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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE C.T. SELVAM
A.N. Dyaneswaran & Another
Versus
The Assistant Director Directorate of Enforcement
Crl.R.C.Nos.572, 601 of 2011 & 1070 of 2010 & M.P.Nos.1,1 & 1 of 2010
Decided On : 07-02-2012
Foreign Exchange Regulation Act - Prosecution of Accused for Offences under Section 9(1)(a) and 9(1)(d) - Summary of Acts and Sections: Section 9(1)(a), Section 9(1)(b), Section 9(1)(d) of the Foreign Exchange Regulation Act, 1973 - The court discussed the provisions of Section 9 of the Act, which restricts payments and receipts by persons in or resident in India to or from persons resident outside India, and the burden of proof under Section 72 of the Act. The court also considered the applicability of directions issued by the Reserve Bank of India under Section 73(3) of the Act and the legal principles established in previous judgments related to the standard of proof required in criminal cases and the framing of charges under the Criminal Procedure Code.
Fact of the Case:
The accused were facing prosecution for alleged violations of the Foreign Exchange Regulation Act, 1973, related to payments and receipts from a person resident outside India. The prosecution alleged that the accused contravened the provisions of Section 9(1)(d) by making payments to a person resident outside India without the exemption of the Reserve Bank of India. The accused contended that the findings of the Income Tax Appellate Tribunal nullified the prosecution case and that the non-examination of the person from whom the alleged payments were received was fatal to the prosecution. The trial court dismissed the petitions for discharge, stating that at the stage of framing charges, it could not go into the probative value of the material, and the petitioners would have a chance to make out their defense in the trial.
Finding of the Court:
The court found that a prima facie case existed based on the evidence presented, including statements from the accused and documents seized, and the burden of proof under Section 72 of the Act. The court also noted that the accused faced distinct offences in each of the cases and that the issue of the validity of the recorded statements would be decided at the time of trial.
Issues: The issues included the applicability of findings from the Income Tax Appellate Tribunal to nullify the prosecution case, the non-examination of the person from whom the alleged payments were received, and the burden of proof under Section 72 of the Act.
Ratio Decidendi: The court held that a prima facie case existed based on the evidence presented, including statements from the accused and documents seized, and the burden of proof under Section 72 of the Act. The court also noted that the accused faced distinct offences in each of the cases and that the issue of the validity of the recorded statements would be decided at the time of trial.
Final Decision: All three revisions were dismissed, and the connected miscellaneous petitions were closed.
1. The petitioners in Crl.R.C.Nos.572/2011 and 601/2011 are the accused in cases pending trial in E.O.C.C.No.251 of 1997 on the file of Additional Chief Metropolitan Magistrate (E.O-1), Egmore, Chennai. They have moved petitions for discharge in Crl.M.P.Nos.2556/2010 and 10/1998 and the revisions are against the dismissal of such petitions under orders dated 24.08.2010 of the Additional Chief Metropolitan Magistrate (E.O-1), Egmore, Chennai.
Crl.R.C.1070/2010:
The petitioner is the sole accused in the case pending trial in E.O.C.C.No.253 of 1997 on the file of Additional Chief Metropolitan Magistrate (E.O-1), Egmore, Chennai. He has sought discharge in M.P.No.12/1998 and upon dismissal under order dated 24.08.2010 of the learned Additional Chief Metropolitan Magistrate (E.O-1), Egmore, Chennai, he has preferred this revision.
2. A sum of Rs.1,36,50,000/- was allegedly received as gift by the Dr.Dharmambal Namasivayam Trust. One Nadadur Varadhan, an NRI, had taken loans on his NRE accounts and the proceeds were "gifted". The 2nd accused informed of being a chartered accountant by qualification and of being a Director of DoMore Tools Accessories, Madras, engaged in the manufacturing of machine tools and of being the first cousin of the said Nadadur Varadhan. He had deposited a total sum of Rs.41,16,529.40 during 1994-95 into the NRI account of Nadadur Varadhan by means of cheques drawn from his (2nd accused) savings bank account. He had further deposited into such NRI account a sum of Rs.54,67,534.25 during 1994-95 by means of cheques of his company DoMore Tools Accessories, Madras. A2 is also said to have paid a sum of Rs.4,22,000/- to the said Nadadur Varadhan as requested by him as also made payments totalling Rs.8,50,000/- to other persons on his instructions.
3. Prosecution informs that A1 is the power of attorney of the Dr.Dharmambal Namasivayam Trust, members of which only are other members of his family. Prosecution alleges that as quid pro quo for the alleged "gift" of Rs.1,36,50,000/-" a sum of Rs.1,45,59,195/- was paid by the 1st accused to Nadadur Varadhan through the 2nd accused. It accuses A1 of having contravened the provisions of Section 9 (1) (d) of the Foreign Exchange Regulation Act, 1973 (hereinafter called as the Act) by making various payments totalling Rs.1,45,59,195/- during 1994-95 to the 2nd accused on behalf of the said Nadadur Varadhan, a person resident outside India, without general or special exemption of the Reserve Bank of India. The charge against the 2nd accused is that he, as a person resident in India and not being an authorised dealer in Foreign exchange has contravened Section 9 (1) (b) of the Act by receiving various payments totalling Rs.1,45,59,195/- during 1994-95 from the 1st accused on behalf of Nadadur Varadhan, a person resident outside India without general or special exemption of the Reserve Bank of India.
4. Before the trial court, both petitioners had contended that the assessment of the sums gifted to the Dr.Dharmambal Namasivayam Trust as the income of the 1st accused successfully had been challenged before the Income Tax Appellate Tribunal. In answering the challenge of the department to the findings of the Income Tax Appellate Tribunal in Tax Case (Appeal) No.150 of 2004, this court under orders dated 03.09.2007 held as follows:
"......From the above it is clear that the Tribunal had given a factual finding and there is no direct involvement of the assessee in the case and the amounts have been assessed under the Income Tax Act. Also, the entire donation amounts have been accounted for in the books of the Trust. Further, there is no evidence available from the Department, to show that the assessee had repaid any money either to Sampath kumar or Varadhan. Hence the additions made in respect of amounts in the name of Dharmambal Namasivayam Trust had been correctly deleted by the Tribunal on the ground that the Trust is a separate juristic person and also the same
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