TMI Blog1969 (10) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... were dismissed which by the Madras High Court by a common judgment against these two appeals by certificate have been filed. The complaint which is in respect of the acquisition of 88913.09 Swiss Kronars in contravention of the Act states that on reliable information received by the Assistant Director of Enforcement, Madras that A 2 was utilising his position as Managing Director of the Rayala Corporation Ltd. in acquiring foreign exchange illicitly, on December 20, 1966, a search was conducted of the premises of the Said company in the presence of A-2, Jaga Rao and the legal advisor of the company one Sita Ram. During the search certain documents were recovered and seized, one of which was a letter dated the 25th March 1965 in Swedish language from the Associated Swedish Steels A.B. Sweden, as ASSAB to A with the enclosures. The Rayala Corporation Private Ltd. was a concern manufacturing Halda typewriters for which purpose certain materials were being imported from Sweden. The firm with which initially the transactions were being entered into was known as A.B. Atvidabergs, later known as Facit AB, of which A 1, a Swedish national, has been the export manager. It is alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sections 4(3), 5 (1 ) (e) and 9 of the Foreign Exchange Regulation Act and Rule 132A of the Defence of India (Amendment) Rules, 1964 and further that between August 1963 and 1966 A 1 and A 2 in pursuance of the said agreement did commit acts in contravention of sections 4 (3) , 5 (1) (e) and 9 of the Foreign Exchange Regulating Act and Rule 132 A of the Defence of India (Amendment) Rules, 1964 and thereby committed offence punishable under sec. 120 B of the Indian Penal Code, read with sections 4(3), 5 (1) (e) and 9 of the F.E.R. Act and Rule 132 A of the Defence of India (Amendment) Rules, 1964 . The complaint also refers to the fact that C.C. No. 8736 of 1968 had already been filed against the Rayala Corporation Private Ltd. In view of this reference it is necessary, for a better appreciation of the issues involved in this petition, to give a brief account of the earlier proceedings taken by the Directorate of Enforcement in this regard. It appears that the earlier notice sent by the Enforcement Directorate dated the 25th August 1967 was for the contravention of the Act in respect of 244,713.70 Swiss Kronars alleged to have been deposited in A 2's bank account, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directorate served a notice for adjudication on A 1 in his capacity as a director of the, Rayala Corporation which was purported to be in continuation of the previous adjudication notice dated August 25,'1967 issued to the company under s. 23 C of the Act. These allegations were also denied by A 1 on the 30th January 1969 and on 5th February 1969 A 1 filed a writ petition in this Court for the issue of a writ of habeas corpus. It is however unnecessary to narrate the various stages of this and the subsequent. petitions for directing A 1's release and for according him permission to leave this country for Sweden. The subsequent writ petition filed by him after the withdrawal of the first one filed on 5th Feb- ruary 1969, came up for hearing along with these criminal appeals and this Court on the 10th September 1969 while allowing the writ petition to be withdrawn passed a consent order permitting A 1 to depart from India provided he furnishes ban guarantee in the foreign exchange equivalent of ₹ 1,50,0001- in Swedish Kronars and on his undertaking to appear before the Chief Presidency Magistrate, Madras or any other Magistrate to whom the complaint case might be transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears on the enquiry made by A 2 at the instance of the Enforcement Directorate from Swenska Handels Banken, Stockholm, that in fact there is no account is alleged either in the name of the Rayala Corporation or in the name of the Managing Director of the Rayala Corporation, that is, A 2. there would be no basis for the complaint; and thirdly, the agreement alleged does not either come under s. 120B I.P.C. or would amount to a contravention of any of the provisions of the Act including s. 21(1) thereof. It would not be necessary at this stage to go into these questions because what has to be seen is whether, assuming the facts as stated in the complaint to be true, A 1 and A 2 could be charged with the offences specified therein. The answer to this question must depend upon the nature of the part which A 1 agreed to play in the acquisition of the foreign exchange under which agreement he is said to have continued to participate in the conspiracy by rendering, help to A 2 in acquiring foreign exchange even after 21st of January 1964 and also till after the amendment of s. 4(1 of the Act. Under s. 120B there must be an agreement between two or more persons to commit an offence or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany was to credit Pratap's (A 2) account with 40 per cent of the over-invoice price. If these facts are established, they certainly amount to a contravention of cl. (1) and cl. (3) of s. 4 which provide that where any foreign exchange is acquired by any person other than by any authorised dealer for any particular purpose or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or as the case may be, fail to comply with any condition to which. the permission granted to him' is subject, and where any foreign' tax. change so acquired cannot be so used or. as the case may be the condition cannot be complied with, the said person shall without delay sell the foreign exchange to an authorised dealer. Now it is alleged that A 2 Pratap has in breach of this condition on which foreign exchange was released to the Rayala Corporation to pay the actual cost of the goods has not only not complied with the conditions on which the permission was granted but has also committed default in not selling the foreign exchange so acquired by him without delay to an autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal conspiracy similar to s. 120B. Section 21 does not in terms deal with an agreement to commit in offence or a legal act in an illegal way but merely provides that an agreement or contract by itself ought not to evade or avoid the provisions of the Act. The agreement entered into between ASSAB and A 2 Pratap would, it proved, come within the mischief of S. 21 ( 1 ) but the agreement such as the one alleged to have been entered into between A 1 and A 2 does not itself evade or avoid any of the provisions of the Act, rules or directions. The words directly or indirectly do not take in any agreement to do illegal acts in future. It now remains to be seen whether the alleged agreement which A 1 and A 2 arrived at in Stockholm in 1963 and again in Madras in 1965, would, if established, amount to a criminal conspiracy. The first of the offences defined in S. 120A Penal Code which is itself punishable as a substantive offence is the very agreement between two or more persons to do or cause to be done an illegal act or a legal act by illegal means subject however to the proviso that where the agreement is not an agreement to commit an offence the agreement does not amount to a conspirac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subsequent watching over the account and sending or bringing a state- ment of the account of A 2 relating to the acquisition of the foreign exchange does not amount to an offence. The agreement which constitutes an offence, it is said is the one between A 2 and ASSAB. The subsequent act of A 1 was neither necessary to acquire nor does it further the acquisition of the foreign exchange in contravention of the provisions of the Act and is therefore not an offence under s. 120B of the Penal Code. This argument would postulate that the several acts which constitute it can be split up in parts and the criminal liability of A 1 must only be judged by the part he has played. It appears to us that this is not a justifiable contention, because what has to be seen is whether the agreement between A 1 and A 2 is a conspiracy to do or continue to do something which is illegal and if it is, it is immaterial whether the agreement to do any of the acts in furtherance of the commission of the offence do not strictly amount to an offence. The entire agreement must be viewed as a whole and it has to be ascertained as to what in fact the conspirators intended to do or the object they wanted to ach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sweden. A 2 Pratap one of the conspirators also in furtherance of that conspiracy obtained foreign exchange invoices which were over priced with a view to acquire the same in Sweden. It would, therefore, appear that on the allegations contained in the complaint A 1 and A 2 could be charged with an offence under s. 120B. These appeals are accordingly dismissed with a word of caution that nothing that has been stated here should be taken as establishing any of the facts required to constitute the offence which if the prosecution case has to be sustained must be proved at the trial in accordance with law. Mitter, J. These two appeals by certificate arise out of a common judgment of the Madras High Court in Crl. M.P. 469/ 1969 and Crl. M.P. No. 621/1969, the object of both being to quash the complaint in C.C. No. 5438 of 1969 on the file of the Court of the Chief Presidency Magistrate, Egmore, Madras. Cr. M.P. 469 of 1969 was by Lennart Schussler while Cr. M.P. 621/ 1969 was by M. R. Pratap. The complaint before the Chief Presidency Magistrate was filed on February 16, 1969 by the' Director of Enforcement against Schussler and Pratap under s. 120-B of the Indian Penal Cod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice dated November 4, 1967 from the Directorate to Pratap under s. 23(3) of the Act for prosecuting him under the Act in respect of 88,913- 09 Krs. On November 13, 1967 Pratap replied to the show cause notice dated August 25, 1967 denying the allegations. On November 15, 1967 the Directorate, sent show cause notices to the other Directors of the Corporation and its Manager in continuation of the notice dated 25th August asking them to show cause why adjudication proceedings should not be instituted. On 29th November 1967 Pratap denied the allegations in the notice dated 4th November. On 20th January 1968 notice was issued by the Director of Enforcement to the Corporation to show cause why it should not be prosecuted for the violation of the Act in respect of 88,913-09 Sw. Krs. On March 16, 1968 a revised adjudication show cause notice was issued by the Director of Enforcement to the Corporation and Pratap superseding the notice dated August 25, 1967 and informing, them that they were prosecuting the Corporation and Pratap for 88,913-09 Sw. Krs. and adjudicating in respect of 155,801 Sw. Krs. On March 20, 1968 the Director of Enforcement filed a complaint against the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 30, 1968 under the Foreigners Act on condition that Schussler should move for bail before the Chief Presidency Magistrate and then apply for permission to the Foreigners Registration Officer to leave India. The Chief Presidency Magistrate granted ball to Schussler on two sureties but his application for permission to the Foreigners Registration Officer was rejected on the objection raised by the Additional Director, Enforcement. On April 30, 1969 Schussler filed Writ Petition No. 144 of 1969 for the issue of a writ of habeas corpus directing the respondents, the Foreigners Regional Registration Officer and others, to allow him to leave the territory of India and for other reliefs. This Writ Petition came up for hearing before this Court along with the above Criminal Appeals Nos. 113 and 163 of 1969 on 8th September. On 10th September the Court ordered that the Foreigners Regional Registration Officer would permit him to leave India on condition of his giving a bank guarantee for 155,800 Sw. Krs. and on his undertaking to appear before the Chief Presidency Magistrate Madras or any other Magistrate to whom the complaint case might be transferred at the time of disposal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sler agreed with Pratap to continue to help him and accordingly did help him to accumulate foreign exchange illegally in the same manner. Thereafter even later when Schussler became Director of Rayala Corporation similar transactions were continued by him and Pratap. In September 1966 Schussler came to Madras bringing further details of the said account. The complaint winds up with the statement that Schussler and Pratap had agreed to commit illegal acts, namely, acquisition by Pratap of foreign exchange illicitly and retaining the same abroad without surrendering it to the Government of India and to defraud the Government of India of foreign exchange thereby contravening sections 4(3), 5(1)(e) and 9 of the Act and Rule 132A of the Defence of India Rules 1962 and further between August 1963 and 1966 Schussler and Pratap in pursuance of the said agreement did commit acts in contravention of the said sections of the Act and the said r. 132A and thereby committed an offence punishable under s. 120B of the Indian Penal,Code read with the said sections of the Act and the said rule. The relevant provisions of the Act may now be noticed. Sub-s. (1) of s. 4 of the Act as origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the acquisition by any person of property outside India; (ii) the creation or transfer in favour of any person of a right whether actual or contingent to receive a payment or acquire property outside India; Section 9 reads The Central Government may, by notification in tile official Gazette, order every person in, or resident in, India- (a) who owns or holds such foreign exchange as may be specified in the notification, to offer it, or cause it to be offered for sale to the Reserve Bank on behalf of the Central Government or to such person as the Reserve Bank may authorise for purpose, at such price as the Central Government may fix, being a price which is in the opinion of the Central Government not less than the market rate of the foreign exchange when it is offered for sale; (b) who is entitled to assign any right to receive, such foreign exchange as may be specified in the notification to transfer that right to the Reserve Bank on behalf of the Central Government on payment of such consideration therefore as the Central Government may fix : Provided that the Central Government may by the said notification or another order exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committing a contravention is a company, every person who, at the time the contravention was committed, was in-charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly : Provided that nothing contained in this sub- section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention. 23D. (1) For the purpose of adjudicating under clause (a) of sub-section (1) of section 23 whether any person has committed a contravention, the Director of Enforcement shall hold an inquiry in the prescribed manner after giving that person a reasonable opportu- nity of being heard and if, on such inquiry, he is satisfied that the person has committed the contravention, he may impose such penalty as he thinks fit in accordance with the provisions of the said section 23 : Provided that if, at any stage of the inquiry, the Director of Enforcement is of opinion that having r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the penalty which he was empowered to impose under s. 23 (1) (a) would not be adequate and that it was necessary to make a complaint in writing to the court instead of levying a penalty himself. Mr. Sen arguing the appeal of Schussler contended that the Act was a complete Code containing provisions not only for punishment of violation of different sections of the Act but also a conspiracy to commit acts prohibited under the Act which might otherwise have been amenable, to the jurisdiction under s. 120-A and 120-B of the Indian Penal Code. In this connection, he referred to the provisions in s. 21 (1) of the Act. Under s. 21 (1) any agreement which could directly or indirectly evade in any way the operation of the provisions of the Act or any rule direction or order made thereon was forbidden. The contravention of s. 21 (1) does not find a place in s. 23 ( 1 ) of the Act but it would be an offence covered by s. 23(1A) and any contravention of s. 21 (1) would be punishable upon conviction by a court with imprisonment for a term which may extend to two years or with fine or with both. The punishment is the same as the one prescribed under s. 23 (1) (b) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bit a criminal conspiracy to acquire foreign exchange abroad illicitly and retaining the same abroad by reason of the provision of s. 21 (1). The judgment of this Court in Cr. As. 18 and 19 of 1969 lays down that a complaint under s. 23 (1) (b) cannot be launched before the Director of Enforcement has taken up the adjudication proceedings and made some inquiry in those proceedings and formed the opinion that it was necessary to have resort to the more drastic provision of conviction by a court as envisaged by S. 23 (1)(b). No proceedings have been started either against Schussler or Pratap in pursuance of the notices dated 30th November 1963 and 21st January 1969. It would therefore appear that in respect of the substantive offences for contravention of the different sections of the Act, the Director of Enforcement cannot at present make a complaint as he has not followed the procedure laid down in s. 23-D of the Act. It would be absurd to allow him to file a complaint for violation of S. 21 (1) by making a charge under s. 120-B I.P.C. when the overt acts alleged are contravention of different provisions of the Act, punishable only under s. 23 (1) (b) by followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd accept consideration as an inducement or reward for abstaining from bidding at sales by auction.' This Court is of opinion that those particulars of this particular conspiracy describe in terms offences which the Act creates, or are substantially the same. The same can be said on the facts of this case. The particulars of conspiracy alleged in this case are offences which the Act has created. In my view the Director of Enforcement must first take up the adjudication proceedings, it being open to him in the course thereof to form an opinion that the penalty which he may impose will not be adequate having regard to the circumstances of the case, whereupon he can make a complaint in writing to the Court. He can at the same time make a complaint about the agreement to evade the operation of the provisions of the Act calling for punishment under s. 23(1A) of the Act. The agreement with overt acts alleged for proving a conspiracy under s. 120-B I.P.C. is in reality an offence under s. 23(1A) read with s. 21 ( 1 ). The complaint does not lie at this stage and must be quashed. In the result I would allow the appeals and quash the com- plaint made on 16th Februar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Rayala Corporation Private Limited is a Private Limited Company with headquarters at Madras, manufacturing 'HALDA' typewriters out of materials imported from aboard. Originally they were importing raw materials through one A. B. Atvidabergs , Sweden, now known as Facit AB. The first accused has been working as the Export Manager of that concern. The raw material supplied by Atvidabergs was over- invoiced at the instance of the 'And accused and thereby foreign exchange was illicitly acquired in Swedish Kronara to the tune of 7,56,529/- by the 2nd accused Pratap before August 1963 with the full knowledge of the 1st accused. Later in August 1963 the 2nd accused and the General Manager of Rayala Corporation Mr. Jagga Rao went to Sweden. There Jagga Rao, 2nd accused and the first accused met to-ether at Stockholm and agreed to a plan regarding purchase of certain raw materials viz., steel alloy sheet directly from M/s. Associated Swedish Steels AB, Sweden, also known as ASSAB, instead of purchasing the same from M/s. Atvidabergs. The 2nd accused told the first accused that henceforth he would buy on behalf of his company raw materials from ASSAB. He in f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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