2007 (4) TMI 269 - HC - Customs

Summary

Issues Involved:
1. Quashing of a criminal complaint u/s 482 Cr.P.C.
2. Alleged commission of offences u/s 56 of FERA read with Sub-sections 3 and 4 of Section 49 of FEMA.
3. Exoneration in adjudication proceedings and its impact on criminal prosecution.

Summary:

1. Quashing of a criminal complaint u/s 482 Cr.P.C.:
The petitioner sought quashing of a criminal complaint filed by the Chief Enforcement Officer alleging offences u/s 56 of FERA read with Sub-sections 3 and 4 of Section 49 of FEMA. The petitioner was implicated as the eighth accused, being a Chartered Accountant of M/s. Esam Trading Company, which held 99% of KEPL.

2. Alleged commission of offences u/s 56 of FERA read with Sub-sections 3 and 4 of Section 49 of FEMA:
The case involved M/s. Kudos Exports Pvt. Ltd. (KEPL) importing worthless material claimed to be computer software from M/s. Ganton Limited, London. The investigation revealed that the imported software was pirated and highly over-invoiced. Statements recorded u/s 108 of the Customs Act and u/s 40 of FERA indicated that the transactions were under the exclusive directions of Abhishek Verma, Chairman of Esam India Limited and Director of KEPL.

3. Exoneration in adjudication proceedings and its impact on criminal prosecution:
A show cause notice was issued to the petitioner and other accused, alleging violations of various provisions of law. The Special Director (Enforcement) imposed penalties on several entities and individuals but dropped proceedings against the petitioner after discussing the evidence and materials on record. The findings indicated that the import transactions were with the ulterior motive of transferring foreign exchange surreptitiously. The petitioner contended that his exoneration in the adjudication proceedings nullified the foundation for continuing the prosecution.

The court noted that while adjudication and criminal proceedings can be maintained simultaneously, the exoneration in adjudication proceedings on merits should impact the criminal prosecution if both are based on identical facts. The court concluded that the Special Director's findings, which fully exonerated the petitioner, amounted to a categorical and unambiguous finding that no contravention of provisions of law took place. Therefore, the foundational issue for prosecuting the petitioner ceased to exist.

Conclusion:
The court quashed the proceedings in complaint Nos. 581/1/2002 and 582/1/2002 pending before the concerned court as far as they concerned the petitioner, stating that it would be unjust to permit the prosecution given the exoneration in the adjudication proceedings. The petitions were allowed with no orders as to costs.