2011 (2) TMI 154 - SC - FEMA

Foreign exchange - Search and seizure - Prosecution and penalty - appellant submits that the standard of proof required to bring home the charge in a criminal case is much higher than in the adjudication proceedings and once the appellant has been exonerated in the adjudication proceedings, his prosecution is an abuse of the process of court. - Held 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 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. 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 November 18, 1996, may be a point for the appellant and it is for him to put forth the same before the Magistrate. Inasmuch as the FERA contains certain provisions and features which cannot be equated with the provisions of the 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 criminal court to discharge its functions vested with it and give effect to the legislative intention, particularly, in the context of the scope and object of the FERA which was enacted for the economic development of the country and augmentation of revenue. Though the Act has since been repealed and is not available at present, those provisions cannot be lightly interpreted taking note of the object of the Act. - appeal dismissed.

Issues Involved:
1. Whether the Enforcement Directorate (ED) can prosecute the appellant under Section 56 of the Foreign Exchange Regulation Act (FERA) after exoneration in adjudication proceedings under Sections 50 and 51.
2. The impact of findings in adjudication proceedings on subsequent criminal prosecution.
3. The interpretation and application of Sections 50, 51, and 56 of the FERA.
4. The relevance of previous judgments and principles of law regarding simultaneous adjudication and prosecution.

Issue-wise Detailed Analysis:

1. Whether the Enforcement Directorate (ED) can prosecute the appellant under Section 56 of the Foreign Exchange Regulation Act (FERA) after exoneration in adjudication proceedings under Sections 50 and 51:

The appellant argued that since he was exonerated in the adjudication proceedings, his prosecution under Section 56 of FERA should be quashed. The adjudicating officer concluded that the allegations of contravention of Sections 8(2) and 9(1)(f)(i) read with Section 64(2) of FERA could not be sustained due to insufficient evidence. The Enforcement Directorate did not challenge this order, which attained finality. The appellant contended that continuing the prosecution would be an abuse of the process of the court, as the standard of proof in criminal cases is higher than in adjudication proceedings.

2. The impact of findings in adjudication proceedings on subsequent criminal prosecution:

The court examined whether the findings in the adjudication proceedings could influence the criminal prosecution. The appellant relied on previous judgments under the Income-tax Act, where exoneration in adjudication proceedings led to the quashing of criminal prosecutions. However, the court distinguished these cases, noting that the FERA has specific provisions (Sections 50, 51, and 56) that allow for independent and simultaneous adjudication and prosecution.

3. The interpretation and application of Sections 50, 51, and 56 of the FERA:

Section 50 of FERA provides for the imposition of penalties for contraventions, while Section 51 outlines the procedure for adjudication. Section 56 deals with offenses and prosecutions, stating that prosecution is "without prejudice to any award of penalty by the adjudicating officer." The court emphasized that adjudication and prosecution under FERA are independent proceedings. The findings in adjudication are not binding on criminal courts, and both proceedings can be pursued simultaneously. The court cited Standard Chartered Bank v. Directorate of Enforcement, which held that adjudication is not a prerequisite for prosecution under Section 56.

4. The relevance of previous judgments and principles of law regarding simultaneous adjudication and prosecution:

The court referred to several judgments, including Assistant Collector of Customs v. L. R. Melwani, which established that findings in adjudication proceedings do not constitute a verdict of acquittal in criminal trials. The court also cited K. G. Premshanker v. Inspector of Police, which discussed the relevance of civil judgments in criminal cases. The court concluded that the principles from these cases apply to FERA, supporting the view that adjudication and prosecution are separate processes.

Conclusion:

The court allowed the appeal, quashing the criminal prosecution against the appellant. It held that continuing the prosecution after exoneration in adjudication proceedings would be unjust and an abuse of the process of the court. The court reiterated that while adjudication and prosecution under FERA are independent, the exoneration on merits in adjudication proceedings should preclude further criminal prosecution on the same facts. The court's decision aligns with the principles of higher standard of proof in criminal cases and the need to prevent abuse of judicial processes.

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