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Wednesday, January 7, 2015

CRIMINAL APPEAL NO. 14 OF 2015 [ Arising out of SLP (Crl.) No.7067 of 2014] K.K. Kuda ... Appellant versus Chief Enforcement Officer, Enforcement Directorate & Anr ..Respondents


                        IN THE SUPREME COURT OF INDIA
      CRIMINAL APPEAL NO.  14    OF 2015
[ Arising out of  SLP (Crl.) No.7067 of 2014]

K.K.  Kuda                        ...     Appellant


Chief Enforcement Officer,
Enforcement Directorate & Anr   ..Respondents

                               J U D G M E N T


Leave granted.

This appeal  is  preferred  against  the  Judgment  and  Final  Order  dated
02.09.2013 passed by the High Court of Delhi in Criminal Miscellaneous  Case
No.5096/2006, whereby the High  Court  dismissed  the  petition  seeking  to
quash the complaint filed under Section 56 of  Foreign  Exchange  Regulation
Act, 1973.

The first respondent herein issued Show Cause Notice dated 21.01.1994  under
Section 51 of FERA, 1973 against ANZ  Grindlays  Bank,  the  Account  Holder
and three bank officials for having credited   Non-convertible  Rupee  Funds
of Rs.1,15,00,000/-   (Rupees One Crore and Fifteen Lakhs only)  during  the
period August to December,  1991   received  from  Moscow,   into  the  Non-
Resident (External) Account of Dr. P.K. Ramakrishnan  in   contravention  of
Section 6(4), 6(5)   read with Section 49 of  FERA,  alleging  that  it  had
taken place  with  the  consent,  connivance  of  and  attributable  to  the
negligence on the part of the said Officials.   However,   by  letter  dated
10.7.2001 addressed to the appellant, the respondent  ordered  that  charges
relating to 'consent' and 'connivance' shall stand  deleted  from  the  Show
Cause Notice dated 21.01.1994.

In  the  meanwhile,  Opportunity  Notice,  dated  12.5.2002,   followed   by
Complaint dated 29.5.2002, was filed under Section 56 of FERA, 1973  against
the persons abovenamed   for having  credited  Non-convertible  Rupee  Funds
into the Non-Resident (External) Account of the person  concerned,  alleging
contravention of Section 6(4), 6(5) read with S.49 of  FERA    having  taken
place with the consent, connivance of and  attributable  to  the  negligence
of the Officials and the Additional  Chief  Metropolitan  Magistrate,    New
Delhi, took cognizance of the complaint for the offence under Section 56  of
FERA on 29.5.2002 itself and issued summons  to  the  accused.   Challenging
the same, the appellant herein and other Officials sought for  quashing  the
complaint proceedings in their  petition  in  Crl.M.C.No.5096/2006,  on  the
file  of  the  High  Court,  Delhi.   While  the  matter  stood  thus,   the
adjudicating authority passed the final Order dated 14.5.2010  holding  that
the Officials of the Bank have not consented or connived in the  performance
of the official duties and they were  negligent.   The  High  Court  by  the
impugned order held that the prosecution of the  accused  persons  shall  be
confined to the negligence on their part and not for they  having  consented
or connived in the commission of the said offence.  The said order is  under
challenge before us.

Mr. C.A.Sundaram,  learned  Senior  Counsel  appearing  for  the  appellant,
strenuously contended that the allegations of  consent  and  connivance  had
been dropped by the respondent vide  letter  dated  10.7.2001,  despite  so,
complaint  was  lodged   on  the  allegations  of  consent,  connivance  and
negligence on the part of the officials of the Bank  suppressing  the  facts
and the respondent is guilty of suppressio veri and suppressio facto and  on
this ground itself, the complaint is  liable  to  be  quashed.   It  is  his
further contention  that  the  complaint  pertains  to  the  allegations  of
consent, connivance and negligence on the part of the officials  for  having
credited Non-convertible Rupee Funds of the  Account  Holder  concerned  and
the cause of action disclosed therein is composite and  inseparable  and  it
cannot be quashed in part and    continuance of  the  complaint  proceedings
on the allegation of negligence would tantamount to abuse of the process  of
law.  He also  contended  that  taking  advantage  of  Sunset  clause  under
Section 49 of Foreign Exchange Management Act, 1999, without disclosing  the
issuance  of  reply  by  the  appellant  to  the  Opportunity  Notice,   the
respondent in  an  arbitrary  and  mechanical  manner  filed  the  complaint
without enclosing a single original document  and  in  the  absence  of  any
material, the learned Magistrate could not have applied his mind  and  taken
cognizance and summoning order is bad in law.

Per  contra,  Mr.  V.Shekhar,  learned  Senior  Counsel  appearing  for  the
respondents, contended that the complaint consists of three  components  and
even eschewing the allegation of consent  and  connivance,  the  prosecution
can be continued on the allegation of negligence and the impugned  order  is

We carefully considered the rival submissions and perused the documents.

The crediting of Non-Convertible Rupee Funds in the Non-Resident  (External)
Account of  Dr.  P.K.Ramakrishnan  happened  during  the  period  August  to
December, 1991.    Three officials of ANZ Grindlays Bank  were  involved  in
it and Show Cause Notice was issued by Respondent No.1 on 21.1.1994  to  the
Bank as well as the Officials for contravention of Section 6(4),  6(5)  read
with Section 49 of FERA, alleging that it had taken place with the  consent,
connivance of and  attributable  to  the  negligence  on  the  part  of  the
Officials.    It is true that  the  respondent  by  letter  dated  10.7.2001
ordered that the charges relating to 'consent' and 'connivance' shall  stand
deleted from the Show  Cause  Notice.   Though  FEMA  came  into  force   on
1.6.2000, Sunset clause under Section  49  of  the  said  Act  provided  for
filing of complaints under the FERA, 1973 till 31.5.2002.  Taking  advantage
of it, the Respondent No.1  issued  Opportunity  Notice  to  all  the  three
officials  on  12.5.2002  and  lodged  the  complaint  on  29.5.2002.    The
Additional Chief Metropolitan Magistrate, New Delhi, on the  same  day  took
cognizance of the complaint for the offence under Section  56  of  FERA  and
issued summons.

In spite of having dropped the allegations of  'consent'  and  'connivance',
the respondent in their complaint levelled  allegations  of  all  the  three
components, namely, consent, connivance and negligence.  The  contention  of
the appellant that the cognizance was taken on irrelevant consideration,  is
to be countenanced.   There was suppression and also  material  omission  in
non-mentioning of reply sent by the appellant to the Opportunity Notice,  in
the complaint.  Further, to substantiate the  averments  in  the  complaint,
not even a single original document was enclosed.  It is not  known  as  to,
on what material the Additional Chief Metropolitan  Magistrate  applied  his
mind,  while  taking  cognizance  of  the  statutory  offence.   Though  the
allegation of negligence can be independently looked into,  considering  the
standard of proof in criminal prosecution,    we are of the  view  that,  in
the present case, the continuance of prosecution against  the  appellant  is
not tenable in law and the proceedings are liable to be quashed.

The appeal  is  allowed  and  the  impugned  order  is  set  aside  and  the
proceedings  in  Criminal  Complaint  No.704/2002,  on  the  file   of   the
Additional  Chief  Metropolitan  Magistrate,  New  Delhi,  insofar  as   the
appellant is concerned are quashed.

                                                           (V. Gopala Gowda)


New Delhi;
January 06, 2015

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