1969 (7) TMI 109 - SC - FEMA

Whether s. 23(1)(b) of the Act is ultra rites Article 14 of the Constitution inasmuch as it provides for a punishment heavier and severer than the punishment or penalty provided for the same acts under s. 23(1)(a) of the Act? Even if s. 23 ( 1 ) (b) is not void, the complaint in respect of the offences punishable under that section has not been filed properly in accordance with the proviso to s. 23-D (1 ) of the Act, so that proceedings cannot be competently taken on the basis of that complaint? Charge of violation of R. 132-A(2) of the D.I. Rs. punishable under R. 132-A(4) of those Rules and is to the effect that R. 132-A of the D.I. Rs. was omitted by a notification of the Ministry of Home Affairs dated 30th March, 1965 and, consequently, a prosecution in respect of an offence punishable under that Rule could not be instituted on 17th March, 1968 when that Rule had ceased to exist Held that - In the case before us, it is s. 23(1)(b) which is challenged and on a slightly different ground that it provides for a higher punishment than that provided by S. 23 (1) (a). The record before us, therefore, does not show that any material at all was available to the respondent in the course of the enquiry under s. 23D( 1 ) on the basis of which he could have formed an opinion that it was a fit case for making a complaint on the ground that he would not be able to impose adequate penalty. The complaint has, therefore, to be held to have been filed without satisfying the requirements and conditions of the proviso to. s. 23D(1) of the Act and is in violation of the safeguard provided by the Legislature for such contingencies. The complaint, insofar as it related to the contravention by the accused of provisions of ss. 4 ( 1 ), 5 ( 1 ) ( e ) and 9 of the Act punishable under s. 23(1)(13) is concerned, is invalid and proceedings being taken in pursuance of it must be quashed. We are inclined to agree with the submission of Mr. Sen that the language contained in el. 2 of the Defence of India (Amendment) Rules, 1965 can only afford protection to action already taken while the rule was in force, but cannot justify initiation of a new proceeding which will not be a thing done or omitted to be done under the rule but a new act of initiating a proceeding after the rule had ceased to exist. On this interpretation, the complaint made for the offence under R. 132A(4) of the D.I. Rs., after 1st April, 1965 when the rule was omitted, has to be held invalid. It, however, appears that when s. 4(1) of the Act was amended, the Legislature did not make any provision that an offence previously committed under R. 132A of the D.I.Rs. would continue to remain punishable as an offence of contravention of s. 4 ( 1 ) of the Act, nor was any provision made permitting operation of R. 132A itself so as to permit institution of prosecutions in respect of such offences. The consequence is that the present complaint is incompetent even in respect of the offence under R. 132A(4). This is the reason why we hold that this was an appropriate case where the High Court should have allowed the applications under s. 561A of the Code of Criminal Procedure and should have quashed the proceedings on this complaint. Appeal allowed.

Summary

Issues involved:
1. Constitutionality of Section 23(1)(b) of the Foreign Exchange Regulation Act, 1947 (FERA) under Article 14 of the Constitution.
2. Compliance with the proviso to Section 23D(1) of FERA in filing the complaint.
3. Validity of prosecution under Rule 132A(4) of the Defence of India Rules (D.I.Rs.) after its omission.

Issue-wise detailed analysis:

1. Constitutionality of Section 23(1)(b) of FERA under Article 14 of the Constitution:

The appellants challenged the constitutionality of Section 23(1)(b) of FERA, arguing that it violated Article 14 of the Constitution by providing for a more severe punishment compared to Section 23(1)(a) for the same acts. The Court examined the provisions of Sections 23 and 23D(1) of FERA. Section 23(1)(a) allows for a penalty adjudged by the Director of Enforcement, while Section 23(1)(b) provides for imprisonment upon conviction by a court. The Court held that the choice of proceeding under Section 23(1)(a) or (b) is not left to the arbitrary discretion of the Director of Enforcement but is guided by principles in Section 23D(1). The Director must first proceed under Section 23D(1) and can file a complaint for prosecution only if he finds that the penalty he can impose would not be adequate. This interpretation ensures that the law does not violate Article 14, as the Director's discretion is not unguided.

2. Compliance with the proviso to Section 23D(1) of FERA in filing the complaint:

The Court found that the Director of Enforcement did not comply with the proviso to Section 23D(1) when filing the complaint on 17th March 1968. The proviso requires that a complaint can only be made if, during the inquiry, the Director forms an opinion that the penalty he can impose would not be adequate. The Court noted that there was no material before the Director to form such an opinion, as the inquiry under Section 23D(1) had not progressed to a stage where relevant evidence was considered. The complaint was filed based on preliminary notices and investigations, not on the findings of a formal inquiry. Therefore, the complaint was invalid, and proceedings based on it were quashed.

3. Validity of prosecution under Rule 132A(4) of the D.I.Rs. after its omission:

The appellants argued that prosecution under Rule 132A(4) of the D.I.Rs. was invalid because the rule had been omitted by a notification on 30th March 1965. The Court agreed, stating that the omission of Rule 132A did not allow for new prosecutions for acts committed while the rule was in force. The notification only protected actions already taken under the rule but did not permit new proceedings. The Court distinguished this case from others where the expiry of a temporary statute or specific saving clauses allowed for continued prosecution. Since the rule was omitted without such provisions, the complaint for the offence under Rule 132A(4) was invalid.

Conclusion:

The appeals were allowed, the High Court's order rejecting the applications under Section 561A of the Code of Criminal Procedure was set aside, and the proceedings for the prosecution of the appellants were quashed.