Rasik Ramji Kamani Vs. S.K. Tripathi and Others - Court Judgment

K. Sukumaran, J.

1. Soon after Chapter XIX-A was introduced into the Income-tax Act, 1961, by the Taxation Laws (Amendment) Act, 1975, the petitioner herein - Rasik Ramji Kamani involved the facilities afforded by that benign fiscal measure, by moving the Settlement Commission with the necessary application. The application was admitted on December, 15, 1976. Soon thereafter, the Commission, by its notices issued in December, 1976, directed the petitioner to file a statement of facts (in relation to the income-tax and wealth-tax, respectively, on 24th, 25th, and 26th December, 1976). Such a statement was filed, but only on March 7, 1978, 'seeking successive adjournments'.

2. The Kamani family, of which the appellant is a member, was in control of several corporate entities. It is a fairly long list. As it quite often happens in respect of such controlled companies, the members of the family had their distinct rules in ordaining the affairs of those companies.

3. Some had vaster powers and greater influences. They had subtle and sophisticated operations. Many of them were on wings and wheels, now in London, now in Sudan, now in Switzerland and so on. It is unnecessary to dilate on the activities of the companies or of the persons at the wheel. It is a fact that, as part of a deliberate design, and with the full knowledge of the legal consequences, the advantages derivable and the risks arisable, various legal agencies were created in foreign countries. Such concerns accumulated profits really derived by the business activities in India. The members of the family received/could receive the accumulated funds standing in their names. Dissensions and differences which arose among the members of the family and otherwise, generated many litigations which spread out to even alien fields. The attempts of each group at overpowering the rival groups as revealed from the prolix records need not be recounted in this case and at this stage. It is sufficient to indicate that the Settlement Commission felt that the general information furnished by the appellant along with his application for settlement was bereft of specific particulars to enable the Commission to have a good grip of the facts to undertake the delicate operation which the Commission had to perform in such a situation, the appellant filed a supplementary statement of facts on December 1, 1983. The Settlement Commission found that too inadequate, insufficient and unsatisfactory.

5. The appellant then left the precincts of the Settlement Commission, to pursue a path of confrontation. He invoked jurisdiction and purported to seek relief against the Commissioner of Income-tax attempting to make out a grievance that the Commissioner should be ordered to issue directions to various agencies as demanded by the appellant. Somewhat significantly, stay of the proceedings before the Settlement Commission was also sought for. This court was not impressed by the plea and the conduct of the appellant. The writ petition was dismissed by a learned single judge, The appeal, being Appeal No. 1065 of 1986, shared the same fate; it was dismissed on December 10, 1986. The Supreme Court declined to disturb the conclusion of the learned trial judge and of the appellate court.

6. Nothing tangible happened in the meanwhile. Three years' time was a long enough wait. The Settlement commission thereupon issued a notice on September 1, 1989, indicating its inclination to dispose of the proceedings before it, in view of the non-co-operation of the appellant. Opportunity for furnishing additional clarification and time requisite in that behalf were sought for by the appellant. The Settlement Commission had directed the appellant to produce among others the deed of trust and documentary evidence with regard to trusteeship agreements with the foreign companies. The direction was not complied with by the appellant. The Commission then disposed of the entire matter and with strong enough comments. The appellant did not co-operate with the Settlement Commission was one of the essential findings. It expressed the view that the reply of the appellant dated September 13, 1989, made it apparent to the Commission that the appellant's only attempt was to seek shelter from criminal prosecution. It noted that the passage of time - of 13 years - was not an insignificant durations. The Settlement Commission did not conceal its strong reaction about the conduct of the appellant had not cared to send a proper reply to the show-cause notice under section 245HP of the Act. It, accordingly, disposed of the proceedings, holding that all the cases before the Income-tax and Wealth-tax Officer should be disposed of as if no application under section 245C of the Income-tax Act/section 22C of the Wealth-tax Act had been filed.

7. The order was challenged before this court. Rule was issued initially. The respondents entered appearance. They were heard in the matter. A contention forcefully urged on behalf of the appellant sought to charge the Commission with legal indiscretion, in disposing of a pending application in the light of a statutory provision which came into effect sub-sequent to the commencement of the proceedings. The application was filed on July 22, 1976. The amendments under section 245HA/section 22HA were introduced by the amendment Act which came into force only on June 1, 1987. How come an earlier application is processed in the light of a later enactment, when the stricter requirements of the newly created statute were attracted only on and from June 1, 1987, queried the petitioner. Alternatively, the very basis of the Commission about the non-co-operative attitude on the side of the petitioner was also challenged as unjustified by the factual fabric woven from the materials on record. The contentions have been dealt with exhaustively and carefully by our learned brother Pendse J., who, however, did not find any merit whatever in those contentions. This resulted in the inevitable dismissal of the writ petition.

8. The same contentions have been repeated before us. And all material papers neatly bound in three volumes were presented to us. Arguments were forcefully and elaborately advanced. At the end of the day, we have, however, come to a conclusion similar to that which appealed to our learned brother. The thought processes behind the concurring conclusion shall, and need be, briefly recorded. We hasten to clarify that the views expressed by us herein are only in the context of the contentions urged in relation to the proceedings before the Settlement Commission and the Commission's conclusion and that they do not in any way inhibit the exercise of power and discretion by the taxing and other authorities who have to deal with the problems in the from and setting in which these are presented before them and when the occasion in that behalf may arise.

9. The scheme regarding the working of the settlement commission is no longer obscure. A deep exploration of the background of the constitution of the Commission had been already undertaken by the Supreme Court in its decision in Shreeram v. Settlement Commission 118 ITR 169 . It is not the policy of the law or the direction of legislation to learn in favour of a social criminal, particularly of the white collar brand. This notwithstanding, the scheme of the Settlement Commission escaped judicial frowns for a major reason : a speedier culmination of a tax dispute may, in a sense, serve the cause of the nation needing huge resources for its vast welfare schemes. The Commission is to be manned by persons of impeccable integrity and unquestioned competence. Great expertise and greater responsibility in the decision-making process are integral parts of its independent functioning. It has to free itself from extraneous considerations or alien influences. It is, therefore, not reasonable for an assessee to expect the Settlement Commission to function as if it were a mere rubber stamp or yet another limb of the ordinary executive mechanism of tax-gatherers. Neither the Revenue nor the taxpayer can, therefore, play truant with that high responsible, purpose-actuated and result-oriented mechanism.

10. A party approaching the Settlement Commission has to adjust itself to the requirements of the scheme and the needs of the procedure. A settlement, effective and meaningful, would require candid co-operation and frankness from the taxpayer, albeit a sinner in the past. If proceedings are conceived of only for intermediate insulation from possible prosecution, and if essential materials are withheld from the Commission by a party who could ordinarily be expected to have the care and custody of such materials, that by itself would be a good ground for the Settlement Commission to cry a halt to exercise potent only with futility. Some of these aspects have their greater significance in the order passed by the Settlement Commission and the thirteen year old history of events which surface in the course of the cause.

11. In its fairly detailed order, the Settlement Commission has clearly shown how the appellant had been playing a hide and seek game in relation to the serious attempts made by the Settlement Commission for procuring materials and information for an effective evaluation of the situation. The gross inadequacy of relevant information in the initial application, and the additional communication dated July 1, 1978, had been rightly stressed by the Commission. The search of the premises of the Kamani family in October, 1983, by the Enforcement Directorate and the supplementary statement of facts dated December 1, 1983, generated, justifiably, strong suspicion in the mind of the Commission about the intended purpose underlying the additional statement. The requirement of the commission in terms of rule 7 read with rule 8 intimated by a specific notice issued in that behalf on December 31, 1983, and the reply of January 12, 1984, have been closely analysed by the Commission. The fact that twenty-five letters and reminders had to be sent by the Commission for due compliance by the appellant with the basic requirements prescribed by the Rules and the requisitions of the Commission, on their face, would indicated the recalcitrant attitude, totally incompatible or inconsistent with an honest desire for a just settlement. The Commission felt that replies and documents furnished by the appellant constituted a mass of irrelevance, (Going through the documents ourselves, we can appreciate the strong comments so made by the Commission). The appellant, according to it, made false and misleading assertions about having submitted all the details, while in fact he had not done so. Issues were sidetracked and all attempts at focusing on the point were successfully thwarted by designedly delaying tactics. A faint excuse of disability in production of documents arising out of the seizure made in 1983 was dishonestly made. The rash projection of the excuse overlooked the fact that many years had passed after the appellant had approached the commission (in 1976) and before the search by the Enforcement in 1983.

12. We cannot easily discard the observations made by the Commission about what it felt to be undesirable tactics on the part of the appellant as elaborated in paragraphs 9 and 10 its order. The appellant had filed an affidavit on October 28, 1981, in the foreign court. That solemn document contained a statement that he had a one-sixth share in the foreign assets along with his five brothers. Before the Commission, he made a volte-face. According to him, the affidavit in the foreign court was absolutely false and he had filed it only with a view to secure a locus in the litigation in the court. It is, indeed, difficult for any responsible authority to delineate the areas of duplicity and rightly and rightful dealing when as has been demonstrated by these telling facts, the appellant has been changing his stand, quicker than quicksilver in a crucible. The Commission gave the appellant three months' time to furnish information and evidence to the Commission on points referred to in its letter dated November 28, 1986. The compliance was to be made by February 5, 1987. The conduct of the appellant thereafter is highly relevant. As indicated earlier, he then plunged into further litigation by filing Writ Petition No. 2819 of 1986, making a complaint that the Commission refused to issue appropriate directions in exercise of the powers vested in it. Interestingly enough, a prayer for deferring the deferring the disposal of the settlement application was also made. The write petition and the writ appeal, understandably, were dismissed; and the supreme court did not intervenes. The adverse comments made by the appellate court about the appellant cannot be dismissed as mere casual observations. Much delay entailed as a result of the request for adjournments made when the Settlement Commission fixed its hearing on October 5, 1989. The reason urged was the pendency of an application before the Supreme Court seeking stay of the proceedings before the Commission. The Settlement Commission granted that request too. The applicant appeared in person on November 6, 1989, the adjourned date, raising then a plea about denial of the inspection of the records from the Enforcement Directorate. The reaction of the Commission and the reply of the appellant on November 13, 1989, have all been evaluated by the Settlement Commission. Ultimately, it stated :

'We are constrained to observe that the sole objective of the applicant in approaching us has been to obtain that very same rescue shelter.'

13. The irreconcilable contradiction in the stand of the appellant, as disclosed and revealed from solemn documents to which could enter the reckoning in the ultimate conclusion by the Settlement Commission. The theory that the Indian companies were the real owners of the shares to profit would point to the conclusion that the appellant's own affidavit in a court of low was nothing else than rank perjury. No responsible authority can afford to overlook such a serious and self-confessed lapse of the appellant. The appellant could not aspire to appease a high-ranking commission with something which may be sufficient to act as a sop to the gullible.

14. The history of corporate entities is as thrilling as the adventures of those who set sail in unchartered waters in search of new lands, and new gold. It is equally known that, almost simultaneously, scheming men managed to unjustly enrich themselves at the expense of innocent investors in corporate enterprises. The corporate veil concealed from public gaze many such mischiefs. The South Sea Bubble was not the only bubble that burst. History records that the period commencing from 1865 had been one of wild speculation 'which brought no profit to any one except their promoters'. (See A History of Modern England by Herbert Paul, page 34). With development of corporate activities all over an empire on which the sun never set, frauds also became bizarre. Even judges were shocked at the magnitude and manifestations of such corporate frauds. Judge Dickens (the son of that immortal literary figure who knew much of law and legal process) observed at the culmination of the Jubilee Mills' case (in which frauds of a company director named a Modern Midas were unfolded) that he had never been a company director, and 'after hearing this case certainly never would be....' An eminent counsel who later became an eminent judge as well was inclined to agree with him (See the biography of Sir Norman Birkett). Whitaker Wright was another evil genius who could easily win over the public and the Government by his manipulations in the corporate sector, some of them have been chronicled in the experiences of another lawyer who later became Lord Chief Justice Lord Reading. (See biography of Lord Reading by Montgomery Hyde, page 51). Horizons of manipulations had unimaginable expanses, when those who had intimate experience with the working of the corporate sector commanded newly harnessed technological knowledge and pushed their way across national frontiers of developed and developing counties. These observations are intended only to furnish a general background to the versatility and variety of activities indulged in by the members of the Kamani family.

15. Ramji Hansraj Kamani and his five brothers built up the industrial empire. The appellant is the eldest son of Ramji Hansraj Kamani. The Kamani group had about eight companies by the 1970s. Ramji Hansraj Kamani passed away in 1965. Poonamchand was the eldest among the rest. Creation of foreign assets had admittedly begun in the 1960s. Poonamchand Kamani also bid goodbye to this world and to his hectic activities in 1972. The appellant became the eldest surviving brother in 1972. It is, indeed, impossible in the above circumstances to believe his apparently innocent version that he was not in the full know of the goings on, including the genesis and growth of the five foreign companies including Comsat. There has been a spate of litigation in the family. Arbitration by Viron J. Shah (where also matters used to be taken to the level of the apex court on several occasions), the family settlements, the suits in foreign courts, the dealings with the Reserve Bank (which contained crucial, even if unwilling, admissions), the raid by the Enforcement Branch and the parade of facts by the Public Account Committee all furnish corroborative support to the ultimate factual findings as entered by the Settlement Commission. The orchestrated chorus of abuse against the arbitrator, the Commissioner of Income-tax, and even against the Settlement Commission made by the appellant are only consistent with a lack of candour and refinement as commented upon by the Commission. If, in the backdrop of the unassailable facts and indubitable circumstances, the Settlement Commission declared that the appellant had not furnished full and true particulars to the Commission and the a meaningful and effective settlement as visualised by the Act was impossible in the circumstances, the finding cannot be faulted at all. That was the finding of our learned brother Pendse J. With it, we wholly agree.

16. We have so far proceeded with the claim and case of the appellant without reckoning the positive finding of the Settlement Commission about the paucity of co-operation from the applicant. The finding is fully justified. In the face of the finding, the action under section 245HA/22HA of the Acts is eminently justified. Mark the wording of the section :

'The Settlement Commission may, if it is of opinion that any person who made the application.... has not co-operated with the Settlement Commission in the proceedings before it......'

17. The fact that an ingredient of a statutory provision has been picked up from the past does not mean that the section is retrospective in character. The amendment which brought in section 245HA does not operation in the realm of vested rights. It is purely procedural in character. And it is well-settled that such a provision will apply to pending proceedings. It is unnecessary to burden this judgment with citations of past decisions on the point including the decision of the Supreme Court in Anant Gopal Sheorey v. State of Bombay, : 1958CriLJ1429 , relied on by the Settlement Commission. We repel the contention of the appellant on this aspect also. As already indicated above, our conclusion would be the same de hors the discussion on the retrospective character of section 245HA.

18. In the result, we dismiss the appeal.