TaxTMI 
TaxTMI 
TaxTMI 
2006 (2) TMI 272
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...., Ms. Anuradha, Ms. Swati Grover, Ms. Sonia Dube, Prasenjit Keswani, Ms. Indra Sawhney, A. Subba Rao, N.K. Matta, P. Parmeswaran, B. Krisna Prasad, V.K. Verma, H.D. Petit, Tara Chand Sharma, Ms. Neelam Sharma, D. Bharathi Reddy, M/s. Fox Mandal & Co. (N.P.), Advocates, for the appearing parties. [Judgment per : P.K. Balasubramanyan, J]. - Leave granted in SLP(Crl.) No. 5892/2004. 1. On receipt of notices under the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as the FERA) for showing cause why adjudication proceedings for imposition of penalty under Sections 50 and 51 of the FERA be not initiated against the appellant bank and some of its officers and further notices under Section 61 of the FERA giving an opportunity to the first appellant bank and its officers of showing that they had the necessary permission from the concerned authority for the transaction involved, the appellant bank filed Writ Petition No. 1972 of 1994, seeking a declaration that the relevant sections of the FERA are unconstitutional, being violative of Articles 14 and 21 of the Constitution of India and for writs of prohibition restraining the authorities under the FERA from proceedin....
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....at a sentence of imprisonment and fine has to be imposed and no imprisonment can be imposed on a company or an incorporated body, would not make Section 56 of the FERA inapplicable and that a company did not enjoy any immunity from prosecution in respect of offences for which a mandatory punishment of imprisonment is prescribed. In the light of the said decision of the Constitution Bench, the controversy before us has narrowed down and we have to proceed on the basis that the appellant banks are liable to be prosecuted for offences under the FERA. 4. In this context, it is necessary to refer to the scope of the writ petitions filed by the appellant bank and its officers in the High Court of Bombay. The prayers in the said writ petition are for a declaration that provisions of Sections 50, 51, 56 and 68 of the FERA are unconstitutional, invalid and void being violative of Articles 14 and 21 of the Constitution of India and for a writ of prohibition directing the authorities under the Act from proceeding further, based on the notices issued to the bank and its officers. It may be seen that the challenge to the constitutional validity is based on the alleged violation of Article....
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.... to a violation of the basic structure of the Constitution, namely, the rule of law, and the court had to quash the legislative provisions. If the contention founded on the basic structure theory is not pursued, it is not very clear how far it would be open to the appellants to urge and necessary for this Court to consider the validity of the relevant provisions on the ground that they are violative of Articles 14 and 21 of the Constitution. The High Court found no reason to accept the argument based on the violation of rights under Articles 14 and 21 of the Constitution or based on the alleged impact of the provisions on rule of law and rejected the contention, though it upheld the plea that Section 68 of the FERA had no application for imposition of a penalty based on an adjudication under Sections 50 and 51 of FERA. The question is whether there is any reason to interfere with the decision of the High Court on either of these aspects. 7. Mr. K.K. Venugopal, learned senior counsel, advanced considerable arguments on the interpretation and scope of Section 68 of the FERA. Considering the prayers in the writ petitions filed in the High Court of Bombay by the appellants, it is....
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.... since one of the ingredients of the offence is absence of permission from the concerned authority, they are intended only to give an opportunity to the appellants to show that they had the necessary permission and hence, there was no violation of the relevant provision or provisions of the FERA as sought to be made out in the notice. As pointed out by the learned Additional Solicitor General, on the failure of the appellants to show that they had the requisite permission, a complaint will have to be lodged before the concerned magistrate - here it has been launched with the permission of this Court pending these appeals - and the magistrate will consider whether the process should issue on the basis of the complaint made before him. In view of the fact that sufficient opportunities will be available to the appellants to put forward their contentions before the concerned criminal court, it cannot be said that there is any merit in the challenge to the notices issued under Section 61 of the FERA. The said notices are really in terms of Section 61 of the FERA and their scope and ambit is also controlled by Section 61 of the FERA and on receipt of those notices, it was open to the app....
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....ons the respondent has no jurisdiction to initiate proceedings or make an inquiry under the said sections in respect of certain acts alleged to have been done by the appellants, the respondent can certainly be prohibited from proceedings with the same." On a reading of the notices issued under Section 61 of the Act, we are of the view that they are in terms of that Section and there is no reason to interfere with them in these writ petitions and that it would be appropriate to leave the appellants to their available defences in the prosecutions that have been initiated. Suffice it to say that it is not possible to issue the writ of prohibition as sought for by the appellants on the ground that these notices do not satisfy the jurisdictional requirement under Section 61 of the Act. 12. At this stage, we cannot ignore the argument on behalf of the respondents that if the appellants are not able to show any permission, complaints have to be filed before the concerned magistrate and that magistrate will issue process only on being satisfied that a case has been made out for such issue and that the attempt of the appellants to block the prosecution should not be countenanced. The....
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.... burden of proving the wrong doing, with a potential to pick and choose between sub-section (1) and sub-section (2). This also violated Article 21 of the Constitution. The fiction involved in Section 68(1) would equally violate Article 21 where the presumption of knowledge attaches to the officers of the company against whom no wrong doing whatsoever is alleged except by indicating his status in the company. Learned Additional Solicitor General met these contentions by pointing out that in view of the inclusion of the Act in the Ninth Schedule to the Constitution, these arguments even if found tenable, cannot carry the appellants far. He also submitted that Section 68(1) was consistent with similar provisions under other laws and it applied only to a person who was in charge of and who was responsible to the company for the conduct of the business of the company as well as the company at the relevant time. This was a clear identification of the person who was to be roped in, in terms of Section 68(1) of FERA, and there was nothing arbitrary, unclear or unreasonable in the provision. He also pointed that under Section 68(1) what was needed to be proved was an offence against the com....
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.... 68(2) is attracted in a case where a company has contravened the provisions of the Act or any rule, direction or order made thereunder and that particular contravention is proved to have taken place with the consent or connivance or is attributable to any neglect on the part of any Director, Manager, Secretary or other officer of the company. In other words, the prosecution, in addition to prosecuting the company, can also prosecute any particular officer whose action or inaction or negligence resulted in the commission of the particular offence by the company. This only means that a person who is instrumental in the commission of an act by the company that is in contravention of FERA or the rules or directions issued thereunder, also lays himself open to prosecution. Having done something or omitted to do something leading to the company contravening the provisions of the Act, the officer concerned cannot say that it is unreasonable to prosecute him also, along with the company and the person in charge of and responsible to the company for the conduct of its business. 16. The argument that the section violates Article 14 of the Constitution cannot thus be accepted. The same....
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.... light of the findings in the adjudication for penalty, decide to initiate a prosecution and seek to impose or not to impose a further punishment under Section 56 of the Act. It is submitted that the adjudication proceedings would give an idea to the authorities under the Act as to the gravity of the violation and the opportunity to decide whether the contravention deserved also a punishment by way of prosecution. They would decide whether the penalty imposed under Section 50 of the Act is adequate or not. If in the adjudication proceedings it is found that the alleged offender has not infringed any of the provisions of the Act, there will be no occasion for the Directorate of Enforcement to prosecute the concerned person. It would then be incongruous and unreasonable for the Directorate of Enforcement to prosecute a person for violating FERA, when in the adjudication proceedings against him, it had been found that the person had not violated any of the provisions of FERA. It was in this context that the scheme of the FERA should be understood as indicating that there should first be an adjudication and thereafter, if the Directorate of Enforcement feels that the penalty is inadequ....
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.... the provisions of the Act, especially in the context of the presence of the "without prejudice" clause in Section 56 of the Act dealing with offences and prosecutions. We find substance in the contention of the learned Additional Solicitor General that the Act subserves a twin purpose. One, to ensure that no economic loss is caused by the alleged contravention by the imposition of an appropriate penalty after an adjudication under Section 51 of the Act and two, to ensure that the tendency to violate is curbed by imposing an appropriate punishment after a due prosecution in terms of Section 56 of the Act. The contention that as a matter of construction - since the provisions could not be attacked as violative of the rights under Part III of the Constitution - we should interpret the provisions of the Act and hold that an adjudication has to precede a prosecution cannot be accepted as we see nothing in the provisions of the Act justifying such a construction. On the scheme of the Act, the two proceedings are seen to be independent and the launching of the one or the other or both is seen to be controlled by the respective provisions themselves. In the context of the inclusion of thi....
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.... Director, Enforcement Directorate (1984 Excise and Customs Cases 319) and that of the Andhra Pradesh High Court in Anil Kumar Agarwal v. K.C. Basu (2003 Criminal Law Journal 2197) which also take the same view as the one taken by the Full Bench in the judgment under challenge. The court has also derived support for its view from the decisions of this Court in Assistant Collector of Customs, Bombay v. L.R. Melwani and another (AIR 1970 SC 962) and in P. Jayappan v. S.K. Perumal (AIR 1984 SC 1693 = 1984 Suppl. SCC 437). We see no reason not to approve the answer given by the Full Bench to the question referred to it for decision. On the whole, we are satisfied that there is no justification in accepting the argument that unless an adjudication proceeding under Section 51 of the Act is completed, a prosecution under Section 56 of FERA cannot be initiated. Both proceedings can simultaneously be launched and can simultaneously be pursued. 22. Counsel submitted that the devising of a special machinery for adjudication, the limiting of the "without prejudice" clause in Section 56 to any award of penalty and not the initiation of proceedings under Section 51 of the Act, the making o....
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....23. The prayer for the issue of a writ of prohibition restraining the authorities under the Act from proceeding with the adjudication and the prosecution is essentially based on the constitutional challenge to the relevant provisions of the Act on the ground that they violate Articles 14 and 21 of the Constitution of India. Once we have held, as the High Court did, that the provisions are constitutional, the basis on which the writ of prohibition is sought for by the appellants disappears. It is settled by the decisions of this Court that a writ of prohibition will issue to prevent a Tribunal or Authority from proceeding further when the Authority proceeds to act without or in excess of jurisdiction; proceeds to act in violation of the rules of natural justice; or proceeds to act under a law which is itself ultra vires or unconstitutional. Since the basis of the claim for the relief is found not to exist, the High Court rightly refused the prayer for the issue of a writ of prohibition restraining the Authorities from continuing the proceedings pursuant to the notices issued. As indicated by this Court in State of Uttar Pradesh v. Brahm Datt Sharma [(1987) 2 SCC 179] when a sho....
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....o penalty. Since the penalty could be imposed on a company, as distinct from the punishment of imprisonment, if the company contravenes any of the provisions of the Act, it would be proper to understand Section 68 as being confined only to criminal prosecutions. The High Court stated that Section 50 of the Act dealing with liability for penalty, does not refer to the persons referred to by Section 68 of the Act. As such, Section 68 of the Act could not be availed of to impose a penalty on the officials of the company in terms of Sections 50 and 51 of the Act simultaneously with the company, which is the person guilty of contravention. In view of the fact that Section 50 also prescribes an outer limit for the penalty to be imposed and the said penalty can be imposed on the company itself, it would be incongruous to hold that the same quantum of penalty could be recovered from the officials of the company all over again. That would lead to an anomalous position of the penalty exceeding the outer limit prescribed in Section 50 in respect of a particular offence committed by the company. The High Court gave liberty to the Writ Petitioners to raise this aspect before the Adjudicating Au....
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.... person who contravenes any of the provisions of the Act coming within Section 50 of the Act. 27. Both, Section 50 providing for imposition of penalty and Section 56 providing for prosecution, speak of contravention of the provisions of the Act. Contravention is the basic element. The contravention makes a person liable both for penalty and for prosecution. Even though the heading to Section 56 refers to offences and prosecutions, what is made punishable by the Section is the contravention of the provisions of the Act and the prosecution is without prejudice to any award of penalty. The award of penalty is also based on the same contravention. Section 63 is the power of confiscation of currency, security or any other money or property in respect of which a contravention of the provisions of the Act has taken place conferred equally on the Adjudicating Authority and the Court, whether it be during an adjudication of the penalty or during a prosecution. Whereas Section 64(1) relating to preparation or attempt at contravention is confined to Section 56, the provision for prosecution, sub-Section (2) of Section 64 makes the attempt to contravene or abetment of contravention, itse....
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....scribed as an offence, though no criminal sanction is imposed but merely a pecuniary sanction recoverable as a civil debt." The expression, 'offence' as defined in Section 3(38) of the General Clauses Act means an act or omission made punishable by any law for the time being in force. 'Punishable' as noticed by this Court in Sube Singh & Ors. v. State of Haryana & Qrs. [(1989) 1 SCC 235] is ordinarily defined as deserving of, or capable or liable to punishment. According to Concise Oxford English Dictionary, 'punish' means, 'inflict a penalty on as retribution for an offence, inflict a penalty on someone for (an offence)'. In the New Shorter Oxford English Dictionary (Vol. 2, 3rd ed., reprint 1993), the meaning of punishment is given as, "infliction of a penalty in retribution for an offence; penalty imposed to ensure application and enforcement of a law." Going by Black's Law Dictionary (8th ed.) it is, "a sanction-such as a fine, penalty, confinement, or loss of property, right or privilege-assessed against a person who has violated the law." According to Jowitts Dictionary of English Law Vol. 2 (2nd ed. By John Burke), punishment is the penalty for transgressing the law. It is s....
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....ing the provisions of the Act, if the operation of Section 68 is extended to penalty proceedings also, the penalty would become leviable against each person who comes within the purview of Section 68 of the Act and that will create a serious anomaly. 29. There does not appear to be any reason to confine the operation of Section 68 of the Act as was done by the High Court. Merely because the expression 'punished' is used, it does not mean that it is confined to a prosecution under Section 56 of the Act, since the element that attracts the imposition of penalty and the prosecution is the same, namely, the contravention of any of the provisions of the Act. Moreover, there is nothing in the Act which, confines the expression 'punished' only to a punishment for a criminal prosecution. An imposition of a penalty can also be a punishment. The second part of the reasoning appears to be self-contradictory. If a person includes a company, there is no reason to confine Section 68 to a prosecution only, because the company as a person is liable to be proceeded against under Section 50 and Section 56 of the Act, though in a criminal prosecution the punishment by way of imprisonment can be....
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....aise all available defences before the concerned Criminal Court. Criminal Appeal No. 684 of 2005 : 33. This appeal challenges the decision of the High Court of Andhra Pradesh refusing to interfere with an order of the Special Judge of Economic Offences at Hyderabad refusing to discharge the appellant. The argument before the High Court was that the prosecution contemplated by Section 56 of the Act could take place only if an adverse finding is recorded by the Adjudicating Officer in the proceedings under Section 51 of the Act and that no crime or offence can be said to have been committed by the appellant unless the proceedings under Section 51 of the Act culminates in a finding adverse to him. The High Court rejected this contention. In view of our conclusions recorded earlier, the said argument which is reiterated before us in support of this appeal, has only to be rejected. The order of the High Court does not call for interference and this appeal deserves to be dismissed. Criminal Appeal Nos. 847 and 848 of 2004 : 34. The accused has filed these appeals challenging the orders of the High Court of Delhi. Criminal Appeal No. 847 of 2004 is filed by the accused chall....