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L e g a l O p i n i o n

Certain queries were raised by the learned advocates appearing on behalf of

Mr Lalit K Modi (‘LKM’) for my answers thereon. However, after discussing the facts

and the legal position relevant in this behalf, with the said learned counsel, I have

re-formulated the queries as follows:

1. Whether the authorities under the Foreign Exchange Management

Act, 1999 (‘FEMA’) had the power to call upon, or compel, the

physical presence of LKM in India and whether the authorities

acting under FEMA were acting legally in requesting the authorities

under the Passports Act to impound the passport of LKM for the

failure of LKM to appear personally before the Enforcement

authorities (authorities acting under FEMA).

2. Whether the authorities under the Passports Act were acting within

the four corners of the powers vested in them by the Act in taking

proceedings under the Passports Act, 1967 with a view to compel

the presence of LKM before the Enforcement authorities.

3. Whether the provisions of Section 10 (3) (c) are constitutionally

invalid and inoperative for the reason that the said clause does not

provide any guidance in the matter whether to impound the

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passport or revoke the passport in a given case? Secondly, did the

authorities under the Passports Act act accordingly to law in

revoking the passport of LKM?

The facts relevant to the above queries are not many and are as follows:

On 2.8.2010 the Director of Enforcement (‘DoE’) sent ‘summons’ to LKM to

appear in person under Section 37 (1) and (3) of FEMA read with Section 13 (1) of

the Income Tax Act, 1961 and Section 30 of the Code of Civil Procedure , 1908,

stating that an “investigation is being conducted against you under the provisions of

the FEMA and whereas in connection with the said investigation you are hereby

summoned to appear before me in person on 10.8.2010 at 11.00 hours to tender

evidence in respect of various agreements executed by BCCI-IPL along with the

documents listed in the schedule below. ….”. After specifying the documents

required, the summons stated that in default of his appearance, LKM will be liable

to action under the aforesaid provisions of the Act. The summons was signed by

the Assistant Director.

On 7.8.2010 LKM sent copies of all the documents required but expressed his

inability to be physically present in India “because of serious security concerns”.

He stated that there is a threat perception to his life and that he has been advised

to stay outside the country until the said threat perception cease. He, therefore,

asked his personal presence to be excused. He expressed his readiness to furnish

such further information as may be required.

On 24.8.2010 another summons was issued by the Directorate of

Enforcement again stating that in connection with the said investigation, LKM

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should appear before the Assistant Director in person 7.9.2010 for tendering

evidence and producing documents mentioned in the schedule to the said letter.

LKM was warned that in default of his appearance on the said date he will be liable

to action under the aforementioned provisions of law.

On 7.9.2010 LKM sent a reply stating that because of the threat perception

and risk to his life, he is obliged to stay abroad and that it will be open to the

Enforcement authorities to verify the correctness of the threat perception from the

Mumbai police who indeed had provided security to him on the said account. LKM

stated expressly in this letter that while he is unable to be present personally

before the Enforcement Officer, he is prepared to make himself available by video

conferencing whenever required and to answer all questions and submit all

documents required.

On 16.9.2010 the Assistant Director, DoE filed a “complaint under Section 16

(3) of FEMA” before the Deputy Director of Enforcement, Mumbai – Adjudicating

Authority. In this complaint, the Officer stated that in spite of repeated summons,

LKM has failed to appear personally before him and that the threat perception

pleaded by him is not acceptable for the reason that even after receiving a

particular threat letter (dated 23.8.2010 referred to by LKM), LKM was in India and

was participating in the several public and other functions. It was, therefore,

opined that the failure of LKM to appear personally before the Enforcement

authorities is deliberate and without any valid reasons which means that he has

contravened the provisions of Section 37 of FEMA read with Section 13 (1)_(c) of

the Income Tax Act, 1961 and has rendered himself liable to be proceeded against

under the said provisions. (Though this complaint refers to the letter dated

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7.9.2010 from LKM, his offer to appear by video linkage was not referred to). On

the basis of the above complaint of the Enforcement Officer, the Deputy Director /

Adjudicating Authority issued a show cause notice on 20.9.2010 calling upon LKM to

show cause “why adjudicating proceedings as contemplated under Section 13 of

FEMA, 1999 should not be held against you for the aforesaid contraventions of

provisions of FEMA, 1999”. LKM was asked to appear either in person or through a

legal practitioner / chartered accountant duly authorized by him on the said date.

I am informed that the said adjudication proceedings are still pending.

On 15.10.2010, LKM received a notice from the Regional Passport Office

(signed by Assistant Passport Officer (Policy), Regional Passport Office, Mumbai)

stating that he has been informed by the DoE that on 16.9.2010 a complaint has

been filed against him under Section 13 of FEMA and that a show cause notice

dated 20.9.2010 has also been issued to him for non-compliance of the summons

issued by the DoE. Accordingly LKM was called upon to explain “as to why action

under Section 10(3)(c) of the Passports Act, 1967 should not be initiated against

you”. The notice further stated “If you wish you ,may appear before Assistant

Passport Officer (Policy) to present your case in person within 15 days from the

date of issue of this letter along with passport bearing No. …. “. He was informed

that if no reply is received within the stipulated period, necessary action will be

initiated against him under the Passports Act, 1867. Then followed a good amount

of correspondence between Wadia Ghandy and Co, Advocates & Solicitors acting for

LKM and the Assistant Passport Officer (Policy) with regard to supply of documents,

compliance with principles of natural justice and so on which it is not necessary to

refer to in any detail. Suffice it to say that in one of his letters dated 1.11.2010

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sent by the Assistant Passport Officer, he set out the gist of letters received from

DoE wherein a request was made by the DoE authorities to Assistant Passport

Officer to impound the passport issued to LKM.

On 3.3.2011 the Regional Passport Officer, Mumbai passed an elaborate

order, after giving personal hearing to the advocates for LKM, whereunder he held

that “it is in the interests of game of cricket and the public in general that the case

is properly investigated for which the interrogation of Sri Lalit K Mode is required”.

He then ordered the revocation of the passport issued to LKM “under Section

10(3)(c) f the Passports Act, 1967 in the interests of general public”.

The appeal preferred by LKM before the Chief Passport Officer, New Delhi

was dismissed on 31.10.2011. The said dismissal is based upon the finding that “in

these circumstances his refusal to make himself available in India for personal

interrogation by the investigating authorities on the alleged lack of adequate

protection in India can only be construed as an action intended to avoid the process

of law and non-compliance of a legal process. … That the alternative procedure for

his examination through video conferencing, questionnaires, interrogatories, etc.,

was considered by the concerned authorities but it was found that no meaningful

investigation was possible except by his examination in person since the appellant

is required to be confronted with a number of documents and his evidence is

required to be recorded on many issues”. (No such finding by the Enforcement

authorities is said to have been recorded.) It was also noted that the modality of

interrogation in such cases has to be decided primarily by the investigating agency

and the individual conveniences need not take precedence while arriving at a

decision. In the circumstances, the insistence of the physical presence of the

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appellant in India by the Enforcement Directorate is considered justified”. The

Chief Passport Officer then added, “As per procedure impounding is resorted to

when the passport is in the temporary custody of the passport authority or has

been surrendered to them. Revocation is resorted to when the passport is not in

the custody of the passport authority and it is unlikely that the passport would be

presented to a PIA for temporary custody. In the instance case, the passport is still

in the custody of the appellant. ….”.

A writ petition preferred by LKM being Writ Petition (Civil) No.376 of 2012

was dismissed by a learned single Judge on 16.1.2013 under an elaborate

judgment and order. Against the said judgment and order of the learned single

Judge, I am informed, a Writ Appeal is preferred which is pending consideration of

the Delhi High Court.

In the light of the above facts and circumstances, I may now proceed to

answer the three queries formulated at the inception of this opinion.

Query No.1:

FEMA has been enacted to consolidate and amend the law relating to foreign

exchange with the objective of facilitating external trade and payments and for

promoting the orderly development and management of foreign exchange in India.

Indeed the several provisions of the Act show that the proceedings are mainly

directed against the assets / properties / monies and are not directed towards

conviction and imprisonment of the person concerned.

An examination of the relevant provisions of FEMA, 1999 further indicates

that there are three stages of proceedings viz.., investigation, adjudication and

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enforcement of the orders of the adjudicating authority. The stage of investigation

is governed by Section 37 which reads as follows:

“37. (1) The Director of Enforcement and other officers of Enforcement, not

below the rank of an Assistant Director, shall take up for investigation the

contravention referred to in section 13.

(2) Without prejudice to the provisions of sub-section (1), the Central

Government may also, by notification, authorize any officer or class of officers

in the Central Government, State Government or the Reserve Bank, not

below the rank of an Under Secretary to the Government of India to

investigate any contravention referred to in section 13.

(3) The officers referred to in sub-section (1) shall exercise the like

powers which are conferred on income-tax authorities under the Income-tax

Act, 1961 (43 of 1961) and shall exercise such powers, subject to such

limitations laid down under that Act.”

The stage of adjudication is governed by Section 16. (Subsequent sections

provide for appeal and its disposal). The third stage is governed by Section 14.

Indeed it is only Section 14 (2) which provides for “arrest and detention in civil

prison of a defaulter” who fails to implement and pay the penalties imposed on him

under the provisions of the Act; this arrest and detention is designed only to make

him pay up the penalty. There is no provision in the Act empowering the

authorities to compel personal or physical presence of the person against whom

proceedings are initiated. Neither Section 37 nor provisions of Income-tax Act or

Sections 30 and 32 of the Code of Civil Procedure empower the authorities under

the FEMA to compel the physical presence of the person against whom proceedings

under the Act are being taken. This circumstance is of a fundamental importance.

Assuming that some questions have to be asked or some information has to be

obtained from the person by questioning him, the same can be done through video

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conferencing also which offer has been repeatedly made by LKM. Of course there is

no room for “interrogation” as understood in the Police vocabulary but no such

“interrogation” is contemplated by FEMA and the use of the said word by the

passport authorities is uncalled for. So far as the documents are concerned, he

submitted all the documents which are called for from him. It is not the complaint

of either the Enforcement authorities or the Passport authorities that LKM has failed

to produce any documents. Their only grievance is the physical / personal

presence of LKM before the Enforcement authorities. It is here that LKM has

offered to be examined or questioned, or what may be incorrectly said

‘interrogated’ by the Enforcement authorities through video conferencing. There is

no reason why this plea should not have been accepted particularly in the light of

the judgment of the Hon’ble Supreme Court in STATE OF MAHARASHTRA vs Dr

PRAFUL B DESAI [(2003) 4 SCC 601]. The said decision was rendered in the

context of Section 273 of the Code of Criminal Procedure which requires that “all

evidence taken in the course of the trial or other proceedings shall be taken in the

presence of the accused or when his personal attendance is dispensed with, in the

present of his pleader”. The judgment shows that the prosecution wanted to

examine a particular witness who was abroad through video conferencing which

was allowed by the trial judge but set aside by the High Court. When the matter

reached the Supreme Court, it held:

“20. Recording of evidence by video-conferencing also satisfies the object of

providing, in Section 273, that evidence be recorded in the presence of the

accused. ….”.

It was held that examination of a witness through video-conferencing “fully meets

the requirements of Section 273” and that such recording of evidence would be “as

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per ‘procedure established by law’ ”. The principle of this decision applies with

greater force to the present proceedings which are not criminal proceedings but

purely civil proceedings directed against the assets, properties and monies and not

against the person as such. As pointed out hereinabove, the object of the said

proceedings is not to convict or punish / sentence the person to imprisonment or

fine but only to pass appropriate orders against assets / properties / monies and to

levy penalties if any upon the person violating the provisions of the FEMA.

It is thus clear that the Enforcement authorities were acting beyond their

power and jurisdiction under the Act in insisting upon the physical presence of LKM

before them; they had no such power. In any event, the offer of LKM to appear by

video-conferencing and answer all questions and interrogatories should have been

accepted since there is nothing which cannot be done by video-conferencing which

can be done in the presence of the person.

In this connection, reference may be had to a finding recorded by the learned

single Judge of the High Court in Writ Petition No.l376 of 2012 that on a combined

reading of Sections 13 and 37 (1) and (3) of FEMA, Section 13 (1) of the Income-

tax Act and Sections 30 and 32 of the Code of Civil Procedure it has to be held that

the officers of the DoE do possess the power “to enforce the attendance of the

persons who have violated the provisions of the Income-tax Act and by necessary

implication the provisions of FEMA”. This finding was recorded repelling the

contention of the learned counsel for LKM that there was no such power in the

Enforcement authorities. But even if we assume for the sake of argument that the

DoE authorities do have the power to enforce the attendance of the person against

whom proceedings are taken under the Act, two further questions arise viz.,

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(a) if the Enforcement authorities themselves have such a power then they

should exercise that power instead of calling upon the passport authorities to

impound the passport of LKM with a view to compel him to present himself

before the Enforcement authorities. There can be no valid justification for

the Enforcement authorities in not exercising their own powers and in

seeking the assistance of passport authorities for that purpose.

(b) In any event, the said power is available only at the stage of

investigation and it is important to notice that the stage of investigation

came to an end when the Enforcement Officer filed a complaint before the

Adjudicating Officer to initiate adjudication proceedings against LKM and the

Adjudicating Authority did indeed commence such proceedings, which are

now pending. During the course of adjudication proceedings, the powers

under Sections 13 and 37 read with Section 13 (1) of the Income-tax Act and

Sections 30 and 32 of the Code of Civil Procedure are not available which are

available only at the stage of investigation. As stated above, only after an

order of penalty is passed under Section 16 and in case the penalty is not

paid, a person concerned can be arrested and sent to civil prison under

section 14 (2) with a view to compel him to pay up the penalty and

admittedly in this case that stage has not arrived since the adjudication

proceedings are still pending and no final orders are passed therein.

For all the above reasons I am of the opinion that:

(a) The Enforcement authorities had no power to call upon or compel the

physical presence of LKM before them in connection with the investigation

commenced by them.

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(b) In any event once the investigation has come to an end, no such power

can conceivably inferred.

(c) Once the very foundation on the basis of which the Enforcement

authorities requested the Passport authorities to initiate action against LKM is held

to be unsustainable it would equally follow that the initiation of proceedings under

the Passports Act would equally become incompetent and without jurisdiction.

Query No.2:

It would be evident from the notice issued by the Passport authorities and

their orders that the only purpose for which the proceedings against LKM have been

initiated under the Passports Act is to compel LKM’s presence before the

Enforcement authorities. The question is whether such a purpose can fall within the

expression “interests of general public” employed in Section 10 (3)(c) of the

Passports Act, 1967. It is true that the said expression is of wide amplitude but can

it be said that the proceedings under the Passports Act can be taken, not for the

purpose of the Passports Act but to achieve the ends of authorities under different

enactments. Here again even if it is assumed that such a power exists, its exercise

in this case is bad. The authorities, after having noticed that the desired purpose of

the Enforcement authorities could have been achieved by accepting the LKM’s offer

to appear by video-conferencing and to answer all questions and interrogatories,

yet insisted upon personal / physical presence of LKM before them. Such an

attitude is bound to create suspicion about the bona fides of the said authorities

and of their said purpose. It looks as if the authorities want to achieve some other

oblique purpose by compelling LKM to be present in person before them.

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It may also be noticed in this connection that the show cause notice dated

15.10.2010 issued by the Assistant Passport Officer only called upon LKM to show

cause why “action under Section 10(3)(c) of the Passports Act, 1967 should not be

initiated against you”. Without any further show cause notice and without giving an

opportunity to LKM to show cause why his passport should not be revoked, the

Passport Officer passed orders revoking the passport. It would thus be a case

where the Passports Authority did not afford an opportunity to explain as to why his

passport should not be revoked. The pressure of Enforcement authorities is evident

from their request made to the Passports Authorities (referred to in the letter dated

1.11.2010 from the Assistant Passport Officer to LKM and his advocates) to

impound his passport. It is equally significant to notice that in the show cause

notice dated 15.10.2010 issued by the Assistant Passport Officer, there is again a

direction to LKM to represent his case “in person” which is totally

ununderstandable. It is evident that the Passport authorities were totally under the

influence of Enforcement authorities and were merely carrying out their diktat.

Even the reference to ‘interrogation’ in the orders of the Passport authorities is

indicative of the real purpose of the Enforcement authorities. For the above

reasons, it must be held that:

(i) The very initiation of proceedings under the Passports Act was for a

purpose not connected with the Passports Act and was indeed alien to the said Actg

and, therefore, bad.

(ii) It is evident that Passport authorities were merely acting as agents of the

Enforcement authorities to achieve the not very acceptable objective of the

Enforcement authorities to somehow procure the physical presence of LKM to

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achieve their not very desirable objectives. The facility of video-conferencing

should have been availed of.

(iii) In any event, the orders of the Passport authorities can be said to have

been passed in violation of the principles of natural justice.

Query No.3:

The question is whether Section 10(3)(c) of the Passports Act is violative of

Article 14 of the Constitution of India inasmuch as it does not provide any guidance

in which cases to impound the passport and in which cases to revoke it; the

absence of such guidance amounts to vesting an arbitrary, unguided and

unchannelled power in the authority; in one case, he may impose the punishment

of impounding and in another case, on identical facts, he may impose the

punishment of revocation; such a procedure, it is submitted, is inherently

discriminatory and violative of Article 14 of the Constitution. Section 10(3)(c) of

the Passports Act reads as follows:

“10. Variation, impounding and revocation of passports and travel

documents.- ….

(3) The passport authority may impound or cause to be impounded or revoke

a passport or travel document, -

…..

(c) If the passport authority deems it necessary so to do in the

interests of the sovereignty and integrity of India, the security of

India, friendly relations of India with any foreign country, or in the

interests of the general public;

…..”.

In Maneka Gandhi vs Union of India [(1978) 1 SCC 267] the Supreme Court

has held that impounding means withholding of passport for a limited period and

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cannot be for an indefinite period of time. This holding makes it clear that while

impounding is a temporary measure for a given period, revocation is a final act and

a case of cancellation of the passport altogether. Even so, the grounds upon which

these two actions can be taken are the very grounds as are mentioned in Section

10(3)(c) viz., “in the interests of the sovereignty and integrity of India, the security

of India, friendly relations to India with any foreign country, (or) in the interests of

general public”. Let us take a case where ground of interest of general public is

invoked. How does the Passport Officer determine which punishment is to be

imposed. It is left to his pleasure to choose one of them. This is the situation as

the law now stands inasmuch as the clause viz.., Section 10(3)(c), nor for that

matter any other provision in the Act, furnish any guidance to the Passport

authority in which cases the power of impounding should be exercised and in which

cases the power of revocation should be exercised. Even in the decision of the

Seven Judge Constitution Bench in MANDANLAL CHAGANLAL vs MUNICIPAL

CORPORATION OF BOMBAY (AIR 1974 SC 2009) the law has been stated thus:

“Therefore the contention that the mere availability of two procedures will

vitiate one of them, i.e., the special procedure, is not supported by reason or

authority. The Court held that where there are two procedures of

determination and enforcement of a liability, be it civil or criminal or revenue,

one of which is substantially more drastic and prejudicial than the other, and

they operate in the same field, without any guiding policy or principle

available from the legislation as to one or the other provisions should be

followed, the law providing for the more drastic and prejudicial would be liable

to be condemned as discriminatory and void. This principle has held the filed

for over 20 years and it is logically sound and unexceptionable”.

It may not be necessary to multiply the decisions.

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Applying the principle of the said decision it has to be held that in the

absence of any guidance either in Section 10(3)(c) or in the Passports Act, the

provision Section 10(3)(c) is rendered discriminatory and therefore violative of

Article 14 of the Constitution of India. It may be made clear that in Maneka

Gandhi’s case, the Supreme Court considered the constitutionality of Section

10(3)(c) but only on the ground whether the expression “in the interests of general

public” is too wide and vague as to violate Article 14 and the Court held that it did

not. The ground on which the present attack on constitutionality is leveled, is

entirely distinct and different and was not considered in Maneka Gandhi’s case or in

any other decision brought to my notice.

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