Kerala HC Reserves Judgment On Pleas Seeking To Quash CBI FIR In LIFE Mission Case

The High Court of Kerala on Thursday reserved orders on petitions filed by the Chief Executive Officer(CEO) of LIFE Mission Project of Kerala Government and the Managing Director of Unitac Builders Ltd to quash the FIR registered by the Central Bureau of Investigation (CBI) alleging violations of the Foreign Contributions Regulation Act (FCRA) with respect to the contributions received from the United Arab Emirates (UAE) for the construction of apartments for flood victims.

A single bench of Justice V G Arun reserved orders in the matter after hearing Senior Advocate K V Viswanathan (for LIFE Mission CEO), Advocate K. N Abhilash (for Unitac), Advocate Gangesh K. B (for Congress MLA Anil Akkara, the complainant) and Sasthamangalam S. Ajith Kumar, Standing Counsel for the CBI.

Submissions of LIFE Mission

The prime argument of Senior Advocate Viswanathan was that FCRA was not attracted to the allegations.  LIFE Mission is not covered under Section 3 of the Act, which specifies the persons and entities prohibited from accepting foreign contributions. State governments, government agencies, statutory bodies and entities subject to CAG audit are exempted from FCRA as per the notifications of the Government of India.

To highlight the objectives of the FCRA, he referred to the Supreme Court judgment in Indian Social Action Forum (INSAF) v Union of India.

"It is clear that preventing foreign contribution into the political arena is the object sought to be achieved by the Act...such of those voluntary organisations which have absolutely no connection with either party politics or active politics cannot be denied access to foreign contributions", he quoted from the INSAF judgment.

He submitted that there was no direct foreign contribution to the LIFE Mission. The agreement was between UAE Red Crescent and the builder Unitac Builders Ltd. As per the MoU between LIFE Mission and UAE Red Crescent, it is the latter which identifies the project proponent for the construction of homes for the rehabilitation of flood victims. The Government only gives the land.

Unitac is entitled to raise bills and receive consideration for its contractual services. Such receipts do not come under the defintion of "foreign contribution" under Section 2(h) of the Act. Explanation 3 of Section 2(h) excludes the amount received by any person from a foreign source by way of fee or towards cost in lieu of goods and services rendered in the ordinary course of business.

If the principal accused is not coming under FCRA, LIFE Mission can in no way be subjected to FCRA.

He stressed that the FIR was an abuse of process of law initiated out of political considerations. The FIR will destabilize the humanitarian efforts of the government and will stigmatize the officials. 

He also pointed out that in respect of allegations of corruption, the Vigilance Bureau has already initiated an investigation. The CBI FIR, registered in haste on the complaint of Congress MLA Anil Akkara, is mala fide and unsustainable.

Advocate K. N Abhilash, appearing for Santhosh Eappen, the MD of Unitac, submitted that he has been dragged into the case to settle political rivalries. Unitac received the offer after a tender by Red Crescent.

The receipts are exempted under Section 4 of the Act as contributions accepted "as agent of foreign source in relation to any transaction made by such foreign source with the State Government".

Submissions of Anil Akkara, Congress MLA

Advocate Gangesh, appearing for the complainant, Anil Akkara, submitted that the agreement of Unitac is with the Consulate General of the UAE. There is no authorization for the Consulate General to represent Red Crescent. But the funds came from Red Crescent.

The agreement says that the money is for "services rendered" and not for "services to be rendered". So advance payment cannot be made.

He further contended that though the agreement was with "Unitac Builders & Developers Ltd", funds were given to "M/s Unitac Energy Solutions Pvt Ltd".

Section 3(c) of FCRA says no foreign contributions should be received by "any other body controlled or owned by the government". The amounts were received on behalf of LIFE Mission. The amounts were received on behalf of LIFE Mission. They are not saved by Explanation 3 of Section 2(h) of the FCRA.

CBI's submissions.

The Standing Counsel for the CBI termed the deal "underbelly transactions" and said that the MoU was an "eye wash".

Referring to the statement of Santosh Eapen recorded by the CBI, he submitted that Unitac had discussions with Swapna Suresh, Sandeep and Sarit - who are now under custody in the gold smuggling case - to obtain the LIFE Mission deal.

To get the project, commission was paid to them. Swapna told Unitac MD that it was a government project financed by UAE Govt and assured him that all govt approvals will be arranged by her. She demanded commission of 30% - 20% for UAE Consular General and 10% for her.

It is wrong to say that Unitac got the contract after a tender process. They got it through Swapna Suresh and other accused smugglers after agreeing to pay commission to them.

As per the original plan, 203 units were to be constructed. Santhosh Eapen wanted it to be reduced as 100 so that he can pay the kickbacks. After negotiations with govt officials, the number of units was increased to 140. After that, Santhosh Eapen told Swapna that he was reducing the commission as 26% (20% for UAE consulate general and 6% for Swapna) so as to make up for the increase of apartments.

The Standing Counsel further submitted that M Sivsankar, the former Secretary to the Chief Minister's Office, was also actively involved in the discussions.

"How can they say it is on the basis of tender? This is a game. A very intelligent game", he remarked.

"Our preliminary investigation has revealed that money came from the UAE consulate and not from Red Crescent", he added.

As regards the competence of the CBI, he submitted that the Central Government has notified CBI as the authority to investigate FCRA offences. The Kerala Government has also notified in 2017 that the CBI can investigate FCRA offences. Further, in 1989, the Government of Kerala had notified that CBI had sanction to investigate corruption allegations against government officials.

He submitted that the investigation could even reveal corruption and kickbacks received by the government officials, and in such an event, the CBI will register offences under the Prevention of Corruption Act as well.

"The facts of the case clinchingly point out that there is a conspiracy to flinch the money intended for poor people. If we find out kickbacks given to govt officials, we will come with Prevention of Corruption Act as well", he said.

"If the statements of Santosh Eapen (Unitac MD) are taken into account, they show allegations of criminal misconduct against the former Secretary of CMO. So CBI definitely has the power to investigate", CBI's counsel submitted.

To a query posed by Justice Arun as to how LIFE Mission was linked to the case, the CBI counsel submitted that it was premature to comment about the involvement of the CEO.

"It is too early to say if the CEO will be an accused or a witness. The investigation is in the embryonic stage", he submitted. 

In rejoinder, Viswanathan, referring to Akkara's lawyer's submission on Section 3(c), said that the provision talks of "employees of any body controlled or owned by govt" and "body controlled or owned by govt" cannot be read disjunctively, as attempted by the complainant's counsel.

Viswanathan stressed that CBI cannot investigate into corruption allegations without a sanction from the State Government. When a vigilance enquiry is underway, the CBI needs specific sanction, and the general sanction order cannot come to its aid in such a scenario.

The CBI FIR was a mockery of the Delhi Special Police Establishment Act and the List II of the Seventh Schedule of the Constitution.

"Those who are not intended by the Act to be covered cannot be roped in by stretching the provisions of the Act (FCRA). That would be an abuse of process", he submitted.

"The FIR is a device, a subterfuge to clutch jurisdiction which CBI does not have. Are we to mock at Section 6 of DSPE Act? Are we to mock at List II of Seventh Schedule?", he asked.

 Before concluding, Viswanathan urged Justice Arun to keep in mind one "overarching aspect" of the case - that the entire contributions came through proper banking channels.

Unitac's lawyer submitted during the rejoinder that at the relevant time, the affairs of UAE consulate were under the control of Swapna Suresh and Sarith. So, his client had to interact with them.

 LIFE(Livelihood, Inclusion and Financial Empowerment) Mission' is a housing project mooted by the Kerala Government for the benefit of the homeless.

The issue relates to the project for the construction of 140 housing units in Wadakkanchery in Thrissur district. As per the application filed by the CEO in the HC, in 2019, the 'Red Crescent Authority' of the United Arab Emirates offered to sponsor the project and accordingly, a Memorandum of Understanding was entered into that year itself. As per the MoU, the sponsor was to execute the project through independent contractors.

Alleging that foreign contributions to the tune of 10 Lakh Arab Emirates Dirham were transferred to the private contractors - Unitac Ltd and Sane Ventures - in violation of FCRA norms, a legislator belonging to the Congress party, Anil Akkara, filed a complaint before the CBI on September 20.

After four days, the CBI registered the FIR under Section 35 read with Section 3 of the FCRA and Section 120B of the Indian Penal Code arraying the Managing Directors of Unitac and Sane Ventures as accused numbers 1 and 2 respectively.

As the third accused, the FIR mentioned "unknown public servants/private citizens".