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TMI Blog2024 (7) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... iated companies in and at the residential premises of the Chairman, Ex-chairman, Directors and Executives at the Calcutta, Delhi, Bombay, Madras, Guntur, Hyderabad and Secandrabad covering 36 premises in execution of search warrants, a large number of documents were seized as per Panchanama/Search lists/ Mahazar on the respective dates. 4. That during the course of investigation, documents and information(s) were called for and/or collected from M/s ITC Ltd. and other sources from time to time under Section 33(2) of the Foreign Exchange Regulation Act, 1973 and statements of Directors and Executives of M/s ITC Ltd. and/or other persons under Section 40 of the Foreign Exchange Regulation Act, 1973 on the various dates, were recorded. 5. It further transpired that the Chairman, Ex-chairman and directors of different Divisions of M/s ITC Itd., such as IBD, ILTD, ITD, ITC Bhadrachalam (hereinafter referred to as ITCBPBL) BAT nominee Directors and directors of financial institutions were examined on various dates and their statements were recorded under Section 40 of the Foreign Exchange Regulation Act, 1973. 6. During the course of investigation, it has been revealed that M/s ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt Manager of IBD M/s ITC Ltd. it further transpired that through full filling of counter trade obligation of various companies. M/s ITC Ltd. was able to get service charge ranging from 5% to 11% from time to time and that counter trade business and the profits thereof was periodically reported to Dr. E. Rabindranath, Vice- president (operation) of IBD, M/s ITC Ltd, and that he was told that these information were shared by him with Sri G.K.P. Reddy, the Line Director of IBD, M/s ITC Ltd, and eventually with the chairman of M/s. ITC Ltd. that he was also told that the aforesaid fund was to come back to IBD, M/s. ITC Ltd. Through pricing of products and that by the time he left M/s ITC Ltd. the counter trade profit to the extent of US $ 1.5 Million were transferred to various account of M/s ITC Ltd. Singapore or to the EST A/c of Chitalia. 10. It further transpired from the statements dated 14.1.97 of Sri N. Lakshminarayan, Financial Controller of IBD, M/s ITC Ltd. that he was told by Dr. E. Rabindranath, Vice-president (operation) that IBD Agro was getting certain percentage of counter trade benefit of export deals but the same was not accounted for in their books of accounts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in USA and the balance amount of US $ 1 million approximately was retained with M/s ITC Ltd. subsidiaries in Singapore and or with Chitalias instead of bringing back into India without any general or special permission/exemption of Reserve Bank of India. 14. That by otherwise acquiring and frastering of US $ 2.66 million of EST Group of companies of Chitalias in USA and ITCs subsidiaries in Singapore and by making payment of US $ 1.614 million to NRIs and other towards Bukhara pay off settlement in USA and also by their failure to repatriate US $ 1.046 million into India in the manner as aforesaid without any general or special exemption from the Reserve Bank of India, the said M/s ITC Ltd. appeared to have contravened the provisions of Section 8(1), 9(1)(a), and 16 (1) (b) of the Foreign Exchange Regulation Act, 1973 and thereby rendered themselves liable to be proceeded against under Section 56 of the Foreign Exchange Regulation Act, 1973. 15. It also transpired that Shri R.K. Kutty, Director, of M/s ITC Ltd., Sri G.K.P. Reddy, Line Director of IBD, M/s. ITC Ltd., Dr. E. Rabindranath, Vice-president (operation), Sri K.K. Rao, Manager (Export), Sri M.B. Rao, Export Executive a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings during the pendency of the application under Section 482 of the Code of Criminal Procedure by his order dated 20th August, 2015 decided the said proceedings on merit and dropped all the charges against the petitioner and other persons against whom notice was issued. Petitioner as such, in course of arguments solely emphasised on the issue, that as the petitioner has been exonerated in the departmental/adjudication proceedings and the allegations in the aforesaid proceedings are identical to the allegations made in the criminal proceedings, under such circumstances as per the settled proposition of law, exoneration from the adjudication/departmental proceedings would enure benefit to the petitioner and further continuance of the criminal proceedings would be an abuse of the process of the Court as such the same should be quashed. Learned senior advocate appearing for the petitioner has in detail dealt with the allegations in the show cause as well as the criminal complaint by way of a comparative chart, which for convenience is set out as follows: Para Complaint Dated 31.05.2002 Show Cause Memorandum (SCM) (SCM) XV dated 02.01.1998 Para Para 3 On the basis of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Regulation Act, 1973 and during the course of recording of statements of Directors and Executives of accused No. 1 and/ or other persons under Section 40 of the Foreign Exchange Regulation Act, 1973 on the various dates were recorded; AND WHEREAS, during the course of investigation documents/ information were called for and/ or collected from ITC Ltd., and other sources from time to time under Section 33 (2) of the Foreign Exchange Regulation Act, 1973 and during the course of recording of statements of Directors and Executives of ITC Ltd. and/ or other persons under Section 40 of the said Act on the various dates; Para 2 of SCM XV Para 5 It further transpired that the Chairman, Ex-Chairman, Directors of different divisions of accused No. 1 such as IBD, ILTD, ITD, ITC Bhadrachalam (hereinafter referred to as ITC BPBL), BAT Nominee Directors and Directors of Financial Institutions were examined on various dates and their statements were recorded under section 40 of the Foreign Exchange Regulation Act, 1973; AND WHEREAS, it further appears that the Chairman, Ex-Chairman, Directors of different divisions of ITC Ltd., such as IBD, ILTD, ITD, ITC Bhadrachalam (hereinaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unter Trade to various ITC Ltd companies in Singapore and EST Group of Chitalias in USA and the total amount of US$ 2 Million generated out of said counter trade business was transferred directly by counter trade beneficiaries overseas through Chitalia group of companies in USA; Para 8 It further transpired from the statement of Dr E Ravindranath, Vice President (Operations) of IBD, M/s ITC Ltd that since 1990 they have been doing counter trade business and that he was instructed by Sri GKP Reddy to remit the counter trade fund to M/s ITC Ltd Singapore and EST group of companies in USA and EST Rotterdam A/s and that he pleaded ignorance about purpose for which those amounts were generated out of the counter trade premium and was used by the Chitalia company on behalf of M/s ITC Ltd. and that he was told by the then M/s ITC Ltd chairman Sri K L Chugh that M/s ITC Ltd would get premium ranging from 3% to 3.5% plus interest for 120 days post shipment credit along with counter trade benefit and that benefits would be remitted through overseas offices by adjusting the price and that with the knowledge of Line Directors, the Financial Controller used to communicate the product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dated 25.10.96 of Mr M B Rao, Export Manager of IBD M/s ITC Ltd it further transpired that through fulfilling of counter trade obligation of various companies, M/s ITC Ltd was able to get service charge ranging from 0.5% to 4% from time to time and that counter trade business and the profits thereof was periodically reported to Dr E Ravindranath, Vice President (Operations) of IBD, M/s ITC Ltd and that he was told that these information were shared by him with Sri GKP Reddy, the Line Director of IBD, M/s ITC Ltd and eventually with the chairman of M/s ITC Ltd that he was also told that the aforesaid fund was to come back to IBD, M/s ITC Ltd, through pricing of products and that by the time he left M/s ITC Ltd the counter trade profit to the extent of US$ 1.5 Million were transferred to various account of M/s ITC Ltd Singapore or to the EST A/c of Chitalia; Para 7 of SCM XV Para 10 It further transpired from the statements dated 14.1.97 of Sri N Laksminarayan, Financial Controller of IBD M/s ITC Ltd that he was told by Dr E Ravindranath, Vice President (Operations) and that IBD Agro was getting certain percentage of counter trade benefit of export deals but the same was not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illion in respect of sale of leaf tobacco on which no counter trade profit were realized by ILTD from IBD and ILTD have not been informed of the profit generated through the counter trade done by IBD and that counter trade done by IBD and that counter trade margin varied from time to time any where from 2% to 5% depending on through when counter trade was carried out and profit earned @4% should have been US$ 660,000 on a turnover of US$ 14.4 million ILTD, M/s ITC Ltd. did not receive the trade profit amounting to US$ 660.000; Para 10 of SCM XV Para 13 It transpired from the statement dated 9.10.96 S/Shri Suresh Chitalia and Devang Chitalia of USA and also the subsequent documents sent by them with their letter dated 15.10.96 and Dr E Ravindranath arranged US$ 244000 through EST A/c of Chitalia for Bukhara settlement out of the counter trade benefit and that US$ 1.37 million used for Bukhara settlement by M/s ITC Ltd appears to have been generated out of counter trade benefit as Sri GKP Reddy viz. statements dated 23.10.96 and 24.10.96 admitted to have transferred and utilized about US$ 2 million generated out of counter trade benefit towards Bukhara settlements in USA; It al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... million to NRIs and other towards Bukhara pay off settlement in USA and also by their failure to repatriate US$ 1.046 million into India in the manner as aforesaid without any general or special exemption from the RBI, the said M/s ITC Ltd, appeared to have contravened the provision of Section 8(1), 9(1) (a) and 16 (1)(b) of the FERA 1973, and thereby rendered themselves liable to be proceeded against under Section 56 of the FERA 1973; And whereas by otherwise acquiring and transferring of US$ 2.66 million of EST Group of companies of Chitalias in USA and ITC's subsidiaries in Singapore and by making payment of US$ 1.614 million to NRIs and other towards Bukhara pay off settlement in USA and also by their failure to repatriate US$ 1.046 million into India in the manner as aforesaid without any general or special exemption from the RBI, the said M/s ITC Ltd, appeared to have contravened the provision of Section 8(1), 9(1) (a) and 16 (1)(b) of the FERA 1973, and thereby rendered themselves liable to be proceeded against under Section 50 of the FERA 1973; Para 16 of SCM XV Para 15 It also transpired that Shri RK Kutty, Director of M/s ITC Ltd, Sri GKP Reddy, Line Director of IBD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is exonerated can he ask for dropping of the criminal proceeding on that ground alone. 32. There are authorities of this Court in relation to the Income Tax Act in this regard. The first in the series is the judgment of this Court in Uttam Chand v. ITO [(1982) 2 SCC 543 : 1982 SCC (Tax) 150] in which registration of the firm was cancelled on the ground that it was not genuine and prosecution initiated for filing false return. However, in appeal, the Income Tax Appellate Tribunal reversed the finding and held the firm to be genuine. Relying on that, this Court quashed the prosecution inter alia observing as follows: (Uttam Chand case [(1982) 2 SCC 543 : 1982 SCC (Tax) 150] , SCC p. 543, paras 1 & 2) "1. Heard the counsel, special leave granted. In view of the finding recorded by the Income Tax Appellate Tribunal that it was clear on the appraisal of the entire material on the record and Shrimati Janak Rani was a partner of the assessee firm and that the firm was a genuine firm, we do not see how the assessee can be prosecuted for filing false returns. We, accordingly, allow this appeal and quash the prosecution. 2. There will be no order as to costs." 33. In G.L. Didwania ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 8 (2) read with Section 64(2) of the Foreign Exchange Regulation Act, 1973 cannot be sustained". In the face of the aforesaid finding by the Enforcement Directorate in the adjudication proceedings that there is no contravention of any of the provisions of the Act, it would be unjust and an abuse of the process of the court to permit the Enforcement Directorate to continue with the criminal prosecution." 5. Learned senior advocate appearing for the petitioner by referring to Videocon Industries Limited & Ors. -Vs. - State of Maharashtra & Ors. reported in (2016) 12 SCC 315, drew the attention of the Court to paragraph 17 which categorically observed as follows: "17. ......... In case it is found on merit that there is no contravention of the provisions of the Act in the adjudication proceedings, the trial of the person concerned shall be an abuse of the process of the court. ........." 6. In order to draw the attention of the Court to the changed circumstances which took place in course of pendency of the revisional application before the High Court, reference was made to Joseph Salvaraj A. -Vs. - State of Gujarat & Ors., (2011) 7 SCC 59; Anand Kumar Hohatta & Anr. -Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t deals but the same was not accounted for in the books of accounts." (ii) In the 3rd paragraph of page 14 of the adjudication order it is stated that "On carefully going through the above relied upon documents, the reply to the SC Memorandum submitted, the documents furnished in defence by the Noticee, it may be seen that as far as the cited relied upon documents are concerned, what is relevant and directly related to the allegations in the Memorandum are the ..." It is manifestly clear from a bare perusal of this paragraph that the adjudicating authority did not deem the statement of Shri N. Lakshminarayan contained in Sl. No. 16 of relied upon documents to be "relevant and directly related to the allegations in the Memorandum" 10. According to the Enforcement Directorate the adjudicating authority committed an error in arriving at its finding that the statement of Shri N. Lakshminarayan who was Financial Controller, IBD, ITC Ltd, was not relevant or directly related to the allegations in the memorandum which is an inherent contradiction and it is evident that Shri N. Lakshminarayan possessed relevant information relating to counter trade premium which is basis of the criminal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation of the contention is on the basis of the statement of Mr. N. Lakshminarayan. According to the petitioner the adjudicating order itself reflects that so far as the allegations of the investigating agency to the extent that "M/s ITC Limited exported various agro product commodities viz, cashew and coffee to the extent of Rs. 130 crores during the period 1991-93 against counter trade agreement with an understanding between ITC Ltd., EST Group of Chitalia of USA and various other ultimate overseas buyers that ITC would receive 3 to 4% counter trade premium on the total volume of business" was based upon the statement of Mr. GKP Reddy, Dr. E Ravindranath, Mr. M.B. Rao and Mr. N. Lakshminarayan. The other instance where Mr. N. Lakshminarayan's involvement was concerned were in respect of certain documents which were letters signed by him addressed to various executives of the petitioners. The contents of the said letters were carefully examined by the adjudicating authority and it was held that the same could not be linked with the charges made against the petitioner in the Show Cause Memorandum No. XV dated 2nd January, 1998. The next observation in the adjudicating authority's o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, Mr. Ashutosh Garg and that there was a categorical finding by the adjudicating authority that: "Shri E. Ravindranath in his statement has not admitted any direct knowledge of the counter trade premium but he has stated what was told by Chitalias." 16. The adjudicating authority after assessing whole of the circumstances, the relevant RBI Guidelines, arrived at its finding as follows: "Considering all the points discussed above, it is difficult to place any reliance on the statement of Shri G.K. P Reddy, Shri E. Ravindranath or Shri Ashutosh Garg as they do not find support in any other documents and the statements are also general and vague with no mention of specific contracts and parties involved. The Noticee has also pointed out RBI guidelines regarding limit for commission of export sales and there is indeed logic behind the defence that if they had to make adjustments for any losses overseas, it would have been easier to do it through commission in export sales rather than any adjustment in counter trade premium as alleged. The SCM is also silent on the calculation of US$ 2 million CP allegedly not brought into India and the contracts against the same, counter p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the facts of the present case, rather the case of the petitioner falls within the ambit of paragraph 38(vii) of Radheshyam Kejriwal (supra) case which states as follows:
"38. (vii) In case of exoneration, however, on merits where the allegation is found to be not sustainable at all and the person held innocent, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue, the underlying principle being the higher standard of proof in criminal cases."
21. In view of the aforesaid, I am of the opinion that further continuance of the complaint case being Case No. C-2482/2002 pending before the learned Metropolitan Magistrate, 9th Court, Calcutta would be an abuse of the process of the Court and as such the same is hereby quashed.
22. Consequently, CRR 1175 of 2004 is allowed.
23. Pending connected applications, if any, are consequently disposed of.
24. All parties shall act on the server copy of this judgment duly downloaded from the official website of this Court.
25. Urgent Xerox certified photocopy of this judgment, if applied for, be given to the parties upon compliance of the requisite formalities. X X X X Extracts X X X X X X X X Extracts X X X X
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