Holding

A writ petition against a show‑cause notice and any interim relief therefrom should be entertained only if the court is satisfied that the notice is totally non‑est and the issuing authority lacks jurisdiction; otherwise, such relief must be denied.

Summary

Respondent No. I filed a writ petition in the Bombay High Court challenging a show‑cause notice issued by the Special Director of the Enforcement Directorate under the Foreign Exchange Regulation Act, 1973 and the Foreign Exchange Management Act, 1999, and sought an interim injunction restraining further investigation. The High Court granted a status‑quo order without stating any reasons, effectively staying the proceedings. On appeal, the Supreme Court held that a writ petition against a show‑cause notice should not be entertained, nor should interim relief be granted, unless the court is satisfied that the notice is totally non‑est and the issuing authority lacks jurisdiction. The Court emphasized that interim orders must not denude statutory functionaries of their powers and must be accompanied by reasons. Since the High Court failed to give reasons, its interim order was set aside, and the proceedings under the notice were directed to continue, with the final order not to be communicated without the High Court’s leave. The appeal was allowed in part.

Issues considered

Whether a writ petition challenging a show‑cause notice can be entertained as a matter of routine.
Whether an interim order restraining investigation can be granted without the court being satisfied that the notice is totally non‑est and without stating reasons.
Whether the jurisdiction to issue a show‑cause notice lies exclusively with the statutory authority and can be challenged only after the authority decides.
Whether granting interim relief amounts to a denial of the statutory functionary's powers.

Legislation cited

Subjects

show cause noticewrit petitioninterim reliefjurisdictionnon‑estEnforcement DirectorateFERAFEMAArticle 226statutory functionaries

Judgment

~ THE SPECIAL DIRECTOR AND ANR. A
v.
MOHD. GHULAM GHOUSE AND ANR.

JANUARY 9, 2004

[DORAISWAMY RAJU AND ARIJIT PASAYAT, JJ.] B

Constitution of India, 1950-Artic/e 226--Writ petition-Show cause
notice Challenged-Petition entertained by High Court and interim relief
granted restraining the proceedings-On appeal, held: Petition against show
cause notice should not be entertained as a matter of routine, unless Court is
c
satisfied that the notice was totally non-est for absolute want of jurisdiction
of authority to even investigate into the facts-While granting interim order,
Court should be cautious of not denuding the statutory functionaries of their
powers and to ensure that in the interim order ultimate relief is not granted-
Foreign Exchange Regulation Act, 1973-Foreign Exchange Management Act, D
1999.

Respondent No. I filed writ petition before High Court questioning
legality of show cause notice issued by appellant No. I, praying for quashing
the same. Prayer for interim injunction restraining the appellants from
initiating any proceedings pursuant to show cause notice was also made. E
High Court issued 'Rule' and ordered for 'status quo' without giving any
reason.

In appeal to this Court, appellant contended that the writ petition
was misconceived as it challenged show cause notice; and that High Court,
F
.. .! by granting interim relief has in effect allowed the writ petition even before
it was heard on merits.

Allowing the appeal, the Court

HELD: I. Unless High Court is satisfied that the show cause notice
was totally non-est in the eye of law for absolute want of jurisdiction of G
the authority to even investigate into facts, writ petition should not be
entertained for the mere asking and as a matter of routine, and the writ
"\ petitioner should invariably be directed to respond to the show cause notice
and take all stands highlighted in the writ petition. Whether the show cause
399 H
400 SUPREME COURT REPORTS (2004] I S.C.R.

A notiCe was founded on any premises is a jurisdictional issue which can even ~;

be urged by the recipient of the notice and such issues also can be
adjudicated by the authority issuing the very notice initially, before the
aggrieved could approach the Court. [402-B-D[

2.1. When the Court passes an interim order, it should be careful to
B see that the statutory functionaries specially and specifically constituted
for the purpose are not denuded of powers and authority to initially decide
the matter and ensure that ultimate relief which may or may not be finally
granted in the writ petition is accorded to the writ petitioner even at the
threshold by the interim protection, granted. [402-D[
~
c 2.2. In the instant case, High Court has not indicated any reason
I

while giving interim protection. Though, while passing interim orders, it
is not necessary to elaborately deal with the merits, it is certainly desirable
and proper for the High Court to indicate the reasons which has weighed
with it in granting such an extra ordinary relief in the form of an interim
D protection. [402-E[

[The Court directed that the protection emanating from the show Jr
cause notice shall be continued, but the final order passed pursuant A
thereto shall not be communicated to respondent No.I, without
leave or further orders of the High Court.[
E
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.
35 of 2004.

From the Judgment and Order dated 11.9.2002 of the Bombay High
Court in W.P. No. I 065 of 2002.
F
A.L. Panda, Ms. Neelam Sharma for B. Krishna Prasad for the :\.
Appellants.

V.R. Reddy, Rajindra Singhvi for Ashok Kumar Singh for the
Respondents.
G
The Judgment of the Court was delivered by.

ARIJIT PASAYAT, J. Leave granted. "
!
The interim order passed by a Division Bench of the Bombay High
H Court is under challenge by the Union of India and the Special Director,
SPECIAL DIRECTOR v.MOHD. GHULAM GHOUSE [ARIJIT PASAYAT, J.] 401
Enforcement Directorate, Ministry of Finance, Govt. of India. Respondent A
No.1 filed a writ petition before the Bombay High Court questioning legality
of the show cause notice no.T-4/144/SDE/(AKB)/B/2002 dated 31st May,
2002 issued by the appellant No. I and prayed that the same may be quashed
and set aside, for allegedly being illegal, null and void. A prayer for interim ·
relief was made to the effect that pending hearing and final disposal of the B
writ petition, the Court be pleased to pass an ·Order of injunction restraining
the respondents i.e. present appellants before this Court and the State of
Maharashtra (respondent No.3 in the present appeal) and/or his subordinates
or any other officer acting on his behalf from initiating any proceeding pursuant
to the show cause notice referred to above, as issued by the present appellants.
The High Court passed the following order on 11.9.2002: c
"Rule. Status quo".

According to the appellants the writ petition is thorou,ghly misconceived
as it challenges a show cause notice and in any event the final relief as sought D
for by respondent No. I-writ petitioner in relation to the show cause notice
should not have been granted by an interim order of the nature passed by
withholding any further action in this regard . It was pointed out that respondent
No. I is responsible for financial irregularities involving nearly Rupees 270
crores and documents have been forged, accounts have been manipulated;
and in any event respondent No. I was free to canvass all the points that were E
taken in the writ petition before the authority issuing the notice. Instead of
doing that he rushed to the High Court and unfortunately the High Court not
only entertained the writ application but also granted interim relief which
was in effect allowing the writ petition even before it was heard on merits.
The final relief sought for itself, in substance, was granted by the interim F
order. There was clear violation of the provisions of Foreign Exchange
Regulation Act, 1973 (in short the 'FERA') and Foreign Exchange
•i Management Act, 1999 (in short the 'FEMA '). The Enforcement Directorate
has clearly indicated in the notice the various infractions which led to such
large scale illegal transactions of more than Rupees 270 crores. Respondent
No. I (writ petitioner) was clearly guilty of various provisions of FERA and ·G
FEMA. The High Court should have thrown out the writ petition at the
threshold.

Per contra, learned counsel for respondent No. I submitted that the
show cause notice is clearly unfounded in law, cannot stand the test of legal H
402 SUPREME COURT REPORTS [2004] I S.C.R.

A scrutiny and the High Court was justified not only in entertaining writ petition
but also in granting the interim protection.

This Court in a large number of cases has deprecated the practice of the
High Courts entertaining writ petitions questioning legality of the show cause
B notices stalling enquiries as proposed and retarding investigative process to
find actual facts with the participation and in the presence of the parties.
Unless, the High Court is satisfied that the show cause notice was totally non
est in the eye of law for absolute want of jurisdiction of the authority to even
investigate into facts, writ petitions should not be entertained for the mere
asking and as a matter of routine, and the writ petitioner should invariably
C be directed to respond to the show cause notice and take all stands highlighted
in the writ petition. Whether the show cause notice was founded on any legal
premises is a jurisdictional issue which can even be urged by the recipient of
the notice and such issues also can be adjudicated by the authority issuing the
very notice initially, before the aggrieved could approach the Court. Further,
D when the Court passes an interim order it should be careful to see that the
statutory functionaries specially and specifically constituted for the purpose
are not denuded of powers and authority to initially decide the matter and
ensure that ultimate relief which may or may not be finally granted in the
writ petition is not accorded to the writ petitioner even at the threshold by the
interim protection, not granted.
E
In the instant case, the High Court has not indicated any reason while
giving interim protection. Though, while passing interim orders, it is not
necessary to elaborately deal with the merits, it is certainly desirable and
proper for the High Court to indicate the reasons which has weighed with it
F in granting such an extra ordinary relief in the form of an interim protection.
This admittedly has not been done in the case at hand.

While issuing notice on 7.7.2003, this Court had granted interim stay
of the impugned interim order. The respondent had entered appearance and
we have heard the learned senior counsel on either side. In the fitness of
G things, taking into account the above "Circumstances, we dispose of the appeal
with a direction that the proceedings emanating from the show cause notice
shall be continued, but the final order passed pursuant thereto shall not be
communicated to the respondent No. I (writ petitioner) without leave or further
orders of the High Court. The writ petition shall be disposed of on merits in /
H accordance with law. Any observation made in this appeal shall not be
SPECIAL DIRECTOR 1·. MOHD. GHULAM GHOUSE [ARIJIT PASA YAT, J.] 403
construed to be expression of any opinion on the merits of the matter pending A
before the High Court. Since the controversy is of a very limited as well as
serious nature, the High Comt may explore the possibility of early disposal
of the writ petition. The appeal is allowed to the extent indicated -with no
order as to costs.

K.K.T. Appeal allowed.