TMI Blog2009 (11) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise of the powers vested on them under Section 37 read with Section 131 of the Income Tax Act. In Standard Chartered Bank and Others v. Directorate of Enforcement and Others which arose out of the FERA violation, the Supreme Court spelt out the parameters in entertaining a writ petition against initiation of adjudication proceedings. - the attempt by the petitioner to stall the summons issued by the respondent has to be necessarily rejected - 2429 of 2009, 1 of 2009 - - - Dated:- 24-11-2009 - K. Chandru, J. REPRESENTED BY : S/Shri B. Kumar, SC for S. Ramachandran, for the Petitioner. Shri M. Dhandapani, Spl. G.P., for the Respondent. [Order]. - Heard Mr. B. Kumar, learned Senior Counsel leading Mr. S. Ramachandran for the petitioner and Mr. M. Dhandapani, learned special counsel appearing for the Enforcement Directorate. 2. The short question that arises for consideration is whether the summons issued by the respondent under Section 37 of the Foreign Exchange Management Act, 1999 (for short 'FEMA') should be interdicted by this Court on the ground that there was no application of mind and the documents sought for would amount to a roving enquiry by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Income Tax Officer under the Income Tax Act in terms of Section 131. Such power is available to deal with the discovery of materials in contravention of foreign exchange violations. It was also stated that there is no necessity to disclose the particulars even at the time of summons, which will enable a person to manipulate or conceal the required particulars. The summoning authority need not disclose the nature of the enquiry/ investigation to the person so summoned. The issuance of summons will no way affect the rights of the person, as it is only for the preliminary investigation and for production of documents before the authority for further investigation. It was also stated that the petitioner was well aware that the summons was issued to him with regard to the enquiry, which was initiated on the basis of a case registered by the Director General of Central Excise (Intelligence), Chennai and the summons issued is for a preliminary enquiry and for submission of documents mentioned in the schedule to the summons. 6. Before dealing with the contentions raised by the learned counsel, it is necessary to refer to the Statement of Objects and Reasons for the introduction of FEMA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act has completely been overhauled and the concept of the offence has been removed and replaced only by penalty with a two-tier appellate system. Therefore, at this stage, it is unthinkable to question the summons issued by the Enforcement Directorate under Section 37 of the FEMA. 8. Section 37 of FEMA reads as follows :- "37. Power of search, seizure, etc. - (1) the Director of Enforcement and other officers of Enforcement, not below the rank of an Assistant Director, shall take up for investigation the contravention referred to in section 13. (2) Without prejudice to the provisions of sub-section (1), the Central Government may also, by notification, authorise any officer or class of officers in the Central Government, State Government or the Reserve Bank, not below the rank of an Under Secretary to the Government of India to investigate any contravention referred to in section 13. (3) The officers referred to in sub-section (1) shall exercise the like powers which are conferred on income-tax authorities under the Income-tax Act, 1961 (43 of 1961) and shall exercise such powers, subject to such limitations laid down under that Act." 9. Since Section 37(3) of FEM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely chosen not to apply the concept of summons used either under the Code of Civil Procedure or under the Code of Criminal Procedure, but has chosen to apply analogous provisions found in the Income Tax Act. Therefore, while interpreting the scope and width of Section 37 of FEMA, one cannot apply the concept of summons as available to a Civil Court under the Code of Civil Procedure, only because the power of a Civil Court was conferred on the authorities. 11. The word "summons" is defined in K.J. Aiyar's Judicial Dictionary (10th Ed. 1988) to mean as "a call of authority to appear before a Judicial Officer". In the Oxford Dictionary of Law (2003) published by the Oxford University Press, it is defined as follows :- "A court order to an individual to appear in court at a specified place and time. The term is used in criminal cases for appearance at a Magistrate's Court. Before the introduction of the Civil Procedure Rules in 1999, it was used in civil cases for hearing in the county court and applications to a Judge sitting in chambers about procedural matters prior to the court hearing. Such orders are now made by application notice." 12. Mr. B. Kumar, learned Senior Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also an analogous provision and, therefore, the summons before its issuance must be based on reasons and , calling for all the documents relating to an immovable property owned by the petitioner is nothing but a fishing expedition. In the Barium Chemicals case (cited supra) in paragraph 19, the Supreme Court had also observed as follows :- "19. The fact that an omnibus order was made in respect of all documents relating to the appellants, which were in the custody of the Registrar under the order of this Court, including some of the documents which have not even remotest bearing on the matter covered by the Act, goes to show that there was no due application of the mind by the authority concerned. As mentioned earlier, an essential condition precedent to the making of an order under Section 19(2) is that the authority concerned should have considered it necessary to obtain and examine for the purpose of the Act the specified information, book or other document. The element of due care and attention which is an essential ingredient of the phrase 'considers it necessary' is lacking in this case. As such, the impugned order should be held to be not in conformity with sub-section (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of Barium Chemicals Ltd. v. A.J. Rana (AIR 1972 S.C. 591), in this case I must accept the petitioner's contention that there has been no application of mind by the Income-tax Officer and, as such, the impugned summons was beyond the power under Section 131 of the Income-tax Act, 1961." 16. The said judgment came to be confirmed by a Division Bench of the Calcutta High Court in Dwijendra Lai Brahmachari and Others v. New Central Jute Mills Co. Ltd. and another reported in 1978 Vol. 112 I.T.R. 568. At page Nos. 573 and 574, it was observed as follows :- "From a perusal of Section 131 of the Income-tax Act, we are of the opinion, that the power of the Income-tax Officer under that section is co-extensive with that of a court trying a suit under section 30 of the Civil Procedure Code, read with rules 12, 14 and 15 of Order 11 of the Code. Section 131 empowers the officers mentioned in the section to act for the purpose of the Act, but that cannot be the only limitation set out under Section 131 imposed upon the powers of the officers mentioned in the said section to act in the terms of the said section. All statutory bodies must act for the purposes of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted in 1993 Vol. 204 I.T.R. 454, referred to Dwijendralal Brahmachari's case (cited supra) and in page 458, it was observed as follows :- "Under the circumstances, it appears that the issuance of such notice by the Income-tax Officer was without jurisdiction. It has been averred in paragraph 10 of the writ petition that in respect of proceedings which were pending similar notices were issued by the Income-tax Officer and those had been duly complied with. Under the circumstances, as very rightly observed by the learned court below, the Income-tax Officer was not entitled to exercise such power as a mere cloak for the purpose of making a fishing investigation and a roving enquiry in order to take proceedings under section 1 47 of the Act." 18. But this line of reasoning did not find acceptance by this court. A Division Bench of this Court in V. Datchinamurthy and another v. Assistant Director of Inspection (Intelligence), I.T. Department and another reported in 1984 Vol. 149 I.T.R. 341, set out the purpose of the power conferred on an Income-tax Officer under Sections 131 and 132 of the Income Tax Act. In page 356, V. Sethuraman, J. speaking for the Bench, had observed as foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of Customs Act or similar statute will be completely frustrated, if whims of the person in possession of useful information for the Department are allowed to prevail. The relevant provisions of the Constitution have to be construed in the spirit in which they were made and the benefits thereunder should not be expanded to favour the exploiters engaged in tax evasion at the cost of public exchequer and, therefore, such persons do not have the protection of Article 20(3) of the Constitution. 20. He also referred to the judgment of this Court in T.T.V. Dinakaran v. Enforcement Officer, Enforcement Directorate reported in 1995 (80) E.L.T. 745 (Mad.) for the purpose of stating that under the earlier enactment, viz., FERA, 1973, the attempt to challenge the summons served under section 40 was repelled by this Court. In paragraph 11, it was stated as follows :- Para 11. ..Moreover, if the summons is taken into consideration it is stated therein that the petitioner's attendance is necessary to give evidence and/or to produce documents in an investigation being made by the respondent under the FERA Act. So far as the documents mentioned are concerned, it is mentioned the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned authorities to issue summons for a restricted purpose. It is known that the summons are being issued only to hold the preliminary enquiry and hence it would be too premature for the petitioner to contend that the authority should apply his mind for what purpose the petitioner's attendance is required and indicate the same in the summons. Hence, this contention is also rejected. Para 13. "So far as the third point is concerned that the documents and the investigation must have nexus with each other, as already mentioned while considering the first point, that the documents mentioned are only concerned with the petitioner i.e. his passport, his bank account passbooks relating to his accounts in India and abroad and his property details. The documents 'are' all 'not' related to third parties but related to the petitioner himself. While so, the investigation may be in respect of the petitioner himself or in respect of third person who had some connection with the petitioner. When there is suspicion with regard to the involvement of the petitioner in any of the transactions which are prohibited under the FERA Act, it is open to the authorities to summon him for enquiry. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. 24. In this context, it is necessary to refer to Section 13(2) of the FEMA. The explanation to Section 13(2) defines "property" and Section 13(2)(c) deals with a property which has resulted out of the conversion of that property. Under the said sub-section, the adjudicating authority, adjudging the contravention under sub-section (1) to Section 13, if he thinks fit then in addition to any penalty, which he may impose for such contravention, direct the property in respect of which the contravention has taken place to be confiscated to the Central Government. Therefore, the petitioner cannot contend that he has no obligation to inform the authorities about the nature of properties possessed by him. 25. The Supreme Court in C. Sampath Kumar v. Enforcement Officer reported in 1997 (96) E.L.T. 511 (S.C.) = (1997) 8 SCC 358, while deciding the case in respect of Section 40 of the FERA, held that when a person is summoned and examined under Section 40, it cannot be presumed that a statement will be obtained under pressure or duress. In fact it was held in that case that such a statement obtained does not infringe the constitutional guarantee of protection against self-incrimina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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