India Cements case: ED sticks to its stand

The Directorate of Enforcement (ED) on Wednesday told the Madras High Court that it need not give reasons at this stage for having summoned top executives of India Cements, the franchise of Indian Premier League cricket team Chennai Super Kings for an enquiry in connection with alleged violation of the provisions of the Foreign Exchange Management Act (FEMA) of 1999 when the team toured South Africa in 2009.

Appearing before a Division Bench of Justices K.K. Sasidharan and R. Subramanian, Additional Solicitor General G. Rajagopalan said the subject was governed by the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules of 2000.

Rule 4 of the statutory rules deals with holding of inquiry, and nowhere does it require the prosecuting agency to adduce reasons before summoning people for an inquiry, he also added.

Striking a comparison with Section 5 of the Prevention of Money Laundering Act of 2002 which requires the officer concerned to record the reasons in writing before attaching properties, the ASG said such express provision was not available under Foreign Exchange Management Rules. He, however, stated that the ED officials had in fact recorded the reasons in their internal files but did not communicate them to those who had been summoned.

Opposing the arguments, senior counsel P.R. Raman, representing India Cements, its Managing Director N. Srinivasan and other executives, contended that no prejudice would be caused to the prosecution by simply citing the reasons for having summoned the officials for inquiry. When the petitioners had given elaborate replies to the show-cause notices issued by ED, they must be told why they were being summoned without dropping the proceedings on the basis of the written explanations, he contended.

After hearing the arguments, the judges asked the ASG to submit the original files in which the ED officials had recorded the reasons for having summoned Mr. Srinivasan, the company’s executive president T.S. Raghupathy and vice-president (finance and taxation) R. Hariharasubramanian and adjourned further hearing on the case to April 25.

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