Foreign exchange enforcement procedures and special police powers were upheld as constitutionally valid under the statutory scheme

A special statutory procedure for foreign exchange offences is constitutionally valid when it bears a rational relation to the legislative object, and enforcement discretion to proceed by adjudication or complaint is not arbitrary where the law preserves that scheme. Ordinary police powers do not override the special complaint requirement for offences covered by the statute, but police action remains valid for cognisable offences within ordinary criminal jurisdiction even if the facts also disclose foreign exchange violations. A pre-Constitution law extending the Special Police Establishment's powers into a State with State consent remains valid, and the notified investigation machinery can operate within that State.

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Issues: (i) Whether Sections 23(1)(a), 23(1)(b), 23-D and 23-F of the Foreign Exchange Regulation Act, 1947 were unconstitutional for conferring arbitrary and unguided discretion on the Director of Enforcement and for providing a special procedure different from the Criminal Procedure Code; (ii) Whether the police could investigate offences under the Foreign Exchange Regulation Act, 1947 despite the special procedure and the requirement of complaint by the Director of Enforcement; (iii) Whether the Delhi Special Police Establishment could investigate offences within a State and whether Sections 5 and 6 of the Delhi Special Police Establishment Act, 1946 were valid.

Issue (i): Whether Sections 23(1)(a), 23(1)(b), 23-D and 23-F of the Foreign Exchange Regulation Act, 1947 were unconstitutional for conferring arbitrary and unguided discretion on the Director of Enforcement and for providing a special procedure different from the Criminal Procedure Code.

Analysis: The provisions were upheld on the footing that a special procedure for breach of foreign exchange law is not hit by Article 14 if it bears a reasonable relation to the object of the legislation. The adjudication under Section 23(1)(a) was treated as civil in nature, and the later introduction of Section 23-F, making non-payment of the penalty punishable, did not convert the adjudication into a criminal proceeding. The discretion given to the Director to proceed by adjudication or complaint, and the power to transfer the matter to court, was not treated as arbitrary or unguided.

Conclusion: The challenge to the constitutional validity of Sections 23(1)(a), 23(1)(b), 23-D and 23-F failed.

Issue (ii): Whether the police could investigate offences under the Foreign Exchange Regulation Act, 1947 despite the special procedure and the requirement of complaint by the Director of Enforcement.

Analysis: The special provisions in the Act regulating investigation by enforcement officers restricted the ordinary police power only to the extent the statute so indicated. The saving in Section 19-J(2) preserved police power only for the specified offence under Section 4(1). For other offences under the Act, cognisance by court could not be taken except on complaint by the Director, and the general machinery of the Criminal Procedure Code could not override that restriction. At the same time, where the police were investigating a cognisable offence such as cheating under the Indian Penal Code, the fact that the facts might also disclose offences under the special Act did not invalidate the investigation or the notice issued in aid of it.

Conclusion: Police investigation was upheld only to the extent of cognisable offences within ordinary police jurisdiction, and the challenge to the impugned investigation failed.

Issue (iii): Whether the Delhi Special Police Establishment could investigate offences within a State and whether Sections 5 and 6 of the Delhi Special Police Establishment Act, 1946 were valid.

Analysis: The Act was held to be a valid pre-Constitution law continued by Article 372 of the Constitution of India. The extension of the Special Police Establishment's powers to State areas with the consent of the State Government was supported by the legislative scheme under the Government of India Act, 1935 and the Constitution of India, including the power to extend police jurisdiction outside the local area with consent. The notification extending authority, and the consent of the State Government, removed the challenge based on lack of territorial competence.

Conclusion: Sections 5 and 6 of the Delhi Special Police Establishment Act, 1946 were valid, and the Special Police Establishment could investigate the notified offences within the State.

Final Conclusion: The writ petitions were rejected in their entirety, and all constitutional and jurisdictional challenges to the impugned proceedings failed.

Ratio Decidendi: A special statutory procedure for investigating and adjudicating foreign exchange offences is constitutionally valid if it is rationally connected to the legislative object, and the ordinary police procedure yields to the special law except where the statute expressly preserves it; further, a pre-Constitution law extending police powers outside a State with the State's consent remains valid after the Constitution.

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