LENNART SCHUSSLER Vs. DIRECTOR OF ENFORCEMENT AND AN

JUDGEMENT

(1.) The Director of Enforcement, New Delhi, filed complaint on February 16, 1969 before the Chief Presidency Magistrate, Madras against Lennart Schussler, accused No. 1, and M. R,. Pratap, accused 2 Managing Director, the Rayala Corporation Ltd. hereinafter referred to as A.1 and A.2 respectively under Section 120-B I. P. C. and Section 4 (3), 5 (1) (a) and 9 of the Foreign Exchange Regulation Act (VII) of 1947 (hereinafter called the Act). Two Criminal Miscellaneous Petitions, one filed by A1 being No. 459 of 1969 and the other filed by A2 being No. 621 of 1969 for quashing the complaint were dismissed by the Madras High Court by a common judgment against which these two appeals by certificate have been filed.

(2.) 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 A2 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 A2, Jaga Rao and the legal adviser 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, know as ASSAB to A1 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 know as Facit AB, of which A1, a Swedish national, has been the export manager. It is alleged that in August 1963, A2 Jaga Rao and A1 met together at Stockholm and agreed to a plan regarding purchase of certain raw materials, namely, Steel alloy sheets directly from ASSAB instead of purchasing them from Atvidabergs. At that meeting A2 informed A1 that henceforth he would buy material on behalf of his company from ASSAB instead of M/s. Atvidabergs. A2 further informed A1 that the arrangement made between him and the ASSAB was to over-invoice the value of goods by 40 per cent of the true value and that he should be paid the difference of 40 per cent on account of the aforesaid over-invoicing by crediting it to his personal account, and that since under the laws of India this acquisition by him was unlawful and had to be kept secret, it should not be mentioned in the Official correspondence of Messrs. Rayala Corporation with the Swedish firm. He requested the first accused to help him in opening the account in Swenska Handles Banken, Sweden, in order not to transfer the money lying to his credit in Atvidabergs but also to have further deposits to his personal account from ASSAB on account of the difference between the actual value and the over-in-voiced value. A1 agreed to act as requested by A2. A2 made arrangement with ASSAB to intimate to A1 the various amounts credited to A2's account and asked A1 to keep a watch over the correctness of the account and to further intimate to him the account position from time to time through unofficial channels and whenever A1 came to India. A1 is said to have agreed to comply with this request. Subsequently in November 1965 A1 came to India when he is said to have brought the incriminating letter dated the 25th March 1965 which was seized. He is said to have also agreed at that time with A2 to continue to help him to accumulate foreign exchange illegally in the same manner. In September 1966 also A1 arrived at Madras where he stayed for a month and at that time also he brought further details of the account. The gravamen of the charge is set out in paragraph 9 of the complaint as follows:- "Thus it is clear that A 1 and A 2 agreed to commit illegal acts, namely, acquisition by A 2 of foreign exchange illicitly and retaining the same abroad without surrendering the same to the Government of India and also to defraud the Government of India of foreign exchange thereby contravening Section 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 Regulation Act and Rule 132A of the Defence of India (Amendment) Rules, 1964 and thereby committed offence punishable under Section 120B of the Indian Penal Code, read with Section 4 (3), 5 (1) (e) and 9 of the Foreign Exchange Regulation Act and Rule 132A of the Defence of India (Amendment) Rules, 1964."

(3.) 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, which amount included 88,913.09 Swiss Kronars. This notice was followed by a further show cause notice under Section 23 (3) of the Act dated the 4th November, 1967, to A2 as to why he should not be prosecuted in respect of 88913.09 Swiss Kronars. A 2 in his reply of November 13, 1967, to the show cause notice of the 25th August, 1967, denied the allegations. The Enforcement Director further issued another show cause notice dated the 15th November, 1967, to the other directors of the Corporation and its General Manager, Jaga Rao in continuation of the notice dated the 25th August, asking them to show cause why adjudication proceedings should not be instituted. On November 29, 1967, A 2 replied to the notice of the 4th November, 1967 denying the allegations Thereafter on January 20, 1968, the Director of Enforcement issued a notice to the Rayala Corporation to show cause why it should not be prosecuted for violation in respect of 88,913.09 Swiss Kronars. Two months later, namely, on March 16, 1968, a revised show cause notice was issued to the Corporation and A 2 superseding the notice of 25th August, 1967 and intimating to them that they were prosecuting the Corporation and A 2 for the contravention of the Foreign Exchange Regulation Act in respect of 88,913.09 Swiss Kronars. Four days thereafter the Director of Enforcement filed a complaint against the Corporation A 2 under Rule 132A of the Defence of India Rules and Sections 4 (1), 4 (3), and 5 (1) (e) of the Act. Both the Corporation and A 2 filed Criminal Misc. Petns. Being respectively Nos. 978 and 980 of 1968, (reported in 1969 Mad LW 98) for quashing the complaint but the High Court of Madras dismissed these petitions in October 1968. Two appeals by certificate preferred against that order, being Criminal Appeals Nos. 18 and 19 of 1969, (reported in AIR 1970 SC 494) were allowed by this Court on July 23, 1969, setting aside the order of the High Court rejecting the applications under Section 561-A of the Code of Criminal Procedure for quashing the proceedings against the appellants therein. While the above proceedings were pending, A 1 who happened to be a passenger travelling by an aircraft from Singapore to Karachi via Palam was detained on November 27, 1968, by the officers of the Office of the Enforcement Directorate when the aircraft which had landed at Palam on November 26, 1968, for refuelling had to be temporarily grounded due to engine trouble. On November 30, 1968, the Enforcement 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 Section 23C 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 February, 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 bank guarantee in the foreign exchange equivalent of Rs. 1,50,000/- 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 transferred at the time of the disposal thereof.