Supreme Court of India
RADHEYSHYAM KEJRIWALversusSTATE OF WEST BENGAL AND ANR.
- Citation
- 2011 INSC 133
- Decided
- 18 February 2011
- Disposal
- Appeal(s) allowed
- Bench
- H S BEDI
Holding
If the adjudicating authority, on the merits, finds that no contravention of FERA occurred, a subsequent criminal prosecution on the identical allegations constitutes an abuse of the court's process and must be quashed.
Summary
The appellant, Radheshyam Kejriwal, was investigated by the Enforcement Directorate (ED) for alleged violations of Sections 8(2) and 9(1)(f)(i) of the Foreign Exchange Regulation Act, 1973 (FERA). An adjudication proceeding under Section 51 concluded that the charges were not sustainable and the ED dropped the penalty proceedings under Section 50. Despite this exoneration, the ED filed a criminal complaint under Section 56 of FERA, which the Metropolitan Magistrate and the Calcutta High Court refused to quash. The appellant argued that the higher standard of proof required in a criminal trial made the continued prosecution an abuse of process. The majority held that when the adjudicating authority, on the merits, finds no contravention, a subsequent criminal prosecution on the same facts is an abuse of process and must be quashed. The minority view held that the two proceedings are independent and prosecution may continue. The Court ultimately allowed the appeal, setting aside the lower courts' orders and quashing the criminal prosecution.
Issues considered
- The applicability of Section 56 of FERA to prosecute a person after the same allegations have been adjudicated and dismissed under Section 51 and 50.
- Whether an exoneration in an adjudication proceeding, which requires a lower standard of proof, bars a subsequent criminal prosecution requiring proof beyond reasonable doubt.
- Whether the two proceedings under Sections 51 and 56 are independent or one is dependent on the other.
Legislation cited
- Foreign Exchange Regulation Act, 1973s. 50, s. 51, s. 56, s. 61, s. 64(2), s. 8(2), s. 9(1)(f)(i)
Subjects
Foreign Exchange Regulation ActSection 56 prosecutionSection 51 adjudicationAbuse of processStandard of proofEconomic offencesPenalty vs. criminal liability
Judgment
• [2011] 4 S.C.R. 889
RADHEYSHYAM KEJRIWAL A
v.
STATE OF WEST BENGAL AND ANR.
(Criminal Appeal No. 1097 of 2003)
FEBRUARY 18, 2011
B
[HARJIT SINGH BEDI, P. SATHASIVAM AND
CHANDRAMAULI KR. PRASAD,. JJ.]
Foreign Exchange Regulation Act, 1973- ss. 50, 51 and
56 - Scope and applicability of - Charges against the C
appellant for contravening the provisions of s.9(1)(f)(i) and
s.8(2) rlw s.64(2) - Enforcement Directorate (ED) sought to
prosecute appellant in a proceeding uls. 56 though on the
self-same facts and cause of action, respondent-adjudicating
authority had dropped charges framed against the appellant D
u/s.50 - Plea of appellant that standard of proof required to
bring home the charge in a criminal case is much higher than
the adjudication proceeding and once the appellant was
exonerated in the adjudication proceeding, his prosecution
was an abuse of the process of Court - Held (per majority): E
The yardstick would be to judge as to whether allegation in
the adjudication proceedings and the proceedings for
prosecution was identical and exoneration of the person
concerned in the adjudication proceeding was on merits - In
case it is found on merit that there was no contravention of F
the provisions of the Act in the adjudication proceedings, the
trial of the person concerned shall be an abuse of the process
of the court - In the instant case, in the adjudication
proceeding on merit the adjudicating authority had
categorically held that the charges against the appellant for
contravening the provisions of s. 9(1 )(f)(i) ands. 8(2) r/w s. 64(2) G
were not sustainable - In the face of the finding by the
Enforcement Directorate in adjudication proceeding that there
was no contravention of any of the provisions of the Act, it
889 H
890 SUPREME COURT REPORTS [2011) 4 S.C.R.
A would be unjust and an abuse of the process of the court to
permit the Enforcement Directorate to continue with the
criminal prosecution - Resultantly the appellant's prosecution
is quashed - Held (per minority): The scheme of the Act
makes it clear that adjudication by the concerned authorities
B and prosecution are distinct and separate - The two
proceedings are independent and irrespective of the outcome
of the decision u/s.50, there cannot be any bar in initiating
prosecution uls.56 - In the fight of the mandate of s.56, it is
the duty of the Criminal Court to discharge the functions
c vested with it and give effect to the legislative intention,
particularly, in the context of the scope and object of FERA
which was enacted for economic development of the country
and augmentation of revenue.
The Enforcement Directorate alleged that the
D appellant had contravened the provisions of Section 8(2)
and 9(1 )(f)(i) of the Foreign Exchange Regulation Act,
1973 and accordingly rendered himself liable to
imposition of penalty under Section 50 of the Act.
Accordingly, adjudication proceeding as contemplated
E under Section 51 of the Act were instituted against him
for the aforesaid contraventions. The adjudication officer
(the Special Director) came to the conclusion that the
allegation made against the appellant of contravention of
the provisions of Section 8, 9(1 )(f)(i) and Section 8(2) read
F with Section 64(2) of the Act were not sustainable. The
Enforcement Directorate did not challenge this order and
it attained finality.
The Enforcement Directorate on the same allegation
G which was the subject matter of adjudication proceeding
laid complaint against the appellant for prosecution
under Section 56 of the Act before the Metropolitan
Magistrate. After the issuance of process and exoneration
in the adjudication proceeding, the appellant filed
H
RADHEYSHYAM KEJRIWAL v. STATE OF WEST 891
BENGAL
application for dropping the proceedings, inter alia, A
contending that on the same allegation the adjudication
proceedings having been dropped and the appellant
exonerated, his continued prosecution is an abuse of the
process of the Court. The Metropolitan Magistrate rejected
his prayer. Aggrieved, the appellant preferred criminal B
revision application which was dismissed by the High
Court by the impugned order.
In the instant appeal, dispute arose as to whether the
Enforcement Directorate (ED) could prosecute the
appellant in a proceeding under Section 56 of the FERA C
when on the self-same facts and cause of action, the
respondent-adjudicating authority· had dropped the
charges framed against the appellant under Section 50
of the FERA.
D
It was contended on behalf of the appellant that
standard of proof required to bring home the charge in a
criminal case is much higher than the adjudication
proceeding and once the appellant was exonerated in the
adjudication proceeding, his prosecution was an abuse E
of the process of Court.
Allowing the appeal (per majority),
Per Chandramauli Kr. Prasad, J. (for Harjit Singh Bedi, J.
and himself): F
HELD: 1. Section 50 of the Foreign Exchange
Regulation Act, 1973 (FERA) provides for mandatory
penalty and fixes the outer limit of such penalty on any
person contravening the provisions of the Act which is G
to be adjudged by the Director of Enforcement or any
other officer of the Enforcement not below the rank of an
Assistant Director empowered by the Central Government.
The procedure and the power to adjudicate penalty has
-:~~ .
·H
892 SUPREME COURT REPORTS [2011] 4 S.C.R.
A been provided under Section 51 of the Act. From a plain
reading of Section 51 of the Act it is evident that for
adjudging the penalty under Section 51 of the Act for
contravention of the provisions of the Act or any rule,
direction or order made thereunder the adjudicating
B officer is to be satisfied that the person has committed
the contravention after holding an inquiry in the
prescribed manner and after giving the person
concerned a reasonable opportunity of making
representation. Thus besides the procedural requirement
c the sine qua non for imposition of penalty under Section
51 of the Act is that the adjudicating officer has to record
its satisfaction that the person concerned has committed
the contravention of any of the provisions of the Act or
of any rule, direction or order made thereunder. [Paras
D 8, 9) [903-E-H; 904-A-G]
2. As would be evident from the preamble of the
FERA, it was enacted for the conservation of foreign
exchange resources of the Country and the proper
utilization thereof in the economic development of the
E Country. The proceedings under Section 51 and 56 of the
Act are independent of each other and the finding in an
adjudication proceeding under Section 51 of the Act is
not binding in the proceeding for prosecution under
Section 56 of the Act and both can go hand in hand.
F Further, the prosecution can be launched even before
conclusion of adjudication proceeding under Section 51
of the Act. [Paras 10, 11] [904-H; 905-H; 906-A-C]
3, The standard of proof in a criminal case is much
G higher than that of the adjudication proceeding. The
Enforcement Directorate has not been able to prove its
case in the adjudication proceeding and the appellant has
been exonerated on the same allegation. The appellant
is facing trial in the criminal case. Therefore, the
H determination of facts in the adjudication proceeding
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL
893
cannot be said to be irrelevant in the criminal case. A
However, the finding in an adjudication proceeding is not
binding in the proceeding for criminal prosecution. A
person held liable to pay penalty in adjudication
proceeding cannot necessarily be held guilty in criminal
trial. Adjudication proceedings are decided on the basis B
of preponderance of evidence of a little higher degree
whereas in a criminal case entire burden to prove beyond
all reasonable doubt lies on the prosecution. [Paras 15,
16] [909-H; 910-A-B; 911-F-G]
4. The yardstick would be to judge as to whether
c
allegation in the adjudication proceeding as well as
proceeding for prosecution is identical and the
exoneration of the person concerned in the adjudication
proceeding is on merits. In case it is found on merit that
there is no contravention of the provisions of the Act in 0
the adjudication proceeding, the trial of the person
concerned shall be in abuse of the process of the court.
[Para 19) [916-A-B]
5. In the instant case, in the adjudication proceeding E
on merit the adjudicating authority has categorically held
that "the charges against Shri Radheshyam Kejriwal for
contravening the provisions of Section 9(1 )(f)(i) and
Section 8(2) read with Section 64(2) of the Foreign
Exchange Regulation Act, 1973 cannot be sustained". In F
the face of the aforesaid finding by the Enforcement
Directorate in adjudication proceeding that there is no
contravention of any of the provisions of the Act, it would
be unjust and an abuse of the process of the court to
permit the Enforcement Directorate to continue with the G
criminal prosecution. [Para 23] [919-F-!'i; 910-A]
·~
6. In the result the impugned judgment of the
Metropolitan Magistrate and the order affirming the same
H
894 SUPREME COURT REPORTS [2011) 4 S.C.R.
A by the High Court are set aside and appellant's
prosecution is quashed. [Para 24] [920-B]
Standard Chartered Bank and others vs. Directorate of
Enforcement and others (2006) 4 SCC 278; Assistant
Collector of Customs, Bombay and another vs. L.R. Melwani
8
and another AIR 1970 SC 962 and Iqbal Singh Marwah v.
Meenakshi Marwah (2005) 4 SCC 370 - distinguished.
Uttam Chand and others vs. Income Tax Officer, Central
Circle, Amritsar (1982) 2 SCC 543; G.L. Didwania and
C Another vs. Income Tax Officer and Another 1995 Supp (2)
SCC 724 and K. C. Builders and Another vs. Assistant
Commissioner of Income Tax (2004) 2 SCC 731 - relied on.
Hemendra M. Kothari v. Shri W. S. Vaigankar, Asstt.
0 Director, Enforcement Directorate (FERA), Govt. of India and
State of Maharashtra (decided by Bombay High Court on 25-
04-2007) and Sunil Gulati & Anr. V. R.K. Vohra 145 (2007)
DLT 612 - approved.
B.N. Kashyap vs. Emperor AIR (32) 1945 Lahore 23 Full
E Bench; K.G. Premshanker v. Inspector of Police (2002) 8
sec 87 - referred to.
Case Law Reference:
(2006) 4 sec 278 distinguished Para 11, 20
F
AIR 1970 SC 962 distinguished Para 12, 13
AIR (32) 1945 Lahore 23 referred to Para 15
(2002) 8 sec 87 referred to Para 15
G (2005) 4 sec 370 distinguished Para 16
(1982) 2 sec 543 relied on Para 17
H
RADHEYSHYAM KEJRIWAL v. STATE OF WEST 895
BENGAL
1995 Supp (2) SCC 724 relied on Para 17 A
(2004) 2 sec 731 relied on Para 17
145 (2007) DLT 612 approved Para 22
PER SATHASIVAM, J. (dissenting): B
HELD: 1. The Foreign Exchange Regulation Act,
1973 (FERA) being a statute relating to economic
offences, there is no reason to restrict the scope of any
provisions of the Act. These provisions ensure that no
economic loss is caused by the alleged contravention by C
the imposition of an appropriate penalty after
adjudication under Section 51 of the Act and to ensure
that the tendency to violate is guarded by imposing
appropriate punishment after due transaction in terms of
Section 56 of the Act. In fact, Section 230 of the Foreign D
Exchange Regulation Act, 1947 had a proviso, which
indicates that the adjudication for the imposition of
penalty should precede making of complaint in writing to
the court concerned for prosecuting the offender. The
absence of a similar proviso to Section 51 or to Section E
56 of the 1973 Act is a clear indication that the Legislature
intended to treat the two proceedings as independent of
each other. There is nothing in the present Act to indicate
that a finding in adjudication is binding on the Court in a
prosecution under Section 56 of the Act or that the F
prosecution under Section 56 depends upon the result
of adjudication under Section 51 of the Act. The two
proceedings are independent and irrespective of the
outcome of the decision under Section 50, there cannot
be any bar in initiating prosecution under Section 56. The G
scheme of the Act makes it clear that the adjudication by
the concerned authorities and the prosecution are distinct
and separate. No doubt, the ·conclusion of the
adjudication, in the case on hand, the decision of the
H
896 SUPREME COURT REPORTS [2011] 4 S.C.R.
A Special Director, may be a point for the appellant and it
is for him to put forth the same before the Magistrate.
Inasmuch as FERA contains certain provisions and
features which cannot be equated with the provisions of
Income Tax Act or the Customs Act and in the light of the
B mandate of Section 56 of the FERA, it is the duty of the
Criminal Court to discharge its functions vest with it and
give effect to the legislative intention, particularly, in the
context of the scope and object of FERA which was
enacted for the economic development of the country
c and augmentation of revenue. Though the Act has since
been repealed and not available at present, those
provisions cannot be lightly interpreted taking note of the
object of the Act. [Para 23] [942-D-H; 943-A·D]
2. In view of the above, the conclusion arrived at by
D the Metropolitan Magistrate, Calcutta as well as the
decision of the High Court are upheld. [Para 24] [943-E]
G.L. Didwania and Another v. Income Tax officer and
Another 1995 Supp (2) SCC 724; K. C. Builders and Another
E v. Assistant Commissioner of Income-Tax (2004) 2 SCC 731;
P. S. Rajya vs. State of Bihar (1996) 9 SCC 1; Uttam Chand
and Others v. Income Tax Officer, Central Circle, Amritsar
(1982) 2 sec 543 - distinguished.
Standard Chartered Bank and Others vs. Directorate of
F Enforcement and Others (2006) 4 SCC 278; K. G.
Premshanker vs. Inspector of Police and Another (2002) 8
SCC 87; Assistant Collector of Customs vs. LR. Malwani,
1969 (2) SCR 438; Iqbal Singh Marwah and Another vs.
Meenakshi Marwah and Another (2005) 4 SCC 370 - relied
G on.
Asstt. Commr. vs. Ve/liappa Textiles Ltd. (2003) 11 SCC
405; ANZ Grindlays Bank Ltd. vs. Directorate of Enforcement
(2004) 6 SCC 531; Standard Chartered Bank vs. Directorate
H
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST 897
BENGAL
of Enforcement (2005) 4 SCC 530 - referred to. A
B.N. Kashyap vs. Emperor AIR (32) 1945 Lahore 23 Full
Bench - referred to.
Case Law Reference:
B
1995 Supp (2) sec 724 distinguished Para 9, 10,
11,16,19,22
(2004) 2 sec 731 distinguished Para 9, 11
(1996) 9 sec 1 distinguished Para 9, 12 c
(1982) 2 sec 543 distinguished Para 9 , 13
(2006) 4 sec 278 relied on Para 15, 22
(2002) 8 sec 87 ·relied on Para 15, 17
D
1969 (2) SCR 438 relied on Para 15, 18,
19, 22
. (2005) 4 sec 370 relied on Para 15, 20
AIR (32) 1945 Lahore 23 E
Full Bench referred to Para 15, 21
(2003) 11 sec 405 referred to Para 16
(2004) 6 sec 531 referred to Para 16
F
(2005) 4 sec 530 referred to Para 16
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
No. 1097 of 2003.
From the Judgment & Order dated 10.08.2001 of the High G
Court of Calcutta in C.R.R. No. 3593 of 1997.
A. Sharan, Punet Jain, Sushil Kr. Jain, Pramod Sharma,
Anil K. Verma, Pratibha Jain for the Appellant.
H
898 SUPREME COURT REPORTS [2011] 4 S.C.R.
A P.P. Malhotra. ASG, P.K. Dey, Ranjana Narayan, B.
Krishna Prasad. Tara Chandra Sharma, Neelam Sharma for the
Respondents.
The Judgement of the Court was delivered by
B CHANDRAMAULI KR. PRASAD, J. 1. We have gone
through the draft judgment prepared by our noble and learned
Brother Sathasivam, J. and we find ourselves unable to
subscribe to the view taken by him.
c 2. Shorn of unnecessary details facts giving rise to the
present appeal are that on 22nd May, 1992 various premises
in occupation of the appellant Radheshyam Kejriwal besides
other persons were searched by the officers of the Enforcement
Directorate. The appellant was arrested on 3rd May, 1992 by
D the officers of the Enforcement Directorate in exercise of the
power under Section 35 of the Foreign Exchange Regulation
Act, 1973 (hereinafter referred to as the 'Act') and enlarged on
bail on the same day. Further the appellant was summoned by
the officers of the Enforcement Directorate to give evidence in
E exercise of the power under Section 40 of the Act and in the
light thereof his statement was recorded on various dates, viz.
22nd May, 1992, 10th March, 1993, 16th March, 1993, 17th
March, 1993 and 22nd March, 1993. On the basis of materials
collected during search and from the statement of the appellant
F it appeared to the Enforcement Directorate that the appellant,
a person resident in India, without any general or specific
exemption from Reserve Bank of India made payments
amounting to Rs.24,75,000/- to one Piyush Kumar Barodia in
March/April, 1992 as consideration for or in association with
the receipt of payment of U.S. $ 75,000 at the rate of Rs.33/-
G per U.S. Dollar by the appellant's nominee abroad in
Yugoslavia. It further appeared to the Enforcement Directorate
that transaction involved conversion of Indian currency into
foreign currency at rates of exchange other than the rates for
the time being authorised by the Reserve Bank of India. In the
H
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
899
opinion of the Enforcement Directorate the act of the appellant A
in making the aforesaid payment of Rs.24,75,000/- in Indian
currency for foreign currency at the rate of Rs.33/- per US Dollar
against the official rate of Dollar i.e. Rs.30/- per Dollar
(approximately), contravened the provision of Section 8(2) of
the Act. Further the Said payment having been made without B
any general or special exemption from Reserve Bank of India,
the appellant had contravened the provisions of Section 9(1)(f)(i)
of the Act and accordingly rendered himself liable to imposition
of penalty under Section 50 of the Act. Enforcement Directorate
was further of the opinion that by abetting in contravening the C
provisions of Sections 9(1)(f)(i) and 8(2) of the Act read with
the provisions of the Section 64(2) of the Act the appellant has
rendered himself liable for penalty under Section 50 of the Act.
3. Accordingly, a show cause notice dated 7th May, 1993
was issued by the Special Director of the Directorate of D
Enforcement calling upon the appellant to show cause as to why
adjudication proceeding as contemplated under Section 51 of
the Act be not held against him for the contraventions pointed
above. Show cause notice dated 7th May, 1993 referred to
above led to institution of proceeding under Section 51 of the E
Act (hereinafter referred to as the 'adjudication proceedings').
The adjudication officer came to the conclusion that the
allegation made against the appellant of contravention of the
provisions of Section 8, 9(1 )(f)(i) and Section 8(2) read with
Section 64(2) of the Act cannot be sustained. While doing so F
the Special Director observed as follows:
The payment alleged to have been made by Shri
Radheshyam Kejriwal amounting to Rs.24,75,000/- has to
be examined in the context of Section 9(1)(f)(i) and Section G
8(2) r/w Section 64(2) of Foreign Exchange Regulation Act,
1973. The important ingredients for sustaining the
conviction under the above provisions would require the
proof of payment having been made to the credit of any
person @ exchange other than the rate which has been
H
900 SUPREME COURT REPORTS [2011] 4 S.C.R. •
A authorized by the Reserve Bank of India. In the case before
me, it has not been proved beyond reasonable doubt
whether a sum of Rs.24,75,000/- has actually been paid
or not. There is no documentary evidence except the
statement of Shri Piyush Kumar Barodia and the retracted
B statement of Shri Radheshyam confirming the fact that
Rs.24,75,000/- was exchanged @ of Rs.33/- per dollar.
Therefore, it is very relevant to take the above facts and
circumstances into consideration before coming to a
conclusion as to the correctness of the statements given
by S/Shri Radheshyam Kejriwal and Piyush Kumar
c Barodia. The documentary evidence available and the
statements of the other co-accused will definitely throw
further light in the matter.
After considering all the above facts, I find that the
D only evidence available against Shri Radheshyam Kejriwal
is the fact that his telephone number and name are
mentioned in the documents seized from Shri Piyush
Kumar Barodia and the fact that some transactions have
been noted against his name which do not match the sum
E of Rs.24, 75,000/- which was alleged to have been
transferred. Secondly, there is no evidence to show that
he was indulging in any foreign exchange transaction to
transfer money abroad. In conclusion, the benefit of doubt
will have to be given to Shri Radheshyam Kejriwal in the
F absence of any further evidence and also the fact that both
Raju Poddar and Babubhai Umaidmal have denied having
taken part in any such transaction. Significantly, on enquiry,
it was found that Shri Sirish Kumar Barodia, brother of
Shri Piyush Kumar Barodia staying at Bombay, was not
G available for the past year during which these transactions
took place. Shri Piyush Kumar Barodia is absconding,
therefore, his case is being decided on merits. However,
since the charges against Shri Radheshyam Kejriwal for
contravening the provisions of Section 9(1 )(f)(i) and
Section 8(2) read with Section 64(2) of the Foreign
H
RADHEYSHYAM KEJRIWAL v. STATE OF WEST 901
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
Exchange Regulation Act, 1973 cannot sustained, the A
charges against Shri Piyush Kumar Barodia can also not
be sustained. Therefore, the charges against S/Shri Raju
Poddar, Sirish Kumar Barodia and Babubhai Umaidmal
Jain @ Babubhai Bhansali, are not sustainable for
contravening the provisions of Section 9(1 )(f)(i) and 8(2) B
read with Section 64(2) of the Foreign Exchange
Regulation Act, 1973.
In view of the foregoing, the proceedings initiated against
S/Shri Piyush Kumar Barodia, Radheshyam Kejriwal, Raju C
Poddar, Sirish Kumar Barodia and Babubhai Umaidmal
Jain and Babubhai Bhansali, vide the impugned
Memorandum, are hereby dropped."
It is common ground that the Enforcement Directorate has
not challenged this order and it has attained finality. D
4. It is relevant to state that any person contravening the
provisions of Sections 8 and 9 of the Act besides other
provisions is also liable to be prosecuted under Section 56 of
the Act without prejudice to any award of penalty by the E
adjudicating officer under Section 51 of the Act. However,
before launching such prosecution for contravening such
provisions of the Act which prohibits the doing of an act without
permission, the proviso to Section 61(2) of the Act mandates
giving an opportunity to the person concerned to show that he F
had such permission. Accordingly, by notice dated 29th
December, 1994 the appellant was given an opportunity to show
permission granted by the Reserve Bank of India. Appellant
replied to that but did not produce any permission.
5. The Enforcement Directorate on the same allegation G
which was the subject matter of adjudication proceeding laid
complaint against the appellant for prosecution under Section
56 of the Act before the Metropolitan Magistrate. After the
issuance of process and exoneration in the adjudication
proceeding appellant filed application for dropping the H
902 SUPREME COURT REPORTS [2011) 4 S.C.R.
•
A proceedings, inter alia, contending that on the same allegation
the adjudication proceedings having been dropped and the
appellant exonerated, his continued prosecution is an abuse
of the process of the Court. The Metropolitan Magistrate by
order dated 2nd September, 1997 rejected his prayer.
B Aggrieved by the same appellant preferred criminal revision
application and reiterated the same submission but it did not
find favour with the Calcutta High Court and by the impugned
order dated 10th August, 2001, it rejected the revision
application. While doing so it observed as follows:
c "Therefore, the contention of Mr. Ghosh is unacceptable
that in the adjudication proceedings being held by the
department concerned the allegations against the
petitioner having not been found established the
prosecution against him before a Court of law cannot have
D any legs to stand upon, since the same departmental
authority which held the enquiry against him and found no
materials for establishing his guilt cannot be expected to
lodge the prosecution on the self-same allegations against
that person before a Court and cannot be expected to take
E a different stand on the self-same materials as available
against him on the record. As we have noted above, the
Enforcement Officer who has investigated into the case is
a different agency from that of the adjudicating officer and,
what is more important, it cannot be taken for granted that
F the Court will take the same view on the materials on record
which have prompted the departmental authority to find the
allegations not substantiated. As it has been already
pointed out, the procedure according to which the trial of
such an accused by the Court it held has some special
G features and the two testing processes are so divergent
that there is ample scope for the two parallel authorities
to hold even diametrically opposite views so far as the
question of proof of the charge against the accused is
concerned. The most of decisions relied upon by Mr.
H Ghosh and discussed above in respect of his above
RADHEYSHYAM KEJRIWAL v. STATE OF WEST 903
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
contention cannot be attracted to our present case for the A
simple reason that none of those judicial pronouncements
are relating to a case under the Foreign Exchange
Regulation Act the provisions of which cannot be equated
with those of the Income Tax Act or Customs Act."
B
6. Being aggrieved, the appellant is before us with the
leave of the Court.
7. Mr. Amarendra Sharan, Senior Counsel appearing on
behalf of the appellant submits that standard of proof required
to bring home the charge in a criminal case is much higher than C
the adjudication proceeding and once the appellant has been
exonerated in the adjudication proceeding, his prosecution is
an abuse of the process of Court. Mr. P.P. Malhotra, Additional
Solicitor General, however, contends that from the scheme of
the Act as reflected from Sections 50, 51, 56 of the Act, the D
plea put forth by the appellant is unsustainable.
8. The submissions made necessitate examination of the
scheme of the Act. Section 50 of the Act which is relevant for
the purpose reads as follows:
E
50. Penalty.- If any person contravenes any of the
provisions of this Act other than section 13, clause (a) of
sub-section (1) of section 18, section 18A and clause (a)
of sub-section (1) of Section 19 or of any rule, direction or
order made thereunder, he shall be liable to such penalty F
not exceeding five times the amount or value involved in
any such contravention or five thousand rupees, whichever
is more, as may be adjudged by the Director of
Enforcement or any other officer of Enforcement not below
the rank of an Assistant Director of Enforcement specially G
empowered in this behalf by order of the Central
Government in either case hereinafter referred to as the
adjudicating officer.
The aforesaid provision provides for mandatory penalty H
__ ..,,.
904 SUPREME COURT REPORTS [2011] 4 S.C.R.
A and fixes the outer limit of such penalty on any person
contravening the provisions of the Act which is to be adjudged
by the Director of Enforcement or any other officer of the
Enforcement not below the rank of an Assistant Director
empowered by the Central Government. The procedure and the
B power to adjudicate penalty have been provided under Section
51 of the Act, which reads as follows:
51. Power to adjudicate.- For the purpose of adjudicating
under section 50 whether any person has committed a
contravention of any of the provisions of this Act other than
c those referred to in that section or of any rule, direction or
order made thereunder, the adjudicating officer shall hold
an inquiry in the prescribed manner after giving that person
a reasonable opportunity for making a representation in
the matter and if, on such inquiry, he is satisfied that the
D person has committed the contravention, he may impose
such penalty as he thinks fit in accordance with the
provisions of that section.
9. From a plain reading of Section 51 of the Act it is
E evident that for adjudging the penalty under Section 51 of the
Act for contravention of the provisions of the Act or any rule,
1
<' direction or order made thereunder the adjudicating officer is
to be satisfied that the person has committed the contravention
after holding an inquiry in the prescribed manner and after
F giving the person concerned a reasonable opportunity of
making representation. Thus besides the procedural
requirement the sine qua non for imposition of penalty under
Section 51 of the Act is that the adjudicating officer has to
record its satisfaction that the person concerned has committed
G the contravention of any of the provisions of the Act or of any
rule, direction or order made thereunder.
10. As would be evident from the preamble of the Act, it
was enacted for the conservation of foreign exchange
resources of the Country and the proper utilization thereof in
H the economic development of the Country. It is relevant here to
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
905
mention that the Forty Seventh Report of the Law Commission A
of India on the Trial and Punishment of Social and Economic
Offences quoted the following portion from the Report of the
Study Team on Leakage of Foreign Exchange through Invoice
Manipulation:
B
"... like the Customs Act, there should be a provision that
for an offence in the Foreign Exchange Regulation Act,
both adjudication by the Director of Enforcement and
conviction by a Court of law are possible. The two should
not be alternatives as at present. We would also suggest C
that in more and more cases, prosecution should also be
launched apart from adjudication so as to have a deterrent
effect."
Bearing in mind aforesaid the Legislature in order to
ensure that no economic loss is caused by the contravention D
provided for an appropriate penalty under Section 51 of the Act
and to prevent the tendency to violate is curbed by inserting
Section 56 of the Act providing for imposing appropriate
punishment after due prosecution, relevant portion whereof
reads as follows: E
"56. Offences and prosecutions.- (1) Without
prejudice to any award of penalty by the adjudicating officer
under this Act, if any person contravenes any of the
provisions of this Act other than section 13, clause (a) of
sub- section (1) of section 18, section 18 A, clause (a) of F
sub- section (1) of section 19, sub- section (2) of section
44 and sections 57 and 58, or of any rule, direction or
order made thereunder, he shall, upon conviction by a
court, be punishable,-
G
xxx xxx )()()( )()()(
11. With deepest respect we are entirely in agreement
with the conclusion of our learned Brother Sathasivam, J. that
the proceedings under Section 51 and 56 of the Act are H
906 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A independent of each other and the finding in an adjudication
proceeding under Section 51 of the Act is not binding in the
proceeding for prosecution under Section 56 of the Act and
both can go hand in hand. Further, the prosecution can be
launched even before conclusion of adjudication proceeding
B under Section 51 of the Act. In fact, it has explicitly been said
by this Court in the case of Standard Chartered Bank and
others vs. Directorate of Enforcement and others (2006) 4
sec 278 which is as follows :
"24.There is nothing in the Act to indicate that a finding in
c an adjudication is binding on the court in a prosecution
under Section 56 of the Act. There is no indication that the
prosecution depends upon the result of the adjudication.
We have already held that on the scheme of the Act, the
two proceedings are independent. The finding in one is not
D conclusive in the other. In the context of the objects sought
to be achieved by the Act, the elements relied on by the
learned Senior Counsel, would not justify a finding that a
prosecution can be launched only after the completion of
an adjudication under Section 51 of the Act."
E
12. However, in a case like the present one in which the
penalty proceeding under Section 51 of the Act and the
prosecution under Section 56 of the Act though launched
together but the penalty proceeding culminated earlier
F exonerating the person, the question would arise as to whether
continuance of the prosecution would be permissible or not. In
other words, the question with which we are concerned is the
impact of the findings which are recorded on the culmination
of adjudication proceeding on criminal proceeding and in case
G in the adjudication proceeding person concerned is exonerated
can he ask for dropping of the criminal proceeding on that
ground alone. Mr. Malhotra submits that finding in the
adjudication proceeding cannot either operate as estoppel or
res judicata in case of prosecution under Section 56 of the Act
H and in this connection, he has drawn our attention to a
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
907
Constitution Bench judgment of this Court in the case of the A
Assistant Collector of Customs, Bombay and another vs. L.R.
Me/wani and another AIR 1970 SC 962, wherein in paragraph
8, it has been held as follows :
"8. We shall now take up the contention that the finding of B
the Collector of Customs referred to earlier operated as
an issue estoppel in the present prosecution. The issue
estoppel rule is but a facet of the doctrine of autre fois
acquit."
)()()()( )()()()( )()()()( )()()()( c
But before an accused can call into aid the above rule, he
must establish that in a previous lawful trial before a
competent court, he has secured a verdict of acquittal
which verdict is binding on his prosecutor. In the instant 0
case for the reasons already mentioned, we are unable to
hold that the proceeding -before the Collector of Customs
is a criminal trial. From this it follows that the decision of
the Collector does not amount to a verdict of acquittal in
favour of accused Nos. 1and 2."
E
We do not find any substance in the submission of Mr.
Malhotra and the decision relied on has no bearing in the facts
and circumstances of the case.
13. In L.R. Melwani's case (supra), the accused persons F
resisted their prosecution on the ground that the Collector of
Customs having given the benefit of doubt, in view of the
guarantee granted under Article 20 (2) of the Constitution for
the same offence they can not be tried more than once. It was
also contended that that person once convicted or acquitted can G
not be tried for same offence again in view of the safeguard
provided under Section 403 of Code of Criminal Procedure,
1898, which corresponds to Section 300 of the Code of·
Criminal Procedure, 1973. In order to get benefit of Section 300
H
908 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A of the Code of Criminal Procedure, 1973, it is necessary for
an accused person to establish that not only he had been tried
by a Court of competent jurisdiction for an offence but convicted
or acquitted of that offence and the said conviction or acquittal
is in force. In the aforesaid background the question which fell
B for consideration before this Court was as to whether the
proceeding before the Collector of Customs is a criminal trial
by a court of competent jurisdiction for trial of offence. On
analysis of the various authorities of this Court, the Constitution
Bench came to the conclusion that the Collector of Customs
c was not a Court of competent jurisdiction for criminal trial. This
would be evident from the following passage from the said
judgment:-
" ....... Hence the question is whether that
prosecution is barred under Article 20 (2) of the
D Constitution which says that no person shall be prosecuted
and punished for the same offence more than once. This
Article has no direct bearing on the question at issue.
Evidently those accused persons want to spell out from this
Article the rule of autre fois acquit embodied in S.403,
E Criminal Procedure Code. Assuming we can do that, still
it is not possible to hold that a proceeding· before the
Collector of Customs is a prosecution for an offence. In
order to get the benefit of Section 403, Criminal Procedure
Code or Article 20 (2), it is necessary for an accused
F person to establish that he had been tried by a "Court of
competent jurisdiction" for an offence and he is convicted
or acquitted of that offence and the said conviction or
acquittal is in force .... ."
G 14. In the present case, it is not the case of the appellant
that they were tried by the Enforcement Directorate and
therefore further trial by the criminal court is not permissible but
their contention is that in the face of the finding in the
adjudication proceeding, their continued prosecution is an
H abuse of the process of the court. In view of what we have
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
909
observed above, the contention of Mr. Malhotra is without merit A
and the decision relied on in no way supports his contention.
15. Mr. Malhotra, then contends that finding of the
Enforcement Directorate in the adjudication proceedings is not
binding or relevant in the criminal court where the appellant is B
facing the trial. In support of the contention, reliance has been
placed on a full Bench decision of the Lahore High Court in the
case of B.N. Kashyap vs. Emperor AIR (32) 1945 Lahore 23
and our attention has been drawn to the following passage:
"There is no reason in my judgment as to why the C
decision of the civil Court particularly in an action in
personam should be allowed to have that sanctity. There
appears to be no sound reason for that view. To hold that
when a party has been able to satisfy a civil court as to
the justice of his claim and has in the result succeeded in D
obtaining a decree which is final and binding upon the
parties, it would not be open to criminal Courts to go
behind the findings of the civil Court is to place the latter
without any valid reason in a much higher position than
what it actually occupies in the system of administration E
in this country and to make it master not only of cases
which it is called upon to adjudicate but also of cases which
it is not called upon to determine and over which it has
really no control. The fact is that the issues in the two cases
although based on the same facts (and strictly speaking F
even parties in the two proceedings) are not identical and
there appears to be no sufficient reason for delaying the
proceedings in the criminal Court, which unhampered by
the civil Court, is fully competent to decide the questions
that arise before it for its decision and where in the nature G
of things there must be a speedy disposal."
We do not find any substance in this submission of Mr.
Malhotra also. We may observe that standard of proof in a
criminal case is much higher than that ofthe adjudication
proceeding. The Enforcement Directorate has not been able H
910 SUPREME COURT REPORTS [2011) 4 S.C.R.
•
A to prove its case in the adjudication proceeding and the
appellant has been exonerated on the same allegation. The
appellant is facing trial in the criminal case. Therefore, in our
opinion, the determination of facts in the adjudication
proceeding cannot be said to be irrelevant in the criminal case.
B In the case of B.N. Kashyap (Supra), the full Bench had not
considered as to the effect of a finding of fact in a civil case
over the criminal cases and that will be evident from the
following passage from the said judgment :
"I must, however, say that in answering the question,
c I have only referred to civil cases where the actions are in
personam and not those where the proceedings or actions
are in rem. Whether a finding of fact arrived at in such
proceedings or actions would be relevant in criminal
cases, it is unnecessary for me to decide in this case.
D When that question arises for determination, the provisions
of Section 41, Evidence Act. will have to be carefully
examined."
This Court had the occasion to consider this question in
E the case of K. G. Premshanker v. Inspector of Police (2002) 8
sec 87, wherein it has been held as follows :-
"30. What emerges from the aforesaid discussion is
- (1) the previous judgment which is final can be relied
upon as provided under Sections 40 to 43 of the Evidence
F Act; (2) in civil suits between the same parties, principle
of res judicata may apply; (3) in a criminal case, Section
300 CrPC makes provision that once a person is convicted
or acquitted, he may not be tried again for the same
offence if the conditions mentioned therein are satisfied;
G (4) if the criminal case and the civil proceedings are for
the same cause, judgment of the civil court would be
relevant if conditions of any of Sections 40 to 43 are
satisfied, but it cannot be said that the same would be
conclusive except as provided in Section 41. Section 41
H
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
911
provides which judgment would be conclusive proof of what A
is stated therein."
Hence, we reject this submission of Mr Malhotra.
16. Mr. Malhotra submits that finding recorded in the
' adjudication proceeding is not binding on the criminal B
proceeding as both the cases have to be decided on the basis
of the evidence therein. Reliance has been placed on a
decision of this Court in the case of Iqbal Singh Marwah v.
Meenakshi Marwah (2005) 4 SCC 370, relevant portion
whereof reads as follows :- C
"32. Coming to the last contention that an effort should be
made to avoid conflict of findings between the civil and
criminal courts, it is necessary to point out that the standard
of proof required in the two proceedings are entirely 0
different. Civil cases are decided on the basis of
preponderance of evidence while in a criminal case the
entire burden lies on the prosec.ution and proof beyond
reasonable doubt has to be given. There is neither any
statutory provision nor any legal principle that the findings E
recorded in one proceeding may be treated as final or
binding in the other, as both the cases have to be decided
on the basis of the evidence adduced therein .... "
We do not have the slightest hesitation in accepting the
broad submission of Mr. Malhotra that finding in an adjudication F
proceeding is not binding in the proceeding for criminal
prosecution. A person held liable to pay penalty in adjudication
proceeding can not necessarily be held guilty in criminal trial.
Adjudication proceedings are decided on the basis of
preponderance of evidence of a little higher degree whereas G
in a criminal case entire burden to prove beyond all reasonable
doubt lies on the prosecution. In the case of Iqbal Singh
Marwah (supra) relied on by Mr. Malhotra, the question which
fell for consideration was as to whether bar under Section 195
(1) (b) (i) and (ii) operates for taking cognizance when a H
912 SUPREME COURT REPORTS (2011] 4 S.C.R.
•
A complaint is filed alleging that will filed by the accused in a
probate case is forged and while holding that the bar would not
operate if the will is forged before its filing in the court, hence
the aforesaid observation of this court has no bearing in the
facts and circumstances of this case.
B
17. It is trite that standard of proof required in criminal
proceedings is higher than that required before adjudicating
authority and in case accused is exonerated before the
adjudicating authority whether his prosecution on same set of
facts can be allowed or not is the precise question which falls
C for determination in this case. There are authorities of this Court
in relation to the Income-tax Act in this regard. The first in the
series is the judgment of this Court in the case of Uttam Chand
and others vs. Income Tax Officer, Central Circle, Amritsar
(1982) 2 sec 543 in which registration of firm was cancelled
D on the ground that it was not genuine and prosecution initiated
for filing false return. However, in appeal, the Income Tax
Appellate Tribunal reversed the finding and held the firm to be
genuine. Relying on that, this court quashed the prosecution
inter alia observing as follows :
E
"1. Heard counsel, special leave granted In view of the
finding recorded by the Income Tax Appellate Tribunal that
it was clear on the appraisal of the entire material on the
record and Shrimati Janak Rani was a partner of the
F assessee firm and that the firm was a genuine firm, we do
not see how the assessee can be prosecuted for filing
false returns. We, accordingly, allow this appeal and quash
the prosecution.
2. There will be no order as to costs."
G
In the case of G.L. Didwania and Another vs. Income Tax
Officer and Another 1995 Supp (2) SCC 724, on setting aside
the order of the assessing authority which led to the prosecution
of the assessee by the Income-Tax Appellate Tribunal, this Court
H
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
913
held the prosecution not permissible and while doing so A
observed as follows :
"4. In the instant case, the crux of the matter is attracted
and whether the prosecution can be sustained in view of
the order passed by the tribunal. As noted above, the
8
assessing authority held that the appellant-assessee made
a false statement in respect of income of Mis. Young India
and Transport Company and that finding has been set
aside by the Income Tax Appellate Tribunal. If that is the
position then we are unable to see as to how criminal C
proceedings can be sustained."
Similar view has been- taken by this Court in the case of
K. C. Builders and Another vs. Assistant Commissioner of
Income Tax (2004) 2 SCC 731, in which it has been held as
~~: D
"26. In our view, once the finding of concealment and
subsequent levy of penalties under Section 271 (1 )(c) of the
Act has been struck down by the Tribunal, the assessing
officer has no other alternative except to correct his order E
under Section 154 of the Act as per the directions of the
Tribunal. As already noticed, the subject-matter of the
complaint before this Court is concealment of income
arrived at on the basis of the finding of the assessing
officer. If the Tribunal has set aside the order of
concealment and penalties, there is no concealment in the F
eye of the law and, therefore, the prosecution cannot be
proceeded with by the complainant and further
proceedings will be illegal and without jurisdiction. The
Assistant Commissioner of Income Tax cannot proceed
with the prosecution even after the order of concealment · G
has been set aside by the Tribunal. When the Tribunal has
set aside the levy of penalty, the criminal proceedings
against the appellants cannot survive for further
consideration. In our view,Jhe High Court has taken the
view that the charges l:la~~een framed and the matter is H
914 SUPREME COURT REPORTS [2011] 4 S.C.R.
A in the stage of further cross-examination and, therefore, the
prosecution may proceed with the trial. In our opinion, the
view taken by the learned Magistrate and the High Court
is fallacious. In our view, if the trial is allowed to proceed
further after the order of the Tribunal and the consequent
B cancellation of penalty, it will be an idle and empty formality
to require the appellants to have the order of the Tribunal
exhibited as a defence document inasmuch as the
passing of the order as aforementioned is unsustainable
and unquestionable."
c 18. Mr. Sharan contends that aforesaid principle shall apply
with equal force in the prosecution under the Act as the basic
principle which these judgments take note of to quash the
prosecution is the higher standard of proof required in a
criminal case than the adjudication proceeding and no reference
D at all has been made to the provisions of the Income-tax Act to
come to that conclusion. The decisions referred to above
pertain to prosecution under the Income-tax Act and obviously
had not adverted to any of the provisions of the Act, particularly
Sections 50, 51 and 56 of the Act points out Mr. P.P. Malhotra,
E the Additional Solicitor General and therefore these decisions
in his submission shall have no bearing on the facts of the
present case.
19. We find substance in the submission of Mr. Sharan.
F There may appear to be some conflict between the views in
the case of Standard Charted Bank (supra) and LR. Me/wani
(supra) holding that adjudication proceeding and criminal
proceeding are two independent proceedings and both can go
on simultaneously and finding in the adjudication proceeding
G is not binding on the criminal proceeding and the judgments of
this Court in the case of Uttam Chand (supra), G.L. Didwania
(supra) and K.C. Builders (supra) wherein this Court had taken
a view that when there is categorical finding in the adjudication
proceeding exonerating the person which is binding and
conclusive, the prosecution cannot be allowed to stand.
H
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
915
Judgments of this Court are not to be read as statute and when A
viewed from that angle there does not seem any conflict
between the two sets of decisions. It will not make any
difference on principle that latter judgments pertain to cases
under the Income Tax Act. The ratio which can be culled out from
these decisions can broadly be stated as follows :- B
(i) Adjudication proceeding and criminal pro&ecution
can be launched simultaneously;
(ii) Decision in adjudication proceeding is not
necessary before initiating criminal prosecution; c
(iii) Adjudication proceeding and criminal proceeding
are independent in nature to each other;
(iv) The finding against the person facing prosecution
D
in the adjudication proceeding is not binding on the
proceeding for criminal prosecution;
(v) Adjudication proceeding by the Enforcement
Directorate is not prosecution by a competent court
of law to attract the provisions of Article 20 (2) of E
the Constitution or Section 300 of the Code of
Criminal Procedure;
(vi) The finding in the adjudication proceeding in favour
of the person facing trial for identical violation will
F
depend upon the nature of finding. If the exoneration
in adjudication proceeding is on technical ground
and not on merit, prosecution may continue; and
(vii) In case of exoneration, however, on merits where
allegation is found to be not sustainable at all and G
person held innocent, criminal prosecution on the
same set of facts and circumstances can not be
allowed to continue underlying principle being the
higher standard of proof in criminal cases.
H
916 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A In our opinion, therefore, the yardstick would be to judge
as to whether allegation in the adjudication proceeding as well
as proceeding for prosecution is identical and the exoneration
of the person concerned in the adjudication proceeding is on
merits. In case it is found on merit that there is no contravention
B of the provisions of the Act in the adjudication proceeding, the
trial of the person concerned shall be in abuse of the process
of the court.
20. In the submission of Mr. Malhotra the matter stands
squarely covered by the decision of this Court in the case of
C Standard Chartered Bank (supra) which submission has found
favour with learned Brother Sathasivam, J. We deem it
expedient to consider the ratio and background of the said case
in little detail. In the said case alleging violation of some of the
provisions of the Act the Enforcement Directorate issued
D notices to the Standard Chartered Bank and its officers as to
why proceedings for imposition of penalty under Section 50 of
the Act be not initiated against them. Further notices under
Section 61 of the Act were also issued to them calling upon
them to produce the necessary permission from the concerned
E authority for the transaction involved. The Standard Chartered
Bank and its officers filed writ petitions in the Bombay High
Court challenging the constitutional validity of Sections 50, 51
and 68 of the Act. The Bombay High Court upheld the
constitutional validity of the aforesaid provisions of the Act but
F at the same time observed that Section 68(1) of the Act shall
not be applicable to adjudication proceeding and it is confined
to prosecution under the Act. The Bank and its officers
aggrieved by the judgment of the Bombay High Court upholding
the constitutional validity of the impugned provisions of the Act
G and the Union of India dissatisfied with the observation of the
Court whereby it restricted the application of Section 68(1) of
the Act to only criminal prosecution filed separate appeals
before the Supreme Court. This Court upheld the decision of
the Bombay High Court so far as the constitutional validity of
H the aforesaid provisions of the Act is concerned and accordingly
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
917
dismissed the appeals filed by the Bank and its officers. A
However, this Court reversed the view of the Bombay High
Court in regard to the applicability of Section 68(1) of the Act
and held that it shall be applicable to both adjudication
proceeding as well as proceeding for prosecution under the Act.
In the case in hand we are not concerned with either of the B
issue.
21. Another contention which was raised in the aforesaid
case was that criminal proceeding under Section 56 of the Act
could not be initiated before culmination of adjudication C
proceeding under Section 51 of the Act. It was contended in
the said case that there has to be finding in the adjudication
proceeding about the violation of the provision of the Act and
consequential imposition of a penalty and only thereafter in the
light of those findings prosecution under Section 56 of the Act
could be launched. It was resisted by the Union of India relying · D
on the words "Without prejudice to any award of penalty by the
Adjudicating Officer" in Section 56 of the Act and submission
was made that criminal action cannot wait till outcome of the
adjudication proceeding. In the context of the aforesaid
argument this Court observed that proceedings under Section E
51 and 56 of the Act are proceedings independent of each
other and can be initiated simultaneously and finding in an
adjudication proceeding is not binding on the Court in a
proceeding for prosecution under Section 56 of the Act. The
effect of finding of exoneration in the adjudication proceeding F
on criminal proceeding was not an issue and, therefore, the
judgment under consideration cannot be said to have decided
this question with which we are concerned in the present
appeal.
··~ G
22. A learned Single Judge of the Bombay High Court had
the occasion to consider this question in a case under the
Foreign Exchange Regulation Act in Cr'iminakAppTication No.
1070of1999 (Hemendra M. Kothari vs. Shri W.S. Vaigankar,
Assistant Director, Enforcement Directorate (FERA), Govt. of H
918 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A India and State of Maharashtra), decided on 25.04.2007 and
on a review of large number of decisions of this Court and other
courts it came to the following conclusion :-
"21. It may be noted that in the present case the
applicant was exonerated by the Dy. Director of
B
Enforcement, who was adjudicating authority, in the
adjudication proceedings. Admittedly that order was not
challenged in appeal by the respondent and thus that order
has become final. I have already noted the facts and
findings of the adjudicating authority in detail. The
c adjudicating authority had clearly come to the conclusion
that there was no material to hold the present applicant
guilty for contravention of the provisions of FERA and he
was completely exonerated. When in the departmental
proceedings before the adjudicating authority, the
D department could not establish the charges, it is difficult
to imagine how the department could prove the same
charges before the criminal Court when the standard of
proof may be much higher and stringent than the standard
of proof required in departmental proceedings."
E
The Delhi High Court also considered this question arising
out of a case under Foreign Exchange Regulation Act, in detail
in the case of Sunil Gulati & Anr. V. R.K. Vohra 145 (2007)
DLT 612, and held as follows:-
F "In case of converse situation namely where the
accused persons are exonerated by the competent
authorities/Tribunal in adjudication proceedings, one will
have to see the reasons for such exoneration to determine
whether these criminal proceedings should still continue.
G If the exoneration in departmental adjudication is on
technical ground or by giving benefit of doubt and not on
merits or the adjudication proceedings were on different
facts, it would have no bearing on criminal proceedings.
If, on the other hand, the exoneration in the adjudication
H
RADHEYSHYAM KEJRIWAL v. STATE OF WEST 919
BENGAL [CHANDRAMAULI KR. PRASAD, J.]
proceedings is on merits and the concerned person(s) is/ A
are innocent, and the criminal prosecution is also on the
same set of facts and circumstances, the criminal
prosecution cannot be allowed to continue. The reason is ·
obvious criminal complaint is filed by the departmental
authorities alleging violation/contravention of the provisions B
of the Act on the part of the accused persons. However, if
the departmental authorities themselves, in adjudication
proceedings, record a categorical and unambiguous
finding that there is no such contravention of the provisions
of the Act, it would be unjust for such departmental c
authorities to continue with the criminal complaint and say
that there is sufficient evidence to foist the accused
persons with criminal liability when it is stated in the
departmental proceedings that ex facie there is no such
violation. The yardstick would, therefore, be to see as to D
whether charges in the departmental proceedings as well
as criminal complaint are identical and the exoneration of
the concerned person in the departmental proceedings is
on merits holding that there is no contravention of the
provisions of any Act."
E
We respectfully endorse the view taken by the Bombay
High Court in the case of Hemendra M. Kothari (supra) and
Delhi High Court in Sunil Gulati (supra).
23. Bearing in mind the principles aforesaid we proceed F
to consider the case of the appellant. In the adjudication
proceeding on merit the adjudicating authority has categorically
held that "the charges against Shri Radheshyam Kejriwal for
contravening the provisions of Section 9(1 )(f)(i) and Section
8(2) read with Section 64(2) of the Foreign Exchange G
Regulation Act, 1973 cannot be sustained". In the face of the
aforesaid finding by the Enforcement Directorate in
adjudication proceeding that there is no contravention of any
of the provisions of the Act, it would be unjust and an abuse of
H
920 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A the process of the court to permit the Enforcement Directorate
to continue with the criminal prosecution.
24. In the result the appeal is allowed, the impugned
judgment of the learned Metropolitan Magistrate and the order
B affirming the same by the High Court are set aside and
appellant's prosecution is quashed.
P. SATHASIVAM, J. 1. This appeal is filed against the
final judgment and order dated 10.08.2001 passed by the High
Court of Calcutta in C.R.R. No. 3593 of 1997 whereby the
C learned single Judge of the High Court dismissed the
application filed by the appellant herein under Sections 401 and
482 of the Code of Criminal Procedure, 1973 (hereinafter
referred to as 'the Code') for quashing the criminal proceedings
initiated against him vide Complaint Case No. 965 of 1995
D under Section 56 of the Foreign Exchange Regulation Act, 1973
(hereinafter referred to as "the FERA") pending in the Court of
9th Metropolitan Magistrate, Calcutta.
2. BRIEF FACTS:
E (a) On 07.05.1993, a show cause notice bearing No. T-4/
2-C/93 was issued by the Special Director, Enforcement
Directorate, FERA, Government of India, New Celhi to five
persons including the appellant herein for holding inquiry under
Section 51 of the FERA for the purpose of adjudicating the
F penalty under Section 50 for contravening the provisions of
Sections 8(2) and 9(1 )(f)(i) of the FERA which provides that no
person shall make or receive any payment except with the
special permission of the Reserve Bank of India. A search was
conducted in the premises of one Shri Piyush Kumar Barodia
G at Calcutta wherefrom certain documents were found including
the telephone diary. Apart from certain incriminating documents
found against some other persons, some entries resembling
to the name of the appellant herein were also found. After
interrogating several persons, the D~partment came to the
H conclusion that Piyush Kumar Barodia was engaged in the
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [P. SATHASIVAM, J.]
921
transaction of providing dollars abroad by receiving the money A
in Indian currency in India. He used to send money through his
younger brother placed at Bombay, who in turn, used to give
the same to one Shri Babu Bhai Umaidmal Jain @ Bhansali
and Bhansali used to send the money to one Shri Anil Bhai at
London and the Anil Bhai used to deliver equivalent amount of B
foreign exchange to the agents of such intending persons
abroad.
(b) On 09.12.1994, the Enforcement Directorate, before
receiving the reply from the appellant herein, in response to the C
notice dated 07.05.1993, issued another show cause notice
under Section 61 of the FERA for taking cognizance of the
offences committed on account of the contravention of the
provisions of the FERA. On 07.09.1995, without waiting for the
reply of the appellant in response to the two notices, one under
Section 51 for adjudication of penalty proceedings and other D
under Section 61 for taking cognizance of the offence, a
complaint was filed by the Department under Section 56 of the
FERA alleging violation of provisions contained in Sections
8(2) and 9(1 )(f)(i) of the FERA. The Special Director,
Enforcement Directorate, FERA, New Delhi after going through E
the entire record and the evidences, vide order dated
18.11.1996, acquitted the appellant by holding that no penalty
could be imposed as there is no proper evidence to connect
the appellant with the contravention of any of the provisions of
the FERA and accordingly directed to·drop the proceedings F
and discharged the notices.
(c) Though no triable issue remained after the final
adjudication by the Special Directo~. Enforcement Directorate,
the criminal proceedings were not dropped by the Department. G
On 27.03.1997, the appellant filed an application before the
Metropolitan Magistrate, Calcutta for dropping the
proceedings. Vide order dated 02.09.1997, the Metropolitan
Magistrate rejected the said application and held that there is
no bar to proceed with the criminal case as the proceeding H
922 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A before the FERA Board is separate.
(d) Being aggrieved by the said order, on 04.12.1997, the
appellant filed an application under Sections 401 and 482 of
the Code before the High Court of Calcutta for quashing of the
criminal proceedings. The High Court, by the impugned order
8
dated 10.08.2001, rejected the prayer for quashing of the
criminal proceedings. Against the said order, the appellant has
filed this appeal by way of special leave before this Court.
3. Heard Mr. Amarendra Sharan, learned senior counsel
C for the appellant and Mr. P.P. Malhotra, learned ASG for the
respondents.
4. The main question that arises for consideration in this
appeal is whether the Enforcement Directorate (ED) FERA can
D prosecute the appellant in a proceeding under Section 56 of
the FERA when on the self-same facts and cause of action, the
respondent-adjudicating authority dropped the charges framed
under Section 50 of the FERA.
5. Since I have briefly stated the factual details in the earlier
E paragraphs, there is no need to traverse the same once again.
However, it is not in dispute that the residential premises of the
appellant, a business man was searched by the office of the
Enforcement Directorate on 22.05.1992 and certain documents
were seized. Based on the same, on 07.05.1993, a show cause
F notice was served against him by the E;:nforcement Directorate
directing him to show cause as to why adjudication
proceedings as contemplated under Section 51 of the FERA
should not be proceeded against him for contravening the
provisions of Sections 8(2) and 9(1 )(f)(i) of the FERA. The
G appellant submitted his reply to the show cause notice.
Thereafter, adjudication proceedings in respect of the show
cause notice dated 07.05.1993 was instituted before the
Special Director, Enforcement Directorate, FERA, New Delhi.
After considering the submissions of both sides, Special
H Director passed an order dated 18.11.1996 holding that the
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [P. SATHASIVAM, J.]
923
Enforcement Directorate had failed to make out a prima facie A
case in support of charges of violation of Sections 8(2) and
9(1)(f)(i) of the FERA and directed that the aforementioned
Departmental proceedings be dropped. It is relevant to point
out that in the meantime i.e. on 26.07.1995, the respondents
filed a complaint against the appellant in the Court of Chief B
Metropolitan Magistrate, Calcutta on the same cause of action
which was taken cognizance by the Magistrate. According to
the appellant, inasmuch as the same issues having already
been adjudicated by the authority concerned, the Magistrate
ought to have dropped the complaint and the continuation of c
the proceedings would result in abuse of the process of the
Court. Aggrieved by the order of the Magistrate in not dropping
the proceedings and continuing the same, the appellant
preferred revision before the High Court bein·g CRR No. 3593
of 1997. By the impugned order, the High Court accepting· the D
stand of the Department refused to quash the criminal
proceedings and dismissed the revision.
6. In order to appreciate the claim of the appellant, it ls
useful to refer the relevant provisions of FERA which are
applicable to the issue raised. They are: E
"Penalty
50. If any person contravenes any of the provisions of this
Act [other than section 13, clause {a) of sub-section (1) of F
section 18, section 18A and clause (a) of sub-section (1)
of section 19] or of any rule, direction or order made
thereunder, he shall be liable to such penalty not exceeding·
five times the amount or value involved in any such
contravention or five thousand rupees, whichever is more,
as may be adjudged by the Director of Enforcement or any G
other officer of Enforcement not below the rank of an
Assistant Director of Enforcement specially empowered in
this behalf by order of the Central Government (in either
case hereinafter referred to as the adjudicating officer).
H
924 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A Power to adjudicate
51. For the purpose of adjudging under section 50 whether
any person has committed a contravention of any of the
provisions of this Act (other than those referred to in that
section) or of any rule, direction or order made thereunder,
B
the adjudicating officer shall hold an inquiry in the
prescribed manner after giving that person a reasonable
opportunity for making a representation in the matter and·
if, on such inquiry, he is satisfied that the person has
committed the contravention, he may impose such penalty
c as he thinks fit in accordance with the provisions of that
section.
Offences and Prosecutions
D 56. (1) Without prejudice to any award of penalty by the
adjudicating officer under this Act, if any person
contravenes any of the provisions of this Act [other than
section 13, clause (a) of sub-section (1) of section 18,
section 18A clause (a) of sub-section (1) of section 19,
sub-section (2) of section 44 and sections 57 and 58], or
E
of any rule, direction or order made thereunder, he shall,
upon conviction by a court, be punishable, -(i) in the case
of an offence the amount or value involved in which
exceeds one lakh of rupees, with imprisonment for a term
which shall not be less than six months, but which may
F extend to seven years and with fine:
Provided that the court may, for any adequate and special
reasons to be mentioned in the judgement, impose a
sentence of imprisonment for a term of less than six
G months; (ii) in any other case, with imprisonment for a term
which may extend to three years or with fine or with both."
7. Mr. Amarendra Sharan, learned senior counsel for the
appellant, after taking through the above provisions as well as
H the order dated 18.11.1996 of the Special Director,
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [P. SATHASIVAM, J.)
925
Enforcement Directorate, dropping the departmental A
proceedings submitted that in view of the said conclusion and
of the fact that the Department had not challenged the same
by way of further appeal, there cannot be criminal prosecution
for the same cause of action under Section 56(1) of FERA.
B
8. I have gone through the order of the Special ·Director
dated 18.11.1996. I have already pointed out that pursuant to
the search and seizure, after issuance of show cause notice
and opportunity of hearing, the Special Director, Enforcement
Directorate passed the above order. After considering aH the . c
materials and finding that no incriminating documents relating
to foreign exchange transactions and further finding that the
charges against the appellant for contravening the provisions
of Sections 8 (2) and 9(1 )(f)(i) read with Section 64 (2) of
FERA cannot be sustained, the Special Director dropped the
proceedings initiated against the appellants and others. D
Admittedly, the Department had not challenged the said
conclusion by way of an appeal to the Foreign Exchange
Regulation Appellate Board as per Section. 52 of the FERA. It
is the claim of the appellant that since there is a categorical
finding by the Special Director exonerating the appellant from E
all charges leveled against him, the Department is not
permitted to initiate criminal proceedings under Section 56 of
the FERA. It is the stand of the appellant that in view of the
language used in sub-section (1) of Section 56, namely, "without
prejudice to any award or penalty by the adjudicating officer F
· under this Act. ... ", and in the light of the categorical conclusion
by the Special Director dropping all the charges, the
Enforcement Department is estopped from initiating
prosecution.
G
9. In support of the above claim, learned senior counsel
for the appellant relied on the following decisions:-
(1) G.L. Didwania and Another vs. Income Tax officer and
Another, 1995 Supp (2) SCC 724;
H
926 SUPREME COURT REPORTS [2011) 4 S.C.R.
•
A (2) K. C. Builders and Another vs. Assistant
Commissioner of Income-Tax, (2004) 2 SCC 731;
(3) P. S. Rajya vs. State of Bihar, (1996) 9 SCC 1 and
(4) Uttam Chand and Others vs. Income Tax Officer,
B Central Circle, Amritsar, (1982) 2 SCC 543.
10. The first decision, being G.L. Didwania (supra) arose
under the Income Tax Act. The appellant therein was an
assessee and for the assessment year 1960-61, he filed his
c return of income showing his income as Rs. 26,224/- in the
prescribed form and the verification was signed by him on
25.08.1961 and the return was filed on 08.09.1961. The
appellant showed his business income from firms in Delhi and
Bombay. The assessment was made on 31.10.1961 by the
0 officer concerned taking the income to be of Rs. 35,699/-. There
was another firm, Mis Young India and Transport Company in
which the minor children of the appellant and his two employees
were partners. In the assessment proceeding, the assessing
authority reached the conclusion that it was not a genuine firm
E and the instrument of partnership was invalid and inoperative.
Therefore, the proceedings under Sections 147 and 148 of the
Income Tax Act were initiated against the appellant and his
assessment was reopened. In pursuance of the notice under
Section 148, the appellant filed his return showing his income
as Rs. 29,500/-. By an order dated 17.03.1969, the Income Tax
F Officer assessed the income of the appellant as Rs. 52,634/-
and this figure was arrived at by adding the income of M/s
Young India and Transport Company and for the same
assessment year as though it was the income of the appellant.
The appellant made a statement in the verification to the return
G filed on 02.12.1971 and delivered an account/statement which
according to the assessing authority was false or the assessee
knew or believed to be false. On the basis of this assessment,
the prosecution was launched and the complaint by the
authorised authority was filed on 09.09.1977. Meanwhile, the
H appellant-assessee filed an appeal before the Income Tax
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST 927
BENGAL [P. SATHASIVAM, J.]
Appellate Tribunal and the Tribunal by its order dated A
24.02.1977 allowed the appeal and held that there was no
substantial material to hold that the appellant was the owner of
the entire business. The Appellate Tribunal also observed that
the assessing authority arrived at wrong conclusion from the
facts on record and held that the business run in the name of B
Mis Young India and Transport Company belonged to the
assessee and accordingly the appellate authority deleted the
addition of Rs. 23, 134/- from the total income of the assessee.
After the Appellate Tribunal passed the order, allowing the
appeal in favour of the appellant, the assessee filed a petition c
before the Magistrate to drop the criminal proceedings. The
Magistrate by his order dated 02.09.1979 dismissed the said
application and held that the prosecution has got a right to lead
evidence in support of his complaint and the court can come
to the conclusion whether or not any criminal offence is made
0
out. The Magistrate also observed that the order of the Tribunal
can be taken only as evidence. Aggrieved by the same, the
appellant-assessee filed an application under Section 482 of
the Code before the High Court and the High Court dismissed
the same in limine which was challenged before this Court. The E
question before this Court was whether the prosecution can be
sustained in view of the order passed by the Tribunal. In the
factual scenario, this Court held as under:
"4 ........ As noted above, the assessing authority held that
the appellant-assessee made a false statement in respect F
of income of Mis Young India and Transport Company and
that finding has been set aside by the Income Tax
Appellate Tribunal. If that is the position then we are unable
to see as to how criminal proceedings can be sustained."
The ratio laid down· in the decision is that in view of conclusion G
of the Income Tax Appellate Tribunal, the Department is not
permitted to continue the criminal proceeding which was
pending before the Magistrate and the finding of the Appellate
Tribunal is a conclusive one. Based on such conclusion, this
H
928 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A Court quashed the criminal proceeding and allowed the appeal
of the assessee.
11. The second decision being K. C.Builders (supra) also
arose under the Income Tax Act. Here again, relying on the
earlier decision in G.L. Didwania (supra), this Court held as
8
under:
"31. It is a well-established principle that the matter which
has been adjudicated and settled by the Tribunal need not
be dragged into the criminal courts unless and until the act
C of the appellants could have been described as culpable."
12. The third decision being P.S. Rajya (supra), relates
to power of the Court under Section 482 of the Code in respect
of quashing of complaint/FIR. In this decision, it was held that
D if the issue in the criminal proceeding is identical to the
departmental proceeding which could not be established, the
Department is not permitted to pursue the same charge in the
criminal proceeding.
13. The last decision relied on by the counsel is Uttam
E Chand (supra). This decision also arose under the Income Tax
Act. Without adverting to any statutory provisions and the earlier
decisions, confining to the facts of this case, noting the finding
recorded by the Income Tax Appellate Tribunal that one Smt.
Janak Rani was a partner of the assessee firm and th.at the firm
F was a genuine firm, this Court quashed the criminal proceeding
initiated against her for filing false returns.
14. The first two decisions admittedly arose from the
Income Tax Act. It is not demonstrated before us that whether
G identical provisions, namely, Sections 50, 51 and 56 of the
FERA are available in the Income Tax Act. Even otherwise, in
the light of the language used in Section 56(1) of the FERA,
. there cannot be any bar irrespective of the decision under
Section 50, which I will elaborate in the succeeding
H paragraphs. The third decision relied on by the appellant
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [P. SATHASIVAM, J.]
929
relates to power of the Court under Section 482 of the Code A
for quashing the complaint/FIR and the last decision relied on
has to be confined to the facts of that case since no other
material was available. In other words, there is no ratio for being
considered for other cases.
B
15. Now, let me consider the stand of the Department as
projected by Mr. P.P. Malhotra, learned ASG. After taking
through Sections 50, 51 and 56 of the FERA, Mr. Malhotra
submitted that both the proceedings, namely, the departmental
adjudication and imposition of penalty as covered by Sections C
50 and 51 and the prosecution covered by Section 56 of the
Act can go hand in hand and there is no bar from simultaneous
operation of these two systems. He also submitted that all the
decisions relied on by the learned counsel for the appellant
have no bearing on the issue in the case on hand since no one
has dealt with the provisions of FERA, more particularly, D
Sections 50, 51 and 56. In support of his claim, he relied on
the following decisions:- 1) Standard Chartered Bank and
Others vs. Directorate of Enforcement and Others, (2006) 4
. SCC 278; 2) K.G. Premshanker vs. Inspector of Police and
Another, (2002) 8 SCC 87; 3) Assistant Collector of Customs E
vs. L.R. Malwani, 1969 (2) SCR 438; 4) Iqbal Singh Marwah
and Another vs. Meenakshi Marwah and Another, (2005) 4
SCC 370 and 5) B.N. Kashyap vs. Emperor, AIR (32) 1945
Lahore 23 Full Bench.
F
16. The first decision i.e. Standard Chartered Bank
(supra), is a three-Judge Bench decision and arose on the very
same provisions, namely, Sections 50, 51 and 56 of the FERA.
Since, at the outset, Mr. Amarendra Sharan has pointed out that
the question in that decision was not the one relating to the G
issue being considered in the case on hand, let me first note
down the facts and points determined by the three-Judge
Bench. On receipt of notices under the FERA for showing cause
why adjudication proceedings for imposition of penalty under
Sections 50 and S.1 be not initiated against the appellant Bank H
930 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A and some of its officers and further notices under Section 61
of the FERA giving an opportunity to the appellant Bank and
its officers of showing that they had the necessary permission
from the authority concerned for the transaction involved, the
appellant Bank filed Writ Petition No. 1972 of 1994, seeking a
B declaration that the relevant sections of the FERA are
unconstitutional, being violative of Articles 14 and 21 of the
Constitution of India and for writ of prohibition restraining the
authorities under the FERA from proceeding with the proposed
adjudication and the proposed prosecution, in terms of the Act.
c In another writ petition which was filed by the officers of the Bank
as CWP No. 2377 of 1996 challenging the individual notices,
the High Court of Bombay rejected the challenge to the
constitutional validity of Sections 50, 51, 56 and 68 of the FERA,
but clarified that Section 68( 1) of FERA was not applicable to
0 an adjudication proceeding and that it was confined to a
prosecution for penal offences under the Act. Being aggrieved,
the appellant-Bank and its officers as well as the Union of India
have filed Civil Appeals before this Court. Initially, those appeals
came up before a Bench of two learned Judges which referred
the same to a bench of three Judges by order dated
E 20.04.2004. The three-Judge Bench doubted the correctness
of a decision relied on by the Bank and its officers in Asstt.
Commr. vs. Velliappa Textiles Ltd. (2003) 11 SCC 405 which
was a judgment of a Bench of three Judges and by order dated
16-7-2004 [ANZ Grindlays Bank Ltd. Vs. Directorate of
F Enforcement, (2004) 6 SCC 531] referred the question to a
Constitution Bench. The Constitution Bench, by judgment dated
5-5-2005 (Standard Chartered Bank vs. Directorate of
Enforcement (2005) 4 SCC 530) overruled the decision in
Asstt. Commr. vs. Velliappa Textiles Ltd. (supra) and sent
G these appeals for being heard on merits by a Division Bench.
The question that was decided was whether in a case where
an offence was punishable with a mandatory sentence of
imprisonment, a company incorporated under the Companies
Act, can be prosecuted, as the sentence of imprisonment
H cannot be imposed on the company. The majority in the
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [P. SATHASIVAM, J.]
931
Constitution Bench, held that there could be no objection to a A
company being prosecuted for penal offences under the FERA
and the fact that a sentence ofimprisonment 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 B
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 the three-Judge Bench has narrowed down
and proceeded on the basis that the appellant-Banks are liable c
to be prosecuted for offences under the FERA. Since the
Bench elaborately considered the scope and applicability of
Sections 50, 51, and 56 of the FERA with which I am
concerned, I extract the entire discussion and the ultimate
conclusion.
D
"20. The learned Senior Counsel for the appellants in Civil ·
Appeal No. 1750 of 1999, in addition to adopting the
arguments of the learned Senior Counsel already adverted
to, also contended that on the scheme of the Act, it was
incumbent on the Directorate of Enforcement to first E
adjudicate in terms of Section 51 of FERA and only if
satisfied, proceed with the prosecution under Section 56
of the Act. According to counsel, under the scheme of
FERA.• the adjudication proceedings must first be
commenced and only after they are completed, the F
Directorate of Enforcement can, in the 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 G
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 ?f the Act is adequate or not. If in the adjudication H
932 SUPREME COURT REPORTS (2011] 4 S.C.R.
•
A 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 person concerned. It would then be incongruous and
unreasonable for the Directorate of Enforcement to
B 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 FERA
should be understood as indicating that there should first
be an adjudication and thereafter, if the Directorate of
c Enforcement feels that the penalty is inadequate, to
consider the launching of a prosecution.
21. The learned Additional Solicitor General contended that
under FERA, adjudication and prosecution are two
D separate and distinct procedures with distinct purposes.
There was no bar either in FERA or in any other law, to
an adjudication and prosecution being launched in respect
of an alleged contravention of FERA. Counsel submitted
that the law has permitted it by providing two separate
E modes for dealing with the person who contravenes the
law in relation to foreign exchange. While the primary
purpose of imposing of the penalty is in the interests of
revenue and the preservation of foreign exchange, the
primary purpose of prosecution is to serve as a strong
F deterrent to persons or companies contravening the
provisions of the Act and to send a message to society at
large. Counsel pointed out that Section 56 of FERA which
deals with offences and prosecutions, commences with
the words "without prejudice to any award of penalty by the
G adjudicating officer under this Act". A person contravening
any of the provisions shall upon conviction by a court will
be punished, even if a penalty has been imposed on him.
There was no warrant for reading the words "without
prejudice to" as restricting the right of the authorities under
H the Act to proceed with the adjudication first and to
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [P. SATHASIVAM, J.]
933
commence the prosecution only at its conclusion. Counsel A
also emphasised that the two proceedings are
independently dealt with. Counsel pointed out that even in
respect of FERA of 1947 in Shanti Prasad Jain v. Director
of Enforcement this Court had upheld a special procedure
under the statute holding that it was not violative of Article B
14 of the Constitution. It is submitted that the purpose of
the Act is to bring the accused to book, more so in case
of a serious offence and it could not have been the
intention of the legislature to await a long time for an
adjudication to be completed by way of an appeal and a c
second appeal and then only to commence the
prosecution.
22. The Act was enacted, as indicated by its preamble,
for the conservation of foreign exchange resources of the
country and the proper utilisation thereof in the economic D
development of the country. When interpreting such a law,
in the absence of any provision in that regard in the Act
itself, we see no reason to restrict the scope of any of the
provisions of the Act, especially in the context of the
presence of the "without prejudice" clause in Section 56 E
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 1ppropriate F
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 G
provisions could not be attacked as violative of the rights
under Part Ill 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 H
934 SUPREME COURT REPORTS [2011] 4 S.C.R. •
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 this Act in the Ninth Schedule, the reliance
B placed on the decision in Rayala Corpn. (P) Ltd. v. Director
of Enforcement cannot enable this Court to deem the
provisions as arbitrary and to read them down or
understand them in the manner suggested by the learned
Senior Counsel. The very purpose of the Act and the very
c object of inclusion of the Act in the Ninth Schedule justifies
an interpretation of the provisions as they stand on the
basis that there is nothing arbitrary or unreasonable in the
provisions and in the scheme as enacted. We may also
notice that Section 23-0 of the Foreign Exchange
Regulation Act, 1947 which was considered in Rayala
D
Corpn. (P) Ltd. had a proviso, which indicated that the
adjudication for the imposition of penalty should precede
the making of a complaint in writing to the court concerned
for prosecuting the offender. The absence of a similar
proviso to Section 56 or to Section 51 of the present Act,
E is also a clear indication that the legislature intended to
treat the two proceedings as independent of each other.
Obviously, the legislature must be taken to have been
conscious of the interpretation placed on the
corresponding provisions by this Court in the decisions
F above referred to when the 1973 Act was enacted and it
was also included in the Ninth Schedule to ward off any
challenge on the ground that it would be violative of Article
14 of the Constitution, unless understood or read in a
particular fashion.
G
23. The learned Senior Counsel appearing for the
appellant in criminal appeal arising out of SLP (Crl.) No.
5892 of 2004 in which the Full Bench decision of the
Calcutta High Court is challenged, supported the
H arguments raised by the learned Senior Counsel in Civil
• RADHEYSHYAM KEJRIWAL v. STAfE OF WEST
BENGAL [P. SATHASIVAM, J.]
935
Appeal No. 1750 of 1999. The Full Bench of the Calcutta A
High Court in the judgment under appeal has, on a
consideration of the relevant aspects, answered the
reference made to it by holding that a complaint under
Section 56 of FERA can never be said to be premature if
it is instituted before the awarding of penalty under Section B
50 of the Act and such criminal proceeding being an
independent proceeding, can be initiated during the
pendency of an adjudication proceeding under Section 51
of FERA, 1973. Therein, the Full Bench has referred to the
decision of the Madras High Court in A.S.G. Jothimani c
Nadar v. Dy. Director, Enforcement Directorate and that
of the Andhra Pradesh High Court in Anilkumar Aggarwal
v. K.C. Basu 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 D
decisions of this Court in Asstt. Collector of Customs v.
LR. Melwani and in P. Jayappan v. S.K. Perumal. 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 E
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.
F
24. 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 of a contravention of any of the provisions G
of this Act as the key to both proceedings, would all
indicate that an adjudication should precede a prosecution
under Section 56 of the Act. There is nothing in the Act to
indicate that a finding in an adjudication is binding on the
court in a prosecution under Section 56 of the Act. There H
936 SUPREME COURT REPORTS [2011] 4 S.C.R.
•
A is no indication that the prosecution depends upon the
result of the adjudication. We have already held that on the
scheme of the Act, the two proceedings are independerJ.
The finding in one is not conclusive in the other. In the
context of the objects sought to be achieved by the Act,
B the elements relied on by the learned Senior Counsel,
would not justify a finding that a prosecution can be
launched only after the completion of an adjudication under
Section 51 of the Act. The decision in K.C. Builders v. CIT
is clearly distinguishable. The Court proceeded as if under
c the Income Tax Act, the prosecution is dependent on the
imposition of penalty. That was a case where the
prosecution was based on a finding of concealment of
income and the impositipn of penalty. When the Tribunal
held that there was no concealment, and the order levying
penalty was cancelled: t:lccording to this Court, the very
D
foundation for the prosecution itself disappeared. This
Court held that it is settled law that levy of penalties and
prosecution under Section 276-C of the Income Tax Act
are simultaneous and hence, once the penalties are
cancelled on the ground that there was concealment, the
E quashing of the prosecution under Section 276-C of the
Income Tax Act was automatic. We have held already that
on the scheme of FERA, the adjudication and the
prosecution are distinct and separate. Hence, the ratio of
the above decision is not applicable. That apart, there is
F merit in the submission of the learned Additional Solicitor
General that the correctness of the view taken in K.C.
Builders may require reconsideration as the reasoning
appears to run counter to the one adopted by the
Constitution Bench in Asstt. Collector of Customs v. L.R.
G Melwani and in other decisions not referred to therein. For
the purpose of these cases, we do not think it necessary
to pursue this aspect further. Suffice it to say, that the ratio
of that decision has no application here."
H 17. The next decision heavily relied on by the Department
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [P. SATHASIVAM, J.]
937
is K. G. Premshanker (supra) which is also a three-Judge A
Bench decision. In this case, this Court has considered the
effect of the decision of the civil court on the criminal
proceedings and initiation of civil and criminal proceedings
against the same person belonging to the same cause. The
following discussion and conclusion ·~re relevant: B
~·
"30. What emerges from the aforesaid discussion is - (1)
the previous judgment which is final can be relied upon as
provided under Sections 40 to 43 of the Evidence Act; (2)
in civil suits between the same parties, principle of res
judicata may apply; (3) in a criminal case, Section 300
c
CrPC makes provision that once a person is convicted or
acquitted, he may not be tried again for the same offence
if the conditions mentioned therein are satisfied; (4) if the
criminal case and the civil proceedings are for the same
cause, judgment of the civil court would be relevant if D·
conditions of any of Sections 40 to 43 are satisfied, but it
cannot be said that the same would be conclusive except
as provided in Section 41. Section 41 provides which
judgment would be conclusive proof of what is stated
therein. E
31. Further, the judgment, order or decree passed in a
previous civil proceeding, if relevant, as provided under
Sections 40 and 42 or other provisions of the Evidence
Act then in each case, the court has to decide to what F
extent it is binding or conclusive with regard to the matter(s)
decided therein.
32. In the present case, the decision rendered by the
Constitution Bench in M.S. Sheriff case would be binding,
wherein it has been specifically held that no hard-and-fast G
rule can be laid down and that possibility of conflicting
decision in civil and criminal courts is not a relevant
consideration. The law envisages "such an eventuality .
when it expressly refrains from making the decision of one
court binding on the other, or even relevant, except for H
938 SUPREME COURT REPORTS [2011] 4 S.C.R.
A limited purpose such as sentence or damages".
33. Hence, the observation made by this Court in V.M.
Shah case 1 that the finding recorded by the criminal court
stands superseded by the finding recorded by the civil
court is not correct enunciation of law. Further, the general
8
observations made in Karam Chand case are in context
of the facts of the case stated above. The Court was not
required to consider the earlier decision of the Constitution
Bench in M.S. Sheriff case as well as Sections 40 to 43
of the Evidence Act.
c
34. In the present case, after remand by the High Court,
civil proceedings as well as criminal proceedings are
required to be decided on the evidence, which may be
brought on record by the parties."
D
18. In L.R. Malwani (supra), which is also a Constitution
Bench decision, though various questions of law posed before
the Bench, I am concerned with question Nos. 1 and 2 which
reads thus:
E "(i) Whether the prosecution from which these Criminal
Revision Petitions arose is barred under Article 20(2) of
the Constitution as against accused Nos. 1 and 2 in that
case by reason of the decision of the Collector of Customs
in the proceedings under the Sea Customs Act ?
F
(ii) Whether under any circumstance the finding of the
Collector of Customs that the 1st and 2nd accused are not .
proved to be guilty operated as an issue estoppel in the
criminal case against those accused ?"
G In those appeals, the case of the prosecution was that the
accused persons and some other unknown persons had
entered into a conspiracy at Bombay and other places in the
beginning of October, 1959 or thereabout for the purpose of
smuggling foreign goods into India and in pursuance of that
H
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [P. SATHASIVAM, J.]
939
conspiracy they had smuggled several items of foreign goods A
in the years 1959 and 1960. In that connection, an enquiry was
held by the Customs authorities. In the course of the enquiry,
some of the goods said to have been smuggled were seized.
After the close of the enquiry those goods were ordered to be
confiscated. In addition, penalty was imposed on some of the B
accused. Thereafter, on February 19, 1965, the Assistant
Collector of Customs, Bombay after obtaining the required
sanction of the Government filed a complaint against five
persons including the appellants in Criminal Appeal No. 35 of
1967 (accused Nos. 1 and 2 in the case) under Section 120- c
B, l.P.C. read with Clauses (37), (75), (76) and (81) of Section
167 of the Sea Customs Act, 1878 (Act VIII of 1878) as well
as under Section 5 of the Imports and Exports (Control) Act,
194 7. Before the commencement of the enquiry in that
complaint, the 1st accused filed the application mentioned
0
above on August 3, 1965. In the enquiry held by the Collector
of Customs, he gave the benefit of doubt to accused Nos. 1
and 2. This is what he stated therein:
"As regards Mis. Larmel Enterprises (of which accused No.
1 is the proprietor and accused No. 2 is the Manager) E
although it is apparent that they have directly assisted the
importers in their illegal activities and are morally guilty.
Since there is no conclusive evidence against them to hold
them as persons concerned in the act of unauthorised
importation, they escape on a benefit of doubt." F
Despite the above finding, the Assistant Collector in his
complaint sought to prosecute these accused persons. The
Constitution Bench has considered the contention that "the
finding of the Collector of Customs referred to earlier operated G
as an issue estoppeld in the present prosecution". The following
- -conclusion of the Constitution Bench is relevant:
"9. The rule laid down in that decision was adopted by this
Court in Pritam Singh v. State of Punjab, AIR 1956 SC
415 and again in N.R. Ghose alias Nikhil Ranjan Ghose H
940 SUPREME COURT REPORTS (2011] 4 S.C.R.
•
A v. State of West Bengal, (1960) 2 SCR 58. But before an
accused can call into aid the above rule, he must establish
that in a previous lawful trial before a competent court, he
has secured a verdict of acquittal which verdict is binding
on his prosecutor. In the instant case for the reasons
B already mentioned, we are unable to hold that the
proceeding before the Collector of Customs is a criminal
trial. From this, it follows that the decision of the Collector
does not amount to a verdict of acquittal in favour of
accused Nos. 1 and 2."
c 19. It is relevant to point that the above dictum of the
Constitution Bench in LR. Malwani (supra) was relied on by a
three-Judge Bench in Standard Chartered Bank (supra).
20. In Iqbal Singh Marwah (supra), about the binding
D nature of the decision in criminal court in respect of the same
issue, it was held:
"32. Coming to the last contention that an effort should be
made to avoid conflict of findings between the civil and
criminal courts, it is necessary to point out that the standard
E
of proof required in the two proceedings are entirely
different. Civil cases are decided on the basis of
preponderance of evidence while in a criminal case the
entire burden lies on the prosecution and proof beyond
reasonable doubt has to be given. There is neither any
F
statutory provision nor any legal principle that the findings
recorded in one proceeding may be treated as final or
binding in the other, as both the cases have to be decided
on the basis of the evidence adduced therein. While
examining a similar contention in an appeal against an
G order directing filing of a complaint under Section 476 of
the old Code, the following observations made by a
Constitution Bench in M.S. Sheriff v. State of Madras give
a complete answer to the problem posed: (AIR p. 399,
paras 15-16)
H
RADHEYSHYAM KEJRIWAL v. STATE OF WEST 941
BENGAL [P. SATHASIVAM, J.]
"15. As between the civil and the criminal A
proceedings we are of the opinion that the criminal matters
should be given precedence. There is some difference of
opinion in the High Courts of India on this point. No hard-
and-fast rule can be laid down but we do not consider that
the possibility of conflicting decisions in the civil and B
criminal courts is a relevant consideration. The law
envisages such an eventuality when it expressly refrains
from making the decision of one court binding on the other,
or even relevant, except for certain limited purposes, such
as sentence or damages. The only relevant consideration c
here is the likelihood of embarrassment.
16. Another factor which weighs with us is that a civil
suit often drags on for years and it is undesirable that a
criminal prosecution should wait till everybody concerned
has forgotten all about the crime. The public interests D
demand that criminal justice should be swift and sure; that
the guilty should be punished while the events are still fresh
in the public mind and that the innocent should be absolved
as early as is consistent with a fair and impartial trial.
Another reason is that it is undesirable to let things slide E
till memories have grown too dim to trust.
This, however, is not a hard-and-fast rule. Special
considerations obtaining in any particular case might
make some other course more expedient and just. For F
example, the civil case or the other criminal proceeding
may be so near its end as to make it inexpedient to stay
it in order to give precedence to a prosecution ordered
under Section 476. But in this case we are of the view that
the civil suits should be stayed till the criminal proceedings G
have finished."
21. In B.N. Kashyap (supra), the Full Bench of the Court
while considering Sections 40 to 43 of the Evidence Act, 1872
has held that finding on certain facts by a civil Court in action
in personam is not relevant before the Criminal Court when it H
942 SUPREME COURT REPORTS [2011) 4 S.C.R. •
A is called upon to give a finding on the same facts. Similarly the
finding on certain facts by the Criminal Court is not relevant
before the civil Court when it is called upon to give a finding
on the same facts.
22. The above decisions, particularly, the decision in
8
Standard Chartered Bank (supra) which arose under the FERA
and dealt with the scope of Sections 50, 51 and 56 which in
tum relied on and followed in the decision of Constitution Bench
in L.R. Malwani (supra) is directly on the point raised in this
appeal. In fact, this Court, in para 21, in the Standard Chartered
C Bank (supra) considered the very scope of the words "without
prejudice to any award of penalty by the adjudicating officer
under this Act" as mentioned in Section 56 of the Act.
23. Considering the interpretation relating to Sections 50,
D 51 and 56 by various decisions, I am of the view that in a statute
relating to economic offences, there is no reason to restrict the
scope of any provisions of the Act. These provisions ensure
that no economic loss is caused by the alleged contravention
by the imposition of an appropriate penalty after adjudication
E under Section 51 of the Act and to ensure that the tendency to
violate is guarded by imposing appropriate punishment after
due transaction in terms of Section 56 of the Act. In fact, it is
relevant to point out that Section 230 of the Foreign Exchange
Regulation Act, 1947 had a proviso, which indicates that the
F adjudication for the imposition of penalty should precede
making of complaint in writing to the court concerned for
prosecuting the offender. The absence of a similar proviso to
Section 51 or to Section 56 of the present 1973 Act is a clear
indication that the Legislature intended to treat the two
G proceedings as independent of each other. There is nothing in
the present Act to indicate that a finding in adjudication is
binding on the Court in a prosecution under Section 56 of the
Act or that the prosecution under Section 56 depends upon the
result of adjudication under Section 51 of the Act. It is reiterated
H that the two proceedings are independent and irrespective of
• RADHEYSHYAM KEJRIWAL v. STATE OF WEST
BENGAL [P. SATHASIVAM, J.]
943
the outcome of the decision under Section 50, there cannot be A
any bar in initiating prosecution under Section 56. The scheme
of the Act makes it clear that the adjudication by. the concerned
authorities and the prosecution are distinct and separate. No
doubt, the conclusion of the adjudication, in the case on hand,
the decision of the Special Director dated 18.11.1996, may be B
a point for the appellant and it is for him to put forth the same
before the Magistrate. Inasmuch as FERA contains certain
provisions and features which cannot be equated with the
provisions of Income Tax Act or the Customs Act and in the light
of the mandate of Section 56 of the FERA, it is the duty of the c
Criminal Court to discharge its functions vest with it and give
effect to the legislative intention, particularly, in the context of
the scope and object of FERA which was enacted for the
economic development of the country and augmentation of
revenue. Though the Act has since been repealed and not 0
available at· present, those provisions cannot be lightly
interpreted taking note of the object of the Act.
24. In view of the above analysis and discussion, I agree
with the conclusion arrived at by the Metropolitan Magistrate,
Calcutta as well as the decision of the High Court. E
Consequently, the appeal fails and the same is dismissed.
B.B.B. Appeal allowed.
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