Criminal Writ Petition No.1268 of 1999

5th March, 2004

Petitioner Counsel: Mr. GIRISH DESAI, Mr. SUBODH DESAI
Respondent Counsel: Mr. D. S. MHAISPURKAR, Mr. J. C. SATPUTE

Cases Cited:
Uttam Chand Vs. Income-tax Officer, Central Circle, Amritsar, 1982 ITR (133) 909 (S.C.) [Para 12,14,15,17]
G. L. Didwania Vs. Income-tax Officer, 1997 ITR (224) 687 [Para 12,15]
Hira Lal Hari Lal Bhagwati Vs. C.B.I., New Delhi, AIR 2003 SC 2545 [Para 12,19]
Adam Jusab Sameja Vs. Asstt. Collector of Customs, 1990 (48) E.L.T. 330 (Bom) [Para 12,16]
Willi Lemback Vs. Rajan Mathur, XI-1992(3) Crimes 692 [Para 12,20]
P. Jayappan Vs. S. K. Perumal, First Income-tax Officer, Tuticorin, (1984)149 ITR 696 [Para 17]
Smt. Sushila Rani Vs. Commissioner of Income-tax, AIR 2002 SC 823 [Para 19]
S. K. Sinha Vs. S. K. Shingal, (1987)32 D.L.T. 91 (Delhi) [Para 20]

JUDGMENT

JUDGMENT :- In this petition, the petitioner has prayed that the order dated 29/1/1999 passed by the Chief Metropolitan Magistrate in Criminal Case No.208/CW/91 rejecting his application for discharge be quashed and set aside. He has also prayed that the complaint being C.C. No.208/CW/91 pending on the file of the Chief Metropolitan Magistrate, Esplanade, Mumbai, be quashed.

2. The petitioner was working as Superintendent in the Indian Airlines. At the relevant time, the Indian Airlines Corporation was acting as Handling Agent of Emirates Airways. It appears that on 26/6/1989, the officers of AIU Customs noticed a blue coloured zipper bag in the check-up area of Department Module-I, Sahar Airport, Bombay. The bag was brand new and it was in unlocked condition giving rise to suspicion. Enquiry was conducted in respect of the ownership of this bag and one passenger Mr. Ismail Moiddin Shaikh was contacted on the basis of the baggage tag of the said bag by the Customs. He acknowledged the ownership of the said bag, which was checked in at the ticket checking counter of the Airlines. The said Mr. Shaikh was found in possession of Emirates Air Ticket for Mumbai-Dubai-Mumbai. The air ticket showed that the said Mr. Shaikh had one checked-in baggage showing Sr. No.82. The said ticket also showed small torn portion of baggage identification tag affixed to it. Mr. Shaikh admitted the ownership of the said bag as his. The said bag was then examined. Indian currency and foreign currency of various denomination equivalent to Rs.11,19,836.70 was found concealed in the false bottom of the said bag. The currency notes were seized under reasonable belief that they were attempted to be smuggled out of India and so they were liable for confiscation under the provisions of the Customs Act, 1962 read with the Foreign Exchange Regulation Act, 1973.

3. On 26/6/1989, statement of Ismail Moiddin Shaikh was recorded under section 108 of the Customs Act in which he admitted possession of Indian and foreign currency and its recovery and seizure. He stated that he was carrying it on behalf of one Abdul Razak to Dubai on monetory consideration. He stated that Abdul Razak had given him idea about the modus operandi and told him that he would meet him at the airport on the departure side where one person would come and shake hands with him outside the departure hall and that man would take the said bag containing currencies inside the check-in counter and take care of its despatch. As per the instructions, on 26/6/1989 at about 11.a.m. he reached Sahar Airport and waited outside the departure hall of Module-II-A, Mr. Ali Abdul Razak approached him outside the departure hall with a trolley laden with one light blue coloured zipper wheeled bag at about 1.30 p.m. Thereafter, one person in uniform (the present petitioner) came out and shook hand with Mr. Ali Abdul Razak at about 2.00 p.m. Immediately, Mr. Ali Abdul Razak signalled him to follow the said person in uniform along with the trolley. He followed the person in uniform by pushing the trolley laden with the bag and reached the Emirates Airline check-in-counter. He then narrated the role played by the present petitioner. He confirmed that the petitioner had torn the baggage identification tag pasted on the ticket and had also scored out check-in-baggage endorsement. Pursuant to this statement, Mr. Ismail Shaikh and the petitioner were arrested on 26/6/1989 by the Customs at the Sahar Airport.

4. The statement of the petitioner was recorded under section 108 of the Customs Act in which he disclosed that one Mr. Ramachandran had approached him at his residence and told him that one Mr. Anjum would bring one passenger along with zipper hand bag in the early morning of 26/6/1989 and that he should push his bag on flight EK-501 for which he was to be paid Rs.5,000/-. He further disclosed that he was on duty from 8.00 p.m. onwards on 25/6/1989 and at about 2.00 a.m. on 26/6/1989 the said Anjum came to the gate of departure hall along with the said passenger Mr. Ismail Moideen. As per the plan, he met Mr. Anjum and, therefore, he went to Emirates Airlines checked-in-counter along with Mr. Ismail Moideen and the said zipper bag. He took charge of Mr. Ismail Moideen's air ticket and requested Ms. Kalpana Mukherjee to check in Mr. Ismail Moideen for flight EK-501 whose ticket was confirmed. She checked in the said passenger after endorsing the ticket, one piece of 10 Kgs. checked in baggage and she gave the boarding card and air ticket in the petitioner's hand after taking the coupon of the ticket. She also gave him one baggage identification tag number to fix on the said zipper hand bag and affixed the counterfoil of the same on the jacket of the air ticket. He put the baggage identification tag on the said zipper hand bag and placed it on the conveyor belt. Thereafter, he tore the said counterfoil of the baggage tag affixed to the jacket of the air ticket. He went out and gave the same to Mr. Anjum, who told him to see him after the departure of the flight to collect the money. Thereafter, he came in and collected the flight coupon of the said air ticket and after putting it on the said air ticket he cancelled the entry made by Ms. Kalpana Mukherjee and endorsed himself the said air ticket along with coupon as no baggage. He kept back the flight coupon and gave the ticket to the passenger Mr. Ismail Moideen and told him to proceed for immigration and Customs formalities. He further disclosed that before coming into contact with Mr. Anjum, he used to push baggages of passengers going to Dubai by Emirates flight for one Mr. Moosa. He used to get Rs.4,000/- from Mr. Moosa on each occasion. The petitioner was released on bail on 12/7/1989. Immediately thereafter he retracted his statement.

5. On or about November, 1989, the Assistant Collector of Customs (AIU) issued a notice to the petitioner to show cause as to why penalty should not be imposed upon him for allegedly contravening the provisions of sections 113, 114, 118 and 119 of the Customs Act read with provisions of the Foreign Exchange Regulations Act, 1973 (for short, the FERA Act) and the Export Trade Control Act, 1955. The said notice was issued under section 124 of the Customs Act. The petitioner showed cause by filing his statement before the Additional Collector of Customs, Mumbai. The petitioner denied having violated any provisions of the Customs Act or the FERA Act or any Rules made thereunder.

6. The Additional Collector of Customs, Bombay, by his order dated 18/9/1991, inter alia, held that the petitioner has committed violation of the Customs Act and the FERA Act and the Rules framed thereunder. He imposed a penalty of Rs.2,50,000/- on the petitioner.

7. Simultaneously, the petitioner was also issued a show cause notice dated 10/5/1991 by AIU of the Enforcement Directorate. The said notice stated that the petitioner had committed offence under section 8(1) read with section 64(2) of the FERA Act.

8. The Director of Enforcement by his order dated 27/9/1992 quashed the said proceedings against the petitioner. The relevant observations of the Additional Director, Enforcement Directorate, may be quoted.

"The charge against Shri. U. N. Mehta is that he abetted Shri. Ismail M. Sheikh in an attempt to transfer foreign exchange equivalent to Rs.9,69,836.70 and thereby by virtue of section 64(2) of the Foreign Exchange Regulation Act, 1973 contravened the provision of section 8(1). It appears that in formulating the charges against Shri. U. N. Mehta, Shri. Ismail M. Sheikh's attempt to illegally export foreign exchange equivalent to Rs.9,69,836.70 has been construed as tantamounting to an attempt to 'transfer' foreign exchange within the meaning of the expression 'transfer' in the context of section 8(1); I am unable to accept this construction of the term 'transfer' as used in section 8(1) of the Act. The expression transfer of section 8(1) cannot logically be construed as including the physical carriage of currency out of the country."

9. In may be stated here that against this order, no appeal was preferred by the Department.

10. Aggrieved by the order dated 18/9/1991 passed by the Collector of Customs, the petitioner preferred an appeal before the Customs, Excise & Gold (Control) Appellate Tribunal, (for short, "the CEGAT"), Western Region, Bombay. By order dated 11/9/1998, the CEGAT allowed the appeal and quashed and set aside the penalty imposed on the petitioner and stated that Enforcement Authorities acting under the FERA Act had proceeded against the petitioner based on the same evidence and had given a finding that no case is made out under that Act against the petitioner and, hence, the same result should follow in the proceedings under the Customs Act, 1962. It was observed that the order of Additional Director of Enforcement exonerating the petitioner has been passed subsequent to the order dated 18/9/1991 passed by the Additional Collector of Customs, Bombay. It was further observed that when the proceedings before the CEGAT pertain to provisions of the FERA Act read with section 11 of the Customs Act, 1962 and once it is found by the FERA authorities that the petitioner was not liable to be penalised under that Act, penalty under the Customs Act becomes unsustainable. In this view of the matter, the appeal was allowed and the penalty was set aside.

11. In or about June, 1989, respondent 2 - Collector of Customs (Airport), Bombay, had sanctioned the prosecution of the petitioner under the provisions of section 135(1)(a) read with section 135(1)(ii) of the Customs Act, 1962. On the basis of the said sanction, on or about 26/2/1991, a complaint came to be filed before the Chief Metropolitan Magistrate, Esplanade, Mumbai, on charges as sanctioned by the Collector of Customs. On or about November, 1998, the petitioner filed an application for discharge under the provisions of the Code of Criminal Procedure, 1973 (for short, "the Code) before the learned Chief Metropolitan Magistrate basically on the ground that the CEGAT and the Additional Collector, Enforcement Directorate had exonerated the petitioner and, hence, the petitioner could not be prosecuted for the same offence. By order dated 29/1/1999, the learned Chief Metropolitan Magistrate rejected the application. In this petition, the petitioner has challenged the said order and the petitioner has also prayed that the said complaint being C.C. No.208/CW/91 be quashed.

12. I have heard at great length Mr. Girish Desai, the learned counsel appearing for the petitioner. The learned counsel contended that the CEGAT is constituted under the provisions of the Customs Act. It is the final authority to decide all the questions regarding levy of penalty, seizure of goods and related questions. Therefore, if the CEGAT exonerates a person, he cannot be prosecuted on the same charges again. The findings given by the CEGAT must be treated as conclusive of the issue. The learned counsel further contended that even the Additional Director, Enforcement Directorate, has in his reasoned order dated 24/9/1992 exonerated the petitioner. That order was not even challenged by the Department. It must be taken, therefore, that the order of the Additional Director, Enforcement Directorate is being accepted by the Department. Therefore the petitioner's contentions having been accepted by the Department, the prosecution launched on the same charges is liable to be quashed. In his connection, the learned counsel relied on several judgments of the Supreme Court as well as of this court and other High Courts. He relied on the judgments of the Supreme Court in Uttam Chand & others Vs. Income-tax Officer, Central Circle, Amritsar, 1982 ITR Vol.133 pg. 909 (S.C.); G. L. Didwania and another Vs. Income-tax Officer and another, 1997 ITR Vol. 224 pg. 687 and Hira Lal Hari Lal Bhagwati Vs. C.B.I., New Delhi, AIR 2003 SC 2545. He then relied on the judgment of this court in Adam Jusab Sameja Vs. Asstt. Collector of Customs, 1990 (48) E.L.T. 330 (Bom). Reliance was also placed on the judgment of the Delhi High Court in Willi Lemback Vs. Rajan Mathur & Anr., XI-1992(3) Crimes 692. The learned counsel then contended that the learned Magistrate has not applied his mind to the relevant judgments of the Supreme Court as well as of this court and, hence, his order dated 29/1/1999 also deserves to be set aside.

13. As against this, Mr.Satpute, learned counsel for respondent 2 contended that there is a basic difference between adjudication proceedings and prosecution and there is no absolute rule that if a person is exonerated in an adjudication proceedings, the prosecution initiated against him must necessarily be dropped. He submitted that considering the nature of the involvement of the petitioner, the prosecution initiated against him ought not to be quashED.

14. It is necessary to first have a look at the judgment relied upon by Mr. Desai. In Uttam Chand & Others Vs. Income-Tax Officer, Central Circle, Amritsar (1982)133 ITR 909 (S.C.), the registration of partnership under the Income-tax Act, 1961 had been granted and the firm was assessed for several years as a registered firm. For the assessment year 1969-70 the Income-Tax Officer cancelled the registration on the ground that the firm was not genuine. The Tribunal, on an appraisal of the material on record, found that the firm was genuine. The Tribunal set aside the cancellation order passed by the Income-Tax Officer. In the meantime, the Income-Tax Officer had initiated prosecution of the partners of the firm under section 227 of the Income-Tax Act for having filed false return. The Punjab and Haryana High Court, in revision petition filed for quashing the prosecution launched against the firm, held that the Tribunal's finding was not binding on the Criminal Court and cannot be a bar to the prosecution proceedings. On appeal to the Supreme Court, the Supreme Court held :

"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 that 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."

15. In G. L. Didwania and Another Vs. Income-Tax Officer and Another (1997)224 ITR 687, the appellant therein had filed his return for the year 1960-61 showing business income from firms and the assessment was made. The assessment was reopened on the ground that the firm was not a genuine firm. In response to the notice under section 148 of the Income-Tax Act, 1961, the appellant filed a return in the prescribed form showing an income of Rs.29,500/- with a verification signed by him. The Income-Tax Officer assessed the income of the appellant at Rs.52,634/- by adding the income of the firm in question. A prosecution was launched against the appellant on the ground that the appellant had made a false verification in the return. In the meanwhile, on appeal by the appellant against the assessment, the Tribunal held that there was no substantial material to hold that the appellant was the owner of the entire business and deleted the addition of Rs.23,134/- from the total income of the appellant. Thereupon, the appellant filed a petition to the Magistrate praying that the criminal proceedings be dropped. The said petition came to be dismissed. The petition filed by the appellant in the High Court also came to be dismissed and the appellant appealed to the Supreme Court. The Supreme Court allowed the appeal of the appellant observing that the assessing authority's finding that the appellant had made a false statement in respect of the income of the firm in question has been set aside by the Tribunal and, therefore, the criminal proceedings could no longer be sustained. The Supreme Court followed its judgment in Uttam Chand's case (supra).

16. In Adam Jusab's case (supra), contraband god was seized from a vessel. The petitioner therein was a tindel. He was arrested. After the investigation, adjudication proceedings were taken up with notices to all the accused. The Additional Collector of Customs (Prev.) completely exonerated the petitioner holding that except the retracted confession of the co-accused, there was no independent material to connect the petitioner therein with smuggling. In spit of the said order, the Assistant Collector of Customs filed a criminal complaint against the petitioner. On this complaint, process came to be issued. In a petition filed in this court challenging the issuance of process, this court quashed the process on the ground that the petitioner was fully exonerated in the adjudication proceedings.

17. In P. Jayappan Vs. S. K. Perumal, First Income-tax Officer, Tuticorin (1984) 149 ITR 696, in the assessment there was suppression inter alia of several bank accounts, fixed deposits and investments made in the name of wife and daughter. Reassessment proceedings were pending. The question was whether institution of criminal proceedings was premature. The charge against the petitioners therein was under section 276-C and under section 277 of the Income-tax Act. Section 276 pertains to wilful attempt to evade tax and section 277 pertains to false statement in verification. The petitioners therein were also charged under section 193 of the Indian Penal Code (for short, "the IPC") which is giving false evidence in any stage of judicial proceedings or fabrication of false evidence for the purpose of using it in judicial proceedings. The petitioners were also charged under section 196 of the IPC which pertains to using false evidence knowing it to be false or fabricated. Since reassessment proceedings were pending it was urged that in the event of the petitioner being exonerated in the reassessment proceedings, the prosecution may have to be dropped and hence the prosecution may be quashed. The Supreme Court affirmed its observation in Uttam Chand 's case (supra) by saying,. "It is true that as observed by this Court in Uttam Chand Vs. I.T.O. (1982)133 ITR 909, the prosecution once initiated may be quashed in the light of a finding favourable to the assessee recorded by the authority under the Act, subsequently in respect of the relevant assessment proceedings ......". Obviously, keeping in mind the facts before it, namely pending assessment proceedings, the Supreme Court further observed, ...... "but that decision is no authority for the proposition that no proceedings can be initiated at all under section 276-C and section 277 as long as some proceedings under the Act, in which there is a chance of success of the assessee is pending. A mere expectation of success in some proceedings in appeal or reference under the Act cannot come in the way of the institution of criminal proceedings under section 276(C) and section 277 of the Act." Significantly the Supreme Court observed that the criminal court, no doubt, has to give due regard to the result of any proceeding under the Act having a bearing on the question in issue and in an appropriate case it may drop the proceedings in the light of an order passed under the Income-tax Act. The Supreme Court considered a situation where an assessee liable under the Income-tax Act had failed to convince the authorities in the proceedings under the Income-tax Act that he has not deliberately made any false statement or that he has not fabricated any material evidence. It observed that if the decision of the Income-tax authorities is held to be binding on the criminal court, then the conviction of the assessee by the criminal court would follow and, therefore, the criminal court will have to independently judge the evidence before it.

18. It appears from the above judgments that though it is true that generally, if a person is fully exonerated in the adjudication proceedings, a prosecution based on the same evidence and on the same charges is liable to be quashed, no hard and fast rules can be laid down in that behalf. In a given case where adjudication proceedings are finally concluded and the result thereof is in favour of the accused, the prosecution may have to be dropped. The possibility of success in an adjudication proceeding can be no ground for quashing the prosecution. There may be a case where the accused may be charged with grave offences under the IPC apart from those under the Customs Act or the Income-tax Act or the like. In that case, the prosecution may still have to go on.

19. Mr. Desai, however, contended that even where a person is charged for offences under the IPC, if he is exonerated in the adjudication proceedings, the prosecution will have to be quashed. In this connection, he relied on the judgment of the Delhi High Court in Hira Lal Hari Lal Bhagwati Vs. C.B.I., New Delhi, AIR 2003 SC 2545. In my opinion, the facts of that case are entirely different. In that case, the Gujarat Cancer Society (for short, "the GCS") was accused of having evaded the customs duty. During the pendency of the adjudication proceedings, Kar Vivad Samadhan, 1998 Scheme (for short, "the said Scheme") was launched. Under the said Scheme, whoever took benefit of it was granted immunity from prosecution for offences under the Customs Act. The GCS took the benefit of the said Scheme. There was a full and final settlement of the tax arrears. However, a case was registered against it for offences under section 120-B read with section 420 of the IPC. A petition was filed in the Delhi High Court praying that the said complaint be quashed. The said petition was dismissed. The petition travelled up to the Supreme Court. The Supreme Court, after relying on its judgment in Smt. Sushila Rani Vs. Commissioner of Income-tax and another, AIR 2002 SC 823, held that if an assessee takes the option under the said Scheme, he obtains immediate immunity under any proceeding under any and all laws in force. The Supreme Court, therefore, held that the proceedings initiated against GCS under section 120-B read with section 420 of the IPC are liable to be quashed. In my opinion, the proceedings were quashed because under the said Scheme the petitioners therein were granted immunity against prosecution. The ratio of that case will, therefore, have to be confined to its own facts. Depending on the nature of the allegations, the seriousness of the charges and other attendant circumstances, in a given case, though a person is exonerated in adjudication proceedings, the prosecution may still have to go on.

20. However, in this case, there is yet one more circumstance which is in favour of the petitioner. The respondents have not challenged the order dated 27/9/1992 passed by the Additional Director, Enforcement Directorate, whereby the proceedings against the petitioner were quashed. The respondents have, therefore, accepted the finding that the petitioner has not attempted to transfer the foreign currency. If they were to challenge that order, then perhaps the complexion of the present case might have changed. In Willi Lemback's case (supra), where the Delhi High Court was faced with a similar fact situation, while quashing the complaint, the Delhi High Court referred to its earlier judgment in S.K. Sinha Vs. S. K. Shingal & another, (1987)32 D.L.T. 91 (Delhi). It would be advantageous to reproduce the relevant paragraphs from S. K. Sinha's case (supra).

"A decision by the Tribunal in the proper sense of the word therefore, is a decision of a departmental authority drawn on the basis of a set of facts and evidence. The least that can be said is that if the department does not feel aggrieved of the finding of the Tribunal and accepts it as final and correct,then it has to be content with it. I, therefore, fail to understand as to how on the same set of facts and evidence, the department can foist criminal liability upon a person about whom it has accepted that on this set of facts and evidence he cannot even be proceeded against in the adjudication proceedings. In criminal matters the degree of proof required is far more strict. If the departmental authority, has no good case, for purposes of adjudication, it cannot claim to have a good case for purposes of criminal prosecution, particularly when the prosecution is also based on the same set of facts and evidence ..."

21. Since in this case, the adjudicating authorities have exonerated the petitioner and the said orders have not been challenged and have thus assumed finality, it is improper on the part of the respondents to prosecute the petitioner on the same facts. If the authorities were serious, they would have challenged the order passed by the Additional Director, Enforcement Directorate, dated 27/9/1992. They would have also challenged the order dated 11/9/1998 passed by the CEGAT. They seem to have accepted the conclusions of the adjudicating authority that the petitioner is innocent. In such circumstances, the pending prosecution will have to be quashed. Hence the following order.

ORDER

"The complaint being C.C. No.208/CW/91 pending on the court of the Chief Metropolitan Magistrate, Esplanade, Mumbai, is quashed. Needless to say that the order dated 29/1/1999 passed by the Chief Metropolitan Magistrate in the same case also stands quashed."

22. Petition is disposed of in the aforestated terms.

Petition allowed.