Case: Hira Lal Hari Lal Bhagwati Vs. C.B.I., New Delhi

2. These two appeals arise out of the final judgment and order passed by the High Court of Delhi at New Delhi in Criminal Miscellaneous (M) Nos. 360/2002 and 447/2002 filed under Section 482 of the Criminal Procedure Code read with Article 227 of the Constitution of India by the appellants herein seeking the invocation of the inherent powers of the High Court for quashing the F.I.Rs and the proceedings initiated in pursuance thereto, as also the process issued by the Chief Metropolitan Magistrate, Delhi. The learned single Judge of the Delhi High Court, by the impugned final orders, held against the appellants that obtaining from the Ministry of Health Customs Duty Exemption Certificate, that was meant for actual user on false assertion makes out the offence under Section 120B read with Section 420 of the Indian Penal Code.3. The respondent herein (Central Bureau of Investigation, New Delhi) initiated criminal proceedings under Section 120B read with Section 420 of the Indian Penal Code against the appellants on the ground that the appellants in conspiracy with the Director of Gujarat Cancer and Research Institute, Mr. T.B. Patel (deceased), Secretary of the Gujarat Cancer Society, Mr. N.L. Patel and Dr. Viral C. Shah with each other have cheated the Government of India in terms of evasion of Customs Duty and by concealment of facts obtained Customs Duty Exemption Certificate in respect of MRI and Lithotripsy machines and by violating the provisions of actual user condition as per Import Export Policy and Customs Notification No. 279/83 dated 30.9.1983 and Customs Notification No. 64/88 dated 1.3.1988 during the year 1987-90, despite acknowledging the fact that the Customs Duty has been paid by the appellants to the Customs Department and settled under the Kar Vivad Samadhan Scheme, 1998. In the instant case, two machines were imported into India by the Gujarat Cancer Society (hereinafter referred to as the GCS) who availed to the duty exemption certificate issued in the name of the Gujarat Cancer and Research Institute (hereinafter referred to as "the GCRI") on a bona fide premise that since all the activities of the GCRI were funded by the GCS and all the operations of GCS were carried out through the GCRI and that they are akin to holding any subsidiary company, the same could be done. The Customs Authority raided the premises of the GCRI and seized the machines and necessary paper work on the ground that the exemption certificate was issued in the name of the GCRI and not in the name of the GCS and thus the GCS was not entitled to exemption and was, therefore, liable to pay Customs Duty. The machines were immediately released on giving a usual undertaking. On 11.10.1991, Show Cause Notice was issued to the GCS which was replied to by them. The Collector of Customs, Bombay by an order dated 10.4.1993 held that the GCS was liable to pay the Customs Duty, thus denying the concessional duty benefit under Customs Notification Nos. 279/1983 and 64/1988 and demanded a duty of Rs. 2,16,80,444/- under Section 28 of the Customs Act, 1962 read with the proviso to the said Section. The said duty was to be paid by the importer-GCS and Canbank Financial Services as well as ICICI being joint holder of the said imported machines. However, considering the charitable and philanthropic activities of the GCS, no prosecution was recommended and only a token redemption fine of Re. 1/- was imposed. No penalty was imposed on the above said financial organisations, namely, Canbank Financial Services and ICICI as they were acting as a lessor, who had extended financial extension to the above charitable organisation for import of sophisticated machines. A personal penalty was imposed on M/s. Shah Diagnostic Institute Pvt. Ltd. Ahmedabad and its Director, Dr. Viral C. Shah jointly under Section 112A the Customs Act, 1962.4. Against the order of the Collector of Customs, the appellants preferred appeals before the Customs, Excise and Gold (Appellate) Tribunal, West Regional Branch, Bombay which confirmed the findings of the Collector of Customs.5. Against the order of the Customs, Excise & Gold (Appellate) Tribunal, the GCS came up in appeal before this Court in Civil Appeal No. 31/1999. Whilst the matter was pending before this Court, the Government of India launched the Kar Vivad Samadhan Scheme, 1998, whereby whoever takes the benefit under the said Scheme is granted immunity from prosecution from any offence under the Customs Act including the offence of evasion of duty. In accordance with the Kar Vivad Samadhan Scheme, 1998, the GCS had agreed to deposit the stipulated amount of over Rs. 98 lakhs which had already been deposited earlier and withdraw the Civil Appeal pending before this Court. In 19.7.1999, a certificate for full and final settlement of tax arrears in respect of the Kar Vivad Samadhan Scheme, 1998 was issued to the GCS. The said Certificate, inter alia, certified the receipt of payment from the GCS towards full and final settlement of tax arrears determined in the order dated 10.2.1999 of the Designated Authority and further granting immunity to the GCS from any proceedings for prosecution from any offence under the Customs Act, 1962, or from the imposition of penalty under the said enactment, in respect of the matters covered in the declaration made by the GCS.6. However, a case was registered against the appellants on 6.1.1999 by the respondent alleging that the appellants in conspiracy with the Director of the GCRI, Mr. T.B. Patel (deceased), Secretary of the GCS, Mr. N.L. Patel and Dr. Viral C. Shah had cheated the Government of India in terms of evasion of Customs Duty and by violating the provisions of actual user condition as per Import Export Policy during the year 1987-88. A charge sheet was prepared for commission of offence under Section 120B read with Section 420 of the Indian Penal Code. On presentation of the said charge sheet, the trial Court by its order took cognizance and summoned the appellants. The appellants were furnished copies of the charge sheet. In the meantime, the appellants preferred Special Criminal Applications before the High Court of Gujarat at Ahmedabad seeking quashing of the FIR. However, the same was disposed of as withdrawn on the ground of jurisdiction with a liberty to file a fresh petition before an appropriate Court. Thereupon the appellants filed Criminal Miscellaneous (Main) Petitions under Section 482 of the Code of Criminal Procedure read with Article 227 of the Constitution of India in the High Court of Delhi at New Delhi seeking an appropriate order/directions to the respondent quashing the FIR concerned. The learned single Judge of the High Court of Delhi, by his final order, dismissed the said petitions. Hence these two appeals by way of special leave

Court's reasoning:
29. In our view, in the present case, the alleged criminal liability stands compounded on a settlement with respect to the civil issues and, therefore, the First Information Report was erroneously issued and was totally unwarranted. From the aforesaid judgment, the proposition that follows in the instant case is that the Kar Vivad Samadhan Scheme, 1998 issued by the Government of India was a voluntary Scheme whereby if the disputed demand is settled by the Authority and pending proceedings are withdrawn by an importer, the balance demand against an importer shall be dropped and the importer shall be immuned from penal proceedings under any law in force. We are, therefore, of the opinion that this judgment squarely comes in the face of any argument sought to be propounded by the respondent that the Kar Vivad Samadhan Scheme, 1998 does not absolve the appellants from criminal liability under the Indian Penal Code. The learned single Judge of the High Court of Delhi, in our opinion, has not appreciated the fact that the continuance of the proceedings in the instant case would only tantamount to driving the present appellants to double jeopardy when they had been honourably exonerated by the Collector of Customs by their adjudication and further the CGS of which one of the appellants is the General Secretary in which capacity he is accused in the present case was granted amnesty under the Kar Vivad Samadhan Scheme, 1998. In our opinion, the present case does not warrant subjecting a citizen especially senior citizens of the age of 92 & 70 years to fresh investigation and prosecution on an incident or fact situation giving rise to offence under both the Customs Act and the Indian Penal Code when the matter has already been settled. Likewise, the respondent herein has initiated criminal proceedings against Accused No.2 & Accused No.1, inter alia, on the ground alleging that the appellants in conspiracy with the co-accused named therein with each other have cheated the Government of India is terms of the evasion of Customs Duty and by concealment of facts obtained CDEC in respect of MRI and Lithotripsy machines and by violating the provisions of actual user condition as per Import Export Policy and Customs Notification No. 279/83 dated 30.9.1983 and Customs Notification No. 64/88 dated 1.3.1988 during the year 1987-90, despite acknowledging the fact that Customs Duty has been paid by the appellants to the Customs Department and settled and that commission of offences under Section 120B read with Section 420 of the Indian Penal Code are made out.30. In our view, under the penal law, there is no concept of vicarious liability unless the said state covers the same within its ambit. In the instant case, the said law which prevails in the field i.e. the Customs Act, 1962 the appellants have been therein under wholly discharged and the GCS granted immunity from prosecution. It is well established principle of law that the matter which has been adjudicated and settled need not to be dragged into the criminal courts unless and until the act of the appellants could have been described as culpable. The true fact and import of the Kar Vivad Samadhan Scheme, 1998, in our view, is that once the said Scheme is availed of and all the formalities complied with including the payment of the duty the, immunity granted under the provisions of the Customs Act, 1962 also extends to such offences that may prime facie be made out on identical allegations i.e. of evasion of Customs Duty and violation of any Notification issued under the said Act.31. In our view, there is no prima facie case made out in respect of the alleged offence under Section 120B read with Section 420 of the Indian Penal Code and, therefore, the charge sheet and the process issued thereunder has to beis settled law, by catena of decisions, that for establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. From his making failure to keep up promise subsequently, such a culpable intention right at the beginning that is at the time when the promise was made cannot be presumed. It is seen from the records that the exemption certificate contained necessary conditions which were required to be complied with after importation of the machine. Since the GCS could not comply with it and, therefore, it rightly paid the necessary duties without taking advantage of the exemption certificate. The conduct of the GCS clearly indicates that there was no fraudulent or dishonest intention of either the GCS or the appellants in their capacities as office bearers right at the time of making application for exemption. As there was absence of dishonest and fraudulent intention, the question of committing offence under Section 420 of the Indian Penal Code does not arise. We have read the charge sheet as a whole. There is no allegation in the First Information Report or the Charge sheet indicating expressly or impliedly any intentional deception or fraudulent/dishonest intention on the part of the appellants right from the time of making the promise or misrepresentation. Nothing has been said on what those misrepresentations were and how the Ministry of Health was duped and what where the roles played by the appellants in the alleged offence. The appellants, in our view, could not be attributed any mens rea of evasion of customs duty or cheating the Government of India as the cancer society is a non profit organization and, therefore, the allegations against the appellants leveled by the prosecution are unsustainable. Kar Vivad Samadhan Scheme Certificate along with the Duncans and Sushila Ranis judgments clearly absolve the appellants herein from all charges and allegations under any other law once the duty so demanded has been paid and the alleged offence has been compounded. It is also settled law that once a civil case has been compromised and the alleged offence has been compounded, to continue the criminal proceedings thereafter would be an abuse of the judicial process.