2017 (8) TMI 1452
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....st the Petitioner on 19-02-2014. 2. Although mindful that the Act is a path breaking enactment, based on the United Nations Resolutions to globally root out the use of illegal money, acquired via trade in drugs, illegal armaments, acts of terror and misuse of public office and is therefore, the need of the hour, the Petitioner is aggrieved by the indiscriminate application of the provisions of the Act at the whims and fancies of the Officers of the Respondent No.3, who it is alleged, in the absence of a mechanism of proper checks and balances is clothed with unbridled powers, under various sections, leading to possibilities of misuse of the law for personal, political and business vendetta. It is suggested that effective implementation of the Act can be achieved by evolving a mechanism consisting of a retired Judge, Ombudsman or Lok Ayukta, to examine cases in which the Act can be attracted, by affording an opportunity of hearing to the alleged offender. Agreeing that Sections 420, 467, 471, 120B of the Indian Penal Code (for short "IPC") have rightly been inserted in the Schedule of the Act and that a First Information Report (FIR) can be filed by any Police Station and brought....
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....14 was then lodged by the Joint Director before the Adjudicating Authority, seeking confirmation of its Provisional Attachment Order. The Adjudicating Authority issued Show Cause Notice to the EIILMU and confirmed the Provisional Attachment, vide Order dated 03-03-2015, assuming that the fees collected from students were "proceeds of crime". On 09-01-2015, the Joint Director of the Respondent No.3, provisionally attached immovable properties referred to in the Notice and lodged a Complaint dated 02-02-2015, before the Adjudicating Authority for confirmation of the Provisional Attachment Order, who in turn issued Show Cause Notice to the EIILMU. That, FIRs for Scheduled offences covered under the Act cannot be called money-laundering or the amounts involved as "proceeds of crime". Thus, due to baseless inclusion of the Petitioner in the impugned ECIR by the Respondents No. 2 and 3, she has been defamed and her fundamental rights seriously prejudiced due to allegations of money-laundering. 4. The Respondents chose not to file Counter-Affidavit submitting that the questions raised were confined to legal propositions. 5. While reiterating the averments in the pleadings, Learned C....
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.... Section 173 of the Code of Criminal Procedure, 1973 (for short "Cr.P.C."), but proceedings under the Act do not culminate under the IPC as the Authorities have discretionary powers to continue under the Act and invoke all stringent provisions, including denial of bail and trial before a Special Court, thereby subjecting an offender to penalty before trial. 7. The provisions of Section 5 of the Act were assailed as violative of Articles 14, 19 and 300A of the Constitution of India as it bypasses the acclaimed principle of an offender's innocence until proven guilty. The provision can be invoked by the Respondent No.3 on "reason to believe", which is devoid of criteria, to freeze Bank Accounts, thereby jeopardizing the business of the Petitioner or claims could arise in favour of a third party and against the accused. The alleged offender would have to suffer the attachment order, before conviction, as steps against the accused are taken by attachment order or confiscation without even being charged of any offence. No opportunity of being heard is afforded to the Respondent before recording the reasons of such belief. Thus, Section 5 is unfair, unreasonable and open to misuse bes....
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.... of the Act with its non obstante clause and the fiction created by Section 24 of the Act would lead to needless incarceration and punishment before conviction. 13. That, Section 50 of the Act allows any statement recorded by the authorities as admissible in evidence and is contrary to Article 20(3) of the Constitution of India. That, Section 50(4) is identical to the provisions of Section 67 of the Narcotics Drugs and Psychotropic Substances Act, 1985 (for brevity "NDPS Act"), which is presently pending before the Hon'ble Supreme Court, attention of this Court was drawn to the decision of K.P. Tiwari vs. State of M.P., 1994 Supp (1) SCC 540 where it was held that a person ought not to be arrested straight away but enquiries ought to be made before such arrest and to the ratio in Arnesh Kumar vs. State of Bihar and Another (2014) 8 SCC 273. 14. An additional Affidavit filed by the Petitioner urged that the Writ Petition is maintainable and no materials existed before the Enforcement Directorate against the Petitioner, to invoke the provisions of the Act, except the fact that she was named as an accused in the impugned Charge-sheet, despite absence of any evidence against her.....
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....-laundering. Even when he not so accused, the property in his possession may be proceeded against for attachment or confiscation, on the satisfaction of the appropriate and competent Authority. That, the Hon'ble High Court of Karnataka in Smt. K. Sowbaghya vs. Union of India & Others MANU/KA/0192/2016 [Writ Petition No.14649 of 2014 (GM-RES) connected with Writ Petition No.19732 of 2014 (GM-RES) dated 28-01-2016], has upheld the validity of Section 5 of the Act. It was contended that Section 8 cannot be said to be violative of Article 14 of the Constitution of India as the attachment, retention and the essential authority to order confiscation of the property is dependent and contingent upon proof of guilt and finality of conviction for commission of offence under Section 3. The "reason to believe" on the part of the Adjudicating Authority prior to confiscation is in the scheme of the Act, while the determination of the guilt of the accused is in the exclusive domain of the Special Court. 17. With regard to the arguments on Section 24 of the Act, reliance was again placed on Smt. K. Sowbaghya9. Under Section 45 of the Act the contention put forth was that discretionary powers en....
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....are confined to assailing the vires of Sections 2(u) 3, 4, 5, 8, 13, 24, 45 and 50 of the Act. It is pertinent to point out that in the averments of the Petitioner, the challenge to Section 42 of the Act finds no place, but has been inserted only in the prayer. In the absence of averments or arguments, this Section finds no place for consideration or discussion. 20. The constitutional validity of the provisions of Sections 2(u), 3, 4, 5, 8, 13, 24, 45 and 50 of the Act ultra vires Articles 14, 19, 20, 21 and 22 of the Constitution, have been called in question herein. 21. Before embarking on a discussion on the merits, the parameters and principles laid down by judicial pronouncements, for adjudicating the constitutionality of an enactment or its provisions may be referred to. 22. In State of Bihar and Others, etc. etc. vs. Bihar Distillery Ltd., etc. AIR 1997 SC 1511 etc. , the Hon'ble Supreme Court held that while judging constitutionality of an enactment, the Court should (a) try to sustain validity of the impugned law to the extent possible, it can strike down the enactment only when it is impossible to sustain it; (b) the Court should not approach the enactment with a....
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............................................... (a) that a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself ; (b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles ; (c) that it must be presumed that the Legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds ; (d) that the Legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest ; (e) that in order to sustain the presumption of constitutionality the Court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived ex....
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....effort also included elimination of the root cause of the problem of abuse of narcotic drugs and psychotropic substances, including illicit demand for such drugs and substances and profits obtained from illicit trafficking. (b) The initiatives under the aegis of the United Nations are; (i) United Nations Political Declaration and Action Plan against Money-Laundering 1988; (ii) United Nations Global Programme against Money Laundering; (iii) United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 1988; (iv) International Convention for Suppression of the Financing of Terrorism 1999; (v) United Nations Convention against Organised Transnational Crimes 2000 and (vi) United Nations Convention against Corruption 2003. (c) Inter-Governmental initiatives emerged such as the "Basel Committee on Banking Regulation and Supervisory Practices" in 1988, which exchanges information and proposes international standards for Banks, to identify customers, avoid suspicious transactions and cooperation with law enforcement agencies to deal with the problem of money-laundering. The Offshore Group of Banking system, International....
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.... (ii) Layering; which involves financial transactions in several layers to disguise the "proceeds of crime" from their source and (iii) Integration; which is investment of the amount into the financial system by way of investment in real estate or other methods, to wipe away its association with crime. 30. In Ram Jethmalani vs. Union of India (2011) 8 SCC 1, the Hon'ble Supreme Court expressed its concern in the matter as follows; "5. The worries of this Court that arise, in the context of the matters placed before us, are with respect to transfers of monies, and accumulation of monies, which are unaccounted for by many individuals and other legal entities in the country, in foreign banks. The worries of this Court relate not merely to the quantum of monies said to have been secreted away in foreign banks, but also the manner in which they may have been taken away from the country, and with the nature of activities that may have engendered the accumulation of such monies. The worries of this Court are also with regard to the nature of activities that such monies may engender, both in terms of the concentration of economic power, and also the fact that such monies may be tr....
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....roperty or assets, wherever located. Section 2(u), therefore, does not envisage either mens rea or knowledge that the property is a result of criminal activity. If any property, which includes value of the property, is "proceeds of crime", then any transfer in terms of Section 2(za) requires examination to verify as to whether it is by way of a money-laundering operation involving the process of placement, layering or integration. Such property could be subjected to attachment and confiscation, the Section, however, does not presuppose knowledge of the proceeds being of criminal activity. Properties apart from the "proceeds of crime" are not liable to attachment, neither is it included in the ambit of the Act. All that the Section is concerned with is the "proceeds of crime" and does not extend to property not so involved. The argument of Learned Counsel for the Petitioner that the provision necessarily includes a guilty mind, therefore, cannot be countenanced. While reading Section 2 and Section 3 of the Act in juxtaposition it is clear that only a person who is 'involved' with the "proceeds of crime" would be guilty of the offence under Section 3 and not a person who is only in '....
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....onsidering whether mens rea is an essential ingredient in the proceeding taken under Section 23(1)(a) of the Foreign Exchange Regulation Act, 1973, held that it is not an essential ingredient to establish contravention under Sections 10(1) and 23(1)(a) of that Act. 35. In J. K. Industries Limited and Others vs. Chief Inspector of Factories and Boilers and Others (1996) 6 SCC 665 the Hon'ble Supreme Court observed that the offences under the Factories Act, 1948, are not part of general penal law but arise from the breach of a duty provided in a special beneficial social defence legislation, which creates absolute or strict liability, without proof of any mens rea; the offence are strict statutory offences for which establishment of mens rea is not an essential ingredient. The omission or commission of the statutory breach is itself the offence. Similar type of offences based on the principle of strict liability, which means liability without fault or mens rea, exist in many statutes relating to economic crime as well as in laws concerning the industry, food adulteration, prevention of pollution, etc. in India and abroad. Absolute offences are not criminal offences in any real sen....
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.... to meet emergent situations may well be construed as excluding the principle audi alteram partem. All that we say is that Section 238(1) of the Punjab Municipal Act does not." 38. The object of the Act, being borne in mind, as already extracted herein above and the discussions that have ensued it is evident that the definition of "proceeds of crime" has the goal of preventing and stemming criminal activities related to money-laundering at its very inception and cannot be said to be arbitrary or absurdly expansive, or seeking to penalise even non-offenders. Thus, the provision does not suffer from any infirmity. 39. Section 3 of the Act defines the offence of money- laundering and reads as follows; "3. Offence of money-laundering.-Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it is untainted property shall be guilty of offence of money-laundering." While Section 4 of the Act is the penalty for such crime and provides as under; "4. Punishment for mon....
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.... by way of deposits made in the names of people who have not acquired it as of right, but in whose accounts the offender has introduced by way of an ulterior motive. In this context, we may refer to the ratiocination of the Constitution Bench of the Supreme Court in Attorney General for India and Others vs. Amratlal Prajivandas and Others (1994) 5 SCC 54 which while considering the validity of the provisions of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, (for short "SAFEMA") observed that; "44. ..................... The relatives and associates are brought in only for the purpose of ensuring that the illegally acquired properties of the convict or detenu, acquired or kept in their names, do not escape the net of the Act. It is a well-known fact that persons indulging in illegal activities screen the properties acquired from such illegal activity in the names of their relatives and associates. Sometimes they transfer such properties to them, may be, with an intent to transfer the ownership and title. .......................................................... 56. .................................................... (5) The app....
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....Counsel for the Petitioner on Section 4 of the Act although the constitutionality was challenged in the prayer, however, it is axiomatic that no offence decries penalty. The Court although clothed with discretion to award punishment has to exercise the discretion ensuring award of minimum penalty provided for by the Act, however, neither the minimum term nor rigorous imprisonment for an offence means that the provisions are ultra vires. The Hon'ble Supreme Court in State of Gujarat and Another vs. Hon'ble High Court of Gujarat while discussing the liability of the prisoners sentence to rigorous imprisonment, culled out the following principles; "50. ......................................................... (1) It is lawful to employ the prisoners sentenced to rigorous imprisonment to do hard labour whether he consents to do it or not. (2) It is open to the jail officials to permit other prisoners also to do any work which they choose to do provided such prisoners make a request for that purpose. (3) It is imperative that the prisoners should be paid equitable wages for the work done by them. In order to determine the quantum of equitable wages payable to prisoners, the ....
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....may result in frustrating any proceedings relating to confiscation of such proceeds of crime under this Chapter, he may, by order in writing, provisionally attach such property for a period not exceeding one hundred and eighty days from the date of the order, in such manner as may be prescribed: Provided that no such order of attachment shall be made unless, in relation to the scheduled offence, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974), or a complaint has been filed by a person authorised to investigate the offence mentioned in that Schedule, before a Magistrate or court for taking cognizance of the scheduled offence, as the case may be, or a similar report or complaint has been made or filed under the corresponding law of any other country: Provided further that, notwithstanding anything contained in clause (b), any property of any person may be attached under this section if the Director or any other officer not below the rank of Deputy Director authorised by him for the purposes of this section has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material i....
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....e of the scheduled offence. The second Proviso stipulates that regardless of anything in Section 5(1)(b), if the concerned Officer has "reason to believe", on the basis of material in his possession, that not attaching the property involved in money-laundering immediately, would frustrate the proceedings of this Act, he is clothed with powers to attach the property. Once attachment of property under Section 5(1) takes place the Authority is to forward a copy of the order along with relevant materials to the Adjudicating Authority, as per procedure prescribed. The order of attachment, made under Section 5(1), shall cease to have effect after the expiry of the period specified therein or on the date of an order made under Section 8(2), whichever is earlier. Section 8(2), to be discussed later, specifies the process that the Adjudicating Authority shall take after a reply has been filed under Sub-Section (1) of Section 8. The aggrieved person shall be heard and all relevant materials taken into consideration. Section 5(4) of the Act gives liberty to the person whose property is attached to enjoy the immovable property. Under Section 5(5), the Director or any other Officer who provisio....
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.... affected by the proposed action must be afforded an opportunity of being heard as to why that action should not be taken. That, having been said, it may be pointed out that in the same Judgment the Supreme Court had observed that there are situations which demand the exclusion of the rules of natural justice by a reason of diverse factor, like time, the place and the apprehended danger. It would be appropriate to extract herein the observation of the Hon'ble Supreme Court at Paragraph 42, which reads as follows; "42. Having given our anxious and solicitous consideration to this question, we are of the opinion that the procedure prescribed by Section 314 of the Bombay Municipal Corporation Act for removal of encroachments on the footpaths or pavements over which the public has the right of passage or access, cannot be regarded as unreasonable, unfair or unjust. There is no static measure of reasonableness which can be applied to all situations alike. Indeed, the question "Is this procedure reasonable?" implies and postulates the inquiry as to whether the procedure prescribed is reasonable in the circumstances of the case. In Francis Coralie Mullin [(1981) 1 SCC 608], Bhagwati, J....
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....r dealt with in any manner which may result in frustrating any proceeds relating to confiscation of such "proceeds of crime". Such action is independent from any enquiry or investigation of any predicate offence [Binod Kumar vs. State of Jharkhand and Others (2011) 11 SCC 463], but limits the number of days of such provisional attachment and report thereof to the Adjudicating Authority. The provisions of Section 5 while aiming to achieve the object of the Act cannot be said to be violative of Articles 14, 19 or 300A of the Constitution of India. 48. Section 8 of the Act deals with adjudication and reads as follows; "8. Adjudication.-(1) On receipt of a complaint under sub-section (5) of section 5, or applications made under sub-section (4) of section 17 or under sub-section (10) of section 18, if the Adjudicating Authority has reason to believe that any person has committed an offence under section 3 or is in possession of proceeds of crime, he may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub-section (1) of ....
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.... confirmed under sub-section (3), the Director or any other officer authorised by him in this behalf shall forthwith take the possession of the property attached under section 5 or frozen under sub-section (1A) of section 17, in such manner as may be prescribed: Provided that if it is not practicable to take possession of a property frozen under sub-section (1A) of section 17, the order of confiscation shall have the same effect as if the property had been taken possession of. (5) Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of money-laundering shall stand confiscated to the Central Government. (6) Where on conclusion of a trial under this Act, the Special Court finds that the offence of money-laundering has not taken place or the property is not involved in money-laundering, it shall order release of such property to the person entitled to receive it. (7) Where the trial under this Act cannot be conducted by reason of the death of the accused or the accuse....
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....erty attached under Sub-Section (1) of Section 5 or seized under Section 17 or Section 18 has been acquired by him from his legal/known sources of income. Any attachment of the value of any property can also be explained by the concerned accused by production of necessary materials an evidence to establish his bona fides. Once such material has been furnished, the Adjudicating Authority is required to consider the reply and after giving an opportunity to the person of being heard, may either confirm the attachment of the property, or else as a natural corollary release such property, by demurring to pass an order of confirmation to the property attached provisionally or part of it. 51. The rights of the offender or any person in possession of "proceeds of crime" are clearly protected by reading the provisions of Section 5 and Section 8 cumulatively, inasmuch as the provisional attachment can be confirmed only after the Adjudicating Authority affords an opportunity to the offender or any person holding the property to establish his sources of income. The Director is also given the opportunity of being heard at that stage. Should it be found that the property held is from legitima....
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....et out in the order or communicated to the Petitioner or other concerned parties. It was held that the order is clearly bad in law and it is set aside. This aforestated ratio is clearly distinguishable from the case at hand, the statute under consideration does not want in stipulating the opportunity of showing cause, before the order is confirmed. 53. In Sushil Kumar Sharma while discussing the vires on a plea to declare Section 498A of the IPC as unconstitutional and ultra vires, it was held that; "12. It is well settled that mere possibility of abuse of a provision of law does not per se invalidate a legislation. It must be presumed, unless the contrary is proved, that administration and application of a particular law would be done "not with an evil eye and unequal hand". (See A. Thangal Kunju Musaliar v. M. Venkatichalam Potti) [AIR 1956 SC 246] 54. On the same question, reference may also be made to the following ratio; (i) In Mafatlal Industries Ltd. and Others vs. Union of India and Others (1997) 5 SCC 536 a Bench of nine Judges observed that mere possibility of abuse of a provision by those in charge of administering it cannot be a ground for holding a pr....
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....r Section 5 and Section 8 of the Act, proceedings can be against persons who are accused of a scheduled offence or against persons who are accused of having committed an offence of money-laundering or persons who are found to be in possession of the "proceeds of crime". It is not necessary that a person has to be prosecuted for an offence under the Act only if he has committed a scheduled offence. The prosecution can be independently only for the offence of money- laundering as defined in Section 3 and Section 2(p) which provides that "money-laundering" has the meaning assigned to it in Section 3. 57. The argument forwarded by Learned Counsel for the Petitioner is that, by including certain offences under the IPC in the Schedule of the Act, such inclusion does not subserve the aim and objective of the Act. It may be highlighted here that the "offences under the Indian Penal Code" had been incorporated in Part B, in the Schedule, by Section 13 of the Prevention of Money-Laundering (Amendment) Act, 2009 (No.21 of 2009), however, it was omitted from Part B, in the Schedule, by Section 30 of the Prevention of Money-Laundering (Amendment) Act, 2012 (No.2 of 2013), and incorporated in....
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....he onus to the accused, it affords him an opportunity of establishing his innocence and clarifying to the prosecution the source of his property and therefore, contains a safeguard for the accused. Consequently, it cannot be said that the provision is unconstitutional. Thus, when considering the Acts the object has to be given primary importance and the provision thereof cannot be said to be ultra vires when the end goal is to be achieved. Section 24 unequivocally extends an opportunity to the offender to establish the source of his property, which if legitimate can be fully justified by the Petitioner. 60. Section 45 of the Act has next been challenged, inter alia, on the ground that, imposing limitations on bail is violative of Articles 14 and 21 of the Constitution of India, as the grant of bail is subjected to specifications, viz., grounds for believing that the accused is not guilty of such offence and he is not likely to commit any while offence on bail. 61. To examine the aforesaid submissions, we may extract the relevant provision of the Act; "45. Offences to be cognizable and non-bailable.-(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1....
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....tice are paramount considerations while granting such bail. Section 45(2) of the Act prescribes that the limitation on granting of bail under Sub-Section (1) is in addition to the limitations under the Cr.P.C. or any other Law for the time being in force on granting of bail. Hence, the Court has to take in consideration the relevant factors which are considered in a Bail Petition under Sections 437 and 439 of the Cr.P.C. when an application under Section 45 of the Act filed. Conditions stipulated in Section 437 of the Cr.P.C. may also be imposed as the import of the accused remaining at large, the impact on society by his enlargement on bail or whether such bail would thwart the ends of justice, all merit consideration. Thus, the evidence before the Court must be worthwhile under Section 45(ii) of the Act, to persuade the Court to conclude that, if rebutted, the accused might be convicted. Evidence "beyond reasonable doubt" is not envisaged at this stage. In my considered opinion, the limitations are not unfounded or arbitrary. The Legislature has evidently used the words "reasonable grounds for believing", in Section 45(1)(ii) to enable the Court dealing with the bail, to justi....
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....e compensation. The said bench taking note of the fact that the question of awarding Future Prospects to a self-employed person was pending before a larger Bench of the Supreme Court, observed as follows; "9. Taking into account the fact that the deceased was a self employed person and also as the question with regard to award of future prospects of a self employed person is presently pending before a larger Bench of this Court and as some enhancement of compensation has already been made by us, we are of the view that in the facts of the present case, the claim for future prospects ought not to be gone into by us. The said claim, therefore, is refused." 64. Toeing the line of the above observation, it would be apposite to hold here that as the matter of constitutionality of Section 67 of the NDPS Act, which bears a similarity to Section 50 of the Act is pending consideration before the Hon'ble Supreme Court, it would be in the correctness of things not to enter into a discussion of the matter where a decision is awaited. 65. The Petitioner also sought quashing of the ECIR dated 19-02-2014. No separate application under Section 482 of the Cr.P.C. was filed. While dealing w....


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