Legal principle

Separately constituted proprietorship concerns holding independent Importer-Exporter Codes cannot be treated as benami merely because they share a common address or commercial proximity, and alleged regulatory or licensing violations cannot be elevated into offences of cheating or criminal conspiracy to sustain an FIR.

Court decision

The Madhya Pradesh High Court (Milind Ramesh Phadke, J.) allowed the petition and quashed FIR No. 421/2023 and all proceedings against the petitioner under Sections 120B, 417 and 420 IPC, holding the FIR disclosed no cognizable offence.

Facts

The ED's STF, investigating under FEMA, found that Asif Hanif Thara, operating through M/s Unique Traders (proprietor his father Hanif Qadir Thara), imported poppy seeds from China and Turkey at undervalued prices and allegedly created nine proprietorship firms in the names of his employees from the same Bengaluru address to obtain multiple import authorizations from the Central Bureau of Narcotics, Gwalior, circumventing guidelines permitting only one import application per firm per financial year. Based on a complaint by an ED Assistant Enforcement Officer, FIR No. 421/2023 dated 16.06.2023 at PS Morar, Gwalior was registered against the petitioner under Sections 120B, 417 and 420 IPC. The prosecution alleged that while Unique Traders imported 1,267.9 MT (Rs. 23.26 crore), the benami entities imported an additional 6,541.4 MT (Rs. 136.22 crore) during 2018-2022, fraudulently evading taxes, duties and statutory requirements. The petitioner filed under Section 528 BNSS/482 CrPC seeking quashment of the FIR and proceedings emanating from it.

Key provisions

• Section 37, The Foreign Exchange Management Act, 1999 — Power of search, seizure, etc.