Enforcement Directorate ECIR directions unsustainable without proper notice and hearing opportunity to parties

Gagan Banga and another Versus The State of West Bengal and others

Gagan Banga and another Versus The State of West Bengal and others - 2024 INSC 722 Issues Involved:
1. Guidelines for initiating criminal proceedings against financial institutions.
2. Quashing of FIRs registered by disgruntled defaulting borrowers.
3. Imposition of exemplary costs for abuse of process of law.
4. Stay of proceedings related to FIRs and ECIR.
5. Modification and recall of the order dated 04.07.2023.
6. Hearing of the Enforcement Directorate's application.
7. Procedural errors and oversight in the order dated 04.07.2023.

Issue-wise Detailed Analysis:

1. Guidelines for Initiating Criminal Proceedings Against Financial Institutions:
The petitioners prayed for the issuance of a writ, order, or direction in the nature of mandamus to lay down appropriate guidelines to prevent the initiation of criminal proceedings against financial institutions by disgruntled defaulting borrowers. This was aimed at protecting the fundamental rights guaranteed under Articles 14, 19, and 21 of the Constitution of India.

2. Quashing of FIRs Registered by Disgruntled Defaulting Borrowers:
The petitioners sought a writ, order, or direction in the nature of certiorari to quash three FIRs mentioned in Table 1 of the writ petition, which were registered at the instance of disgruntled defaulting borrowers. They argued that these FIRs were an abuse of the process of law, giving a criminal color to civil disputes.

3. Imposition of Exemplary Costs for Abuse of Process of Law:
The petitioners requested the imposition of exemplary costs on the respondents for abusing the process of law by initiating criminal proceedings against them.

4. Stay of Proceedings Related to FIRs and ECIR:
An interim order dated 28.04.2023 granted a stay of all proceedings pursuant to the impugned FIRs. The petitioners later sought to include additional facts and prayers to quash FIR No. 197 of 2023 and ECIR No. ECIR/HIU-1/06/2023. The Court allowed the petitioners to approach the jurisdictional High Courts to challenge all four FIRs and the ECIR within two weeks, directing that no coercive steps should be taken against the petitioner financial institution and its officers until the final disposal of the petitions by the High Courts.

5. Modification and Recall of the Order Dated 04.07.2023:
The order dated 04.07.2023 led to the filing of miscellaneous and interlocutory applications seeking its modification and recall. The Enforcement Directorate, New Delhi, sought recall of the order as it was not heard before the disposal of the case with directions adverse to it.

6. Hearing of the Enforcement Directorate's Application:
The Court noted that no adverse order should be passed against a party without hearing it, a fundamental principle of natural justice. The Enforcement Directorate's application for recall was premised on the ground that it was not given a hearing prior to the passing of the order dated 04.07.2023. The Court held that the directions in relation to ECIR No. ECIR/HIU-1/06/2023 could not be sustained as the Enforcement Directorate was not heard.

7. Procedural Errors and Oversight in the Order Dated 04.07.2023:
The Court acknowledged that certain errors crept in by oversight while relegating the petitioners to the jurisdictional High Courts. Specifically, the Court noted that the directions to seek stay of proceedings before the High Court were unnecessary once no coercive steps were permitted in connection with FIR No. 197 of 2023. Additionally, the stay of proceedings granted in relation to the first three FIRs was directed to continue until the disposal of the writ petitions before the High Courts, which could be misconstrued by the High Courts as observations on the merits of the matter.

Conclusion:
The Court modified the order dated 04.07.2023, recalling it insofar as it pertained to ECIR No. ECIR/HIU-1/06/2023 and substituting the words "till final disposal of the respective petitions..." with "till the filing of the respective petitions." This allowed the High Courts to entertain applications for interim relief and consider the main cases on their own merits. The miscellaneous and interlocutory applications were disposed of accordingly, and the Registry was directed to upload and attach a corrigendum to the order dated 04.07.2023.