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2014 DIGILAW 3189 (DEL)

V. K. Verma & Ors. v. Enforcement Director

2014-12-08

S. MURALIDHAR

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S. Muralidhar, J.:-- 1. These petitions challenge the order dated 23rd April 2002 passed by the learned Additional Chief Metropolitan Magistrate (“ACMM”), Patiala House Courts, New Delhi summoning the Petitioners in Complaint No. 310/1/2002 filed under Section 57 of the Foreign Exchange Regulation Act, 1973 (“FERA”) for failure to pay the penalty amount and the order dated 17th May 2003 passed by the learned ACMM framing notice in respect of the said offence against the Petitioners. 2. The background to the present petition is that a memorandum-cum-show cause notice (“SCN”) dated 25th October 1989 was issued to Continental Construction Limited (“CCL”) and its Directors in respect of purported violations of Sections 9 (1) (a), 19 (1) (d) as well as 29 (1) (b) read with Section 68 FERA. 3. An adjudication order (“AO”) was passed by the Special Director on 15th October 1990 imposing different amounts of penalties upon CCL and its Directors. Aggrieved by the aforementioned AO, appeals were filed by the present Petitioners before the Appellate Tribunal for Foreign Exchange (“AT”). 4. It is the case of the Petitioners that along with the appeals filed on 2nd November 1990, they had also filed applications for stay of the enforcement of the AO i.e. the recovery of penalties. The appeals along with the applications for stay were taken up by the AT on 26th May 1995. It is the case of the Petitioners that on that day the Chairman of the AT heard the appeals and granted stay but that stay order was somehow not communicated. 5. It appears that till 27th September 1999 the ED did not raise the issue of failure to deposit the penalties. However, on that date it issued a letter to CCL and its Directors stating that the penalty amount should be paid within seven days from the date of receipt of the letter. In response thereto, on 3rd January 2000, a reply was sent by CCL to the ED reiterating that the AT had heard the stay applications as well as the appeals on merits on 26th May 1995 and during the course of hearing the AT had stayed the recovery of the penalty. In response thereto, on 3rd January 2000, a reply was sent by CCL to the ED reiterating that the AT had heard the stay applications as well as the appeals on merits on 26th May 1995 and during the course of hearing the AT had stayed the recovery of the penalty. It was, however, mentioned in the said reply “no separate order has been passed for stay as the Board would incorporate the stay order in the decision itself.” The above reply did not satisfy the ED which then proceeded to file on 18th April 2002 complaints against the Petitioners under Section 57 FERA before the learned ACMM for non-deposit of the penalty amount as ordered by the AO. 6. On 23rd April 2002 cognizance was taken by the learned ACMM of the offence under Section 57 FERA and summons were issued to the Petitioners for 12th August 2002. It is at that stage the Appellants again went before the AT with fresh applications reiterating that even earlier they had filed stay applications and that on 26th May 1995 the Chairman, AT had granted stay but that the stay order was not communicated. The fresh stay applications were heard by the AT on 8th July 2002 in the presence of the Deputy Legal Adviser, of the ED. The following order was passed: “Application has been filed for interim stay of the recovery. Facts and circumstances have been mentioned in the application filed today. Let this matter be placed on 26th July, 2002. Till then the recovery proceedings and the impugned order will remain stayed.” 7. Notwithstanding the said order passed by the AT, the proceedings before the learned ACMM continued. On 10th March 2003, the Petitioner appeared before the ACMM and submitted that since the adjudication proceedings had not attained finality and were pending before the AT, the accused should be discharged. On 17th May 2003, the learned ACMM framed notice against the Petitioners under Section 57 FERA. By order dated 15th September 2003, the AT dispensed with pre-deposit in the appeals. By an order dated 29th March 2008, the learned Sessions Judge stayed the proceedings in the complaint case under Section 57 FERA till the disposal of the appeals by the AT. 8. On 30th May 2008, the AT dismissed the Petitioners” appeals against which the Petitioners filed appeals in this Court. By an order dated 29th March 2008, the learned Sessions Judge stayed the proceedings in the complaint case under Section 57 FERA till the disposal of the appeals by the AT. 8. On 30th May 2008, the AT dismissed the Petitioners” appeals against which the Petitioners filed appeals in this Court. On 23rd September 2008, this Court restrained the ED from taking coercive steps against the Petitioners during the pendency of the said appeals. 9. While the appeals before the Court in the adjudication proceedings were pending, the present petitions were filed. On 2nd April 2009 while directing notice to issue in the petitions, the Court exempted the Petitioners from their personal appearance in the trial Court. 10. It may be mentioned that on 4th December 2014, this Court first allowed the appeals filed by the Petitioners in the adjudication proceeding and set aside both the adjudication order dated 15th October 1990, as well as the subsequent order of the Appellate Tribunal. 11. Mr. Mohit Mathur, learned counsel for the Petitioners relied upon the decision of this Court in Navin Kumar Kapoor v. Enforcement Directorate 2009 [2] JCC 850 and submitted that in the facts and circumstances of the present cases, the offence under Section 57 FERA is not attracted. On the other hand, it has been contended for the Respondents that the said decision is distinguishable on facts and would not apply to the present cases. It is submitted that inasmuch as the cognizance of a complaint is taken by the learned ACMM even prior to the formal stay order passed on 8th July 2002 by the AT, the stay order taking cognizance cannot be interfered with and has to be taken to its logical conclusion. 12. The facts relevant to the present cases are that although the AO was passed on 15th October 1990, the order passed by the AT staying recovery of the penalty amount was not passed till 26th May 1995. Then again admittedly the stay order was not formally communicated to the parties. Although the ED appears to have not taken steps to recover the penalties during this entire period, it woke up on 27th December 1999 i.e. more than 9 years after the AO sanctioned the recovery of the penalty amount. Then again admittedly the stay order was not formally communicated to the parties. Although the ED appears to have not taken steps to recover the penalties during this entire period, it woke up on 27th December 1999 i.e. more than 9 years after the AO sanctioned the recovery of the penalty amount. At this time, the Petitioners were under a bona fide belief that the recovery of penalties had been stayed by the AT on 26th May 1995. This was also conveyed to the ED. 13. After waiting for more than two years for the said reply, the ED decided to initiate proceedings under Section 57 FERA at which stage the Petitioners moved the AT again and obtained the formal order of stay on 8th July 2002. 14. Turning to the facts in Navin Kumar Kapoor there was no stay order between 5th March 2002 which was the date of AO in that case and 23rd November 2002 when the AT granted the stay of said order. In between the two dates, the ED had on 26th March 2002 filed the complaint under Section 57 FERA. This Court on those facts held in para 10 as under: “10. It can be said that there was a failure to make payment in terms of the adjudication order only till such time the adjudication order has attained finality. As long as the adjudication order is subject matter of an appeal and an interlocutory order has been passed concerning the payment of penalty, it cannot be said that there was a failure to make the payment of the penalty amount. However, if the adjudication order attains finality, or there is no stay of such order by a superior tribunal and there is no payment of the penalty amount, it can possibly be said that there is a wilful failure to make the payment. However, that is not the position here.” 15. The Court has found that the facts of Navin Kumar Kapoor are similar to the present cases. There it was held that the offence under Section 57 FERA would not be attracted and the present cases where again the Petitioners have acted under the understanding that there was a stay of the recovery of the penalty amount granted by the AT in respect of which again the formal order was passed only on 8th July 2002. 16. There it was held that the offence under Section 57 FERA would not be attracted and the present cases where again the Petitioners have acted under the understanding that there was a stay of the recovery of the penalty amount granted by the AT in respect of which again the formal order was passed only on 8th July 2002. 16. As clarified in Navin Kumar Kapoor if despite adjudication order attaining finality no payment is made of the penalty amount then certainly it could be said that Section 57 FERA is attracted. Here, however, with there being definitely a clear stay order passed on 8th July 2002, there was no justification for the learned ACMM to have proceeded to frame notice on 17th May 2003 against the Petitioners for the offence under Section 57 FERA. It is possible that on the date of taking cognizance of the offence on 23rd April 2002, the ACMM may have been justified in proceeding with the order since the formal order of stay was not yet passed but certainly once that order was passed further proceedings ought not to have been continued. 17. In any event, with the subsequent developments there appears to be no purpose served in keeping the proceedings under Section 57 FERA alive. It is urged by learned counsel for the Respondents that the matters could be sent back to the learned ACMM for appropriate orders to be passed in light of the subsequent developments. The Court sees no purpose being served in doing that except that it would delay the proceedings even further. 18. The Court is satisfied that in the present cases there is no ground made out for continuing the proceedings under Section 57 FERA qua the Petitioners. Consequently, the impugned orders dated 23rd April 2002 passed by the learned ACMM, Patiala House Courts, New Delhi summoning the Petitioners in Complaint No. 310/1/2002 filed under Section 57 FERA for failure to pay the penalty amount and the order dated 17th May 2003 passed by the learned ACMM framing notice are set aside. The petitions are allowed with no order as to costs.