LI Network
Published on: October 11, 2023 at 11:01 IST
The Supreme Court of India has set the stage for a crucial decision regarding the application of the Code of Criminal Procedure (CrPC) to cases under the Customs Act. This decision will come to light in the appeal filed by the Directorate of Revenue Intelligence (DRI) against Adani Enterprises Ltd.
The case, titled Directorate of Revenue Intelligence (DRI) v. Adani Enterprises Ltd, will be heard alongside another case, Senior Intelligence Officer v. Sanjay Agarwal, where two fundamental questions are central to the proceedings. These questions are:
- Whether Customs and DRI Officers should be considered as police officers and, as a consequence, whether they are obligated to register a First Information Report (FIR) for offenses falling under Sections 133 to 135 of the Customs Act, 1962.
- Whether the provisions of Sections 154 to 157 and 173(2) of the Code of Criminal Procedure, 1973 are applicable in cases concerning the Customs Act, 1962, particularly in view of Section 4(2) of the Code. Moreover, the question arises as to whether the registration of an FIR is mandatory before the arrest and production of the accused before a Magistrate in cases involving offenses under Sections 133 to 135 of the Customs Act, 1962.
The Supreme Court has taken note of these pertinent questions and directed that the special leave petition in this case should be heard in conjunction with another related matter. Both matters will be presented before an appropriate bench for thorough consideration.
The backdrop of this legal dispute involves the DRI’s appeal against a judgment by the Bombay High Court in October 2019.
The High Court had invalidated the actions taken by the DRI regarding a letter of Rogatory issued by a Metropolitan Magistrate in Mumbai. This letter of Rogatory was connected to the import of Indonesian coal by Adani Enterprises.
The DRI had launched an investigation into Adani Enterprises, alleging that the company had significantly overstated the value of imported Indonesian coal compared to its actual export value and international market prices. Much of this imported coal was funneled through Adani’s subsidiary companies in Singapore and Dubai during the years 2010 to 2016.
The investigation suggested that this was done in collusion with various individuals and companies to move funds abroad, while simultaneously seeking higher power tariff compensation for selling power to Indian public sector undertakings.
The DRI’s allegations pertained to offenses punishable under Sections 132 and 135 of the Customs Act, 1962, which related to knowingly misrepresenting the value of goods and violations of the Act’s provisions. To gather evidence, requisitions were issued under Section 108 of the Customs Act for obtaining documents and information related to the purchase and sale of Indonesian coal by Adani’s subsidiary companies in Singapore and Dubai.
Adani Enterprises contended that its subsidiary companies were independent legal entities incorporated abroad and suggested that the DRI should communicate directly with them.
When no response was received from these entities, the DRI invoked Section 166-A of the Code of Criminal Procedure (CrPC) and approached the Addl. Chief Metropolitan Magistrate in Mumbai to issue a Letter of Rogatory to authorities in Singapore, the UAE, Hong Kong, and the British Virgin Islands for obtaining information. Subsequently, the Letter of Rogatory to Singapore was issued and sent to the competent authority in Singapore.
In response to these actions, Adani Enterprises filed a petition before the Bombay High Court.
The core issue before the Bombay High Court revolved around the legality of the DRI’s investigation against Adani Enterprises under Section 135 of the Customs Act and the justification of invoking Section 166-A of the CrPC to issue the Letter of Rogatory.
The Bombay High Court determined that, in the absence of a specific procedure outlined for investigating such offenses under the Customs Act, the relevant procedures from the CrPC, specifically Section 154 for cognizable offenses and Section 155 for non-cognizable offenses, must be followed.
The court held that Section 4(2) of the CrPC applies in the absence of any specific provision in the Customs Act regarding the manner of investigation.
The Bombay High Court’s decision drew from the case of Directorate of Enforcement v. Deepak Mahajan (1994), which emphasized that officers of enforcement or customs officers are not police officers, even though they possess arrest powers.
The Court also noted that Section 4(2) of the CrPC is applicable to the investigation, inquiry, and trial of offenses under special laws, including the Customs Act, and that Section 167 of the CrPC can be made applicable during the investigation or inquiry of offenses under special Acts, provided there is no specific provision to the contrary.
The Bombay High Court emphasized that the Customs Act, 1962 classifies offenses as cognizable or non-cognizable but does not specify procedures for dealing with information received by Customs Officers concerning offenses under the Act.
Consequently, the Bombay High Court concluded that “Section 166A is not an independent island on which any investigating/inquiring authority can jump on without taking recourse to Section 154/155.“ As a result, the High Court quashed and set aside the actions of the respondents in giving effect to the Letter of Rogatory related to the import of Indonesian coal.
Unsatisfied with this decision, the DRI took the matter to the Supreme Court, setting the stage for this critical legal debate.