MONOTOSH SAHAversusSPECIAL DIRECTOR, ENFORCEMENT DIRECTORATE AND ANR.

                       [2008] 12 S.C.R. 444
                                                                   ct-
A                      MONOTOSH SAHA
                               v.
             SPECIAL DIRECTOR, ENFORCEMENT
                   DIRECTORATE AND ANR.
                (Civil Appeal No. 5188 of 2008)
B                       AUGUST 21, 2008                             -t
                                                                         •
       [DR. ARIJIT PASAYAT AND DR. MUKUNDAKAM
                      SHARMA, JJ.]

c       Foreign Exchange Regulation Act, 1973: s.19(1) -
  Penalty - Pre-deposit of, as condition to hear appeal - Stay
  !Dispensation of predeposit - Grant of - Held: While granting
  stay, pending disposal of the matters before the concerned
  forum, though discretion is available, same has to be
  exercised judicially - Petitions for stay should not be
D
  disposed of in routine manner - Where denial of interim
  relief may lead to public mischief, grave irreparable private
  injury or shake citizens' faith in the impartiality of ppblic    )<'
  administration, interim relief can be given - Tribunal while
  dealing with stay application has to consider materials placed
E by assessee relating to undue hardship and also to stipulate
  condition as required to safeguard the realization of penalty
  - On facts, appellant deposited penalty amount as directed
  by this Court - For balance amount demanded, with a view
  to safeguard realization of penalty, appellant to furnish such
F security as may be stipulated by the Tribunal - On that being
                                                                   ~
  done, appeal be heard without requiring further deposit -
  Interim order.
       The appellant allegedly acquired foreign exchange
  contravening the provisions of s.8(1) of the Foreign
G
  Exchange Regulation Act, 1973 thereby rendering him
  liable to be proceeded under s.50 of the Act. After
  issuance of show cause notice and receipt of reply, the
  Special Director passed an order imposing penalty of

H                              444
.
~

                         MONOTOSH SAHA      v.
                                         SPECIAL DIRECTOR,              445
                          ENFORCEMENT DIRECTORATE & ANR.

           ·-f   Rs.25 lakhs on the appellant. The appellant filed appeal     A
                 before the Tribunal and an application for dispensing
                 with the requirement of pre-deposit. The Tribunal passed
                 an order directing deposit of 60% of penalty amount for
                 entertaining the appeal. On appeal, High Court held that
                 no case for hardship was made out either before the          B
                 Tribunal or before it, therefore there was no scope for
    ....
           +     interference with the order of Tribunal.
                      In appeal to this Court, appellant contended that
                 case for dispensing with pre-deposit was made out; and
                 that in compliance with this Court's interim order dated     c
                 5.2.2007 the amount of Rs.10,00,000/- was deposited with
                 the concerned Directorate.
                      Disposing of the appeal, the Court
                       HELD: 1. While granting stay, pending disposal of D
                 the .matters before the concerned forum, though
                 discretion is available, same has to be exercised judicially.
                 It is true that on merely establishing a prima facie case,
                 interim order of protection should not be passed. But if
                 on a cursory glance, it appears that the demand raised E
                 has no leg to stand, it would be undesirable to require
                 the assessee to pay full or substantive part of the demand.
                 Petitions for stay should not be disposed of in a routine
                 manner unmindful of the consequences flowing from the
                 order requiring the assessee to deposit full or part of the F
                 demand. There can be no rule of universal application in
                 such matters and the order has to be passed keeping in
                 view the factual scenario involved. Where denial of interim
                 relief may lead to public mischief, grave irreparable private
                 injury or shake citizens' faith in the impartiality of public
                                                                               G
                 administration, interim relief can be given. [Para 6 & 8]
                 [448-G, 449-B-D]
    ~
                      Silliguri Municipality and Ors. v. Amalendu Oas and
                 Ors. AIR (1984) SC 653; Mis Samarias Trading Co. Pvt.
                 Ltd. v. S. Samuel and Ors. AIR (1985) SC 61; Assistant H
    446      SUPREME COURT REPORTS              [2008] 12 S.C.R.


A   Collector of Central Excise v. Dunlop India Ltd. AIR (1985)    \-·
    SC 330 - relied on.
        2.1. There are two important expressions in Section
   19(1) of the Foreign Exchange Regulation Act, 1973. One
   is undue hardship. This is a matter within the special
8 knowledge of the applicant for .waiver and has to be
   established by him. A mere assertion about undue hardship       +
   would not be sufficient. For a hardship to be 'undue' it                 •
   must be shown that the particular burden to observe or
   perform the requirement is out of proportion to the nature
C of the requirement itself, and the benefit which the applicant
  ·would derive from compliance with it. The word "undue"
   adds something more than just hardship. It means an
   excessive hardship or a hardship greater than the
   circumstances warrant. [Paras 12 to 14] [450-D, F-H]
D
        2.2. The other aspect relates to imposition of
   condition to safeguard the realization of penalty. It is for
   the Tribunal to impose such conditions as are deemed
   proper to ~afeguard the realization of penalty. Therefore,
   the Tribunal while dealing with the application has to
E consider materials to be placed by the assessee relating
   to undue hardship and also to stipulate condition as
   required to safeguard the realization of penalty. [Para
   15] [450-H, 451-A-B]
F        S. Vasudeva v. State of Karnataka and Ors. AIR (1994)
    SC 923; Benara Valves Ltd. and Ors. v. Commissioner of
    Central Excise and Anr (2006) 13 SCC 347 - relied on.          X
       3. Undisputedly the appellant had deposited the
  amount which was directed to be deposited. However,
G for the balance amount demanded with a view to
  safeguard the realization of penalty, the appellant shall
  furnish such security as may be stipulated by the                  j..-
  Tribunal. On that being done, the appeal shall be heard
  without requiring further deposit if the appeal is
H otherwise free from defect. [Para 19] (451-E-F]
            MONOTOSH SAHA v. SPECIAL DIRECTOR,           447
      ENFORCEMENT DIRECTORATE & ANR. [DR. ARIJIT PASAYAT, J.]

                            Case law reference                        A
          AIR (1984) SC 653             relied on     para 7
           AIR (1985) SC 61             relied on     para 7
           AIR (1985) SC 330            relied on     para 7
           AIR (1994) SC 923            relied on     para 12         B
+          (2006) 13 sec 347            relied on     para 16
          CIVIL APPELLATE JURISDICTION : Civil Appeal No.
      5188 of 2008
           From the final Judgment and Order dated 13.12.2006 of C
      the High Court of Calcutta in E.E.A. No. 3 of 2006 (GA No.
      2365 of 2006)
           Sushi! Kumar Jain, Puneet Jain and Pratibha Jain for
      the Appellant.                                                  D
            Shweta Garg, B.V. Balaram Das and B. Krishna Prasad
"'    for the Respondents.
'>(        The Judgment of the Court was delivered by
           ~~

           DR. ARIJIT PASAYAT, J. 1. Leave granted.                   E

            2. Challenge in this appeal is to the order passed by a
      Division Bench of the Calcutta High Court dismissing the
      appeal filed by the appellant under Section 35 of Foreign
      Exchange Management Act, 1999 (in short the 'Act').
                                                                      F
           3. Background facts in a nutshell are as follows:
            Memorandum was issued by the Enforcement
       Directorate, Ministry of Finance. On- the basis of certain
      statements recorded it was indicated therein that M/s Godsons
      (India) and its proprietor, the present appellant had acquired G
      foreign exchange contravening the provisions of Section 8(1)
      of the Foreign Exchange Regulation Act, 1973 (in short the
      'Foreign Exchang'e Ad')-.thereby rendering him liable to be
      proceeded under Section 50 of the Foreign Exchange Act.
                                                                      H
    448
       '      SUPREME COURT REPORTS                  [2008] 12 S.C.R.

                                                                         ,,_
A   The memorandum was issued under Rule 3 of the Adjudication                    .;;;;.
    Proceedings and Appeal Rules, 1974 (in short 'Adjudication                     ~

    Rules'). The reply to the show cause notice was filed by the
    appellant. The Special Director, of Foreign Exchange Act
    passed an order on 13th May, 2005 imposing penalty of Rs.25
B lakhs on the appellant. The appellant preferred an appeal
    before the Appellate Tribunal (Foreign Exchange) (in short the
    'Tribunal') and filed an application for dispensing with the          +
    ~equirement of pre-deposit. By order dated 7.3.2006 the
    Tribunal passed an order directing deposit of 60% of the
c   penalty amount for the purp<;>se of entertaining the appeal. An
    appeal was filed under Section 35 of the Act which came to
    be dismissed by the High Co.urt holding that rio ·case for                     )
  · hardship was made out either before the Tribunal or before it
    and,· the:refore, there was no scope of interference with the
    order of the ·Tribunal. However, time permitting the deposit
D
    was extended.
        4. ln support of the appeal, learned counsel for the
  ·appellant <~ubmitted that a case for_disp.erising with pre-deposit
                                                                          ).'
   was made· out. In any event, in compliance with this Court's·
E interim order dated 5.2.200.7 the amount of R~.10,00,000/-
   has been deposited with the concerned Directorate.
         ·5. Learned counsel for the respondents on the other hand
    submitted tha! the. appel_lant did hot make out a case for
    dispensing with pre-deposjt and, therefore, the order of the
p   Tribunal as affirmed by the High Court does not suffer from
    any infirmity.                                                       X·
       6. Prif>'lciples relating to grant of stay pending disposal of
  the matters before the coFlcer.ned forums have been
  considered in several ·cases. It is to be noted· that in such · ·
G
  matters though discretion is ava,ilable, the same has to be
  exe~cised )vdicially..                                                   )...

          7. The applicable principles have been set out succinctly jn
   $illiguri Municipality and Ors. v Amalendu Das and Ors.· (A~R
H- 198-;1 SC 653) and Mis Samaria_s Trading Co. Pvt._ L(d. · v S.
                  MONOTOSH SAHA v. SPECIAL DIRECTOR,           449
            ENFORCEMENT DIRECTORATE & ANR. [DR. ARIJIT PASAYAT, J.]
        i   Samuel and Ors. (AIR 1985 SC 61) and Assistant Collector of A
            Central Excise v. Dunlop India Ltd. (AIR 1985 SC 330).
                  8. It is true that on merely establishing a prima facie
            case, interim order of protection should not be passed. But if
            on a cursory glance it appears that the demand raised has no
            leg to stand, it would be undesirable to require the assessee           B
    +       to pay full or substantive part of the demand. Petitions for stay
            should not be disposed of in a routine matter unmindful of the
            consequences flowing from the order requiring the assessee
            to deposit full or part of the demand. There can be no rule of
            universal application in such matters and the order has to be           c
            passed keeping in view the factual scenario involved. Merely
            because this Court has indicated the principles that does not
            give a license to the forum/authority to pass an order which
            cannot be sustained on the touchstone of fairness, legality
            and public interest. Where denial of interim relief may lead to         D
            public mischief, grave irreparable private injury or shake
            citizens' faith in the impartiality of public administration, interim
            relief can be given.
                 9. It has become an unfortunate trend to casually dispose
            of stay applications by referring to decisions in Siliguri              E
            Municipality and Dunlop India cases (supra) without analysing
            factual scenario involved in a particular case.
                  10. Section 19 of the Act reads as follows:
                  "19(1 ). Save ·~s provided in sub-section (2), the Central        F
 ,y               Government or any person aggrieved by an order made
                  by an Adjudicating Autho.rity, other than those referred to
                  in .. sub-section· (1) of section 17, or the Special Directo"r
                  (Appeals), may prefer an appeal to the Appellate Tribunal:
                                       :                                            G
                 Provided that any person appealing against the order of
....(
                 the Adjudicating Authority or the Special Director (Appeals)
                 levying any penalty, shall while filing the appea1, deposit .
                 the amount of such penalty with su.ch. authority as may be
                 notified by the Central.Government:
                                                                                    H
    450       SUPREME COURT REPORTS                [2008] 12 S.C.R.


A         Provided further that where in any particular case, the      t
          Appellate Tribunal is of the opinion that the deposit of
          such penalty would cause undue hardship to such person,
          the Appellate Tribunal may dispense with such deposit
          subject to such conditions as it may deem fit to impose so
B         as to safeguard the realisation of penalty."
        11. Two significant expressions used in the. provisions        +
  are "undue hardship to such person" and "safeguard the
  realization of penalty". Therefore, while dealing with the
  application twin requirements of considerations i.e.
C consideration of undue hardship asp!3Ct and imposition of
  conditions to safeguard the realization of penalty have to be
  kept in view.
         12. As noted above there are two important expressions
  in Section 19(1). One is undue hardship. This is a matter
0
  within the special knowledge of the applicant for waiver and
  has to be established by him. A mere assertion about undue
  hardship would not be sufficient. It was noted by this Court in
  S. Vasudeva v. State of Karnataka and Ors. (AIR 1994 SC
  923) that under Indian conditions expression "Undue hardship"
E is normally related to economic hardship. "Undue" which
  means something which is not merited by the conduct of the
  claimant, or is very much disproportionate to it. Undue hardship
  is caused when the hardship is not warranted by the
  circumstances.
F
         13. For a hardship to be 'undue' it must be shown that
  the particular burden to have to observe or perform the
  requirement is out of proportion to the nature of the requirement
  itself, and the benefit which the applicant would derive from
G compliance with it.
         14. The word "undue" adds something more. than just
    hardship. It means an excessive hardship or a hardship greater
    than the circumstances warrant.
          15. The other aspect relates to imposition of condition to
H
      MONOTOSH SAHA v. SPECIAL DIRECTOR,           451
ENFORCEMENT DIRECTORATE & ANR. [OR. ARIJIT PASAYAT, J.]

safeguard the realization of penalty. This is an aspect which       A
the Tribunal has to bring into focus. It is for the Tribunal to
impose such conditions as are deemed proper to safeguard
the realization of penalty. Therefore, the Tribunal while dealing
with the application has to consider materials to be placed by
the assessee relating to undue hardship and also to stipulate       B
condition as required to safeguard the realization of penalty.
      16. The above position was highlighted in Benara Valves
Ltd. and Ors. v. Commissioner of Central Excise and Anr
(2006 (13) sec 34 7). The decision was rendered in relation
to Section 35F of the Central Excise Act, 1944 where also           C
identical stipulations exist.
      17. In the instant case Tribunal has rightly observed that
the rival stands have to be examined in detail with reference
to material on record.
                                                                    D
      18. The only other question that needs to be examined
is whether any reduction of the amounts to be deposited as
directed by the Tribunal is called for.
      19. Undisputedly the appellant had deposited the amount
which was directed to be deposited. However, for the balance        E
amount demanded with a view to safeguard the realization of
penalty the appellant shall furnish such security as may be
stipulated by the Tribunal. On that being done, the appeal
shall be heard without requiring further deposit if the appeal
is otherwise free from defect.                                      F
       20. The appeal is disposed of accordingly.
D.G.                                      Appeal disposed of.