Exoneration in Main FERA Case Doesn’t Wipe Out Criminal Liability for Dodging ED Summons

In India’s legal system, it is a well-established principle that disobeying a lawful summons from an investigative authority is a criminal offence in itself, regardless of whether the person is ultimately found guilty of the main charge.

This principle has been reinforced time and again by courts, with one of the most prominent examples being the Supreme Court's ruling against Vijay Mallya in 2015.

Summons Are Not Optional

When law enforcement agencies like the Enforcement Directorate (ED) or Income Tax Department issue summons under statutory powers—such as those under the Foreign Exchange Regulation Act (FERA), the Prevention of Money Laundering Act (PMLA), or the Income Tax Act—it is not a mere formality. It is a binding legal directive, and failure to comply can invite independent criminal charges, regardless of the outcome of the underlying investigation.

The Vijay Mallya Example

In the Vijay Mallya vs. Enforcement Directorate case, the liquor baron was summoned multiple times under Section 40 of FERA in connection with alleged foreign exchange violations related to a sponsorship deal for the "Kingfisher" brand in Formula 1 racing. Despite repeated notices, Mallya failed to appear—at one point even refusing to accept a summons.

Though the adjudicating officer later dropped the proceedings on the main charge (and FERA was repealed), the Supreme Court ruled in 2015 that Mallya could still be prosecuted for failing to comply with summons, under Section 56 of FERA. The Court held this offence to be independent and prosecutable on its own merits.

The judgment made it clear that:

"The fact that the adjudicating officer chose to drop the proceedings against the Appellant herein does not absolve the Appellant of the criminal liability... Exonerating such an accused, who successfully evades the process of law and thereby commits an independent offence... would be destructive of law and order, apart from being against public interest."

The apex court, in its order, held that the offence of non-compliance with summons under Section 40 read with Section 56 of FERA is an independent and prosecutable criminal offence, even if the adjudicating officer drops the main violation proceedings under the Act.

“The fact that the adjudicating officer chose to drop the proceedings... does not absolve the appellant of the criminal liability... Exonerating such an accused who successfully evades the process of law... would be destructive of law and order, apart from being against public interest,” the court observed, adding that such an approach “would only encourage unscrupulous elements... to defy authority with impunity.”

The case stemmed from an investigation into a deal between Mallya’s company United Breweries Ltd. and UK-based Benetton Formula Ltd. for advertising the “Kingfisher” brand on Formula One racing cars during 1996–1998. The ED alleged that no permission was taken from the Reserve Bank of India, in violation of FERA provisions. Multiple summonses were issued to Mallya between 1999 and 2000, which he either ignored or avoided, with one instance of refusal to accept summons.

Although the adjudication proceedings under FERA were eventually dropped, and the Act itself was repealed in 2000, the Supreme Court held that these developments do not render the criminal case infructuous.

The Court further criticized Mallya’s conduct, stating that his response to summons was framed in a manner suggesting that appearances should be scheduled at his convenience—an attitude the Court deemed unacceptable for a person facing serious allegations.

The judges also clarified that the principles laid down in Roshanlal Agarwal cannot be used to justify quashing of such prosecutions. "That case was decided based on specific facts and cannot be stretched to protect those evading lawful authority," the Court said.

Emphasizing the importance of compliance in investigations into economic offences, the Court added:

"It is possible, in certain cases, that the time gained by such evasive tactics... would result in the destruction of the material which might otherwise constitute valuable evidence."

Concluding that Mallya’s approach was a sheer abuse of the judicial process, the Supreme Court dismissed the appeal and imposed a cost of ₹10 lakh, payable to the Supreme Court Legal Services Authority.

This verdict stands as a strong judicial pronouncement on the independent criminal liability for non-cooperation with investigative authorities, reinforcing that procedural violations, especially in economic offences, will not be excused merely due to lack of conviction in the underlying charge.

Why This Matters

The ruling has broader implications. It serves as a strong deterrent against procedural non-compliance, especially by high-profile or powerful individuals who may seek to delay or derail investigations by ignoring summons. It also clarifies that even if one is eventually cleared of financial or criminal wrongdoing, they may still face punishment for obstructing the investigative process.

This has been echoed in several other contexts:

• Tax summons ignored by corporate executives,
• PMLA summons avoided by persons under money laundering probes,
• Or non-compliance with CBI notices in corruption inquiries.

In all such cases, the law provides for separate prosecution, regardless of the final outcome of the main case.

Recent Parallel: ED Summons to Senior Advocates

This brings into question a recent controversy, where the Enforcement Directorate reportedly summoned Senior Advocates Arvind Datar and Pratap Venugopal in connection with a money laundering probe. The summons, which drew widespread legal and political attention, were later withdrawn.

This raises an important legal question:

If a person fails to appear in response to a validly issued ED summons, and if that summons is later withdrawn, does the initial non-appearance still constitute a punishable offence?

Legally speaking, based on the reasoning in the Vijay Mallya case, non-compliance with a valid summons at the time it was issued may still attract criminal liability, unless it is shown that the summons itself was defective, withdrawn before default occurred, or was otherwise legally infirm. The timing, manner of service, and justification for non-appearance would all be critical factors.

However, when summons are voluntarily withdrawn by the issuing authority before any coercive steps or complaints are filed, the matter often becomes moot in practice, though not necessarily in principle.

Conclusion

The Mallya case is a landmark reminder that the rule of law does not bend to convenience or status. Ignoring summons is not a loophole—it is a legal red flag that courts take seriously. Whether you are a business tycoon, public servant, or private individual, legal processes must be respected. Dodging them could land you in even deeper trouble, even if you're ultimately cleared of the original allegations.