1997 (8) TMI 284 - HC - FEMA

Summary

Issues Involved:
1. Maintainability of criminal cases under Sections 40(3) and 56(1)(ii) of the Foreign Exchange Regulation Act, 1973 (FERA).
2. Interpretation of Section 56(1)(ii) concerning non-compliance with Section 40(3) of FERA.
3. Impact of pending special leave petitions before the Supreme Court on the proceedings.
4. Binding nature of precedents and judgments rendered at the admission stage.

Issue-wise Detailed Analysis:

1. Maintainability of Criminal Cases under Sections 40(3) and 56(1)(ii) of FERA:
The petitioners filed criminal original petitions under Section 482 of the Code of Criminal Procedure, seeking to withhold further proceedings in C.C. Nos. 60 and 61 of 1996. The respondent had lodged complaints against the petitioners under Section 56(1)(ii) for alleged violations of Section 40(3) of FERA. The petitioners contended that the criminal cases were not maintainable as Section 40(3) did not specify consequences for non-compliance, nor did it relate to monetary value, which is a requisite for Section 56(1)(ii).

2. Interpretation of Section 56(1)(ii) Concerning Non-compliance with Section 40(3) of FERA:
The petitioners argued that Section 56(1)(ii) pertains to offenses measured by the value of money involved in the contravention, which Section 40(3) does not address. They cited the Kerala High Court decision in Itty v. Assistant Director, which held that failure to obey summons under Section 40(1) is not a contravention under Section 56. The respondent countered that non-compliance with Section 40(3) is punishable under Section 56(1)(ii), emphasizing that the Act is self-contained and non-compliance disrupts the investigation process. The Court examined both provisions and agreed with the petitioners, ruling that Section 56 is identified by the extent and value of money involved, which does not apply to Section 40(3).

3. Impact of Pending Special Leave Petitions Before the Supreme Court on the Proceedings:
The petitioners argued that since their special leave petitions challenging the summons under Section 40 were pending before the Supreme Court, the respondent should not have filed the complaints. They cited Garikapati v. Subbiah Choudhry, emphasizing the vested right of appeal. The respondent argued that the pendency of the matter does not prohibit proceeding with legal remedies unless there is an order of stay. The Court agreed with the respondent, noting the absence of a stay order from the Supreme Court and thus, negated the petitioners' contention.

4. Binding Nature of Precedents and Judgments Rendered at the Admission Stage:
The Court considered the binding nature of the Kerala High Court decision versus an unreported Madras High Court decision rendered at the admission stage. The petitioners argued that the latter, being rendered without full hearing, is not binding. The Court agreed, citing Abdul Malick v. Collector of Dharmapuri, which held that judgments rendered without hearing the contesting party do not serve as binding precedents. Consequently, the Court favored the Kerala High Court's interpretation.

Conclusion:
The Court concluded that non-compliance with Section 40(3) of FERA does not constitute an offense under Section 56(1)(ii) of the Act. Therefore, the criminal proceedings in C.C. Nos. 60 and 61 of 1996 were quashed. The Court emphasized that Section 56(1)(ii) should be read in consonance with Section 56(1)(i), both of which relate to offenses involving monetary value, which is not applicable to Section 40(3).