Holding

The Division Bench order staying the investigation without hearing the State is unsustainable and is set aside; the Single Judge's order vacating the stay is restored.

Summary

The State discovered a large embezzlement by employees of the Jammu & Kashmir Cooperative Supply and Marketing Federation Ltd. and filed an FIR under Section 5(2) of the Prevention of Corruption Act, 1988 and the Ranbir Penal Code. The accused filed a writ petition in the High Court seeking to quash the FIR and obtain a stay of the investigation. The Single Judge initially stayed the investigation but later vacated the stay. On a Letters Patent Appeal, the Division Bench set aside the vacated order and reinstated the stay without hearing the State. The State appealed to the Supreme Court, which held that the Division Bench could not stay the investigation without giving the State an opportunity to be heard and that the order was not "innocuous". Consequently, the Division Bench order was set aside, the Single Judge's order vacating the stay was restored, and the investigation was ordered to proceed expeditiously.

Issues considered

Whether a Letters Patent Appeal can be filed against an order vacating an ex‑parte interim stay order.
Whether a Division Bench may stay a criminal investigation without hearing the opposite party.
Whether the High Court complied with the principles of natural justice in ordering the stay of investigation.

Legislation cited

Constitution of Indias. 136, s. 226
Prevention of Corruption Act, 1988s. 5(2)
Ranbir Penal Code

Subjects

em embezzlementPrevention of Corruption Actstay of investigationwrit petitionLetters Patent Appealnatural justicehigh court procedurecriminal investigation

Judgment

STATE OF JAMMU AND KASHMIR A
v.
SHAM LAL AND ORS.

MAY 10, 1996

[DR. A.S. ANAND AND S.B. MAJMUDAR, JJ.] B

Constitution of India, 1950 :

Articles 226 and 136-Stay of ciiminal proceedings-F.I.R. against the
respondent for offence under s.5(2) of Prevention of Com1ption Act, 1988 and
offences under Jammu and Kashmir State Ranbir Penal Code-W!it petition c
filed in High Court for qu(lshing the F.l.R.-Single Judge while issuing notice,
granted ex-parte order staying further investigatio/1 till next date-On the next
date case adjoumed but stay order was vacated-Jn letters patent appeal
Division Bench of the High Court, without notice to the State Govem:nent,
directed the Single Judge to reconsider the order appealed and till then stayed D
the investigation-Held, on the plainest consideration of justice, the Division
Bench of the High Court was obliged to hear State Govemment before passing
the order, more so, since the order challenged before the Division Bench was
passed after hearing the Govemment-Order of the Division Bench staying
the investigation is not sustainable and is set aside-Investigation shall be E
expedited.

Prevention of Corruption Ac~ 1988 :

S.5(2)--Misappropriation of public money-F.I.R. Investigation-Writ
petition for quashing investigation-Single Judge initially stayed investigation
but on next date vacated the stay order-in letters patent appeal, Division
F
Bench directing the Single Judge to reconsider the order and till then staying
the investigation-Held, order of Division Bench not sustainable.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
675 of 1996. G
From the Judgment and Order dated 9.8.95 of the Jammu & Kashmir
High Court in L.P.A. (yV) No. 212 of 1995.

K.T.S. Tulsi, Additional Solicitor General and Ashok Mathur for the
Appellants. H
835
836 SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.

A R. Sasiprabhu, Ashok K. Mahajan and Ramesh Babu. M.R. (NP) for
the Respondents.

The following Order of the Court was delivered :

Leave granted.
B
On discovering that there had been embezzlement worth crores of
rupees, by way of misapropriation and misutilisation of government funds
meant for purpose of food grains and other essential commodities by the
employees of Jammu & Kashmir Cooperative Supply and Marketing
C Federation Ltd. (JAKFED for short), the Commissioner/Secretary to the
Government, Agriculture Production Department filed a complaint with
the Crime Branch of the Police in 1994. FIR 40/1994 came tu be registered
on the basis thereof. Subsequently, the complaint/FIR was transferred to
the Vigilance Organisation by the Government and the Vigilance Depart-
ment .registered FIR No. 3/95 on its basis for offences under Section 5(2)
D PCA and some other offences under RPC and look up the investigation in
hand. During the preliminary stage of investigation by the Vigilance
Department, the respondents filed a writ petition in the High Court for
quashing of FIR 3/95 and as interim relief sought the stay of investigation
into the criminal case. Notice was issued and the learned single Judge also
E passed an ex-parte order staying further investigation till the 'next date'.
The State, appellant herein, filed a counter to the writ petition as well as
objections to the stay petition.

On 12.7.95 the writ petition came up for hearing before the learned
single Judge. Request for adjournment of the case was made on behalf of
F learned counsel for the writ petitioners, which appears to have been
opposed on behalf of the State. The hearing uf the writ petition was
adjourned. Since, the earlier stay order was lo lost till the 'next date',
arguments were) however, heard on the question of extension of the stay
order. The learned single Judge after taking into account the objections
G and argun1ents raised at the bar \Vas pleased to refuse extension and he
vacated the stay order dated 27.5.95 During the course of the order, the
learned single Judge observed :

"This is a matter where an unusual relief is being claimed by the
petitioners for slaying the very investigation in an FIR which
H involves commission of offences under the Prevention of Corrup-
STATEv. SHAM LAL 837

tion Act and the Penal Code. Jn my view, the extension of the stay A

-·
./ ~
order passed on 26th May 1995, by which investigation process in
the FIR was order to be stayed, is likely to defeat the ends of
justice and the purpose for which the FIR was lodged. The process

.• of investigation relating to the commission of serious offences
cannot, in the ordinary course be allowed to be stalled. It is always
B
however, open to a party, at a stage after the con1pl~tion of the
investigation that he may approach a court of competent jurisdic-
tion for an appropriate relief, if he feels that he is aggrieved in any
manner by the result of the investigation.

It is because of the aforesaid reasons that, even while I propose c
to adjourn the case because of the request of Shri Mohd. Aslam
Bhat, I am not inclined to extend the further operation of the
interim directions of this court dated 26th May 1995. In that view
of the matter, therefore, I direct that the aforesaid interim direc-
lions shall stand vacated forthwith."
D
The writ petitioners, respondents herein, challenged the order of the
learned Single Judge dated 12.7.95 through a Letters Patent Appeal. The
Division Bench disposed of the LPA and the learned single Judge was
required to reco11sider the order dated 12.7.95 and till then the i11vestigation
was directed to remai11 stayed. In actual effect, therefore, the order dated E
12.7.95 was set aside and the stay application remanded for fresh con-
sideration by the learned single Judge. The operative part of the order
reads:

11
Considering the matter in totality, we are of the vie\v that this
appeal can be disposed of al this preliminary hearing stage without F
notice to the respondents in vie\v of the innocuousness of the order
proposed to be passed. Noticing that the stay order dated 26.5.95
was to hold valid till the matter was to be considered by the writ
court on the next date and keeping in regard that prayer for
adjo~rnment had been made on the personal grounds of learned
. counsel for the petitioners, we deem it appropriate to direct that
G
the stay matter shall be reconsidered and counsel for the
~
petitioners heard and appropriate orders passed whereon. Order
accordingly any till the matter is considered again by the writ court,
investigation against the petitioner shall not proceed in FIR No.
3195." H
838 SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.

A The State is aggrieved of this Order, hence this appeal by special
leave.

Apart from the question that ;. is rather doubtful whether a Letters
Patent Appeal would lie against an order vacating an ex- p<trte interim
order of stay, we find that the impugned order of the Division Bench is
B otherwise also unsustainable. We say it with respect to the learned Division
Bench that it was not a proper manner of disposing of the Letters Patent
Appeal. The Letters Patent Appeal has been "allowed" at the preliminary
stage, without issuance of any notice tu the appellant and without even
admitting it. It could not be dune. According tu the Division Bench, the
c issuance of notice \Vas not considered necessary "in vie\v of the innocous-
ness of the order proposed to be passcd 11 • We cannot agree 'vith the vie\V
of the High Court. The order of the Division Bench is nut an 'innocous'
order. The Division Bench has in actual effect set aside the order of the
single Judge dated 12.7.95 and remanded lhe case for reconsideration,
D without expressly saying so. The Division Bench also restored the order
dated 27.5.95 by staying the investigation in FIR 3/95. Such an order could
not be made by the Division Bench with hearing the parties. On the plainest
consideration of justice, in our opinion the Bench was obliged to hear the
opposite party i.e. the appellant herein before passing the impugned order
more so since the impugned order befm;e the Division Bench had been
E made after hearing the appellant, herein, We do not wish to express any
opinion on the merits of the controversy in the writ petition but find that
the order staying the investigation by the Division Bench in the manner in
which it has been done is not al all sustainable. The grievance of the
appellant that it has been seriously prejudiced by the impugned order is
well founded.
F
This appeal accordingly succeeds and is allowed. The impugned
order of the Division Bench is set aside and the order of the learned single
Judge dated 12.7.95 is restored. The investigation shall be expedited.

G The writ petition shall be decided on its own merits, in accordance
with the settled law on the subject, after hearing the parties, expeditiously.

R.P. Appeal allowed.