Allowed

FPA-FE-58/MUM/2009 of M/s. South Indian Bank Ltd. v/s The Special Director Directorate of Enforcement, Mumbai

ATFP25 Jan 2021FPA-FE-58/MUM/2009

Case brief

AI extract

What is this about?

The Appellate Tribunal allowed the appeal against an adjudication order imposing penalties on the appellant bank for alleged abetment under FERA. Despite the hearing being valid, the Tribunal held that the Adjudicating Authority's delay of over two years in delivering the order, without explaining reasons, caused material irregularity and prejudice. Consequently, the order was set aside, and the c

What did the court decide?

The impugned order dated 09.03.2009 is set aside, and the case is remanded to the Adjudicating Authority to decide the case afresh on legal and factual issues, preferably within six months.

FPA-FE-58/MUM/2009 of M/s. South Indian Bank Ltd. v/s The… — Writ and Judicial Review | ATFP (2021)

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APPELLATE TRIBUNAL FOR SAFEMA, FEMA, PMLA, NDPS, PBPT Act AT NEW DELHI

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Date of Decision: 25.01.2021

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FPA-FE-58/MUM/2009

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M/s. South Indian Bank Ltd. … Appellant

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Versus The Special Director Directorate of Enforcement, Mumbai … Respondent

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Advocates/Authorized Representatives who appeared

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For the Appellant	: Shri Madhav Khurana, Advocate Shri Aditya Mukherjee, Advocate Ms. Satya Jha, Advocate Ms. Riya Arora, Advocate
For the Respondent	: Shri Rajeev Awasthi, Advocate
CORAM
SHRI G.C. MISHRA	: ACTING CHAIRMAN

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JUDGMENT

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FPA-FE-58/MUM/2009

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The present appeal has been filed by the South Indian Bank Ltd. (SIBL) against the Adjudication Order No. ADJ/22-27/B/SDE/KNR/2009-FERA dated 09.03.2009 on the following facts and grounds:-

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SIBL is a banking company incorporated under Indian Companies Act with registered office at Trichur, Kerala having its branches throughout India and one of such branch is at Nariman Point, Mumbai-21.

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It is the case of the appellant that the Adjudicating Authority has imposed a sum of Rs. 63 Crores on the allegation of abetment because,

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FPA-FE-58/MUM/2009

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Page 1 of 26

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allegedly the import documents were not handled, with due care as alleged, by the officials then in the branch have failed to follow the procedure as laid down in para 7A.21 of Chapter-7 of Exchange Control Manual, 1993 of RBI.

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It is stated by the SIBL is continuously holding license from the Reserve Bank of India (RBI) for dealing in foreign exchange since 1974. Like many other branches of the SIBL, its branch at Nariman Point, Mumbai-21 is one among them which was designated as a “B” category Branch in the year 1979 for the purpose of dealing with foreign exchange and that the managers of all such branches are vested with necessary powers for allowing foreign exchange transactions, on receipt of necessary import documents and that no specific sanctioned/approval from higher authorities is required to be obtained by such branches for authorizing such payments.

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And that, the Enforcement Directorate initiated adjudication proceedings against certain importers alleging contravention of Section 8(1) of Foreign Exchange Regulation Act, (FERA) 1973 for acquisition of foreign exchange and under Section 8(2) and 8(4) of FERA, 1973 for not bringing into India the goods of the value, quantity and quality for which foreign exchange was acquired by the parties through the appellant bank by seeking remittance on the basis of import documents which are allegedly later found to be not genuine.

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And that, on the basis of investigation the Respondent/ED initially issued a Show Cause Notice (SCN) under No. T-4/4-B/SD/PKA/1997 dated 12.02.1997 and later after repeal FERA, 1973 by Foreign Exchange Management Act (FEMA), 1999, during sunset period, further five SCNs were issued. Out of these SCNs the SCN no. T-4/1/SDE/AKB/2002-SCN-I (SCN-I) dated 04.01.02 two officials of the appellant bank‟s branch were made as noticees.

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FPA-FE-58/MUM/2009

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And that, it is alleged in the said SCN-I that Shri S. Kasturi Rangan, ExManager and Shri Jacob John, Ex-Accountant of the SIBL, Nariman Point Branch, Mumbai appear to have failed to follow the procedures laid down in para 7A.21 of Chapter-7 of Exchange Control Manual (1993 edition) of the RBI to ensure genuineness of import and thereby abetted the illegal transfer of US $ 8,34,83,857.62/- from nine accounts opened with the SIBL‟s Nariman Point Branch, Mumbai and thereby appear to have contravened the provisions of Section 8(3) read with 8(4) again read with Section 64(2) of FERA, 1973.

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And that on 13.2.2002 a corrigendum/addendum was issued vide SCN-I above where under three banks including SIBL‟s, Nariman Point‟s Branch was also impleaded as noticee. The SIBL is not a party to the other SCNs.

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And that, it is alleged in the said SCN-I that Shri S. Kasturi Rangan was the Manager of the SIBL, Nariman Points Branch, Mumbai and during his tenure in the said bank and branch and that during the period July, 1991 to February, 1994, 09 accounts were opened in the name of following entities and remitted huge amount of foreign exchanges to different companies out of India as detailed below:-

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1. M/s. S.R. Diamonds opened on July, 1991 vide account no. 782 opened by Shri Suresh Ratilal Mody, Proprietor of M/s. S.R. Diamonds remitted a sum totaling US $ 44,523/- during the period 16.08.1991 to 27.09.1991 to M/s Lawram Import & Export, Singapore through the aforesaid account.

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2. M/s. Nirmal International opened on July, 1991 vide account no. 783 opened by Shri Nimesh Maganlal Patel, Proprietor of M/s. Nirmal International remitted a sum totaling US $ 7687.50/- during August, 1991 to M/s. Lawram Import & Export, Singapore through the aforesaid account.

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3. M/s. Kumar Exports opened on July, 1991 vide account no. 784 opened by Shri Kumar Kantilal Javeri, Proprietor of M/s. Kumar Exports remitted a sum totaling US $ 80,150/- remitted to M/s. Lawram Import & Export, Singapore through the aforesaid account.

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4. M/s. D.N. Exports opened on July, 1991 vide account no. 785, Shri Dilip Nanalal Shah, Proprietor of M/s. D.N. Exports remitted a sum totaling US $ 44316/- to M/s. Lawram Import & Export, Singapore through the aforesaid account during the year 1991

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5. M/s. R.M. International opened on October, 1991 vide account no. 807, Shri Harshad P. Mehta during the period from 12.11.1991 to 17.12.1991, amounts totaling US $ 501900.70/- remitted to M/s. D.R. Kapadia, Hongkong through aforesaid account against submission of certain Import documents in the assumed name of Shri Rajesh Vijay Mehta, Proprietor of M/s. R.M. International by Shri Harshad Mehta.

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6. M/s. P.M. International opened on December, 1991 vide account no. 820, Shri Hemant D. Barot during the period from 18.12.1991 to 27.11.1992 remitted amounts totaling US $ 2,09,85,242.05/- to M/s. H. Barot, Hongkong in the assumed name of Smt. Smita R. Mehta as Proprietor of M/s. P.M. International.

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7. M/s. Rakesh International opened on July, 1992 vide account no. 890, Shri Anil C. Shah during the period 24.06.1992 to 19.10.1992 remitted amounts totaling US $ 1778934/- to M/s. R. Mehta, Hongkong through the aforesaid account.

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8. M/s. Dee Pee International opened on November, 1992 vide account no. 927, Shri Hemant D. Barot during the period from December, 1992 to June, 1994 acquired foreign exchange to the tune of US $ 3,96,68,773/- and 86,88,489.37/- in the assumed name of Shri Prakash K. Shah, Proprietor of M/s. Dee Pee International to M/s. Gimlee, Hongkong & M/s. K. Bachan, Dubai respectively.

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9. M/s. Chinnubhai Patel & Co. opened on February, 1994 vide account no. 1033, Shri Hemant D. Barot during the period from February-April, 1994 and May-June, 1994 acquired foreign exchange to the tune of US $ 58,84,667/and 57,99,175/- in the assumed name of Shri C. Patel, Proprietor of M/s. Chinnubhai Patel & Co. to M/s. G. Karuvan & M/s. R.P. Import & Export, Hongkong respectively.

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And that, it is the common allegation that these aforesaid remittances of foreign exchange were made against import of goods without importing the goods for which the foreign exchanges were remitted nor the foreign exchange so remitted were surrended to any authorized dealer.

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And that, it is the case of the appellant that out of the aforesaid 09 accounts import documents in respect of 04 accounts namely M/s. S.R. Diamond, M/s. Nirmal International, M/s. Kumar Exports and M/s. D.N. FPA-FE-58/MUM/2009 Page 4 of 26

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Exports were received directly by the appellant bank‟s branch at Nariman Point through the seller‟s bank, Bank of India, Singapore and that the SIBL‟s foreign exchange department of Chennai was making the remittances on behalf of SIBL‟s branch at Nariman Point from 29.07.1991 to 08.06.1994 based on the request and certificate of the Brach certifying that all exchange control formalities are duly complied with as prescribed by RBI, the parties also present postal wrappers copies of the bills of entry duly attested by the Custom Authorities showing that the goods have been cleared from home consumption from the customs.

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For that, the name of appellant bank branch has been added prefixed before the names of its two officials named below by way of corrigendum/addendum dated 13.02.2002 under SCN-I impleading SIBL‟s branch as noticee, inter-alia , alleging that by not exercising due care while handling import documents through the aforesaid 09 accounts, the said S/s Kasturi Rangan and Jacob John (the functionaries of the SIBL at the relevant time) have failed to follow the procedures as laid down in para 7A.21 of Exchange Control Manual, 1993 RBI to ensure genuineness of the import and thereby allegedly abetted the illegal transfer for the aforesaid amount of foreign exchanges totaling to the tune of US $ 8,34,85,657.62/- from the abovesaid 09 accounts with the SIBL. On the basis of aforesaid allegations the SIBL has been charged with contraventions of Sections 8(3) read with 8(4) and 64(2) of FERA, 1973 and violation of para 7A.21 of Exchange Control Manual of RBI.

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And that, the aforesaid allegations against SIBL is leveled without explaining as to how the liability has been arraigned against the SIBL‟s Mumbai Branch, whether direct or vicarious, was not even averred. It could not be “vicarious”, as firstly of Section 68 of FERA, 1973 was not invoked in the charging para 46 in the SCN and secondly nor it could be vicarious as appellant bank could not be responsible by deemed fixation of Section 68 of FPA-FE-58/MUM/2009 Page 5 of 26

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FERA, 1973. Moreover, Sections 8(3) & 8(4) do not contemplate care and caution as an ingredient, much less for the banker for which the SIBL‟s Branch was charged in the SCN by way of corrigendum/addendum.

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And that, within a span of three months from the date of remittance of money from overseas supplier, the importer is required to submit the exchange control copy of the Bill of Entry as evidence of import of goods against the remittances made to show that the goods have actually been released from the customs and that it is not disputed that in respect of the SIBL‟s Branch all the import documents including postal wrapper/custom certified exchange control copies of Bills of Entry had been produced and that it is much after the completion of the transactions that the allegations of such documents being fraudulent or forged surfaced.

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And that, the appellant bank i.e. SIBL has raised several grounds in its appeal memo and also during the course of oral arguments. Similarly, the Respondent ED through its counsel has also made oral arguments. The first ground that has been taken by the appellant that there is a huge delay in delivering the impugned order more than two years after the final hearing of the case by the Adjudicating Authority. It is further contended by the learned counsel for the appellant that the appellant is prejudiced by the delay in delivering the impugned order. It is contended by the learned counsel for the appellant, during the course of argument that, the Adjudicating Authority has failed to address the contentions made by the SIBL on facts and legal issues raised for the legal scrutiny of the impugned order by the Appellate Tribunal.

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(A). For that, there is more than two years delay in passing the impugned order. The last hearing before the Adjudicating Authority took place on 13.12.2006 and order is passed on 09.03.09. The SIBL by relying on the judgments on Hon‟ble Supreme Court, in the case of Bhagwandas Fatechand Daswani & Ors. v/s. H.P. International & Ors.

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FPA-FE-58/MUM/2009

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JT 2000 (1) SC 266 and Kanahaiyalal & Ors. v/s. Anoop Kumar & Ors. JT 2002 (10) SC 98 , sought setting aside of the impugned order on this short ground.

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(B). For that, the provisions of Sections 8(1), 8(3) and 8(4) of FERA, 1973 are not applicable to the authorized dealer. The SIBL is an authorized dealer, as such there is no scope of making allegation of abetment of such offence against such exempted persons. Thus, the adjudication order is illegal and liable to be set aside.

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(C ). For that, the Ld. Adjudicating Authority erred to impose penalty for alleged infraction of para 7A.21 of Exchange Control Manual and that in terms of the law laid down by the Hon‟ble Supreme Court in the case of LIC v/s. Escorts Ltd. AIR 1986 SC 1370 , for infraction or alleged violation of provisions of Exchange Control Manual, the appellant bank cannot be visited with penalty in an adjudication proceedings under FERA, 1973 and that the charge against the appellant bank‟s branch at Nariman Point, Mumbai is that it abetted contravention of Section 8(3) and Section 8(4) read with Section 64(2) of FERA, 1973 whereas while pronouncing the Order imposing Penalty on Mumbai Nariman Point, Branch of the appellant bank, the Ld. Adjudicating Authority committed grave error in citing contravention of Para 7A.21 of Chapter 7 of Exchange Control Manual, 1993 Edition of Reserve Bank of India in addition to Sections 8(3) & 8(4) read with Section 64(2) of FERA, 1973 and that the Ld. Adjudicating Authority erred in imposing penalty on alleged contravention of provisions of Exchange Control Manual, 1993 since adjudication for violation of Exchange Control Manual of RBI is beyond the scope of FERA, 1973 and the same is purely within the sole domain of Reserve Bank of India. Hence order is void abinitio.

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(D). For that, “due care and caution” in handling the import document is not an ingredient of the offences under Section 8(3) & 8(4) of FERA, 1973.

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(E). For that, the Adjudicating Authority has failed to appreciate that the branch of the appellant bank is not a person hence could not be subjected to the adjudication proceedings and that the adjudication proceedings under FERA are quasi-criminal in nature as held by the Hon‟ble Supreme Court in the case of Shanti Prasad v/s. Directorate of Enforcement reported in AIR 1962 SC 1764 (Para 35 ) and that the precondition for initiating criminal or quasi-criminal proceedings is the existence of a “person” living or incorporated. The “person” is defined in Section 11 of Indian Penal Code and in Section 3(42) of the General Clauses Act. Bare perusal of the definitions of the word “person” would make it clear that a “person” for the purpose of initiating or continuance of proceedings should be either a Human person or body of human individuals or a company who is deemed to be a legal person by fiction lf law. The branch at Nariman Point, Mumbai of the appellant bank is not a “person”, hence the whole proceedings and penalty are a nullity in law. The word “person” has not been defined under FERA, 1973 therefore reliance is placed on definition in General Clauses Act under Section 3(42) is relevant and applicable and that the appellant bank is a branch not a legal person as envisaged under Sections 50 & 51 of FERA, 1973 and hence adjudication proceedings and the penalty imposed is a nullity in the eyes of law.

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(F) For that, neither any act nor any omission is referred to which render the order perse unsustainable.

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(G). For that, every employee is obliged to “duty of care” in the task assigned to him and that he is himself responsible for the probable consequences of his acts and towards a degree of foresight and in case such employee in its operation lacks it the employer cannot be made liable for such illegal acts of the employee and that the Adjudicating Authority has not at all focused his attention to this basic issues rendering the order prima facie unsustainable and that performance of legal act could not have been permitted by the appellant bank or the branch and such act is the individual act of the official and cannot be presumed to have been committed under the colour of his office because such service jurisprudence make the employers protective umbrellas of criminals therefore the order of penalty imposed by the Adjudicating Authority is erroneous and misconceived and the order is a nullity.

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(H). For that, it is not permissible for the Adjudicating Authority to twice take the notice of the contravention i.e. once on 04.01.2002 and thereafter on 13.02.2002 as after taking the notice the Adjudicating Authority had become functious officio and could not have taken notice and added Mumbai branch of the bank as notice on 13.02.2002 and that the corrigendum/addendum is permissible to correct only “clerical errors” as envisaged under Section 65 of FERA, 1973 as it amounts to review of the earlier order dated 04.01.2002 and that the corrigendum being illegal the whole proceedings became void ab-initio.

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(I). For that, there is no provision in FERA, 1973 to add a person as noticee after issuance of show cause notice, the “corrigendum/addendum” is erroneous in law.

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(J). For that, the appellant‟s bank branch was victim and comrade in crime with the fraudsters as abetters, as alleged in the SCN.

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(K) For that, the banker who operates on good faith and not being an expert to detect forgery had no means to detect the forgery at the time of dealing or handling the documents and that there was no provision then of referring the Bill of Entry copy for verification to custom authorities during the relevant time i.e. during the period 1991 to 1994. It is only subsequently that RBI issued a detailed circular ADMA/4/96 dated 27.02.1996 incorporating a provision for sending Bills of Entry at random basis to custom officials for verification to prevent recurrence of fraudulent transactions by an unscrupulous party. This being so no penalty ought to have been imposed on the bank.

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(L). For that, the statements recorded under FERA and relied upon by the Adjudicating Officers will not reveal any instigation, conspiracy, intentional aid with full concealment of facts or positive act on the part of the appellant bank to facilitate the alleged contravention and that the documents which are said to be forged were also inspected by RBI and they also could not detect any discrepancy and that the parties have also submitted letters allotting importer-exporter code from DGFT, import licenses issued in their name/transferred in their name at the time of allowing the transactions and the addresses given therein and the addresses in the records maintained at the branch are one and the same. This being so it would be highly improper to suspect or doubt a public document when apparently it did not justify such suspicion.

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(M). For that, no provision of FERA, 1973 provides or entrust the authority on the officials of Enforcement Directorate empowering them to determine forgery nor can such forgery be proved by statements. Hence, the Adjudication Order, on the exemption of forged import documents, undetermined by the Competent Authority, the conclusion is untenable.

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(N) For that, most of the transactions mentioned in the SCN were carried out before 31.12.1993, the date when the Exchange Control Manual, 1993 was published. Hence, the order is dictate of non application of mind.

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(O). For that, non-intentional facilitation does not come within the mischief of abetment. Reliance has been placed in the case of Shri Ram & Ors. v/s. State of U.P. reported in AIR 1975 SC page 175.

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(P). For that, the Adjudicating Authority failed to record any reasons or findings as to how the branch of the appellant bank abetted the contravention of Sections 8(3) read with Section 8(4) read with Section 64(2) of FERA, 1973. On recording of reasons is very fatal as the base of allegation is abetment.

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(Q). For that, in the absence of determination that the company has committed the offence, the charge of contravening the offences cannot be framed and that in the instant case the Authority as well as the Ld. Adjudicating Officer has sought to apply the provisions of Section 68 of FERA, 1973 reversely, in as much as, from the alleged negligence of the official, the company is made liable which is erroneous and contrary to the concept of vicarious liability.

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(R). For that, the Adjudicating Authority has never discussed anywhere the merit of the case, so far as the appellant bank is concerned and that the bank deal in documents and not in goods as per the provisions contained in Uniform Customs Practices (UCP) for collection Bills and that the appellant bank has not made any unlawful gains for carrying out the transactions.

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The Respondent vide the common written submissions submitted that:-

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(i). For that, the banks as South Indian Bank Limited, State Bank of Hyderabad, State Bank of Bikaner in Jaipur and UCO Bank and Dena Bank have preferred the present appeals against the Adjudication order of the Special Director Mumbai dated 9^th March, 2009. Special Director through the aforesaid order Special Director imposed penalty on 66 Defendant including banks, its erring officials and individuals.

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(ii). For that, apart from individuals the above said banks were charged for contravention of Section 8(3) read with Section 8(4) and read with section 64(2) of the Foreign Exchange Regulation Act, 1973. The Special Director broadly based its order on the basis of the following illegal acts resulting into the contraventions:-

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a. The Banks without verifying the genuineness of the import documents allowed foreign remittances.

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b. forged import documents submitted accepted by Banks

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c. The Bill of entry (B/E) filed were fictitious.

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d. No import have taken place as confirmed by the Custom Authorities

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e. The remittances were utilized for the purposes other than for which it was granted.

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f. the foreign exchange remittances outside was lost to the country irretrievably and

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g. the banks failed to follow the procedure laid down in Para 78,21 of Chapter 7 of Exchange Control Manual 1993 of the RBI to ensure genuineness of imports and thereby abated the illegal transfer of amounts.

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(iii). For that, the present case is of very serious nature in which the individuals adopting a specific modus/operandi in connivance in the banks and its offices opened various banks account in different names on the basis FPA-FE-58/MUM/2009 Page 12 of 26

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of forged and fabricated documents and thereafter transferred huge cash in the said banks account and thereafter with the active connivance with the banks and its officials by submitting forged import documents transferred the money and remitted the amount in foreign currency to various individuals abroad and the Special Director after thorough, examination of the documents seized from the searches of the houses of certain individuals which are also named in the order and also against whom the penalties are imposed and going from the testimony as well as scrutiny of the documents have imposed penalties on the banks its employees and the individuals who were part of this entire illegal act and the total penalty imposed in the present case has approximately more than 3 thousand crore. This fact itself shows the seriousness of the case and the loss of exchequer to the Government of India. The modus/operandi have been explained in details in the order of Adjudicating Authority in Para-68 of the order.

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(iv). For that, the banks and individuals were duly representated through its counsels during the Adjudication Proceedings which could be ascertain from the order of Adjudicating Authority UCO Bank presented its case before Adjudicating Authority in Para‟s - 95, 82, 83, 206, similarly, State Bank of Hyderabad in Paras 116, 124, South Indian Bank, Para-210 and Dena Bank at Paras – 211 in impugned order have been discussed in details including other banks also and role of its official. After affording the opportunity and after being heard the Adjudication Authority have given finding Paras – 222 with regard to UCO Bank and its official and P-231m, 234, South Indian Bank P-234, 235, P-236 UCO Bank, P-248 Dena Bank, Similarly, of other banks and its officials.

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(v). For that, the banks has filed their synopsis and mostly everybody has taken the similar grounds to challenged the present order which are:-

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-No. i delay in pronouncing the judgment

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-No. 2 no right to cross examination

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-No. 3 bank juristic person their cannot be proceeded against

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and banks were impleaded as a notices by way

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corrigendum/addendum and not permissible.

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The bankers/officials have not taken due care and caution is not an ingredient of abatement.

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False documents is not forged document.

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8(3) read with section 8(4) applies to persons other than an authorized dealer and banks being an authorized dealer cannot be preceded.

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No penalty can be imposed for alleged violation of the provisions of Exchange Control Manual.

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Bank is a victim and cannot be panalizes for negligence and lack of due care of its employees.

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(vi). For that, the plea of cross examination was addressed before this Tribunal and the arguments were based on division bank judgment of Delhi High Court in case of Shahid Balwa and the said judgment by which the Divisions bank has allowed the cross examination during the Adjudication proceeds was challenged before Hon‟ble Supreme Court by way of filing Special Leave to appeal before Hon‟ble Supreme Court and the order of the Divisions bank of Delhi High Court has been stayed vide its order dated 10.09.2013, copy of which enclosed with the submission. The Adjudicating Authority did consider the issue of cross examination and even issued summons for cross examination in respect of Sanjay Udashi, Shri A.K. Narayn CEO, Mumbai. However, they did not appear before the Adjudicating Authority and the Adjudicating officer refused cross examination by giving details has mentioned in Para-226 of the impugned judgment and summoning of witnesses for cross examination in Para-190 of the impugned judgment. This issue is otherwise left with no consequences in view the stay granted by the Hon‟ble Supreme Court and not only this the Hon‟ble Supreme Court in case M/s. Telestar Travels Pvt. Ltd., v/s. Special Director of Directorate of

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Enforcement JT (2013) 3SC 167 has also dealt with this issue and also denied the right to cross examination.

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(vii). For that, the issue of delay in pronouncing the order of Adjudication order more than two years is fatal according to the appellant. However, Hon‟ble Supreme Court in the case of M/s. Telestar Travels Pvt. Ltd., case has examined the issue in details and relying upon the earlier judgment of the Hon‟ble Supreme Court in Rambali State of U.P held that the delay in pronouncing the judgment will not render the judgment illegal since no prejudices has been caused. M/s. Telestar Travels Pvt. Ltd. & Ors. v/s. Special Director of Enforcement JT 2013 (3) SC 157.

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Elaborating that submission Mr. Diwan argued that since the adjudication order had been passed by the authority concerned nearly 3 ½ years after the matters was finally argued before it, the requirement of affording an opportunity of being heard to the appellants arising under Section 51 of FERA was not satisfied. It is submitted that the appellants had been prejudiced on account of delayed pronouncement of the adjudication order as the pronouncement of the order as the pronouncement of the order by the Authority had been delayed.

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On behalf of respondent, it was per contra argued by Mr. P.P. Malhotra, learned Additional Solicitor General, that the order passed by the Adjudicating Authority was fully complaint with the provisions of Section 51 read with Section 30 of the Rules under FERA and could not be treated as an ex parte order by any stretch of reasoning. He also contended that mere delay in the pronouncement of adjudication order was not enough to justify setting aside of the order if the same was otherwise found to be legally valid and unacceptable. No prejudice was, at any rate, caused to the appellants by the delay, in Ram Bali v/s. State of U.P [JT 2004 (Suppl-1) SC 211 : (2004) 10 SCC 598] to argue that delay in the pronouncement was not itself sufficient to declare the order to be bad in law. Our answer to that question is in the negative. The decision of this Court in Ram Bali V/s. State of U.P. (Supra) is one such case where the Court repelled a similar argument and declared that delay was not a ground by itself otherwise specifically dealt with the matter in issued. The Court at best put to caution requiring a careful and closer scrutiny also the order is not found to be wrong in any way it may decline to set aside the same.

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(viii). For that, as far as issue of bank being juristic person could not be held proceeded against the Hon‟ble Supreme Court has dealt with the issue in detail in its judgment, Standard Chartered Bank & Ors. V/s. Directorate of Enforcement Other, AIR 2006 Supreme Court 1301 as well as in another judgment Standard Chartered Bank & Ors. V/s. Directorate of Enforcement and Other, 2005(4 SCC 513) in view, of the findings there is nothing left which could sustained the argument raised by the appellants.

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Standard Chartered Bank & Ors. Vs. Directorate of Enforcement Other AIR 2006 COURT 1301

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There does not appear to be any reason to confine the operation of S. 68 only to a prosecution and to exclude its operation from a penalty proceedings under S. 50 of the Act. Since the essential ingredient of both is the contravention of the provisions of the Act. A company is liable to be proceeded against under both the provisions. S. 68 is only a provision indicating who all in addition to company can be proceeded against when the contravention is by a company or who all should or can be roped in, in a contravention is by a company. Section 68 only clarifies the nature and mod of proceedings when the contravention of any of the provisions of the Act is by a company, whether it be by way of adjudication to impose a penalty or by way of prosecution leading to imprisonment or a fine;

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There does not appear to be any reason to confine the operation of S. 68 of the Act. Merely because the expression „punished‟ is used, it does not mean that it is confined to a prosecution under S. 56, since the element that attracts the imposition of penalty and the prosecution is the same, namely, the contravention of any of the provisions of the Act. Moreover, there is nothing in the Act which, confines the expression punished‟ only to a punishment for a criminal prosecution an imposition of a penalty can also be a punishment. If a person, includes a company. There is no reason to confine S. 68 to a prosecution only, because the company as a person is liable to be proceeded against under S. 50 and S. 56 of the Act, though in a criminal prosecution the punishment by way of imprisonment can be imposed only on the officer or officers of the company referred to in S. 68 of the Act. S. 68 only indicates the manner in which a contravention by a company can be

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dealt with and it is a general provision relating to a contravening company, which is to be proceeded against whether it be under S. 50 or under S. 56, the fact that a fine alone can be imposed on a company in a prosecution under S. 56 of the Act. Cannot be ground to confine the operation of S. 68 to criminal prosecutions alone under the Act.

¶116

It is true that the entire penalty that may be imposed on adjudication, is capable of being recovered from the company itself. But that does not mean that it cannot be recovered from the officer in charge of the company or those who connived at or were instrumental in the contravention of the provisions of the Act by the company.

¶117

Use of expression „offence‟ in the marginal heading of S. 68 is not indicative of the expression „being confined to a criminal offence alone‟ because an offence in the context of the Act is really a contravention of any of the provisions of the Act referred to in S. 56.

¶118

Standard Chartered Bank & Ors. V/s. Directorate of Enforcement Other (2005) 4 Supreme Court Cases 530

¶119

In as much as all criminal and quasi-criminal offences are creatures of statute, the amenability of the corporation to prosecution necessarily depends upon the terminology employed in the statute.

¶120

In the case of strict liability, the terminology employed by the legislature in such as to reveal an intent that guilt shall not be predicated upon the automatic breach of the statute but on the establishment of the actus reus, subject to the defense of due diligence. The law is primarily based on the term of the statutes. In the case of absolute liability where the legislature by the clearest intendment establishes an offence where liability arises instantly upon the breach of the statutory offence. It is a case of automatic primary responsibility. Therefore, as regards corporate criminal liability, there is no doubt that a corporation or company could be prosecuted for any offence punishable under law, whether it is coming under the strict liability or under absolute liability.

¶121

All penal statutes are to be strictly construed in the that the court must see that the thing charged as an offence is within the plain meaning of the words used and must not strain the words on any notion that there has been a slip that the thing is so clearly within the mischief that it must have been intended to be included and would have been included if thought of. All penal provisions like all other statutes are to be fairly construed according to the legislative intent as expressed in the enactment.

¶122

The distinction between a strict construction and a more free one has disappeared in modern times and now mostly the question is „what is true construction of the statue‟ here, the legislative intent to prosecute corporate bodies for the offence committed by them is clear and explicit and the statute never intended to exonerate them for

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being prosecuted. It is sheer violence to common sense that the legislative intended to punish the corporate bodies for minor and silly offences and extended immunity of prosecution to major and grave economic crimes. As the company cannot be sentenced to imprisonment, the court cannot impost that punishment, but when imprisonment and fine is the prescribed punishment the court can impose the punishment of fine which could be enforced against the company, such a discretion is to be read into the section so far as the juristic person is concerned.

¶126

There is no blanket immunity for any company from any prosecution for serious offences merely because the prosecution would ultimately entail a sentence of mandatory imprisonment. The corporate bodies, such as a firm or company undertake a series of activities that affect the life, liberty and property of the citizens. Large-scale financial irregularities are done by various corporations. The corporate vehicle now occupies such a large portion of the industrial, commercial and sociological sectors that amenability of the corporation to a criminal law is essential to have a peaceful society with stable economy.

¶127

There is no immunity to the companies from prosecution merely because the prosecution is in respect of offences for which the punishment prescribed is mandatory imprisonment and fine. The views expressed by the majority in Velliappa Textiles are overruled on this point.

¶128

(ix). For that, the common dictionary meaning of Abetment is – approved, support permission, encouragement, communication, knowledge, association, tacit consent. That the issue with regard to abatement as stated by the appellant that due care and caution is not a ingredient of abatement. However, the appellant failed to show accept by playing with the words the facts of this case and the manner in which the entire modus/operandi followed the bank and its official have knowingly acted along with individuals in this entire crime. The bank officials admitted this fact, in their statement that they have help the persons by gaining financially which completely establishes the ingredient of abatement as per the statement of the officers they have knowingly assisted the individuals in perpetuating the illegal activity. Now the questions with regard to the innocence of the bank itself concern his falsified, the period of illegal activities running from 1991 to 1995 during which number of transactions and remittances has taken place the audit of banks are done quarterly and against these transaction bank had received commission how could this be possible that such huge transactions and FPA-FE-58/MUM/2009 Page 18 of 26

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commissions received by the bank could escape the knowledge of the bank by not questioning that how and in what manner this transaction has taken place and from where the huge commissions have been received this fact itself proof that there was a tacit consent of the banks in perpetuating and allowing this activity for their gain and benefits. The dictionary meaning of abatement is to approved, encourage and support. These fact clearly prove that the banks not only approves these transaction but continued supporting for more than 5 years. Till this fraud was detected the Hon‟ble Supreme Court in Ranjeet Singh, Bram Singh Sharma v/s State of Maharasthra and Other (2005) 5 SCC 295 has defined the meaning of abatement and establishes that the bank and its officers not only added illegal Act but also abated. As far as Section 8(3) and 8(4) is concern the provision contemplate to unauthorized possession of foreign exchange by persons other than and authorized dealer and the plead of the appellants that the banks are authorzed dealer hence, the provision cannot be invoked against the banks. The contentions of the appellants are not sustainable as the Bank and individuals are charged for contriving u/s 8(3), 8(4) read with section 64(2) to contravene or abet any contravention of, any of the provisions of this Act or any rule, directions or order made here under shall for the purposes of this Act be deemed to have contriving provisions rule, directions or order as the case may be.

¶130

In view of this it is respectfully submitted that the bank has added and abated the crying and same with including the individuals who have given shape to the commission of this crime. The provisions can be read in isolation and it is the totality of facts and circumstances, which establishes the active add and abatement by the bank and its official in perpetuating this crying.

¶131

(2005) 5 Supreme Court Cases 294

¶132

RANJITSING BRAHMAJEETSING SHARMA v/s. STATE OF MAHARASHTRA

¶133

Criminal Laws,- Maharashtra Control of Orgainzed Crime Act, 1999 (30 of 1999) – Ss. 2(1) and 3 (2) – „Abet‟-Meaning – to be construed in the light of

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definition under Ss. 107 and 108 IPC-Expression „communication or association‟ in S. 2(i)(a)(i)-Meaning and Scope-it should have a nexus with commission of organized crime.

¶137

The interpretation clause as regard the expression „abet‟ does not refer to the definition of abatement as contained in Section 107 IPC. It refers to such meaning which can be attributed to it in the general sense with grammatical variations and cognate expressions. However, having regard to the cognate meaning. The term may be read in the light of the definition of these words under sections 107 and 108 IPC. The inclusive definition although expansive in nature, „communication‟ or „association‟ must be read to mean such communication or association which is in aid of or render assistance in the commission of organized crime.

¶138

(x). For that, another contention of the appellant that the banks were included by way of corrigendum/addendum which is not permissible as provided under the statute under 65 of foreign exchange regulation act, this argument cannot be sustained in view of the express provisions in the statute. The plea with regard to issuance of corrigendum/addendum and the plea of the appellant that only clerical error could be corrected by way of corrigendum/addendum as envisaged u/s. 54 of Para 6 find no strength in view of the provisions of FEMA which came into effect after FERA repealed and u/s 28(2)(f) read with section 16(5) of FEMA clearly gives powers to authority to review its in order. The Hon‟ble Supreme Court in AIR 2011 Supreme Court 1725 in the case title Thrimailiya Chemical Pvt. Ltd. v/s. Union of India and other have clearly held:-

¶139

that right of appeal may be a substantive right but the procedure for filing the appeal including the period of limitations cannot be called a substantive right and aggrieved person cannot claim any wasted right claiming that he should be governed by the odd provisions pertaining to period of limitations. Procedural law is retrospective meaning thereby that it will apply even to Act or transactions under the repealed Act.

¶140

(xi). For that, the plea of the appellant that false documents is contrary to the basic definition of the forgery as it is an admitted case that the forged import documents were submitted to the banks and the bank without verifying its genuineness release remittances in foreign currency to the

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individuals abroad defiantly documents were forged and on the basis of same huge foreign remittance were made abroad.

¶144

(xii). For that, it is further, submitted that the Exchange Control Manual 1993 would also be applicable with the illegal transactions have taken place after 1993 also as per the admission of the appellant which further shows the seriousness that even the bank has deliberately and intentionally did not follow the Exchange Control Manual 1993 issued by the Reserve Bank of India to stop such illegal transactions. This is a clear example wherein the bank has not only abated the crime but also added full cooperation in committing the same. In the present case and from the overall facts as well as conduct of the bank it is proved that the Banks possessed both mans-rea as well actus-rea in perpetuating this crime and squarely false with in the definition of abatement.

¶145

(xiii). For that, in view of the above, the order of the Adjudication is lawful and prove the crime beyond reasonable doubt the penalty imposed by the Adjudication officer considering the gravity of the facts and circumstances, and the magnitude of the amount which is involved is less and the same could be also be enhanced to do the complete justice and the appeals of the appellant may also be dismissed with exemplary cost.

¶146

During the course of argument the learned counsel for Respondent has referred to various paragraphs of the impugned order and submitted that no “due care and caution” has been taken by SIBL even though large cash have been deposited in SIBL‟s Branch at Nariman Point, Mumbai even after periodical audit and therefore the penalty levied against SIBL is justified.

¶147

Heard both sides and perused the impugned order, written submissions filed by both the parties, documents and the judgments relied on by both sides. The first question raised by the learned counsel for the appellant is the delay of more than two years in passing the impugned order. In furtherance it FPA-FE-58/MUM/2009 Page 21 of 26

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is also submitted that the appellant is prejudiced as none of the legal questions and factual issues raised before the Adjudicating Authority has been dealt with by the Adjudicating Authority to examine the legality of the impugned order by this Appellate Tribunal and that the appellant is prejudiced by such delay. The appellant has relied on the judgments passed by their lordships of Hon‟ble Supreme Court in the matter of Bhagwandas Fatechand Daswani & Ors. v/s. H.P. International & Ors. JT 2000 (1) SC 266 and Kanahaiyalal & Ors. v/s. Anoop Kumar & Ors. JT 2002 (10) SC 98 and the judgment passed by Hon‟ble High Court, Mumbai in the matter of EMCO Ltd. V/s. Union of India reported in 2014 SCC Online BOM 4962.

¶149

In the aforesaid judgments their lordships of Hon‟ble Supreme Court, in the matter of Bhagwandas Fatechand Daswani & Ors. v/s. H.P. International & Ors. JT 2000 (1) SC 266, have held that:-

¶150

“We, therefore, on this short question, set aside the judgment under appeal without expressing any opinion on the merits of the case and remit the case to the High Court for deciding the appeal afresh, on merits. In view of the fact, that the matter has been pending for a considerable period of time, we request the High Court to decide the matter expeditiously, if possible, within six months.”

¶151

In the aforesaid judgments their lordships of Hon‟ble Supreme Court in the matter of Kanahaiyalal & Ors. v/s. Anoop Kumar & Ors. JT 2002 (10) SC 98 while referring to Shri Bhagwandas Fatechand Daswani (Supra) case held that:

¶152

9. In the light of what is stated above, in our view, the impugned judgments cannot be sustained. Further, as stated above, the arguments were heard in November, 1990 and the High Court pronounced the judgments on 7th May, 1993. This Court in Bhagwandas Fatechand Daswani and Ors. v. HPA International and Ors. , dealing with the contention that the long delay in delivery of judgment is sufficient to set aside the judgment under appeal without going into this broad question, set aside the judgment under appeal on the ground of delay in delivery of judgment without expressing any opinion on the merits of the case and remitted the case to the High Court for deciding the appeal afresh on merits. While doing so this Court observed, “However, it is correct to this extent that a long

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delay in delivery of judgment gives rise to unnecessary speculations in the minds of parties to a case. Moreover, the appellants whose appeals have been dismissed by the High Court may have the apprehension that the arguments raised at the Bar have not been reflected or appreciated while dictating the judgment - nearly after five years..... We, therefore, on this short question, set aside the judgment under appeal.” In this view also the judgment of the High Court under challenge cannot be sustained.

¶156

10. In the circumstances, the impugned judgments are set aside. The appeals are allowed. We remit these matters to the High Court for disposal in accordance with law, keeping in view the observations made above.

¶157

Their Lordships of Hon‟ble High Court of Bombay in the matter of EMCO Ltd. V/s. Union of India have held

¶158

that:-

¶159

6. We have heard the learned counsel for the parties. In the present case, the personal hearing was concluded on 17 September, 2012 and the written submissions were filed by, the Petitioner on 24 September, 2012. The impugned order was passed on 31 July, 2013 i.e. almost nine months after the hearing. This delay has resulted in the Petitioner‟s submissions of goods bring returned within 180 days not being considered. This evidence was sought to be brought on record before the Tribunal but not allowed. However, this Court by its order dated 14 September, 2010, while remanding the matter to the Adjudicating Authority, had left all issues open. Therefore, the above evidence, which was available before the Adjudicating Authority and also relied upon by the Petitioner at the time of hearing, was not considered in the impugned order, then the same can only be attributed to the delay in passing the order. This delay does appear to have caused prejudice to the Petitioner. This Court in the matter of Shivsagar Veg. Restaurant (Supra) has, after considering the various decisions of the Apex Court, laid down that undue delay (four months) in delivery of judgment by the ITAT after the hearing is in itself sufficient to set aside the impugned order without considering the merits of the order. The Apex Court in the matter of Anil Raj (supra) has reiterated the observations made by an earlier Bench of Apex Court in R.C. Sharma V. Union of India, (1976) 3 SCC 574, which reads as under:-

¶160

“ … … … Nevertheless an unreasonable delay between hearing of arguments and delivery of judgment, unless explained by exceptional or extraordinary circumstances, is highly undesirable even when written arguments are submitted. It is not unlikely that some points which the litigant considers

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important may have escaped notice. But, what is more important is that litigants must have complete confidence in the results of litigation. This confidence tends to be shaken if there is excessive delay between hearing of arguments and delivery of judgments. ”

¶164

(emphasis supplied)

¶165

7. In view of the above, it is very clear that the authorities under me Act are obliged to dispose of proceedings before them as expeditiously as possible after the conclusion of the hearing. This along would ensure that all the submissions made by a party are considered in the order passed and sure that the litigant also has a satisfaction of noting that all his submissions have been considered and an appropriate order has been passed. It is most important that the litigant must have complete confidence in the process of litigation and that his confidence would be shaken if there is excessive delay between the conclusion of the hearing and delivery of judgment.

¶166

8. Therefore, in this case we find that the delay by the Adjudicating Authority in rendering its order nine months after the conclusion of the hearing has caused prejudice to the Petitioner as it has not considered the evidence produced in respect of return of goods within 180 day‟s.

¶167

9. We have not relegated the Petitioner to the alternate remedy of filing an appeal under the Act, as we find that the impugned order is against the „parameters laid down by this Court in Shiv Sagar Veg. Restaurant (supra).

¶168

10. In the aforesaid circumstance‟s, we set aside the impugned order dated 31 July, 2013 and direct the Additional Commissioner of Central Excise and Customs to pass a fresh order after granting the Petitioner an opportunity of personal hearing. Needless to add that the resultant adjudication order would be passed within reasonable time after the conclusion of the hearing granted to the Petitioner.

¶169

On the other hand the Respondent ED relied on the judgment passed by Division Bench of Hon‟ble Supreme Court in the matter of M/s. Telestar Travels Pvt. Ltd. & Ors. v/s. Special Director of Enforcement JT 2013 (3) SC 157 wherein it is held that:

¶170

“We have the instant case heard the matter at considerable length for a careful examination of the adjudication by the Authority and that of the Appellate Tribunal and the High Court to examine whether it suffers from any illegality or material irregularity causing prejudice to the appellants. We are of the view that no such illegality

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or irregularity has been demonstrated. That apart delayed pronouncement of the order by the Adjudicating Authority was not urged as a ground of challenge before the Tribunal or the High Court both of whom have remained silent on this aspect. Even on the question of prejudice we find the contention of Mr. Diwan to be more imaginary than real. The argument regarding prejudice is founded on the plea that the appellants could not place some of the documents which they have now placed before this Court for consideration. It is further admitted that no application for permission to produce these documents was filed by them before the Adjudicating Authority no matter they could have done so if they really indeed needed to place reliance on such documents Mr. Malhotra was, in our view, justified in contending that the hearing had been concluded by the Adjudicating Authority in keeping with the requirement of Section 51 and Rule 3 of the Adjudication Rules under FERA. The first limb of the contention urged by Mr. Diwan, therefore, fails and is hereby rejected.”

¶174

In the judgment passed by Hon‟ble Supreme Court in the matter of M/s. Telestar (Supra) the fact was also that “that apart delay pronouncement of order by the Adjudicating Authority was not urged as a ground of challenged before the Tribunal or the High Court both of whom have remained silent on this aspect.”

¶175

In this particular appeal of SIBL, it has been urged that the appellant bank is prejudiced as none of the contentions on facts and legal issues have been addressed and it is prejudiced by delay in pronouncement of the judgment by the Adjudicating Authority. It also appears that the impugned order is suffering from material irregularity in causing prejudice to the appellant. In view of the above the M/s. Telestar (Supra) judgment relied on by the Respondent ED is distinguishable.

¶176

On the other hand the judgments, cited by the appellant on the delay pronouncement of the judgment, are applicable in the present facts and circumstances of the case. The Adjudicating Authority has also not explained, in the impugned order, the reasons of such a huge and undue delay in delivering the order.

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In view of the above, in the peculiar facts and circumstances of the case pertaining to this appeal, without going into the merit of the case and without opining on merit, on the short question of delay in delivering the order, the appeal filed by M/s. South Indian Bank Ltd. is allowed. The impugned order dated 09.03.2009 passed on Show Cause Notice bearing no. T-4/1B/SDE/AKB/2002-SCN-I dated 04.01.2002 read with corrigendum dated 13.02.2002, limited to the present appellant, is set-aside and the case is remanded to the Adjudicating Authority for deciding it afresh in accordance with law, preferably within a period of six months from the date of appearance of the parties before the Adjudicating Authority. The Adjudicating Authority shall decide the case relating to the present appellant on all legal and factual issues after affording opportunities to both the parties i.e. M/s. South Indian Bank Ltd. and the Enforcement Directorate. The parties are directed to appear before the Adjudicating Authority on or before 26^th February, 2021.

¶180