IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.T.SANKARAN TUESDAY, THE 6TH SEPTEMBER 2011 / 15TH BHADRA 1933 Bail Appl..No. 6489 of 2011 CRIME NO.500 OF 2011 OF VADAKKANCHERRY POLICE STATION, THRISSUR PETITIONER/ACCUSED NO.11 -------------------------------------------- JAYANANDA KUMAR V., AGED 52, S/O.LATE P.K.VELUPILLAI, RESIDING AT TC 13/223, PANNIVILAKAM LANE, PATTOOR, VANCHIYOOR P.O., TRIVANDRUM, ASST. COMMISSIONER,DATA MINING CELL, O/O.THE COMMISSIONER,COMMERCIAL TAXES, TRIVANDRUM. BY ADV. SRI.P.VIJAYA BHANU, SENIOR ADVOCATE SRI.C.S.MANU RESPONDENT: COMPLAINANT -------------------------- STATE OF KERALA, REP. BY THE SUB INSPECTOR OF POLICE, WADAKKANCHERRY POLICE STATION, THRISSUR DISTRICT, NOTICE TO WHOM MAY BE SERVED ON THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM-682 031. ADDL.ADVOCATE GENERAL SRI.K.A.JALEEL PUBLIC PROSECUTOR SRI.V.TEKCHAND THIS BAIL APPLICATION HAVING BEEN FINALLY HEARD ON 01/09/2011, THE COURT ON 06/09/2011 PASSED THE FOLLOWING: K.T.SANKARAN, J. ------------------------------------------------------ Bail Appl. NO. 6489 OF 2011 ------------------------------------------------------ Dated this the 6th day of September, 2011 O R D E R This Bail Application is filed by Jayananda Kumar. V., accused No. 11 in Crime No. 500 of 2011 of Wadakkanchery Police Station, Thrissur District, for anticipatory bail under Section 438 of the Code of Criminal Procedure. 2. The petitioner was working as Inspecting Assistant Commissioner, Department of Commercial Taxes, Thrissur in 2010. He was transferred to Thiruvananthapuram. He is now under orders of suspension. 3. The Crime was registered for the offences under Section 406, 420 read with Section 34 of the Indian Penal Code and Sections 3,4 and 5 of the Prize Chits and Money Circulation Scheme (Banning) Act, on the basis of information given by one Badaru on 27.6.2011. Badaru stated to the police that he invested `1,80,000/- in Nano Power Corporation Limited on the assurance that he would get high returns. He stated that a total sum of `48,843/- was received by him from the said Company. Even BAIL APPL. NO.6489 OF 2011 :: 2 :: on demand, he was not paid the principal amount or the offered returns. The Managing Director and Director of Nano Power Corporation (Patrick Thomas) as well as Riyas and Bose were made the accused in the case originally. 4. It would appear that Nano Power Corporation filed a petition before the Bangalore police against Patrick Thomas, one of the directors of the company alleging misappropriation of huge amounts belonging to the company. Patrick Thomas was arrested by the Bangalore police. Kerala police got the custody of Patrick Thomas. Patrick Thomas made two confession statements. In one of the confession statements, Patrick Thomas stated the following facts: In the year 2010, a raid was conducted by the Sales Tax Department in the Thrissur office of Nano Power Corporation. The Department took the view that the company would have to pay `22 crores as penalty. He was informed that for reducing the penalty, to avoid further raid and for releasing the bank accounts which were freezed, it would be ideal to pay `1.5 crores as bribe to the petitioner. Patrick Thomas thus influenced the petitioner by paying the bribe. Accordingly, freezing orders of bank accounts were withdrawn and thereby facilitated the company to continue to commit offences and to cheat the public. BAIL APPL. NO.6489 OF 2011 :: 3 :: 5. On the basis of the confession statement of Patrick Thomas, the petitioner was added as accused No. 11 and the offence under Section 109 of the Indian Penal Code was alleged against him. The Petitioner apprehends arrest and therefore he filed the application for anticipatory bail. 6. Heard Sri. P. Vijayabhanu, Senior Advocate, appearing for the Petitioner and Sri. K.A. Jaleel, Additional Advocate General and Sri. V.Tekchand, the learned Public Prosecutor. 7. Sri. P.Vijayabhanu, learned Senior Counsel invited my attention to the specific averments in the Bail Application and the documents produced alongwith the Bail Application. 8. In the Bail Application, the following averments are made: “6, As a matter of fact on 3-2-2010 the principal place of business of the company at Thrissur was inspected by the Intelligence Squad No. 1, Commercial Tax Department, Thrissur and initiated proceeding under section 67 of the KVAT Act, 2003. Thereafter the Intelligence Officer issued a notice dated 4-2-2010 to the company proposing levy of penalty for attempt for evasion of tax due under the Act. It was stated in the notice that the company has suppressed a BAIL APPL. NO.6489 OF 2011 :: 4 :: sales turn over of Rs. 103,49,75,394/- (Rupees Hundred and three crores forty nine lakhs seventy five thousand three hundred and ninety four only) which would attract a tax of Rs. 7,00,68,469/- (Rupees seven crores sixty eight thousand four hundred and sixty nine only). Faced with the above proceedings the company applied for compounding the matter under section 74 of the Act by the intelligence officer. Accordingly the matter was compounded anda sum of Rs. 8 crores was realized from the company by way of gross amount of tax, surcharge, interest, cess and compounding fee, vide order dated 10-2-2010. The Deputy Commissioner (Intelligence) Ernakulam, the controlling officer of the petitioner on 11-2-2010 recommended to the Commissioner of Commercial Taxes to award incentives to all personnel engaged in the detection, levy and realization the amount. On the basis of the said recommendation the Commissioner of Commercial Taxes on 9-3-2010 recommended to the Government to the personnel engaged in the detection of attempt for evasion of tax, levy and collection of tax and other amounts due. Accordingly the Government awarded the cash incentives to the personnel vide order dated 26-3-2010. 7. The action initiated by the Department under section 35 of the KVAT Act, 2003 and the notice issued thereunder to the banks where the company has accounts is described as freezing of bank accounts by the police. It is true that notices under Section 35 of the Act had been issued to the concerned banks, pursuant to proceedings initiated under Sec. 67 of the Act against the company. Once the amount of BAIL APPL. NO.6489 OF 2011 :: 5 :: tax levied and the other amounts due remitted by the company is remitted the notice issued under section 35 of the Act ceases to operate. Whether notice under section 35 of the Act is to be issued in respect of other bank accounts of the company depends upon the amount of tax or other amounts due if any is due from the company. Once the amount was remitted by the company the action under Section 35 of the Act ceased to operate. 8. The petitioner did not commit any offence as alleged. The allegation coupled with the admitted facts borne out by the official records do not constitute any offence as against the petitioner. By any stretch of imagination the alleged act imputed against the petitioner does not amount to abetment of any offence punishable under Section 109 of the Indian Penal Code. The act alleged to have been done by the petitioner is an official and statutory act done under the provisions of the KVAT Act 2003. The act complained of in the crime is the action under Section 35 of the Act. The said action is perfectly legal and valid. As per Section 79 (1) of the KVAT Act, 2003, no suit, prosecution or other proceedings shall lie against any officer or servant of the Government for any act done or purporting to be done under the Act, without previous sanction of the Government. Therefore the FIR as against the petitioner is a proceeding against him within the meaning of Section 79 (1) of the Act. Admittedly the name of the petitioner was incorporated in the FIR subsequently by arraying him as accused No. 11 charging him with offence under Section 109 of the Indian Penal Code, without BAIL APPL. NO.6489 OF 2011 :: 6 :: obtaining previous sanction of the Government. Hence the FIR is unsustainable as against the petitioner. Moreover, the petitioner is also entitled to the protection from criminal proceeding in respect of the above mentioned act as per section 79 (2) of the Act. The Investigating Officer lost sight of the above law while implicating the petitioner in the crime with offence under Section 109 of IPC. The investigating officer acted without any good faith in arraying the petitioner as accused No. 11. He did not take reasonable care and caution in looking into the proceedings initiated under the provisions of the KVAT Act, 2003 by the Department against the company. He did not look into Section 35 of the Act and consider its scope and effect. He also did not consider the provisions under Section 79 (1) and (2) of the Act. He did not even go through the proceedings initiated under Section 67 of the KVAT Act, 2003 by the Department. He did not conduct any preliminary enquiry before arraying the petitioner as an accused in the crime as required under the law laid down by the Hon’ble Supreme Court of India in Sirajuddin’s case, the petitioner being a public servant. The investigating officer do not enjoy any protection of any law, his action being tainted by lack of good faith. The petitioner therefore intends to prosecute the delinquent police officers who are instrumental in falsely implicating the petitioner in the crime. The petitioner applied to the Government for sanction to prosecute the police officers and the Government has been pleased to accord sanction to the petitioner for prosecuting them. 9. The allegation raised against the petitioner is absolutely BAIL APPL. NO.6489 OF 2011 :: 7 :: false, frivolous and mala fide as well. The petitioner is absolutely innocent and he has not committed any offence as alleged in the crime. The Petitioner is honest and dedicated officer. He has only executed his official work in all earnestness and collected substantial revenue to the State Exchequer. The petitioner taken over the post of the Inspecting Assistant Commissioner (Intelligence) (IAC I) Thrissur, in August 2008. At that time the cumulative yearly collection by the IAC (I), Thrissur was Rs. 4 crores. During his tenure he could contribute to the State Revenue 14.9 crores in the year, marking a four fold increase. This has been made possible just by the intelligent, planned and concerted action by the Thrissur Intelligence Wing of the Commercial Taxes Department under the leadership of the Petitioner. 10. The facts of the case in detail is as follows: On 17-3- 2009, the Intelligence Squad No. 2 functioning under the Petitioner, intercepted lorry bearing registration No. KL 11-D 5819 carrying Pinkoda wooden logs and issued notice u/s 47 (2) of the KVAT Act. The then Deputy Superintendent of Police (Vigilance) Mr. Saifulla Sayed interfered and asked the Intelligence Officer, who headed the Squad No. 2, to release the vehicle to the party unconditionally. The officer having found attempt of evasion of tax by the transporter, ignoring the demand of Mr. Saifulla Sayed, Dy. S.P., collected security amount of Rs. 30,836/- and allowed the law to take its course. On the next day, i.e., on 18-3-2009 at 4 P.M. a team of V& ACB officers headed by Mr. Saifulla Sayed raided the office of BAIL APPL. NO.6489 OF 2011 :: 8 :: the Petitioner which housed the offices of the Intelligence Officer, Squad No. 2 as well. 11. The Petitioner took up the matter with the Commissioner, Commercial Taxes Department and Commissioner in turn took up the matter with Government, vide letter No. A7- 13486/09/TX dated 25-3-2009. True copy of the letter No. A7-13486/09/TX dated 25-3-2009 issued by the Commissioner of Commercial Taxes, Thiruvananthapuram to the Government of Kerala is produced herewith and marked as Annexure A1. 12. Government appointed Mr. K.J.Devasia IPS, Superintendent of Police, V & ACB, Kottayam as Enquiry Officer into the alleged misdeeds of the Dy. Superintendent of Police Mr. Syfullah Syed. On the basis of the report of the Enquiry Officer, Government ordered initiation of disciplinary action against Mr. Saifullah Syed, vide Government letter No. 4537/A1/09/Vig. Dated 6-8-2009. A true copy of the Govt. letter dated 6-8-2009 is produced herewith and marked as Annexure A2. 13. On account of the aforesaid incident a section of police officials in Thrissur District have started showing vengeance against the Commercial Tax officials in the District, particularly the Petitioner and have been harassing the Petitioner in several ways. 14. On 3-2-2010, the principal business place of M/s Nano BAIL APPL. NO.6489 OF 2011 :: 9 :: Excel Enterprises (P) Ltd. Was inspected by the Intelligence Squad No. 1, Thrissur and initiated proceedings u/s 67 of the KVAT Act. A notice in No. ITD/37/2009-10 dated 4-2-2010 was issued to the Company by the Intelligence Officer proposing to levy of penalty for attempt of evasion of tax due under the Act. The Company has suppressed a sales turnover of Rs. 1,03,49,75,394/- with a tax effect of Rs. 7,00,68,469/-. The company was thereupon proceeded u/s 67 KVAT Act 2003 by the Intelligence Officer, Squad No. 1, Commercial Taxes, Thrissur in the first instance and later on the application by the Company the offence was compounded departmentally u/s 74 of the Act by the Intelligence Officer. The gross amount of tax, surcharge, interest, cess and compounding fee realized from the Company was about Rs. 8 crores, vide Order No. ITD/37/2009-10 dated 10-2-2010. A true copy of the order issued by the Intelligence Officer dated 10-2-2010 is produced herewith and marked as Annexure A3. 15. The Deputy Commissioner (Intelligence), Ernakulam, who is the Controlling Officer of the Petitioner observed: ….” In the history of the Commercial Tax Department, especially for the Intelligence Wing, on which record collection of Rs. 7,04,68,469/- was realized by the Intelligence Wing, Thrissur, from a single case detected from the operation………” and recommended the Commissioner to award incentives to all personnel engaged in the process, vide letter No. 320721- 05/317/09 dated 11-2-2010. The copy of the letter No. 320721-05/317/09 dated 11-2-2010 issued by the Dy. Commissioner, Intelligence, Department of Commercial BAIL APPL. NO.6489 OF 2011 :: 10 :: Taxes, Ernakulam to the Commissioner of Commercial Taxes, Thiruvananthapuram is produced herewith and marked as Annexure A4. 16. On the basis of Annex. A4, the Commissioner, Commercial Taxes recommended to the Government for award of incentives to the personnel engaged in the detention of tax evasion and collection of tax and other amounts, vide letter No. A1-5826/2010/CT dated 9-3-2010. Accordingly, the Government examined the matter in detail and decided that the personnel under the Petitioner, including himself, are entitled to incentives by holding that “The cohesiveness of the entire group and the effectiveness of their operation by exhibiting truly professional attitude was the key to the monumental achievement of tax collection ever recorded from a single case.” The Government awarded cash incentives as per GO (Rt) No. 265/2010/TD dated 26-3-2010. A true copy of the Govt. order dated 26-3-2010 is produced herewith and marked as Annexure A5. 17. In the long 16 years of the career in the Commercial Tax Department, the Petitioner has been recognized as a good and efficient officer and he has exceeded always the targets fixed to him by sheer hard work and dedication. Naturally the Petitioner need not face any disciplinary action in the Department during his tenure. The petitioner is thus an officer of unblemished conduct and proven efficiency. 18. In fact the Intelligence Wing, Thrissur of the Commercial BAIL APPL. NO.6489 OF 2011 :: 11 :: Taxes Department was the first government agency which had taken action against M/s Nano Excel Enterprises (P) Ltd. Based on which the illegal/unethical activities were brought to lime light and huge amounts by way of tax and fee were realized and credited to the State Exchequer. The Commercial Taxes Department had also taken action against similar company namely “PI Marketing Pvt. Ltd.” In the course of which the promoters of the said company had even dared to invade the Intelligence Office, Trichur, threaten the officials and stall the office functioning for hours. Even though a formal complaint was given to the police officials no effective action was taken by the Trichur West Police. 19. The case of M/s Nano Excel Enterprises (P) Ltd. Was reported to the earliest Regional Economic Intelligence Centre South meeting on 24-3-2010, where the Police is also a member department along with other agencies like the Revenue Intelligence, Enforcement, Income Tax, Central Excise etc. In the case of ‘P I Marketing’ the case was reported on 8-9-2010. Even though departments like Revenue Intelligence, Enforcement and Income Tax had taken timely effective steps the Thrissur Police had not done anything based on the mentioned reports. 20. Going by the above factual position it can be seen that the Thrissur Police are the one authority that had not taken any timely action against these erring companies in spite of definite evidences and concrete reports by a responsible authority. Going by the media reports it is reasonably felt that BAIL APPL. NO.6489 OF 2011 :: 12 :: the investigation is heading for wrong targets Viz., the Commercial Taxes Department, and on the Petitioner personally, in a dubious attempt to allow the real culprits to escape and to spite vengeance against the petitioner. 21. The Petitioner was recently transferred to the Palakkad District as head of the Intelligence wing in that District. It is in that context that a concerted attempt was made to fix the Petitioner and destroy him in his career and even in life by a group of tax evaders in the Thrissur and Palakkad Districts in collusion with a section of police personnel. 22. The petitioner is apprehending arrest by the police. The police are taking steps to arrest the petitioner. Yesterday the police came to the office of the petitioner in search of him. The petitioner informed all these factors to the Commissioner, vide letter dated 3-8-2011. True copy of the representation issued by the petitioner to the Commissioner of Commercial Taxes is produced herewith and marked as Annexure A6. 23. The petitioner applied to the Commissioner for Commercial Taxes for granting him permission to initiate legal steps against the delinquent officers. The Commissioner of Commercial Taxes in turn, vide his letter dated 4-8-2011 recommended to the Government to grant permission as requested for by the petitioner. A true copy of the said letter dated 4-8-2011 issued by the Commissioner for Commercial Taxes, Thiruvananthapuram to the Government of Kerala is produced herewith and marked as Annexure A7.” BAIL APPL. NO.6489 OF 2011 :: 13 :: 9. Sri. Vijayabhanu submitted that Section 109 of the Indian Penal Code does not apply at all to the facts of the present case. Even if all the allegations are taken as true, the ingredients of Section 109 I.P.C. are not made out and the petitioner could not be made an accused in the case invoking Section 109 I.P.C. If there is any allegation of corruption, proceedings under the Prevention of Corruption Act could be taken against the Petitioner. 10. The Additional Advocate General submitted that there are materials to indicate that the petitioner had taken bribe for reducing the penalty and for issuing orders releasing the bank accounts. The Commercial Tax Department issued notice to remit `22,03,68,352/- as penalty. Hearing of the case was scheduled to 10th February 2010. However, on 9th February, the case was compounded and the penalty was reduced to `7,00,68,469/- The investigation revealed that the bribe was paid at a hotel to a person suggested by the petitioner. Patrick Thomas was directed to hand over the amount to a person who would give a ten rupee currency note having a particular number. After giving the amount to him, the currency note was to be taken from him and it was to be handed over to the petitioner, to ensure that the amount was paid to the right person. The Additional Advocate General submitted that custodial BAIL APPL. NO.6489 OF 2011 :: 14 :: interrogation of the petitioner is required in the case and that the petitioner is not entitled to the discretionary relief under Section 438 of the Code of Criminal Procedure. 11. In reply, Sri. Vijayabhanu submitted that the Company produced records pursuant to the notice issued by the Commercial Taxes Department. The penalty payable was found to be only seven odd crores. The matter was compounded on the basis of the compounding application and the amount was paid. Annexure A3 order reveals all the relevant facts. An order passed by the statutory authority should not be subject to scrutiny by the police. It is not correct to say that the order was passed before the date of hearing. The compounding application was filed on 9.2.2010. The order was passed on 10-2-2010. On 11-2-2010 the Deputy Commissioner of Intelligence, Ernakulam sent Annexure A4 communication to the Commissioner, Commercial Taxes, Thiruvananthapuram, stating all the relevant facts and how the tax evasion was detected and effective action taken by the Commercial Taxes Department culminating in the order dated 10-2-2010. In Annexure A4, it was stated thus: “The unbreakable case of tax detection of tax fraud from a single case could not be evaluated in isolation. The detection of the case and the speedy disposal resulting in the collection of `7,04,68,469/- is the result of the intelligent operation and hard work of BAIL APPL. NO.6489 OF 2011 :: 15 :: Sri.V.Jayanandakumar, Inspecting Asst. Commissioner (Int.) and his team in Thrissur. Sri.E.I. Joshy, Intelligence Officer, Squad No.1, Mattancherry has detected the offence in vehicle checking. It is nothing but collective perpetual team work, and the team has to be appreciated properly.” 12. Sri.Vijayabhanu also submitted that Patrick Thomas is involved in about sixty criminal cases. Even the Company of which he was the Director, initiated criminal action against him. A statement made by Patrick Thomas that he paid `1.5 crores as bribe to the petitioner cannot be believed at all in the facts and circumstances of the case. In all probability, Patrick Thomas would have misappropriated that amount from the Company by perpetrating fraud. 13. Prima facie, the contentions put forward in paragraph 8 of the Bail Application are liable to accepted, for the purpose of disposal of the Bail Application. The various documents produced in the case would also indicate that the petitioner had reported all relevant matters to his superior officer promptly. The Government approved and appreciated the enormous work done by the Petitioner and his team. Even if proceedings are to be initiated against the petitioner under the Prevention of Corruption Act, the built in safeguards thereunder would be available to him. The petitioner had even alleged that illegal demands were made by BAIL APPL. NO.6489 OF 2011 :: 16 :: the Vigilance Dy.S.P. The petitioner had mentioned about the same in the communication issued in 2009. The petitioner had also reported to his superior officer about the retaliatory action taken by the V& ACB team of Thrissur District by conducting an inspection in the office of the Commercial Tax Department on the next day of rejection of the illegal demand made by Vigilance Dy.S.P. The Government was also satisfied about the genuineness of the allegation made against the Vigilance Dy.S.P. Prima facie, it is clear that the police had some axe to grind against the petitioner. As regards the allegation that the petitioner committed the offence under Section 109 IPC, prima facie, there is substance in the contention put forward by the petitioner that the allegations made against him would not attract Section 109 I.P.C. The petitioner passed the orders in the discharge of his official duties. If in the course of the same he had received bribe, the provisions of the Prevention of Corruption Act could be invoked against him. The allegation that the petitioner abetted the commission of the offence alleged against the Managing Director and Directors of the Company is, prima facie, far fetched. If officers of the Commercial Tax Department are roped in criminal cases in this fashion, it would considerably affect their proper discharge of duties as public servants. It should not be taken to mean that officers guilty of corruption should be protected. Appropriate legal action should be