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PETITIONER: PHIROZE DINSHAW LAM ETC.

       Vs.

RESPONDENT: UNION OF INDIA AND ORS.

DATE OF JUDGMENT:       28/02/1996

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) PARIPOORNAN, K.S.(J)

CITATION:  JT 1996 (3)   131        1996 SCALE  (2)637

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T B.P.JEEVAN REDDY.J.      These six  petitions are  filed seeking leave to appeal against a  common judgment  of the  Bombay High  Court dated November 29,  1991 directing the Registrar of the High Court to  file   a  complaint   against   M/s.Godrej   and   Boyce Manufacturing  Company  Private  Limited  and  some  of  its officers and  dealers under  Section 192 of the Indian Penal Code. This  order was made under Section 340 of the Criminal Procedure Code*,  on the  Court being  satisfied prima facie that the  said persons  have committed an offence punishable under Section  193 of  the Indian  Penal Code and that it is expedient in the ------------------------------------------------------------ * 340. Procedure in cases mentioned in Sec.195.-- (1) Where, upon an  application made to it in this behalf or otherwise, any court  is  of  opinion  that  it  is  expedient  in  the interests of justice that an inquiry should be made into any offence referred  to in Cl.(b) of subsection (1) Of Sec.195, which appears  to have been committed in or in relation to a proceeding in  that Court or, as the case may be, in respect of a  document produced or given in evidence in a proceeding in that  Court,  such  Court  may,  after  such  preliminary inquiry, if  any, as  it thinks  necessary, --  (a) record a finding to  that effect;  (b) make  a complaint  thereof  in writing; (c)  send it  to a  Magistrate of  the first  class having jurisdiction;  (d) take  sufficient security  for the appearance of  the accused before such Magistrate, or if the alleged offence  is non-bailable  and the  Court  thinks  it necessary so  to do,  send the  accused in  custody to  such Magistrate, and  (e) bind over any person to appear and give evidence before  such Magistrate. (2) The power conferred on a court  by sub-section (1) in respect of an offence may, in any case where that Court has neither made a complaint under sub-section (1)  in respect  of that offence nor rejected an application for  the making  of such complaint, be exercised

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by the  Court to  which such  former  Court  is  subordinate within the  meaning of  sub-section (4)  of Sec.195.  (3)  A complaint made  under this section be signed-- (a) where the Court making  complaint is  a High Court, by such officer of the Court  as the  Court may appoint; (b) in any other case, by the  presiding officer  of the Court. (4) In this section ’Court’ has the same meaning as in Sec.195." interests of  justice that they should be tried therefor. Of the six  Special Leave  Petitions filed,  the petitioner  in Special  Leave   Petition  (C)   No.20051   of   1991,   Sri K.S.Gurumurthy,died pending  the Special Leave petition. The said   Special    Leave   Petition   has,therefore,   become infructuous  and   is  accordingly  dismissed.  One  of  the petitioners in  Special  Leave  Petition  (C)  No  20049  of 1991,Mrs. Ameen [fourth  petitioner]  has  also  expired  pending  the Special Leave Petition. The said Special ------------------------------------------------------------      Sections 192 and 193 of the Indian Penal read thus: "192.  Fabricating  false  evidence.--  Whoever  causes  any circumstance to  exist or  makes any false entry in any book or  records   or  makes  any  document  containing  a  false statement, intending  that such circumstance, false entry or false  statement  may  appearing,  evidence  in  a  judicial proceeding or  in a  proceeding taken by law before a public servant as  such or  before  an  arbitrator  and  that  such circumstance, false  entry or  false statement, so appearing in evidences  may cause any person who in such proceeding is to form  an opinion  upon  the  evidences  to  entertain  an erroneous opinion  touching any point material to the result of such proceedings is said to fabricate false evidence’.      193.   Punishment   for   false   evidence.--   Whoever intentionally  gives  false  evidence  in  any  stage  of  a judicial proceedings  or fabricate  false evidence  for  the purpose of being used in any stage of a Judicial proceedings shall be  punished with  imprisonment of  either description for a term which may extend to seven years and shall also be liable to fine;      and whoever  intentionally  gives  or  fabricate  false evidence  in   any  other   cases  shall  be  punished  with imprisonment of  either description  for a  term  which  may extend to three years and shall also be liable to fine." Leave Petition  accordingly becomes  infructuous insofar  as the said petitioner is concerned. Of course, so far as other petitioners are  concerned the  Special Leave Petition still survives.      Leave granted. Heard learned counsel for the parties.      Godrej, one  of the  corporate giants  of this country, manufacturers  among   other  goods,   refrigerators.  These refrigerators are  packed in  polythene covering  only  when they are  to be  delivered to  dealers situated  at a  short distance  from  the  factory  but  where  they  have  to  be delivered at  distant places,  they are packed in Corrugated Fibre Containers  [C.F.Cs.] to  protect them  from damage in the course  of transport and for convenient handling. In the proceedings relating  to valuation  under Section  4 of  the Central Excise and Salt Acts 1944 for the period 1976-78 the question arose  whether  the  value  of  C.F.Cs.  should  be included in  the value  of refrigerators  for the purpose of value under  Section 4  of the  Central Excise  Act.  Godrej pleaded  for  exclusion  which  plea  was  rejected  by  the Assistant Collector. On Appellate Collector [Appeals] upheld Godrej’s contention.  The matter  ended there  so far as the said period  is concerned.  In 1982-83,  the Revenue  served demand notices  for a subsequent period, again including the

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value of  C.F.Cs. in the value of refrigerators. Godrej went to Bombay  High Court  by way   of Writ Petition No. 1110 of 1983 questioning the said notices. The writ petition came up for final  hearing before  a learned  Single Judge in March, 1984. Meanwhile,  this Court  had delivered  the judgment in Union of India & Ors. v. Bombay Tyre International [1984 (1) S.C.R.347]  in   May,  1983,   laying  down  the  principles governing the  said issue  among others.  At the hearing  of the writ  petition before  the learned Single Judge,  Godrej wanted to  rely upon  certain letters  said to  have    been addressed to  it by  its dealers  to support  its claim  for exclusion of  the value  of C.F.Cs.  The counsel  for    the Revenue opposed  the admission  of the  said letters at that stage. In  view of  the said  objection, the learned  Single Judge declined  to admit  or rely upon the said letters. The writ petition  was, however,  allowed on  other grounds. The letters which  were actually  handed  over  to  the  learned Single Judge  in the  Court, it  is stated,  remained in the record of the Court.      The Revenue  filed a  Letters Patent  Appeal [No.429 of 1986] against the decision of the learned Single Judge which was dismissed  by the  Division Bench  in  June,  1986.  The Division Bench  too did  not refer  to or rely upon the said letters. A  Special Leave  Petition  was  preferred  by  the Revenue in  this Court  against the judgment of the Division Bench in the year 1987. Meanwhile, certain developments took place, which  are of  immense relevance  to the  controversy herein. In  June, 1987,  the premises of Godrej all over the country were  searched and  several documents seized. One of the documents  seized was  a  letter  dated  June  1,  1983, written by  Sri Hathi  [one of  the  appellants  before  us] addressed to  certain Branch  Managers. At  that  time,  Sri Hathi was the General Manager [Marketing] of Godrej. Under this  letter, Sri  Hathi requested the Branch Managers to obtain  from certain  trusted dealers  antedated  letters stating facts which supported Godrej’s case for exclusion of the value  of the  C.F.Cs. The letters from the dealers were to be obtained as if they were written between May, 1976 and February, 1979. It were these letters - prepared with an eye  upon   the  principles   enunciated  in   Bombay   Tyre International   which were  sought to  be filed  before  the learned Single Judge at the hearing of Writ Petition No.1110 of 1983  in March,  1984 but  which were not actually looked into or  relied upon  by the learned Single Judge in view of the objection  rallied by  the  Revenue.  At  the  time  the letters were sought to be filed, the Revenue was, of course, not aware  that they were fabricated. But the seizure of the said letter  written by Sri Hathi (in the course of searches conducted in June, 1987) convinced the Revenue that the said letters were all fabricated to buttress Godrej’s case in the light of  the decision  in Bombay Tyre International. In the Special Leave  Petition filed  in this  Court,  the  Revenue filed  copies   of  the   said  letters   along   with   the aforementioned letter  of Sri  Hathi contending  that Godrej was guilty  of fabricating evidence and of trying to mislead the Court  by producing  such fabricated evidence. It prayed that the  writ petition  filed by Godrej should be dismissed on the  said ground  alone without  going into merits of the case. The Special Leave Petition came up for orders before a Bench of  this Court on September 4, 1989, The Special Leave Petition was  allowed and  the matter  remitted to  the High Court under the following Order:           "Special leave granted.           We have  heard counsel for the      parties.  Our  attention  has  been

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    drawn to certain letters (appearing      at pages 102 to 122) of the present      S.L.P.  Paper   Book).   The   said      letters   were   indisputably   not      before  the   High  Court   or  the      authorities below  at any  relevant      time. We  are of  the opinion  that      the  questions   herein  should  be      considered in  the light  of  these      letters. The  judgment and order of      the  High   Court  in   that  light      require  to   be  set   aside.   We      accordingly set  aside the judgment      and order  of the  High  Court  and      remand the matter to the High Court      for consideration  of the  question      afresh involved herein in the light      of these  letters. The  High  Court      will  consider   the  question   of      admissibility,  relevancy   &   the      value of  these  letters  and  then      come  to  a  conclusion  about  the      question of assessable value of the      refrigerators and  the  consequence      of that determination.           The  appeal   is  disposed  of      accordingly without any order as to      costs."      The matter  was accordingly  posted before  a  Division Bench of  the High  Court which  thought it appropriate that the matter  be heard  by the  very same learned Single Judge who had  disposed of the writ petition earlier. Accordingly, it was posted before the learned Single Judge. By this time, however, Godrej had become thoroughly demoralized. Caught in the act  of fabrication of evidence, it chose to abandon its case for  exclusion of  the value  of C.F.Cs. It gave up the fight. It  approached the  Revenue authorities including the Central Board of Excise and Customs for a settlement. It saids it  was prepared  to accept the Revenue’s case and pay up all the duty due on that basis. It also offered to refund the amounts  which were  refunded to  it on the basis of the orders of the Court. It is stated by the learned counsel for Godrej that  they even  offered to  pay up  the duty for the period  which   had  become   time  barred.   There  was  no settlement. At  that stage,  the writ  petition came  up for hearing before  the learned Single Judge. A few weeks before the writ petition actually came up for hearings Godrej filed an application)  seeking to  withdraw the  writ petition. It was opposed  by the  Revenue who  has  been  contending  all along, i.e.,  before this  Court as  well as the Bombay High Court  that   inasmuch  as  Godrej  has  indulged  in  clear fabrication of  evidence and  has tried to defraud the court on the  basis of  such documents,  lt should  be dealt  with sternly so that it would serve as a lesson to others. It was submitted that  any indulgent  attitude in such matters will send a  wrong signal  and would serve as an encouragement to persons similarly  minded. The  writ  petition  was  however disposed of  under what  is called "Minutes of the Order" on March 12 . The Order reads:             "MINUTES OF THE ORDER      1. Petitioners  agree and undertake      to pay on or before 15th March 1990      the   sum    of   Rs.3.80    crores      (approximately) comprising  of  the      excise   duty    of   Rs.26   lakhs

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    (approximately)  for   the   period      April  1979   to  March   1980  and      Rs.3.54 crores  (approximately) for      the   period   February   1983   to      February 1987  being amount of duty      payable on   secondary packing. The      aforesaid payment  will be  without      prejudice   to   the   rights   and      contentions of  both the parties in      all pending  petitions before  High      Court  (save   and   except   those      relating   to   the   question   of      inclusion  of   cost  of  secondary      packing in assessable value).      2.  In   so  far  as  the  question      whether assessment  made  on  RT-12      (save  and   except  assessment  in      respect  of  secondary  packing  as      stated above)  are  provisional  or      finals this  being  a  question  of      fact  will  be  determined  on  the      basis of  record  and  as  per  the      provisions of  Central Excise Act &      Rules, thereunder.      3  Affidavit  in  reply  dated  8th      January   1990    filed   by    the      Respondents   on    10th    January      1990.Affidavit in  Rejoinder  dated      28th February 1990 to the aforesaid      affidavit  handed   over   by   the      petitioner to  the Respondents  and      Affidavit  in  sur-rejoinder  dated      9th March  1990 on  behalf  of  the      Respondents are  all taken  on file      of the  Court and  form the part of      the record of these proceedings.      4. On  the above,  Petitioners  are      permitted to withdraw the petition.      It is  agreed before us that the above order was not an agreed order  but an order of the Court though it was signed by counsel for both bides for the purpose of identification.      The Order  dated March 12,1990, it is relevant to note, does not  contain any  reference to  Revenue s allegation of fabrication of  evidence by Godrej nor to its request not to permit withdrawal - much less to the request of the Revenue, which is  supposed to  have been  made  before  the  learned Single Judge  - to  prosecute Godrej,  its officers  and its dealers in  a criminal  court. The order merely provides for payment  of  duties  due  from  Godrej  subject  to  certain observations.      Fifteen months  later, i.e.,  on  June  25,  1991,  the Revenue took  out a notice of motion before a Division Bench of  the   Bombay  High  Court  requesting  that  appropriate criminal  proceedings   be  initiated  against  Godrej,  its officers and dealers for the aforesaid act of fabrication of evidence and its attempt to defraud the Court on that basis.      We may  pause here  for a  moment and mention as to why the said  notice of  motion was  taken out before a Division Bench and  was entertained  by it and not before the learned Single Judge. It appears that prior to October, 1990 all the writ petitions  in the  High Court  were being  heard  by  a learned Single  Judge but  in October,  1990,  there  was  a change in  the procedure,  according to which writ petitions pertaining to  Central Excise were to be heard by a Division Bench alone.  lt is  for this  reason  that  the  notice  of

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mention was  taken out before the appropriate Division Bench according to  the allocation  of work  by the  learned Chief Justice of  prescribes  the  procedure  to  bp  followed  on receipt of an application for settlement. The second proviso to  sub-section   (1)  says   "provided  further   that   an application shall  not be  proceeded with  under  this  sub- section if the Commissioner objects to the application being proceeded with on the ground that concealment of particulars of income  on the  part of  the applicant or perpetration of fraud by  him for evading any tax or other sum chargeable or impossible under  the Indian  Income-tax Act, 1922, or under this  Act,   has  been   established  or  is  likely  to  be established by  any Income-tax authority, in relation to the case."      Sub-section  (4)  provides  that  after  examining  the entire material  including the  report(s) of the Commission, the Commission  may pass  final order in accordance with the provisions of  the pact.  It is  not necessary  to refer  to other sub-sections  in Section  245-D for  the  purposes  of these appeals.      Section 245-E  is relevant  for our purposes and may be set out in full:      "245E.    Power    of    Settlement      Commission  to   reopen   completed      proceedings.  If   the   Settlement      Commission is  of the  opinion (the      reasons  for  such  opinion  to  be      recorded by  it in  writing)  that,      for the proper disposal of the case      pending before  it, it is necessary      or expedient which date  the matters were directed to be listed for final hearing on February 20, 1996.      The entire  thrust of  the submissions  made by learned counsel for  appellants is  not with respect to the truth of fabrication aforesaid but with respect to several procedural aspects. It  is urged  that six  dealers aforesaid  were not even heard before making the direction to prosecute them and that this  omission vitiates  the direction  with respect to all. It  is submitted that the documents were not "tendered" in High  Court but in the Supreme Court and that the Supreme Court alone could have taken action under Section 340 of the Criminal Procedure  Code but  not  the  High  Court.  It  is submitted alternately  that only the learned Single Judge of the Bombay High Court who had heard and disposed of the writ petition could have made that direction but not the Division Bench. It is also argued that in the facts and circumstances of the  case, it  cannot be said that it is expedient in the interests of  justice to  direct the prosecution of the said persons. A  prosecution should be ordered, it is argued, not merely because  there is  evidence  indicating  prima  facie guilt; it  must  also  be  found  expedient  to  direct  the prosecution. It  is also  submitted  that  the  question  of expediency should  have been decided only with notice to and after hearing  the affected  parties. Such  an order,  it is pointed out,  is an  appealable one. Lastly, it is suggested that on  the facts  of the case, Section 192 is not attached because, at  worst, it was a case of fabricating evidence to support a  genuine claim  - rather  an involved argument, we must say,  if not a convoluted argument, and in either case, unacceptable.      The learned  Additional Solicitor General, Sri Jayaram, appearing for  the Revenue, however, supported the reasoning and conclusion  of  the  Division  Bench.  He  disputed  the correctness of  the several contentions urged by the counsel

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for appellants  and submitted  that persons  who indulge  in such crimes  should he  dealt  with  sternly  and  deterrent punishment imposed.      For considering  the contentions urged before us, it is first necessary  to ascertain the facts and the developments in the matter. What are they?      The  Godrej  did  indulge  in  an  act  of  fabricating evidence which  was unworthy  of such  a major  company.  It sought to  buttress its case before the learned Single Judge on the  basis of  the said  documents. It  is another matter that they  succeeded in their writ petition de hors the said fabricated material.  When, however, the letter of Sri Hathi was discovered  during the searches conducted by the Revenue in June,  1987 and its misdeed stood exposed, Godrej was put on the  defensive. The  initiative passed  to Revenue  which contended not  only that  the writ  petition filed by Godrej should be dismissed on the said ground but that it should be dealt with in a manner that it serves as a lesson to others. It is  for this reason that the Special Leave Petition filed by the Revenue was allowed by this Court and the matter sent back to the High Court for deciding the writ petition in the light of  the said letters. The High Court was asked to look into the  relevancy, validity  and admissibility of the said letters -  which admittedly  included the genuineness of the letters. With  this turn  of events, Godrej naturally became nervous. It  did not want to proceed with the writ petition. It approached  the Central  Excise  authorities  at  various levels for  a settlement  but that  did not  materialize. It also sought to withdraw its writ petition, which was opposed by the  Revenue. But  what happened  when the  writ petition came up  for hearing  before the  learned  Single  Judge  is important. The  writ petition  was disposed of under what is called "Minutes  of the  Order"  providing  for  payment  of duties by  Godrej subject to certain observations. The Order neither refers  to the contention of the Revenue relating to fabrication of  evidence by  Godrej nor does it refer to any request of  Revenue to  dismiss the  writ  petition  on  the ground of  fraud sought  to be  perpetrated by  Godrej.  The Order does  not also  say that  any request  was made by the Revenue to  direct the  prosecution of  Godrej, its officers and dealers  responsible for the said Act. This circumstance assumes significance  in view of the fact that the last para of the  "Minutes of the Order" says that the affidavit dated January 8,  1990 filed  by the  Revenues affidavit of Godrej dated February  28, 1990  and the sur-rejoinder [dated March 9, 1990]  are taken  on the  file of  the Court and are made part of  the record. In the affidavit dated January 8, 1990, Revenue had set out its case regarding fabrication by Godrej and asked  for dismissal of the writ petition on that ground alone.  Neither   this  affidavit   nor  the  sur-rejoinder, however,  contain  any  request  or  prayer  to  direct  the prosecution of  Godrej and  its officers  and  dealers.  Two inferences follows  from the above. The Revenue chose not to persist in  its submission  to dismiss  the writ petition on the ground  of the  aforesaid fabrication  and, at any rate, did not also ask for a direction to prosecute Godrej and its officers and  dealers for the said act or it did put forward the said  submissions but  they were  rejected. If the first inference is  correct, then  it is  evident that  not having asked for  the prosecution  at  the  appropriate  stage,  it cannot be allowed to ask for such prosecution after a gap of fifteen months.  Its silence can be construed as abandonment of its  pleas for  dismissal of  writ  petition  and/or  for prosecution. If,  on the other hand, the second inference is the correct  one, then  the Revenue  ought  to  have  either

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applied for  review pressing  for appropriate  directions or filed  an   appeal  against  the  order  disposing  of  writ petition. It  did neither.  It kept quiet for fifteen months and then  moved a  notice of  motion to prosecute Godrej and other persons responsible.      While we agree that the Division Bench was not wrong in making the direction which it did on the merits of the case, it does  not appear to have bestowed sufficient attention to the above  aspect and  its impact  while deciding  upon  the expediency contemplated  by  Section  340  of  the  Criminal Procedure Code  The Division  Bench should  have  considered whether it  is expedient  to  direct  prosecution  when  the learned  Single   Judge  had  chosen  not  to  make  such  a direction-for one  or the other reason pointed out above and on account  of the  silence on  the part  of Revenue  for  a period of  fifteen months.  It is  quite possible  that  the Revenue was  satisfied  with  the  Order  ["Minutes  of  the Order"] dated  March 12,  1990 but  changed its  minds after fifteen months.  It is  not a  question of  jurisdiction  or power  but   one  touching   the  question  of  "expediency" contemplated by Section 340 of the Criminal Procedure Code.      On  a   consideration  of  the  relevant  circumstances mentioned supra  including the  fact that Godrej has paid up all amounts due accepting the contentions af the Revenue, we think that  an order  levying penal  interest would meet the ends of  justice instead  of the  direction for  prosecution made in  the impugned order. We may mention that when during the course  of hearings  we suggested  this alternate course and wanted  to know  the response of the appellants thereto, they agreed with alacrity to the course indicated by us.      For the  reasons given above, we set aside the impugned order and in its place substitute the following order:      Godrej and  Boyce Manufacturing Company Private Limited shall pay  penal interest  at the rate af twenty percent per annum on  all the amounts which were withheld by it, for the period commencing March 1, 1979, whether on the basis of the Order of  the learned  Single Judge of the Bombay High Court dated March  10, 1984 [allowing Writ Petition No.1110/83] or otherwise as well as on the amounts which it had obtained by way of  refund but  which it  ultimately paid  back  to  the Revenue. The  interest  shall  be  payable  for  the  period commencing from the date when the said amount/amounts became due and  payable and  ending with  the  last  date  of  full payment. The observations in the nature of qualifications or reservations contained  in the  Order [Minutes of the Order] dated March 12, 1990, insofar as they relate to inclusion of value of  C.F.Cs. in  the value af refrigerators shall stand deleted. In  other  words,  Godrej  shall  not  dispute  the inclusion  of   the  value   of  C.F.Cs.  in  the  value  of refrigerators for  the period  covered by the demand notices impugned in  Writ Petition  No.1110/83 and  upto  March  12, 1990, the date of "Minutes of the Order" aforesaid.      The appeals  are disposed  of in  the above  terms.  No costs.