Page 1 of 15

Legal

Opinion

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

Page 2 of 15
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

Page 3 of 15
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

Page 4 of 15
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

Page 5 of 15
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

Page 6 of 15
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

Page 7 of 15
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

Page 8 of 15
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 Honble 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

Page 9 of 15
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 Incometax 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.,

Page 10 of 15
(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.

Page 11 of 15
(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 LKMs 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 LKMs 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.

Page 12 of 15
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

Page 13 of 15
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

Page 14 of 15
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.

Page 15 of 15
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

Gandhis 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 Gandhis case or in
any other decision brought to my notice.
************