Bombay HC grants relief to Adani Group in Coal Import Case, sets aside Letters of Rogatory

In a major relief to Adani Enterprises Limited (Adani), the Bombay High Court on Thursday set aside all Letter Rogatory (LRs) issued on the request of the Directorate of Revenue Intelligence (DRI) to Singapore and other countries to investigate the Adani Group firms for the alleged overvaluation of Indonesian coal imports between 2010 and 2016..A Division Bench of Justices Ranjit More and Bharati Dangre passed the judgment while allowing the writ plea filed by Adani last year, seeking the quashing of all LRs against its subsidiaries that are under probe for the alleged over-valuation of Indonesian Coal Imports..The DRI has alleged that between October 2010 and March 2016, the Adani Group of companies had imported about 1,300 consignments of Indonesian Coal from their subsidiary companies, including Adani Global Private Limited (AGPTE), Singapore and Adani Global (AGFZE), Dubai. The DRI went on to claim that AEL, in connivance with individuals and companies, grossly overstated the import value of coal as compared to the actual export value ex-Indonesia..The DRI has claimed that on a comparative analysis, it was found that the difference between the value of Indonesian coal declared to Indian customs by Adani Group as against the value declared by Indonesian exporters to the Indonesian authorities stood at around Rs.930 crore and that this overvaluation was noticed in 231 consignments..In light of this, the DRI had invoked offences punishable under Section 132 (false declaration) Section 135 (evasion of duty) of the Customs Act, 1962 against Adani..The DRI had also cited the non-cooperation of the Adani Group to provide information relating to the imports, prompting the agency to move an application before a Magistrate Court in Mumbai, under Section 166-A of the Criminal Procedure Code (CrPC). Section 166A permits competent authorities to move the court for a letter of request to allow investigation of crimes abroad..The DRI had requested the Magistrate Court to issue LRs to authorities at Singapore, UAE, Hongkong, British Virgin Islands to seek necessary information. The Magistrate, in turn, issued four LRs under the Mutual Assistance Treaty (MLAT)..The Adani Group challenged these letters before the Bombay High Court, contending that the LRs were issued without any notice and without hearing the companies..Adani further submitted that the case made by DRI does not constitute an evasion of custom duty under Section 135 of the Customs Act. Adani argued that the offence under which it is being indicted is a non-cognizable offence falling under Section 104 (5) of the Customs Act. Therefore, the investigation could only be initiated by the lodging First Information Report (FIR). It was Adani’s case that the investigation was illegally initiated and conducted in a non-cognizable offence, despite there being no order under Section 155(2) of the CrPC..Opposing the plea, the Central Government and the DRI argued that the present plea is an attempt to frustrate and thwart an entirely legal investigation carried out by the probing agency into a serious allegation..Responding to Adani’s stance that the investigation of the DRI was ex-facie illegal, the probing agency submitted that there is no concept of FIR if the inquiry is carried under the special statute as provided in Sections 4 and 5 of the CrPC. In this case, it was pointed out that the Customs Act (being a special statute)is equipped with provisions relating to the inquiry of offences relating to import, export and smuggling of goods and punishment. It was also argued that the Act has also provided for Magisterial intervention and that the DRI is bound to conduct an inquiry in terms of the provisions of the said enactment..In order to decide the case, the Division Bench referred to the Supreme Court’s judgments in Directorate of Enforcement v. Deepak Mahajan, Om Prakash v Union of India, Ramesh Chandra Mehta v. Union of India and Illias v Commissioner of Customs, among others..In light of these verdicts, the Court ruled in favour of Adani, observing that,.“… valid investigation cannot be said to be commenced and continued and therefore, recourse to section 166A without obtaining the necessary permission in respect of an investigation of a non-cognizable offence cannot be justified. 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 does not precede the mandatory requirement of initiation of investigation, as prescribed in Chapter XII.”.The Court also referred to the guidelines issued by the Ministry of Home Affairs on December 31, 2007, relating to LRs for initiating investigation abroad. The Bench noted,.“The said guidelines contemplate that in order to obtain a proposal from the Ministry of Home Affairs, the Investigating Agency is expected to send certain documents which include the brief facts of the case, incorporating the allegations, name of the accused and particulars of the offences committed and a copy of the FIR.”.The Court ultimately ruled,.“Since we are of the express opinion that Section 166A is not an independent island on which any investigating/inquiring authority can jump on without taking recourse to Section 154 (FIR for cognizable offence) /155 (Information for non-cognizable offence), we hold and declare that the action of the respondents in giving effect to the letter of Rogatory issued by the learned Metropolitan Magistrate, Mumbai in relation to the import of coal of Indonesian origin cannot be sustained and it deserves to be quashed and set aside.”.However, the Court clarified that it has not gone into the merits of LRs issued by the Magistrate..Adani was represented by Senior Counsel Vikram Nankani and Advocate Atul Nanda, instructed by HKS Legal..The respondent authorities were represented by Senior Counsel Maninder Singh, Advocates Advait M Sethna, Prabha Bajaj, Tejvir Singh Bhatia and Ruju Thakker. Public Prosecutors Deepak Thakare and SR Shinde appeared for the State Government..[Read Judgement]