of the Repeal of FERA and Subsequent Exoneration:
The appellant argued that the repeal of FERA and his exoneration by departmental authorities should lead to the quashing of criminal proceedings. The Supreme Court rejected this argument, noting that the criminal liability for non-compliance with summons under Section 40 read with Section 56 is independent of the outcome of the substantive investigation. The Court distinguished this case from the precedent cited by the appellant, stating that exoneration in the substantive offense does not absolve the appellant from the criminal charge of non-compliance.

5. Interpretation of Sections 40 and 56 of FERA:
The Court reiterated that Sections 40 and 56 must be interpreted purposively to ensure compliance with the law. The provisions aim to facilitate effective investigation and enforcement of foreign exchange regulations. The Court highlighted that non-compliance with summons undermines the investigation process and is punishable under Section 56, irrespective of the outcome of the substantive inquiry.

Conclusion:
The Supreme Court dismissed the appeal, affirming the validity of the summons and the charges against the appellant. The Court imposed exemplary costs of rupees ten lakhs on the appellant, emphasizing that the appellant's approach was an abuse of the legal process. The judgment underscores the importance of compliance with legal summons and the independent nature of criminal liability for non-compliance under FERA.

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