Jatin C. Jhaveri v. Union of India

1. These appeals arise out of common judgment and order dated 19.10.2010 passed by the High Court of Judicature at Bombay in FERA Appeal Nos.64-66 of 2006 & in Writ Petition No.2976 of 2004. The challenge in Civil Appeal Nos.11128-11131 of 2011 at the instance of Union of India is to the decision of the High Court dismissing FERA Appeal Nos.64-66 of 2006 while Civil Appeal No.11127 of 2011 filed by one Jatin Jhaveri challenges the dismissal of his Writ Petition No.2976 of 2004.

2. The facts leading to these appeals are as under:-

Dodia intending to board a flight to Hongkong from Mumbai, had checked in a grey suitcase and a black briefcase. On suspicion, the Custom Officers searched the baggage and found the suitcase to be containing US $ 289,250 while the brief case contained US $ 114,300. The currency was seized and Ajit Dodia was questioned. He disclosed that he was to accompany Jatin Jhaveri, a diamond trader, that his brother Jitendra Dodia was working with Jatin Jhaveri as a sorter, that his trip was finalized and arranged by Jatin Jhaveri who had driven him to the Airport. In his statement Jitendra Dodia confirmed that he was working with Jatin Jhaveri and that he and Jatin Jhaveri had packed US dollars in bundles in the evening. However Jatin Jhaveri was not available for next two months i.e. till 27.09.1993.

USA in June 1993 and had entered into contract for supply of polished diamonds and that in pursuance of the contract he had received US $ 289,250. According to him, his baggage that arrived along with him on 25.06.1993 had contained US $ 254,000 while other bag which arrived three days later on 28.06.1993 contained remainder namely US $ 35,250. In support of his claim, reliance was placed on Currency Declaration Form No.100250 dated 25.06.1993 in respect of US $ 254,000 and Currency Declaration Form No.10763 dated 28.06.1993 in respect of US $ 35,250. According to him the currency was obtained and imported by him as advance payment towards supply of diamonds, that he could not deposit the currency in the bank as the bank had refused to accept the same and therefore he was proposing to take it along with him to Hongkong on 27.07.1993. It was his further case that while he was going towards the Airport he had received a message that his mother was ill and that Ajit Dodia was intercepted with currency and therefore he did not go to the Airport.

C/577/95-Bom preferred by Jatin Jhaveri, Ajit Dodia and Jitendra Dodia against the order of the Commissioner of Customs were disposed by the Customs Excise and Gold Control Appellate Tribunal (CEGAT, for short), West Regional Bench, Mumbai. It held that though Jatin Jhaveri had disowned the currency in his statement dated 12.10.1993, it did not mean that he had forfeited the ownership and could not make a claim in respect thereof at a later stage. The concerned Currency Declaration Forms according to CEGAT sufficiently proved that the currency was brought in by said Jatin Jhaveri. It however held that the currency amounting to US $ 289,250 was sought to be unauthorisedly exported, and was liable to confiscation but imposed fine of Rs. 9 lacs in lieu of confiscation of US $ 289,250. The personal penalty imposed on Jatin Jhaveri was also reduced from Rs.10 lacs to 7 lacs. In so far as currency amounting to US $ 143,300 was concerned, since no one made any claim in respect thereof, the confiscation was confirmed but the personal penalty imposed on Ajit Dodia was reduced to Rs.[1] lac. As regards Jitendra Dodia, it was observed that he had dissociated himself and the role attributed to him was also limited to packing the bag. This decision rendered by CEGAT was not challenged and attained finality in respect of proceedings under the Customs Act.

Directorate of Enforcement, Mumbai to the earlier Show Cause Notice dated 21.11.1997 as to why the currency in question be not confiscated under the provisions of FERA. H. The proceedings so initiated under FERA culminated in an order dated 04.10.1999 passed by the Special Director of Enforcement, Mumbai. He observed that in his statement dated 12.10.1993 Jatin Jhaveri had emphatically denied having any connection with the seized currency and there was no whisper in the statement that any part of that currency was brought by him from USA which represented advance payment towards export or that he was in possession of relevant Currency Declaration Form in support of his claim. He found that the Immigration/Embarkation Card of Ajit Dodia was admittedly filled in by Jatin Jhaveri which indicated that he was physically present at the Airport along with Ajit Dodia. As regards genuineness of the Currency Declaration Forms, he relied upon the observations made by Commissioner of Customs, Mumbai in adjudication order dated 30.08.1995 as quoted above. The Special Director concluded as under:- “From the evidence discussed above, only irresistible conclusion forthcoming is that the entire foreign exchange of US $ 403, 550 seized from Shri Ajit Dodia by the Air Customs, Mumbai was in fact illegally acquired by the said Shri Jatin Jhaveri, as indicated in the impugned SCN and then transferred to Shri Ajit K. Dodia for its onward transfer to his (Shri Jatin’s) brother in Hongkong. Similarly, the notice, Shri Ajit Dodia has in fact otherwise acquired the said foreign exchange of US $ 403,550 from Shri Jatin Jhaveri, a person other than an Authorised Dealer in Foreign exchange in India, which was later on seized by the Air Customs Officers from Shri Ajit Dodia on 28.07.1993 under the panchanama. It is equally abundantly crystal clear that Shri Jitendra Dodia has in fact aided and abetted said Shri Jatin Jhaveri in transferring and his brother Shri Ajit K. Dodia in acquiring the aforesaid foreign exchange of US $ 403,550 from said Shri Jatin Jhaveri. All the three notices viz. Shri Jatin Jhaveri, Ajit Dodia and Jitendra K. Dodia have failed to produce any permission of the RBI as required under Sec. 8(1) of the FERA 1973 for acquiring/transferring foreign exchange as indicated in acquiring/transferring foreign exchange as indicated in the impugned Show Cause Notice. Thus the charges of contravention of Sec. 8(1) of the FERA 1973 against Shri Jatin Jhaveri and Shri Ajit Dodia and of Sec. 8(1) r/w Sec. 64(2) of the FERA 1973 against Shri Jitendra K. Dodia are proved beyond any doubt. Accordingly, I hold them guilty of these respective contraventions against them. Concluding thus, the Special Director imposed penalty of Rs.30 lacs each on Jatin Jhaveri and Ajit Dodia and of Rs.7.[5] lacs on Jitendra Dodia. It was held that the currency in question was liable to confiscation under Section 63 of FERA and it was so ordered.

I. This order of the Special Director was challenged in Appeal

Nos.454, 462 and 463 of 1999 by Jatin Jhaveri, Jitendra Dodia and Ajit Dodia respectively before the Appellate Tribunal for Foreign Exchange, which disposed of those appeals by its order dated 10.03.2004. It accepted the appeal preferred by Jitendra Dodia and held that he could not be held guilty of the charge of abetment in acquiring and transferring of Foreign Exchange unlawfully. In appeal preferred by Ajit Dodia, the confiscation of currency amounting to US $ 114,300 was affirmed but the penalty was reduced to Rs.[1] lac. As regards, appeal preferred by Jatin Jhaveri, the Currency Declaration Forms furnished by him were taken to be strong pieces of evidence. It was observed as under:- “Simply because of the fact that the custom authorities are not able to trace out office copies of these forms, it will not render these forms as not being authentic and therefore inadmissible. It is for the respondent to prove that these forms were not genuine. As regards the confirmatory evidence of overseas buyers, the respondents could have called them for cross examination, if they have any doubt the authenticity of their version.” Allowing the appeal preferred by Jatin Jhaveri, the order of confiscation in respect of US $ 289,250 was quashed on the ground that the acquisition was duly explained.

3. Jatin Jhaveri, being aggrieved in so far as rejection of prayer for grant of interest was concerned, preferred SLP (C) No.5788 of 2011. On the other hand, Union of India preferred SLP (C) Nos.26671-26674 of 2011 challenging the dismissal of FERA Appeal Nos.64-66 of 2006. Special Leave to Appeal in all the matters was granted by this Court vide order dated 09.12.2011. During the pendency of these appeals, by order dated 14.02.2014 passed in Notice of Motion No.225 of 2012 in Writ Petition No. 2976 of 2004 preferred by Jatin Jhaveri, the Customs Department was permitted by the High Court to refund the amount of US $ 289,250 in Indian Rupees. Accordingly amount of Rs.1,83,09,525 was refunded and credited to the account of Jatin Jhaveri subject to the undertaking to return the said sum with interest in case this Court were to accept the appeals preferred by Union of India.

4. Mr. R.P. Bhatt, learned Senior Advocate, who appeared for Jatin Jhaveri submitted that the currency declaration forms were accepted and relied upon in Customs proceedings and thus the aspect of “bringing into India” of the currency in question, was rightly held in his favour. The ownership of the currency having been established, in his submission, Jatin Jhaveri was entitled to the same. On the other hand, Mr. K. Radha Krishnan, learned Senior Advocate, appearing for Union of India submitted that the initial statement of Jatin Jhaveri recorded on 12.10.1993, which itself was more than two months after the seizure, did not even whisper about currency declaration forms and no ownership in respect of currency was claimed. In his submission, Currency Declaration Forms were rightly observed to be suspicious and not relied upon by the Special Director. It was further submitted that the scope of proceedings under FERA was distinct and different and exoneration in Customs proceedings would not enure to the advantage of the person concerned in proceedings under FERA and in any case the crucial question which the High Court failed to appreciate was the absence of requisite permission of Reserve Bank of India.