# K.T.M.S. MOHD. AND ANR v. UNION OF INDIA

- **Citation:** [1992] 2 S.C.R. 879
- **Court:** Supreme Court of India
- **Decided:** 1992
- **Case number:** Criminal Appeal No. 631of1990
- **Bench:** S. Ratna Vel Pandian, M. Fathima Beevi
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/k-t-m-s-mohd-and-anr-v-union-of-india-11528
- **Pages:** 31

## Headnote

B
Indian Penal Code, 1860 :
S.193--Perjury-Prosecution for-lnculpatory statement given to officer
of Enforcement department under s.39 of FERA subsequently retracted stating
it as involuntary and obtained by inducement and threat-Allegation of false C
statement given later to I.T.0.-Prosecuting authority to apply its mind as to
whether inculpatory statement was voluntary and, not obtained by inducement
·and threat and whether it was given in a judicial proceeding-Prosecution tC'
be taken only if expedient in the interest of justice.
S.120-B--Conspiracy-Can be infe"ed from direct or circumstantial
evidence-Agreement between conspirators need not be directly proved.
Foreign Exchange Regulation Act, 1973:
D
Ss.39, 40-'Judicial proceeding'-Statement must be recorded by a E
Gazetted Officer to bring it within the ambit of 'iudicial proceeding'.
Nature of proceedings-Quasi criminal-Statements falling within the
ambit of Judicial proceeding' to be examined only quo the provisions of the
FERA and not with reference to I. T. Act.
Evidence Act, 1872
S.24-Statement recorded by Enforcement Officer under FERA in exercise of power as a Custom Officer--Evidentiary value of-Whether bar to
admissibility would apply@statement is obtained·by inducement and threat.
Income Tax Act, 1961
S.277~alse statement in verijication-Assessee found in posses~ion of
F
G
a large sum of money-lnculpatory statement to officer of Enforcement
Dire.ctorate subsequently retracte~Statement to LT.O. in assessment
proceedings deny(i.i~ .connection with money seized-l'rosecution for.giving H
879
880
SUPREME COURT REPORTS
(1992) 2 S.C.R.
A false statemen~ecision of Income Tax Appellate Tribunal in assessment
proceedings exonerating assessee and. holding that money did not belong to
him and s.69 had no application-Whether can be considered while deciding
criminal liability.
B
Code of Criminal Procedure, 1973
Ss. 195, 34<>-0iminal proceedings for giving false evidence in assessment proceedings-Courts to take care and caution before taking action
against deponent-Result of proceedings under I. T. (f.ct to be given due regard.
C
S.223-Misjoinder of charges and misjoinder of parties-Accused jointly charged of having conspired to commit offence ·under · I. T. Act.~oint
Trial-No specific allegations or acceptalJle evidence to connect different
accused with activities of each other-Whether amounted to a mere irregularity or occasioned f aifure of justice.
D
E
F
The Enforcement Directorate, Madras, OD receipt or infonnation
that appellant-I was engaged in illegal disbursement of money, raided his
premises on 19.10.1966 and recovered a sum of Rs. 4,28,713. On the same
day appellant-I and his brother-in-law appellant-2 were interrogated by
Enforcement Officers. Appellant-I in his statement Ext. P. 39 admitted
that he received a sum of Rs. 6 lakh from a person of Bombay on the
previous day for being dis.bursed to various parties; that Rs. 48,000 were
paid to accused No. S and Rs. ·so,ooo to another person; and that the
amounts were disbursed in compliance of instructions received from ·
abroad. Appellant-2 in his statement Ext. P. 40 admitted the receipt of the
amount by appellant-I and disbursement of the sum in compliance of bis
instructi9ns. Accused No. S, when examined, admitted the receipt of Rs.
49,000 for being disbursed as per the details given in certain sheets of
paper available with him.
On 20.10.1966 both the appellants sent their retraction to the deputy
G Director of Enforcement Direct.orate through their Advocate stating that
their statements Ext. P. 39 and P. 40 were not voluntary but obtained under
threat and force and were bereft·oftrutb.
The Income-Tax · Officer, on coming to know of the raid, issued
summons to appellant-I who was an assessee and recorded bis statement
H (Ext. P. 3) on 16.11.1966. Appellant-I denied or having any connection with
·~·
K.T.S. MOHD. v. U.0.1.
881
the cash of Rs. 4,28,780 recovered from his premises and reiterated that A
the statement

## Text

_Characters 0–39,766 of 74,543. This is a partial read: ask again with offset=39766 for what follows._

K.T.M.S. MOHD. AND ANR.
A
v.
UNION OF INDIA
APRIL 28, 19112
(S. RATNA VEL PANDIAN AND M. FATHIMA BEEVI, JJ.J
B
Indian Penal Code, 1860 :
S.193--Perjury-Prosecution for-lnculpatory statement given to officer
of Enforcement department under s.39 of FERA subsequently retracted stating
it as involuntary and obtained by inducement and threat-Allegation of false C
statement given later to I.T.0.-Prosecuting authority to apply its mind as to
whether inculpatory statement was voluntary and, not obtained by inducement
·and threat and whether it was given in a judicial proceeding-Prosecution tC'
be taken only if expedient in the interest of justice.
S.120-B--Conspiracy-Can be infe"ed from direct or circumstantial
evidence-Agreement between conspirators need not be directly proved.
Foreign Exchange Regulation Act, 1973:
D
Ss.39, 40-'Judicial proceeding'-Statement must be recorded by a E
Gazetted Officer to bring it within the ambit of 'iudicial proceeding'.
Nature of proceedings-Quasi criminal-Statements falling within the
ambit of Judicial proceeding' to be examined only quo the provisions of the
FERA and not with reference to I. T. Act.
Evidence Act, 1872
S.24-Statement recorded by Enforcement Officer under FERA in exercise of power as a Custom Officer--Evidentiary value of-Whether bar to
admissibility would apply@statement is obtained·by inducement and threat.
Income Tax Act, 1961
S.277~alse statement in verijication-Assessee found in posses~ion of
F
G
a large sum of money-lnculpatory statement to officer of Enforcement
Dire.ctorate subsequently retracte~Statement to LT.O. in assessment
proceedings deny(i.i~ .connection with money seized-l'rosecution for.giving H
879
880
SUPREME COURT REPORTS
(1992) 2 S.C.R.
A false statemen~ecision of Income Tax Appellate Tribunal in assessment
proceedings exonerating assessee and. holding that money did not belong to
him and s.69 had no application-Whether can be considered while deciding
criminal liability.
B
Code of Criminal Procedure, 1973
Ss. 195, 34<>-0iminal proceedings for giving false evidence in assessment proceedings-Courts to take care and caution before taking action
against deponent-Result of proceedings under I. T. (f.ct to be given due regard.
C
S.223-Misjoinder of charges and misjoinder of parties-Accused jointly charged of having conspired to commit offence ·under · I. T. Act.~oint
Trial-No specific allegations or acceptalJle evidence to connect different
accused with activities of each other-Whether amounted to a mere irregularity or occasioned f aifure of justice.
D
E
F
The Enforcement Directorate, Madras, OD receipt or infonnation
that appellant-I was engaged in illegal disbursement of money, raided his
premises on 19.10.1966 and recovered a sum of Rs. 4,28,713. On the same
day appellant-I and his brother-in-law appellant-2 were interrogated by
Enforcement Officers. Appellant-I in his statement Ext. P. 39 admitted
that he received a sum of Rs. 6 lakh from a person of Bombay on the
previous day for being dis.bursed to various parties; that Rs. 48,000 were
paid to accused No. S and Rs. ·so,ooo to another person; and that the
amounts were disbursed in compliance of instructions received from ·
abroad. Appellant-2 in his statement Ext. P. 40 admitted the receipt of the
amount by appellant-I and disbursement of the sum in compliance of bis
instructi9ns. Accused No. S, when examined, admitted the receipt of Rs.
49,000 for being disbursed as per the details given in certain sheets of
paper available with him.
On 20.10.1966 both the appellants sent their retraction to the deputy
G Director of Enforcement Direct.orate through their Advocate stating that
their statements Ext. P. 39 and P. 40 were not voluntary but obtained under
threat and force and were bereft·oftrutb.
The Income-Tax · Officer, on coming to know of the raid, issued
summons to appellant-I who was an assessee and recorded bis statement
H (Ext. P. 3) on 16.11.1966. Appellant-I denied or having any connection with
·~·
K.T.S. MOHD. v. U.0.1.
881
the cash of Rs. 4,28,780 recovered from his premises and reiterated that A
the statement by the Enforcement Officer was taken under force. Appellant-2 also gave a similar statement Ext. P. 73 on 11.1.1974. Accused No.
5 also denied to have received any money.
Meanwhile the appellant in Criminal appeal No. 6.12 of 1990 (third
appellant) who was related to appellants 1 and 2, sent a letter (Ext. P. 41) B
to the Enforcement Officer claiming the money seized as belonging to him
and explaining that he was neg~tiating with some film producers for
financing fil,n production and the seized amoulit included the sale
proceeds or his mother's jewels as also bis father's money and, therefore,
the same be returned to him. Proceedings under the Income-Tax Act were C
initiated against him also. He submitted his return of income for the year
1967-68 showing the business income as Rs. 4,000 and a sum of Rs. 2,79,000
representing the cost of Jewels belonging to his mother (accused No. 4).
His claim was, however, rejected.
The Income-tax Officer treated the sum of Rs. 6 fakh as the income D
of appellant-1 from undisclosed sources and assessed him accordingly.
A complaint against the three appellants and accused Nos. 4 and 5
was filed alleging that they conspired to give false statements in the
proceedings under the Income-tax Act and to fabricate false evide~ce and E
thereby committed offences punishable under s. 120-8 read with s. 193
IPC, under s. 120-B IPC read with s. 277 of the Income Tax Act and under
s.193 (simplicitor) of Indian Penal Code. The appellants 1 and 3 were also
indicted under s. 277 of the Income Tax Act.
Appellant-1 challenged the assessment order and the matter twice F
went before the Income-tax Appellate ,Tribunal which in both the rounds
of litigation held that the department bad failed to show that the assessee
was the owner of the money, and that the evidence only indicated that the
assessee had been engaged for disbursing the money belonging to a third
party. It set aside the assessment order and ultimately decided the matter· G
in favour of appellant-1.
In the meantime the proceedings initiated on the basis of the
Criminal Complaint, led to the trial of the three appellants and accused
No. 5. Accused No. 4 had died during the proceedings. The Trial Court
convicted the three appellants of the offences levelled against them and H
882
SUPREME COURT REPORTS
c1m1 2 s.c.R.
A
sentenced each· of them to undergo imprisonment till the rising of the
Court for each of the offences and to pay a total fine of Rs. 2,000, Rs. 600
and Rs. 1,500 respectively holding that they had been detained under
c'OFEPOSA in respect of the amount seiud and bad undergone the ordeal
of enquiries and trial for a considerable length of time. It, however, ·
B acquitted accused No. S.
The first appellate court and the High Court upheld the judgment
of the trial Court.
In the appeals to this Court it was contended on behalf of the
C appellants that (1) the evidence adduced in the case did not constitute the
requisite ingredients to make out a case punishable under the charge
levelled against all the three appellants; (2) the statements of .appellants
1 and 2 Exts. P. 39 and P. 40 recorded by the Enforcement Officers cannot
be said to have been recorded in a judicial proceeding as contemplated by
D s.40, but fell only within the meaning of s. 39 of FERA and therefore could
not form the basis for initiating a criminal case of perjury; (3) the
statements Ext. P. 39 and P. 40 being recorded under the FERA could not
be made use of for prosecuting the deponents of those statements in a
separate and independent proceeding under the Income-Tax Act; (4) in
view of the specific findings of the Income-Tax Appellate Tribunal that the
E appellant- 1/assessee was not the owner of the money seized and Section
69-A of the Income-Tax Act bad no application to the facts of the case,
. appellants 1 and 2 could not be held liable under s.193 IPC and under s.
277 of the Income-Tax Act: (6) the evidence available on record was not
sufficient to put the third aJ.>pellant in a joint trial along with appellants
F
1 and 2 under the conspiracy charges as well as for recording the conviction under sections 193 IPC and 277 I.T. Act especially when the third
appellant consistently took an uniform stand and when it was not the case
of the Department that the amount seized was taxable amount in the hands
of the third appellant.
G
Allowing the appeals and setting aside the conviction and sentence
of the appellants, this court,
HELD : 1.1. The convictions recorded by the courts below under
Section 120-B read with Section 193 IPC and Section 193 IPC (simplicitor)
~
H as against the appellants cannot be sustained.·[p. 902 F-G]
r
K. T.S. MOHD. v. U.0.1.
883
1.2. The complainant has stepped into the shoe of the Enforcement A
Directorate, and assumed the authority under the FERA and levelled a
charge stating that the appellants 1 and 2 by sending the letter of retraction on 20.10.66 denying their earlier statements dated 19.10.66 have made
themselves liable to be convicted under Section 193 IPC. [pp.902 GH, 903A]
1.3. The trial court eommitted an error in not only covicting appelB
lants 1 and 2 for sending the letter of retraction dated 20.10.66 but also,
holding appellant-3 and accused Nos. 4 and S as being parties to a
~onspiracy for causing a letter dated 20.10.66 to be sent to the Enfos;cement
Directorate. [p. 903 AB]
1.4. Since the High Court, without adverting to the important intricated questions of law involved in the case and examining them in the
proper perspective has disposed of the revisions in a summary manner,
·its orders warrant an interference. [p. 909 DE]
c
2.1. Necessary care and caution are to be taken before initiating a D
criminal proceeding for perjury against the deponent of contradictory
statements ia,i judicial proceeding. [p. 901 B-C]
K Kamnakaran v. T. V. Eachara Wanier and Another, [1978) 1 SCC
18, referred to.
E
2.2. The mere fact that a deponent has made contradictory statements at two different stages in a judicial proceeding is not by itself always
sufficient to justify a prosecution for perjury under section 193 IPC but it
must be established that the deponent has intentionally given a false
statement in any stage of the 'judicial proceeding' or fabricated false F
evidence for the purpose of being used in any stage of the judicial proceeding. And such a prosecution for perjury should be taken only if it is
expedient in the interest of justice. [p. 901 CD]
3.1. Every investigation or proceeding under s. 40 of FERA is deemed
to be a judicial proceeding by a legal fiction embodied in its sub-section G
(4) though the -proceedings are neither in nor before any Court at that
stage. But there is no such deeming provision under s. 39 of FERA bringing
every investigation or proceeding in its ambit as "a judicial proceeding"
within the meaning of Ss. 193 and 228 of the Indian Penal Code.
[p. 896 F-H} H
A
B
c
884
SUPREME COURT REPORTS
[1992) 2 S.C.R.
3.2. The exercise of the power under section 40 of FERA to summon
persons to give evidence and produce documents must satisfy the condition
that the officer acting under that section should be a gazetted officer of
Enforcement because every person summoned by such an officer to make
a statement under Section 40(1) is under a compulsion to state the truth
on the pain of facing prosecution. [p. 896 AB]
Pushpdevi M. Jatia v. M.L. Wadhawan, (1987) 3 SCC 367, referred to.
3.3. The statem!lnts Exts. P. 39 and P. 40 were recorded only in
exercise of the powers under s. 39 of the FERA and the prosecution has
not established that those statements were recorded by any gazetted officer
of the Enforcement under the provisions of s. 40 of the FERA bringing
them within the meaning of'judicial,proceeding' so as to make use of them
___.,
as the basis for fastening the makers of those statements with the
..,
criminality of the offences under s. 193 and/or s. 228, IPC on the ground
that the deponents of those statements have retracted from their earlier
D statements in a subsequent proceeding which is deemed to be 'a judicial
proceeding'.,·[pp. 901 E-F;,,897 A]
E
F
3.4. Even if statements E~s. P. 39 and P. 40 fall within the mischief
of section 40 of the FERA, there is absolutely nothing on record to show
that either the sanctioning authority or the prosecuting authority applied
its mind even subjectively and found that the appellants 1 and 2 gave their
earlier inculpatory statements voluntarily but not under any inducement,
coercion, threat or promise; that the deponents have intentionally gave a
false statement before the I.T.O. at the subsequent stage within the ambit
of s. 193 IPC and that it was expedient in the interest of justice to initiate
the criminal proceedings for perjury. [p. 901 FGJ
4. The proceedings under the FERA are quasi-criminal in character.
It is pellucid that the ambit, scope and intendment of these two _Acts are
entirely different a,nd dissimilar. Therefore, the significance of a state~ent
G recorded under the provisions of FERA during the investigation or
proceeding under the said Act so as to bring them within the meaning of
judicial proceeding must be examined only quo the provisions of the FERA
but not with reference to the provisions of any other alien Act or Acts such
as I.T. Act. [p. 898 BC]
H
Subba Rao v. /. T. Commr., AIR 1956 SC 604 = [1956} SCR 577; Mis
. ........-
--
K. T.S. MOHD. v. U.0.1.
885
~ Pannalal Bmjraj v. Union of India, AIR 1957 SC 397 = (1957) SCR 233 A
and Shanti Prasad Jain v. The Director of Enforcement, (1963) 2 SCR 297,
referred to.
5.1. Even if the officers of the Enforcement intend to take action
against the deponent of a statement on the basis of his inculpatory
--{ statement which has been subsequently repudiated, the officer concerned · B
must take both the statements together, give a finding about the nature of
the repudiation and then act upon the earlier inculpatory one. But to bisect
the two statements and make use of the inculpat~ry statement afone by
passing the ot~er cannot be legally permissible because admissibility,
reliability and the evidentiary value or the inculpatory statement depend C
on the bench mark of the provisions of the Evidence Act and the general
y
criminal law. (898 F-GJ
5.2. The voluntary nature of any statement either made before the
Customs Authorities or the officers of Enforcement under the relevant
provisions or the respective Acts is a sine quo non to act on it for any D
'
purpose and if the statement appears to have been obtained by any .
inducement, threat, coercion or by any improper means, that statement
must be rejected brevi manu. However, merely because a statement is
retracted, it cannot be recorded as involuntary or unlawfully obtained. It
is for the maker of the statement who alleges ind~cement, threat, promise E
r etc. to establish that such improper means has been adopted. But if the
maker of the statement fails to establish his allegations of inducement,
threat etc. against the officer who recorded the statement, the authority·
while acting on the inculpatory statement of the maker is not completely
relieved of bis obligations in at least subjectively applying its mind to the
subsequent retraction to hold that the inculpatory statement was not
extorted. [p. 899 D-G]
~
Vallabhdas Liladhar v. Asstt. Collector of Customs, AIR 1965 SC 481
= [1965) 3 SCR 854 and P. Rustomji v. State of Maharashtra, AIR 1971 SC
F
[1087] = [1971] SCR (Suppl.) 35, referred to.
G
5.3. The authority or any Court intending to act upon the inculpatory
statement as a voluntary one should apply its mind to the retraction and
/'-
reject the same in writing. [p. 899 GH]
R.oshan Beevi v. Joint Secretary to the Govt. of Tamil Nadu, Public H
886
SUPREME COURT REPORTS
[1992) 2 S.C.R.
A
Deptt. etc., (1983) Law Weekly (Crl.) 289 = (1984) 15 ELT 289, referred to.
5.4. The l.T.O. erred in not taking into consideration the letter of
retraction sent by both the appellants through their lawyer on 20.10.1966
alleging that "they were coerced to sign statements by using bodily force
B
and threatening with causing injuries to them and they signed the statements fearing danger to their life and body". [p. 902 DE]
6.1. Though a criminal court has to judge the case before it inde·
pendently on the materials placed before it, there is no legal bar in giving
due regard to the result of the proceedings under l.T. Act, and it is one of
c the major factors to be considered and the resultant finding in the said
proceeding will have some bearing in deciding the criminal prosecution in
appropriate cases. [p. 905 C-FJ
Uttam Chand v. l.T.O. (1982) 133 ITR 909, r. Jayappan v. S.K.
Perumal, [1985) 1 SCR 536, referred to.
D
6.2. In view of the findings of the Tribunal that the amount of Rs. 6
lakh was not owned by the first appellant and that s. 69(a) dealing with
the unexplained money etc. has no application to the facts of the case; the
appellants cannot be held to be liable for punishment under s. 120-B IPC
E
read with s. 277 I.T. Act and s. 277 (simplicitor) of the I.T. Act as the very
basis of the prosecution is completely nullified by the order of the
Tribunal, which fact can be given due regard in deciding the question of
the criminal liability of appellants 1 and 2. f pp. 905 F-H; 906 A]
7 .1. An agreement between the conspirators need not be directly
F
proved, and the offence of conspiracy can be established. by either direct
or circumstantial evidence and s. 193 will come to play only when the court
is satisfied that there is reasonable ground . to believe that two or more
persons have conspired to commit an offence or an actionable wrong.
G
[p. 907 AB]
Bhagwan Swarup and Ors. v. State of Maharashtra, AIR 1965 SC 682
= [1964) 2 SCR 378, referred to.
7.2. It was not stated that the individual acts of appellants 1 and 2
and that of the third appellant were due to any conspiracy among all the
three. On the other hand, the offence said to have been committed by the
H third appellant is specificall)· attributed only to him.[p. 907 DJ
,>.
,._
---
-(
--""(
---(
)
K. T.S. MOHD. v. U.0.1.
887
7.3.Appellants 1 and 2 did not state that the amount seized belonged A
to the third appellant nor can it be said that they knew that the third
appellant intentionally fabricated false evidem:e or wilfully made a false
return before the Income-Tax Officer. The evidence direct or circumstantial is very much lacking to bring all the three appellants and other two
accused under the charge of conspiracy. [pp. 907 GH; 908 AB]
8. The third appellant could not be put on a joint trial along with
appellants 1 and 2 and others under the charge of conspiracy, and his
conviction under this charge bas to f~il. Besides, in his case no question
of evading the tax would arise. The Department itself stated that the money
B
recovered did not belong to him. [pp. 908 C~ GH; 909 Al
C
9.1. Even assuming that the third appellant made himself liable to
)r·
be punished under s. 193 IPC ands. 277 of Income-Tax Act (simplicitor),
inasmuch as he was put in a joint trial with appellants 1 and 2 for
conspiracy of the said offences without any speicific allegation or acceptable evidence to connect him with the activities of appellants 1 and 2, there D
is a clear misjoinder of charges which includes misjoinder of parties also.
[p. 909 AB)
9.2. In the facts and circumstances of the case, the misjoinder of
charges cannot be said to be a mere irregularity. A failure of justice has
in fact been occasioned since all the courts below have clubbed all the E
allegations levelled against all the three appellants and two other accused
together as if all the offences were committed in the course of the same
transaction pursuant to a conspiracy which is neither supported ·by the .
allegations in the complaint nor by any evidence as required under the
law. Hence, the conviction under s. 193 IPC and s. 277 of Income-tax Act
(simplicitor) have also to be set aside. [p. 909 BD]
F
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
631of1990.
From the Judgment and Order dated 12.7.1984 of the Madras High
Court in Criminal Revision Case No. 229 of 1981.
G
WITH
Criminal Appeal No. 632 of 1990
C.V. Vaidyanathan and A.T.M. Sampath for the Appellant.
H
888
SUPREME COURT REPORTS
(1992) 2 S.C.R.
A
K. T.S. Tuls~ Addi. Solicitor General (NP) and Ashok Bhan for the
Respondent.
>-
The Judgment of the Court was delivered by
S. RAtNAVEL. PANDIAN, J. The Criminal Appeal No. 631/90 is
B
directed by the two appellants namely, K. T.S. Mohammed and M. Jamal
Mohammed and Criminal Appeal No. 632/90 is directed by Amanullah
Quareshi. All the three appellants are challenging the correctness of the
common order made by the High Court of Madras in Criminal Revision
Case Nos. 229/81 and 239/81 respectively dismissing the "revisions and
C
confirming the judgment of the lower Appellante Court made in Cr. A.
Nos. 221 and 2i2 of 1980 which in turn affirmed the judgment of the trial
Court convicting and sentencing the appellants under the provisions of the
Indian Penal Code and the Income-tax Act (hereinafter referred to as 'the
I.T. Act').
D
The facts leading to the prosecution case are well set out in the
judgments of the Courts below. Nevertheless, we think it necessary to
recapitulate the basic matrix, though not in details, in order to enable us
· · to give our own reasons for the fmdings which we will be arriving at.
E.
The first appellant who is the brother-in-law of the second appellant
received a cash of Rs. 6 lakhs, brought by a person from Bombay for
distributing the said amount to various persons as per the instructions
received from a person at Singapore. While he was engaged in the said
illegal transaction, the Enforcement Directorate, Madras raided his
premises at No. 34, Appu Maistry Street, Madras-1 on 19.10.66 and
F
recovered a sum of Rs. 4,28,713 and certain documents in coded language
relating to the disbursement of the cash. After the search, the first appellant K. T.M.D. Mohammed was interrogated by Shri Amritalingam, Enforcement Officer ·of Madras (PW 4) and the second appellant, Jamal
Mohammed was interrogated by Shri Pancheksharan, Enforcement Officer
on 19.10.66 and their statements were recorded under Exhs. P 39 and P
G 40. The first appellant under Exh. P 39 has admitted that he received a
sum of Rs. 6 lakhs from a person of Bombay on the previous day-for being
d~sbursed to various parties, and that Rs. 50,000 and Rs. 48,000 were paid
to one Baskaran alias Kannan and Angappan of Sarathy & Co. respectively
and the amounts were disbursed on receipt of instructions from one Gop~I
H of Singapore whose full address he did not know. The second appellant" in
---
-r
....
--\ .
)
""'-""'(
K.T.s: MOHD. v. U.0.1. [PANDIAN, J.)
889
his statemcut £xh. P 40 has admitted the receipt of the amount by the first A
appellant and the disblirsement of, Rs. 50,000 to Bhaskaran and Rs. 40,000
to Angappan as instructed by the first appellant in compliance of the
instructions received from Singapore.
The Enforcement Officers conducted a further search at the
premises of Sarathy and Co., and discovered a cash amount of Rs. 48,100 B
and three bank drafts. Angappan when examined admitted the receipt of
Rs. 49,000 for being disbursed as per the details given in certain sheets of
paper available with him.
On 20.10.66, both the appellants sent their retraction. to the Deputy C
Director of Enforcement Directorate thr:ough their Advocate stating that
their statements recorded under Exhs. P j9 and P 40 on 19.10.66 were not·
voluntary statements but obtained under threat and force and the facts
stated therein were not correct.
While it was so, the Income-tax Officer, Karaikudi (PW 1) on coming D
to know about the raid, issued summons to the first appellant who was then
an assessee within his jurisdiction and recorded a statement Exh. P 3 from
him on 16.11.66. The first appellant denied of having any connection with
the cash of Rs. 4,28,718 said to have been recovered from his premises and
reiterated that the statement by the Enforcement Officers was taken from E
him under force. The second appellant also gave a similar statement under
Exh. P 73 on 11.1.74 before PW 8 when examined after eight years. The
appellant in Criminal Appeal No. 632/90, namely, Amanullah who was
arrayed as accused No. 3 (hereinafter referred as 'third appellant') sent a
letter under Exh. P 41dated4.11.66 to the Enforcement Officers claiming
the money seized as belonging to him and explaining that he was negotiatF
ing with some film producers for financing film production and the seized
amount included a sum of Rs. 2, 79,000 being the sale proceeds of his
mother's jewels and Rs. 70,000 being his father's money and therefore the
said amount should be returned to him. Thereafter, the third appellant
gave a statement before the Enforcement Officers on 22.12.66 reiterating G
what he has stated in his letter dated 4.11.66.
In view of the subsequent developments; proceedings were initiated
against the third appellant under the provisions of the l.T. Act. The third
appellant submitted his return of income for the years 1967-68 to the
Income-tax Officer accompanied by statements showing the business in- H
890
SUPREME COURT REPORTS
(1992) 2 S.C.R.
A come at Rs. 4,000 and that a sum of Rs. 2, 79,000 was realised by him by
sale of rubies and jewels belonging to his mother, Smt. A.M. Safia who was
arrayed as accused No. 4 in the complaint. PW 8 on enquiry found that the
third appellant was not in affluent position and as such he could not have
accumulate(j such huge sum and that his statement about the sale of the
B family jewels was false.
After rejecting the claim of the third appellant, the amount of Rs. 6
lakhs said to have been received by the first appellant has been treated as
the income. of the first appellant from some undisclosed sources and the
. first appellant was assessed under the relevant provisions of the I.T. Act.
C According to the 'Complainant, all the appellants have conspired together
to give false evidence at all stages of the procee~ under the I.T. Act
· and to fabricate false evidence intending that the same might cause the
Income-tax Officer to arrive at an erroneous opinion touching the nature
and source of the sum of Rs. 4,28,713 which is alleged to have been
D recovered from the first appellant and that all the appellants thereby have
E
· committed the offences punishable under Section 120-B IPC read with Sec.
193 IPC, under Section 120-B read with Section 2n of the I.T. Act and
under Section 193 (simplicitor} of Indian Penal Code and in addition the
appellants 1and3 were indicted under Section 277 (simplicitor) of the Act.
On the above allegations, the Income-tax Officer, Central Circle,
XIV, Madras filed the criminal complaint before the Chief Judicial
Magistrate, Egmore in C.C. No. 356 of 1977 on his file which proceed~
have culminated to these appeals.
F
Be that as it may, we would like to refer certain proceedings before
the Income-tax Authorities which are very much relevant for the disposal
of these appeals.
The Income-tax Officer on the basis of the statement of the first
appellant given before the Enforcement Authorities found that the amount
G of Rs. 6 lakhs was the income from other sources of the assessee (the first
appellant) and that the explanation given by him was not satisfactory and
included that amount in his taxable income. The Appellate Assistant
Commissioner agreed with the ITO but the Income-tax Appellate Tribunal
held that the department had not brought any material to show that the
H assessee was the owner of the money in question and that the evidence only
;---
!
'-.
K.T.S. MOHD. v. U.0.1. [PANDIAN, J.]
""891
~
indicated that the assessee had been engaged for disbursing the money not A
belonging to him but belonging to a third party. On the above finding, the
Tribunal set aside the assessment order and referred the case back to the
ITO to make a fresh a5sessment. But the ITO again made the same type
of assessment. The first appellant took his statutory appeals under the Act
and ultimately went before the Tribunal once again which by its order B
--(
dated 12.5.1980 allowed the appeal of the assessee namely the first appellant and dismissed the cross objection of the department. In the meantime,
the criminal proceedings against these three appellants were initiated in
January 1977. To. substantiate the case, the prosecution examined 12 wit-
"'-
' nesses and marked Exhs. P 1 to P 87. The appellants did not examine any
witness but filed Exhs. D 1 to D 4. The Trial Court accepting the evidence c
)
adduced by the prosecution, convicted and sentenced the appellants by its
-yjudgment.which was confirmed in C.A. Nos. 221 and 222 of 1980 on the
file of the Vth Additional Judge, Madras. In the result, the three appellants
stood convicted under Sections 120-B read with Sec. 193 IPC and Sec. 277
of the l.T. Act besides under Sections 193 IPC and appellants No. 1 and D
3 separately under_Section 277 of the l.T. Act. But coming to the question
of sentence, the trial court taking into consideration of the fact that the
appellants were detained under COFEPOSA in respect of the amount
seized and they have also undergone the ordeal of enquiries and the trial
for a considerable length of time sentenced each of them to undergo
imprisonment till the rising of the Court for each of the offences and to E
1---
pay a total fine of Rs. 2,000, Rs. 600 and Rs. 1,500 repectively with the
default clause.
Being aggrieved by the judgment of the first appellate court confirming the judgment of the trial court, two revisions were filed before the High
F
Court as aforementioned. The High Court for the reasons mentioned in its
order confirmed the judgment of the first appellate court and dismissed
the revisions. Hence these two appeals.
'
-~
Mr. A.T.M. Sampath, the learned counsel appearing on behalf of the G
appellants assailed the impugned order of the High Court raising multiple
questions of law the core of which is formulated hereunder:
1. The evidence-' both oral and documentary- produced by
the complainant does not constitute the requisite ingredients
to make out a case punishable under the charges levelled H
892
A
B
c
D
E
F
G
H
SUPREME COURT REPORTS
(1992) 2 S.C.R.
against all the three appellants.
2. In view of the specific findings of the Income-tax Appellate
Tribunal in its order Exh. D 4 (enclosed as Annexure 'J' to the
appeal papers) that the assessee is not the owner of the money
seized, that "any other conclusion of ownership will only be
perverse and uncalled for" and that "so Section 69-A of the
Income~tax Act has no application to the facts of the case",
appellants 1 and 2 on the basis of Exhs. P 36 and P 40 cannot
be held to have intentionaQ.y resiled from their earlier stand
when subsequently examined by the Income-tax Authorities
thereby making themselves liable to be punished under Section
193 IPC for perjury and under Section 277 of the I.T. Act for
making false statements in verification.
3. The accusation made in the notice issued to the first appellant dated 8.5.70 by the lncome~tax Officer, Karaikudi stating
"On 19.10.66 you have admitted in your statement before the
Enforcement Directorate that the amount belongs to
....................................... Subsequently on 28.2.67 you have sent a
letter to this office wherein you had denied ownership of the
amount above" is factually incorrect because at no point of time,
the first appellant as pointed out by the Income-tax Appellate
Tribunal had admitted the ownership of the amount. Therefore,
the very basis of the notice for launching the prosecution under
Section 193 IPC and 277 of the l.T. Act is absolutely unsustainable.
4. The statements recorded from appellants 1 and 2 under Exhs,
P 39 and P 40 by the Officers of the Enforcement Directorate
fall only within the meaning of Section 39 of FERA and those
.statements, therefore, cannot be made use of for initiating a
criminal case of perjury in the absence of any legal fiction
bringing the investigatio~ or proceeding as a judicial proceed·
ing within the meaning of Sections 193 and 228 IPC as contemplated under Section 40 ( 4) of FERA.
5. The Income-tax Officer in exercise of his power under
Section 136 of 1.T. Act cannot make use of the statements
recorded by the Enforcement Directorate (an independent
>-
~
--(-
·~
---~
..
K.T.S. MOHD. v. U.0.1. [PANDIAN, J.]
893
A_
authority) under the provisions of the special Act-namely, A
FERA, for prosecuting the deponents of those statements in a
separate and independent proceeding under another special
Act namely the I.T. Act on the ground that the deponents have
retracted their statements given before the authorities of the
Enforcement Directorate.
B
6. If any criminal proceeding is 'initiated under FERA against
the appellants 1 and 2 on the strength of their statements Exhs.
P 39 and P 40 recorded under Section 39 of FERA and
appellants herein would partake the characteristic of an ac-
......_
cused or become an accused of an indictable offence, and c
)
therefore, on a mere denial, normally, the appellants should
y
not be subjected to face the grave charge of perjury, unless
such a serious action is warranted.
7. The third appellant cannot be held to have committed the D
offences charged merely because he has failed to establish his
consistent rightful claim of the amount of Rs. 4,28, 713 as being
the sale proceeds of his mother's jewels.
8. The Courts below ought to have seen that Exh. P 18, the
E
income-tax returns filed by the third appellant was accepted on
'y
enquiry and though reopened belatedly it still stands incomI
plete in spite of several years.
--
9. The evidence available on record is not sufficient to put the
third appellant in a joint trial along with appellants 1 and 2 F
under the conspiracy charge as well as for recording the conviction under Section 193 IPC and 2771.T. Act especially when
the third appellant has consistently taken an uniform stand and
--:--
when it is not the case of the Department that the amount of
-
Rs. 4,28, 713 was taxable amount in the hands of the third
appellant.
G
10. The cognizance of the offence under Sections 120-B read
with 193 and 193 (simplicitor) was taken beyond the period of
>·
limitation, prescribed under Section 468 of the Code of
Criminal Procedui:e.
H
•
894
SUPREME COURT REPORTS
[1992} 2 S.C.R.
A
Before pondering over the above contentions, we would like to make
,A
reference to certain salient facts for proper understanding and appreciation of the issues involved.
The Officers of the Enforcement Directorate conducted the raid and
B seized the amount on 19.10.66 on which day itself the statements under
Exhs. P 39 and P 40 were recorded from the appellants 1 and 2 by the
>-
Officers of the Enforcement Directorate. On the very next day i.e. on
20.10.66 both the appellants sent their retraction to the Director of Enforcement through their Advocate stating that the statements were involuntary
and bereft of truth. While it was so, the ITO of Karaikudi recorded the -
c statement of the first appellant on 16.11.66. Meanwhile, the third appellant
. sent a letter to the Enforcement Officers claiming that he was the owner
·(
of the said amount of Rs. 4,28,713 and asked for the return of the same. --..(
On 22.12.66 the third appellant gave a statement before the Enforcement
Officers explaining how the said amount came into his possession. But that
D explanation was not accepted. In view of the above developments, proceedings were taken against the third appellant under the provisions of the I.T.
Act. The third appellant on 1.3.67 submitted his return of income on
27.2.67 for the assessment year 1967-68 accompanied by a statement showing the business income at Rs. 4,000. The fourth accused before the trial
E
Court who died during the proceedings gave a sworn statement on 2.5.67
before the ITO stating that she gave a cash amount of Rs. 70,000 to the
third appellant and also one necklace studded with red stones and two
~,
bangles studded with blue stones besides some ornaments. The statement
of the fourth accused was also not accepted, The fifth accused (since
acquitted) gave a statement on 11.8.70 before the ITO denying the receipt
F
of any amount from the appellants 1 and 2 on 18.10.66. Thereafter, appel-
.....
lants 1 and 3 gave separate statements on 27.2.71 and 4.11.71 respectively.
The se.cond appellant gave his statement. before the ITO on 11.1.74
repudiating his earlier statement dated 19.10.66 (Exh. P 40) and stated that
the said statement was obtained under duress. On the basis of the above
:.--·
statements and subsequent correspondence, it is stated that appellants Nos. -
G 1 to 3 and accused No. 5 have committed the offenees punishable under
Section 120-B read with 19~ IPC and 120-B IPC read with 277 of the I.T.
Act.
The tri~ 1~ourt after having considered the allegations of the com-
--(
,/
H plaint, indicted the accused inclusive of the appellants thus:
\
--
K.T.S. MOHD. v. U.0.1. [PANDIAN, J.)
895
The first and second appellants wilfully ca~ the Advocate's fetter A
A
dated 20.10.66 with a false statement; that they, thereafter gave separate
statements dated 16.11.66 and 11.1.74 respectively before the ITO repudiating their earlier statements given before the Enforcement Officers and that
they thereby, have committed an offence punishable under Section 193
IPC. Similarly, the third appellant not only by fabricating a letter dated
~ 10.10.66, but also by filing a false affidavit dated 23.3.67 and thereafter by B
making a false statement before the ITO on 4.11.71 has made himself liable
to be punished under Section 193 IPC. In addition, accused No.1 has
committed an offence under Section 277 of the I.T. Act by delivering a
letter to the ITO on 27.2.71 containing a false statement that his statement
under Exh. P 39 was not true and obtained under duress. Accused No. 3 C
has also col}lllii,tttd siinilar offence under Section 277 of the I.T. Act by
_ ~
deilv~iin.{ to the ITO a ~alse sta~ement dated 13.6'. claiming t~e
)--- amount of Rs. 4,28,713 as belongmg to him; Accused No. 5 has made him
, liable for the offence under Section 277 by delivering a false statement to
the ITO on 11.8.70 denying the receipt of a sum of Rs. 50,000 on 18.10.66. D
Be that as it may, a perusal of the entire records show that a gist of ·
the allegations levelled against these appellants is that the appellant No. 1
disowned his ownership of the amount contrary to the version in Exh. P 39
and the appellant No. 2 has repudiated the statement given under Exh. P
40 and that the appellant No. 3 made a false claim and that, thus, all the E
'r three appellants. did so only in pursuance of a conspiracy.
I
Though a specific ground is taken in the appeal grounds that Exhs.
P 39 and P 40 are clearly relatable to the provisions of Section 39 of FERA
and that no other statement was taken on oath, the respondent namely the
Union of Indian represented by the Commissioner of Income-tax, Central
Circle, Madras has not filed any counter denying that plea. Therefore, we
are constrained to hold that Exhs. P 39 and P 40 were recorded by the
officers of the Enforcement in exercise of the power conferred under
Section 39 of the Act.
F
G
Section 39 of FERA empowers the Director of Enforcement or any
other Officer of Enforcement authorised by the Central Government in this
behalf, (i) to require any person to produce or delive'r any document
relevant to the investigation or proceeding and (ii) to examine any person
acquainted with the facts and circumstances of the case.