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Issues: (i) Whether the relevant provisions of the Foreign Exchange Regulation Act, 1973 could be struck down as unconstitutional on the ground of violation of Articles 14 and 21 of the Constitution of India and whether a writ of prohibition could be issued against the statutory proceedings; (ii) whether adjudication for penalty under the Act had to precede prosecution, and whether notices issued under the Act justified interference; (iii) whether Section 68 of the Foreign Exchange Regulation Act, 1973 was confined only to prosecutions or also extended to adjudication proceedings for penalty.
Issue (i): Whether the relevant provisions of the Foreign Exchange Regulation Act, 1973 could be struck down as unconstitutional on the ground of violation of Articles 14 and 21 of the Constitution of India and whether a writ of prohibition could be issued against the statutory proceedings.
Analysis: The Act stood included in the Ninth Schedule, so Article 31B protected it from attack on the ground of inconsistency with Part III rights. In that setting, the challenge based on Articles 14 and 21 could not succeed. Since the constitutional challenge failed, the foundation for seeking prohibition against the authorities also failed.
Conclusion: The constitutional challenge failed and no writ of prohibition could be issued on that basis.
Issue (ii): Whether adjudication for penalty under the Act had to precede prosecution, and whether notices issued under the Act justified interference.
Analysis: The statutory scheme treated adjudication and prosecution as separate and independent. Section 56 proceeded without prejudice to penalty, and nothing in the Act required a prior adjudication before criminal prosecution could be launched. The notices under Section 61 were only show-cause notices calling for an explanation on permission and did not decide the dispute against the appellants. The appellants retained full opportunity to raise their defences before the competent forums.
Conclusion: Prosecution need not await completion of adjudication, and the notices did not warrant interference.
Issue (iii): Whether Section 68 of the Foreign Exchange Regulation Act, 1973 was confined only to prosecutions or also extended to adjudication proceedings for penalty.
Analysis: The expression "offence" in the statutory setting was used broadly to denote contravention of the Act, and the same contravention attracted both penalty and prosecution. Section 68 identified the persons who could be proceeded against when a company contravened the Act, and there was no basis to restrict it to criminal prosecutions alone. The High Court's narrow construction was therefore unsustainable.
Conclusion: Section 68 applies to adjudication proceedings for penalty as well as prosecutions.
Final Conclusion: The appeals and writ petition challenging the constitutional validity and the initiation of proceedings failed, while the Union's challenge to the narrow construction of Section 68 succeeded to the extent that the provision was held applicable beyond prosecutions.
Ratio Decidendi: Where a statute is protected by Article 31B, a challenge based on Articles 14 and 21 cannot invalidate its provisions, and where the statutory scheme treats adjudication and prosecution as independent, neither proceeding depends on the prior completion of the other; a provision identifying persons liable for company contraventions applies wherever the same contravention is the basis of statutory liability.
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