Containers Getting Cleared Without Scanning By Customs Can Have Catastrophic Effect On Nation's Security: Karnataka High Court

The Karnataka High Court has refused to quash a case against ib Track Solutions Pvt Ltd and its director Sudhendra Dhakanikote in a case accusing them of tampering with the RFID e-seals by switching off the tamper notifications which are generally sent to the Customs.

"Such containers passing muster without getting scanned through the customs can result in a catastrophic effect to the security of the nation. Security could be economic, defence or even narcotic. What passes through the container if not detected can definitely pose a serious threat to any of these to the nation," said the court.

Refusing to interfere with or interdict the investigation against the petitioners, Justice M Nagaprasanna said any interference would amount to putting a premium on their acts of "having compromised the security of the nation".

Case Details:

The company supplies e-seals with RFID tags to the exporters in India.

When the Union Govt intended to implement the electronic sealing of cargo under a self-sealing procedure by exporters, the vendors were asked to supply e-seals with technology support. The company was empanelled as an authorised vendor. The e-seals are to remain locked and once the vehicles containing the containers with e-seals reach the port, the custom officers are required to physically check the RFID e-seal for any tampering.

In 2018, the company was directed by the authorities to not sell the e-seals - which are manufactured by an Italian company, and its empanelment was also suspended.

The petitioners were also charged under Sections 66C and 72A of the Information Technology Act, 2000 and Sections 406, 420 and 34 of the Indian Penal Code. It was alleged that e-seals were tampered regularly and they were getting scanned at a distance of a few metres without being in locked condition, and e-mails of the Company indicated that they had switched off the tampering alerts that led the containers with tampered seals to get exported.

On these facts, it was alleged that the Company had intentionally submitted the reports which had serious ramifications on the economy and security of the nation.

The petitioners before the bench argued that its Managing Director of Company had approached this Court earlier and a coordinate Bench by its order dated 13.06.2022 allowed the petition and quashed the FIR qua him, on the ground that he had no role to play in the corporate affairs of the Company. The present petition by the company and its director was filed seeking relief on grounds of parity.

Findings:

The bench noted that Electronic sealing was implemented on 28-08-2017 for containers by exporters under self-sealing procedure. On 23-10-2018, the Competent Authority flagged certain concerns with regard to the electronic seals used on export containers, it noted.

The DRI during investigation found that approximately 832 seals of the Company were faulty, the court said in the order, adding that the tamper status of the seals was covered up as the tamper alarm had been switched off.

The bench also took note of the statement given by Dhakanikote, the company's director, to the agency in which it was admitted that the Company had switched off the tamper alert notifications on its own by making changes in the back end software since e-seals were sub-standard and were not as per the prescribed stipulations.

Further, he had admitted that the entire Board of Directors were aware of the said decision and it was a decision by the Board. The Company had intentionally turned off the tamper notifications which will generally be sent to the Customs and the Exporters on detection of tampering of e-seals, considering the business interest of the Company, according to the statement given to the investigating officer.

"With these admissions in the statement rendered by the 2nd petitioner, the contention of the learned counsel appearing for the petitioners that the 2nd petitioner has got nothing to do with the issue pales into insignificance. If all the members of the Board - Directors, Managing Director and every other member - were aware of the deliberate switching off tampering signals, it cannot be said that the Company alone is responsible. The Directors or the Managing Director, as the case would be, were also responsible for their acts and the entire Board was aware of what has happened," said the court.

It added that the answers given by Dhakanikote would shock the conscience of the Court, "at what he says that 'they did it in their business interest'."

"Such business houses generating vested interest in business cannot be permitted to 'sacrifice the interest of the nation', as the security of the nation and its interest, economic or otherwise, is paramount in comparison to any vested interest of any business house in the nation. Any fact of security of the nation should not be permitted to be compromised 'come what may'," added the bench.

The court further said that the petitioners are accused of compromising the security of the containers, the contents of which ought to be known to the departments even if it is a narcotic drug.

Rejecting the contention of the accused that nothing has happened for the last three years and a co-ordinate Bench has obliterated the proceedings against a co-accused, the bench said the lis is shrouded with admissions and certain seriously disputed questions of fact, which will have to be thrashed out only in a full blown proceeding.

Further the court said that it is rather surprising as to why the DRI has not proceeded further and filed its final report. The bench called it "a serious matter of the kind". It is for the DRI to conclude the investigation, if not already concluded and take the proceeding to its logical end, it added.

Case Title: M/S ib TRACK SOLUTIONS PVT LTD & ANR v. STATE OF KARNATAKA & ANR