Bombay HC Quashes LORs Issued By DRI For Probe Into Alleged Evasion Of Customs Duty By Adani In Import Of Indonesian Coal

A division bench of Justice Ranjit More and Justice Bharati Dangre heard the petition filed by Adani Enterprises Ltd. and Adani Power Ltd. Court held -

"The DRI has commenced the investigation into a non-cognizable offence without obtaining the necessary permission from the Magistrate and in such circumstances, the LR issued by the Magistrate do not meet the test and is not compliant of Chapter XII of the Cr.P.C. since it do not precede the mandatory requirement of initiation of investigation, as prescribed in Chapter XII."

Case Background

According to the DRI, petitioners were involved in the overvaluation of coal of Indonesian origin and it is alleged that during the period from October 2010 to March 2016, Adani Group of Companies had imported about 1300 consignments of Indonesian Coal and majority of the import came to be routed through their group subsidiary company i.e. Adani Global Private Limited (AGPTE), Singapore and Adani Global (AGFZE), Dubai.

Allegedly the petitioners acted in connivance with certain individuals and companies in grossly overstating the import value of coal as compared to the actual export value and with an object of siphoning of the money abroad apart from availing a higher power tariff compensation, this course was adopted so that they can sell power to the power utility public sector undertakings in India.

The precise accusation against Adani was that the difference between value of Indonesian coal declared to Indian customs by them as against the values declared by the Indonesian exporters to the Indonesian authorities at the time of export was to the tune of Rs.930 crore and this over valuation was noticed in 231 consignments.

Moreover, petitioners availed the benefit of nil duty or concessional rate of duty on these imports in terms of the ASEAN- India Free Trade Agreement. According to the DRI, the petitioner was importing coal from Indonesia through its subsidiary companies and availing the benefits of the concessional rates of duty under the AIFTA on one hand and on the other hand, the petitioner was engaged in grossly overstating the value of the imported coal and this was apparent from the mismatch in the values.

As per DRI, both the petitioners are liable to be charged under Sections 132 and 135 of the Customs Act, 1962. Thereafter, requisition under Section 108 of the Customs Act was issued to the petitioner to submit documents relating to purchase and sell of Indonesian coal by their subsidiary companies in Singapore and Dubai. Petitioners responded by stating that the AGPTE & AGFZE are independent legal entities incorporated abroad and DRI is free to directly communicate with them.

The said non- cooperation of the Adani Group of Companies as well as their banks in submitting the transaction relating documents/information led to the DRI filing an application before the Addl. Chief Metropolitan Magistrate, Mumbai with a request to issue Letter of Rogatory to the authorities at Singapore, UAE, Hongkong, British Virgin Irelands in order to secure the necessary information.

Submissions

Senior Counsel Vikram Nankani appeared for the petitioners and submitted that Letter of Rogatory contained in Section 166-A of CrPC can be availed of only when an investigation has commenced under Chapter XII of the Code either in form of Section 154 in respect of cognizable offence or Section 155 in form of non-cognizable offence.

Referring to the allegations, Nankani said that the coal of Indonesian origin imported on payment of applicable and assessed custom duties been mis-declared on account of the mismatch of grade and over-valuation and automatically it follows that it is not a case of evasion of custom duty.

On the other hand, DRI's counsel Senior Advocate Maninder Singh argued that Section 166-A of the CrPC which is a unique provision contained in the Code and which operates with a non-obstante clause can be justiciably invoked by any Investigating Officer, including a Custom officer, when it occurs to him, during investigation into an offence that evidence may be available in a country or place outside India and he may then approach any criminal Court with a letter of Request to the Court or an authority in that country or place competent to deal with such request to examine any person who is acquainted with the facts and circumstances of the case.

Customs officer is not a police officer, thus, investigation of all offences conducted by the police officers is regulated by CrPC. However, there is no concept of FIR, if the enquiry and investigation is carried under any special statute and in terms of Sections 4 and 5 of Cr.P.C.

Judgement

Court examined various judgements of the Supreme Court relied upon by both parties and the Customs Act. While the petitioners placed reliance on judgement of apex court in Om Prakash & Anr Vs. UOI & Anr, the respondents relied upon judgement in Directorate of Enforcement Vs. Deepak Mahajan & Ors.

Court observed-

"Carefully examining the principle enunciated by the Apex Court, the position that emerges is to the effect that though the Customs Act, 1962 classifies the offence punishable thereunder as cognizable/non-cognizable, it does not lay down any set of procedure for dealing with the information received by the Custom Officer for proceeding under the provisions of the Act. It also does not define the term "cognizable/non-cognizable" and in absence of such a definition, the terms take the meaning assigned in the Code of Criminal Procedure."

Furthermore, the bench explained how the non-obstante clause did not override and only such provisions of the Code which are inconsistent with the application of Section 166A are overriden. The said non-obstante clause cannot be construed in a manner that it stands in deviation and derogation of all the procedural safeguards contained in Chapter XII including the mode and manner of commencing a valid investigation, Court said.

"Section 166A cannot be read in isolation and it will have to be read as a part of Chapter XII of the Code to be invoked and applied where the investigation is commenced either under Section 154 or 155 in the manner prescribed therein and it is necessarily an investigation under Chapter XII, which in case of a cognizable offence, commenced with lodging of an information with the police station officer and the police officer following the procedure set out in Section 154 and in case of a non-cognizable offence, by obtaining an order of the jurisdictional Magistrate in terms of sub-section (2) of Section 155, without obtaining such an order from the Magistrate under Section 155((2).

The DRI has commenced the investigation into a non-cognizable offence without obtaining the necessary permission from the Magistrate and in such circumstances, the LR issued by the Magistrate do not meet the test and is not compliant of Chapter XII of the Cr.P.C. since it do not precede the mandatory requirement of initiation of investigation, as prescribed in Chapter XII."

Thus, Letter of Rogatory issued by the DRI to various countries were quashed and set aside.

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