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TMI Blog2006 (2) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... osecution the punishment by way of imprisonment can be imposed only on the officer or officers of the company referred to in Section 68 of the Act. Section 68 only indicates the manner in which a contravention by a company can be dealt with and it does not show that it is confined in its operation only to prosecutions against a company. It is a general provision relating to a contravening company, which is to be proceeded against whether it be under Section 50 or under Section 56 of the Act. The fact that a fine alone can be imposed on a company in a prosecution under Section 56 of the Act, cannot enable us to confine the operation of Section 68 to criminal prosecutions alone under the Act. We see no reason to whittle down the scope of Section 68 of the Act. It is true that the entire penalty that may be imposed on adjudication, is capable of being recovered from the company itself. But that does not mean that it cannot be recovered from the officer incharge of the company or those who connived at or were instrumental in the contravention of the provisions of the Act by the company. Once the ingredient of the offence is contravention of the provisions of the Act and the conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FERA be not initiated against the appellant bank and some of its officers and further notices under Section 61 of the FERA giving an opportunity to the first appellant bank and its officers of showing that they had the necessary permission from the concerned authority for the transaction involved, the appellant bank filed Writ Petition No. 1972 of 1994, seeking a declaration that the relevant sections of the FERA are unconstitutional, being violative of Articles 14 and 21 of the Constitution of India and for writs of prohibition restraining the authorities under the FERA from proceeding with the proposed adjudication and the proposed prosecution, in terms of the Act. Yet another writ petition was filed by the officers of the bank as CWP No. 2377 of 1996 challenging the individual notices. The High Court of Bombay rejected the challenge to the constitutional validity of Sections 50, 51, 56 and 68 of the FERA, but clarified that Section 68(1) of the FERA was not applicable to an adjudication proceeding and that it was confined to a prosecution for penal offences under the Act. Being aggrieved, the appellant bank and its officers have filed Civil Appeal Nos. 1748/99 and 1749/99. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the writ petitions filed by the appellant bank and its officers in the High Court of Bombay. The prayers in the said writ petition are for a declaration that provisions of Sections 50, 51, 56 and 68 of the FERA are unconstitutional, invalid and void being violative of Articles 14 and 21 of the Constitution of India and for a writ of prohibition directing the authorities under the Act from proceeding further, based on the notices issued to the bank and its officers. It may be seen that the challenge to the constitutional validity is based on the alleged violation of Articles 14 and 21 of the Constitution of India. It is admitted that the Act has been included in the Ninth Schedule to the Constitution of India, as Item No. 100. Therefore, in terms of Article 31B of the Constitution of India, none of the provisions of the FERA can be deemed to be void or ever to have become void on the ground that the FERA or any of the provisions thereof, are inconsistent with or take away or abridge any of the rights conferred by Part III of the Constitution. Obviously, the rights conferred by Articles 14 and 21 of the Constitution are rights flowing from Part III of the Constitution and, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on rule of law and rejected the contention, though it upheld the plea that Section 68 of the FERA had no application for imposition of a penalty based on an adjudication under Sections 50 and 51 of FERA. The question is whether there is any reason to interfere with the decision of the High Court on either of these aspects. 7. Mr. K.K. Venugopal, learned senior counsel, advanced considerable arguments on the interpretation and scope of Section 68 of the FERA. Considering the prayers in the writ petitions filed in the High Court of Bombay by the appellants, it is possible to say that all that is required is to decide whether the appellants can successfully challenge the constitutional validity of the relevant provisions of the FERA as being violative of Articles 14 and 21 of the Constitution and whether the statutory authority has to be restrained by the issue of a writ of prohibition from proceeding further on the basis of the notices it had issued for adjudication as well as for penal action. It is not a case where any successful challenge could be mounted on the provisions providing both for adjudication and imposition of penalty and for penal action in the context of the object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... magistrate will consider whether the process should issue on the basis of the complaint made before him. In view of the fact that sufficient opportunities will be available to the appellants to put forward their contentions before the concerned criminal court, it cannot be said that there is any merit in the challenge to the notices issued under Section 61 of the FERA. The said notices are really in terms of Section 61 of the FERA and their scope and ambit is also controlled by Section 61 of the FERA and on receipt of those notices, it was open to the appellants to show that they had the necessary permission from the concerned authority under the Act. Of course, if they do not have such permission, apparently, in the case on hand, there was no such permission, they have necessarily to put forward their defences before the criminal court in the prosecutions that have been launched in that behalf. 10. It is argued that the issue of a notice under Section 61 is not a mere formality and that it is a real right given to a person accused of an offence to establish that the proceedings are being initiated without jurisdiction or wholly in violation of the provisions of FERA. Article 20( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibition as sought for by the appellants on the ground that these notices do not satisfy the jurisdictional requirement under Section 61 of the Act. 12. At this stage, we cannot ignore the argument on behalf of the respondents that if the appellants are not able to show any permission, complaints have to be filed before the concerned magistrate and that magistrate will issue process only on being satisfied that a case has been made out for such issue and that the attempt of the appellants to block the prosecution should not be countenanced. The object of the present notice, submitted counsel, is limited and the arguments attempted on behalf of the appellants can be raised before the criminal court when the occasion arises. We find merit in this submission. Obviously, it is open to the appellants to put forward all their defences to the prosecution at the appropriate stage. 13. The other set of notices are in respect of the adjudication under Section 50 of the FERA. Again, it is for the appellants to put forward their objections thereto before the concerned authority and it is for that authority to decide the relevant aspects while deciding to impose or not to impose any pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that Section 68(1) was consistent with similar provisions under other laws and it applied only to a person who was in charge of and who was responsible to the company for the conduct of the business of the company as well as the company at the relevant time. This was a clear identification of the person who was to be roped in, in terms of Section 68(1) of FERA, and there was nothing arbitrary, unclear or unreasonable in the provision. He also pointed that under Section 68(1) what was needed to be proved was an offence against the company and when that was done, the person in charge of the affairs of the company at the relevant time, still had an opportunity to prove that the alleged contravention took place without his knowledge or that he exercised all due diligence to prevent such a contravention and that this availability of opportunity, adequately safeguarded the rights of any person who was sought to be roped in under Section 68(1) of the FERA. Counsel also pointed out that under Section 68(2), if any other officer of the company had to be roped in, the burden was on the prosecution and this clearly showed that there was nothing arbitrary in Section 68(2) of the Act o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany that is in contravention of FERA or the rules or directions issued thereunder, also lays himself open to prosecution. Having done something or omitted to do something leading to the company contravening the provisions of the Act, the officer concerned cannot say that it is unreasonable to prosecute him also, along with the company and the person in charge of and responsible to the company for the conduct of its business. 16. The argument that the section violates Article 14 of the Constitution cannot thus be accepted. The same is the position regarding the argument based on Article 21 of the Constitution. The object of the Act is clearly to protect the economic interests of the country and to deal with any violation that causes economic loss to the country. In the context of that object, any contravention of the provisions of the Act have to be viewed seriously and any one directly responsible or conniving at the offence is liable to be punished. This appears to be the legislative intent in enacting FERA 1973 replacing the Foreign Exchange Regulation Act, 1947 and also including it in the Ninth Schedule to the Constitution. 17. Considerable amount of argument was raised a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Directorate of Enforcement to prosecute the concerned person. It would then be incongruous and unreasonable for the Directorate of Enforcement to prosecute a person for violating FERA, when in the adjudication proceedings against him, it had been found that the person had not violated any of the provisions of FERA. It was in this context that the scheme of the FERA should be understood as indicating that there should first be an adjudication and thereafter, if the Directorate of Enforcement feels that the penalty is inadequate, to consider the launching of a prosecution. 19. Learned Additional Solicitor General contended that under FERA, adjudication and prosecution are two separate and distinct procedures with distinct purposes. There was no bar either in FERA or in any other law, to an adjudication and prosecution being launched in respect of an alleged contravention of FERA. Counsel submitted that the law has permitted it by providing two separate modes for dealing with the person who contravenes the law in relation to foreign exchange. While the primary purpose of imposing of the penalty is the interests of revenue and the preservation of foreign exchange, the primary purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions could not be attacked as violative of the rights under Part III of the Constitution we should interpret the provisions of the Act and hold that an adjudication has to precede a prosecution cannot be accepted as we see nothing in the provisions of the Act justifying such a construction. On the scheme of the Act, the two proceedings are seen to be independent and the launching of the one or the other or both is seen to be controlled by the respective provisions themselves. In the context of the inclusion of this Act in the Ninth Schedule, the reliance placed on the decision in Rayala Corporation (P) Ltd. Ors. v. Director of Enforcement, New Delhi [1969 (2) SCC 412] cannot enable this Court to deem the provisions as arbitrary and to read them down or understood them in the manner suggested by the learned senior counsel. The very purpose of the Act and the very object of inclusion of the Act in the Ninth Schedule justifies an interpretation of the provisions as they stand on the basis that there is nothing arbitrary or unreasonable in the provisions and in the scheme as enacted. We may also notice that Section 23D of the Foreign Exchange Regulation Act, 1947, which was cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no justification in accepting the argument that unless an adjudication proceeding under Section 51 of the Act is completed, a prosecution under Section 56 of FERA cannot be initiated. Both proceedings can simultaneously be launched and can simultaneously be pursued. 22. Counsel submitted that the devising of a special machinery for adjudication, the limiting of the without prejudice clause in Section 56 to any award of penalty and not the initiation of proceedings under Section 51 of the Act, the making of a contravention of any of the provisions of this Act as the key to both proceedings, would all indicate that an adjudication should precede a prosecution under Section 56 of the Act. There is nothing in the Act to indicate that a finding in an adjudication, is binding on the court in a prosecution under Section 56 of the Act. There is no indication that the prosecution depends upon the result of the adjudication. We have already held that on the scheme of the Act, the two proceedings are independent. The finding in one is not conclusive in the other. In the context of the objects sought to be achieved by the Act, the elements relied on by the learned senior counsel, would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in excess of jurisdiction; proceeds to act in violation of the rules of natural justice; or proceeds to act under a law which is itself ultra vires or unconstitutional. Since the basis of the claim for the relief is found not to exist, the High Court rightly refused the prayer for the issue of a writ of prohibition restraining the Authorities from continuing the proceedings pursuant to the notices issued. As indicated by this Court in State of Uttar Pradesh v. Brahm Datt Sharma [(1987) 2 SCC 179] when a show cause notice is issued under statutory provision calling upon the person concerned to show cause, ordinarily that person must place his case before the Authority concerned by showing cause and the courts should be reluctant to interfere with the notice at that stage unless the notice is shown to have been issued palpably without any authority of law. On the facts of this case, it cannot be said that these notices are palpably without authority of law. In that situation, the appellants cannot successfully challenge the refusal by the High Court of the writs of prohibition prayed for by them. 24. Thus, on the whole, in the context of the answer given by the Constitution Bench o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an outer limit for the penalty to be imposed and the said penalty can be imposed on the company itself, it would be incongruous to hold that the same quantum of penalty could be recovered from the officials of the company all over again. That would lead to an anomalous position of the penalty exceeding the outer limit prescribed in Section 50 in respect of a particular offence committed by the company. The High Court gave liberty to the Writ Petitioners to raise this aspect before the Adjudicating Authority based on its finding. 26. The learned Additional Solicitor General in support of the appeals by the Union of India, urged that the expression offence used in Section 68 is all comprehensive and would include every contravention in respect of which an adjudication under Section 50 of the Act can also be made against a company and the object of the Act being to prevent the evasion of the law relating to foreign exchange, the expression offence need not be confined to a criminal offence and Section 68 should be understood as being applicable even in respect of adjudications of penalty under Sections 50 and 51 of the Act. Learned counsel submitted that the legislation being in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrency, security or any other money or property in respect of which a contravention of the provisions of the Act has taken place conferred equally on the Adjudicating Authority and the Court, whether it be during an adjudication of the penalty or during a prosecution. Whereas Section 64(1) relating to preparation or attempt at contravention is confined to Section 56, the provision for prosecution, sub-Section (2) of Section 64 makes the attempt to contravene or abetment of contravention, itself a contravention, for the purposes of the Act including an adjudication of penalty under the Act. Section 68 relating to offences by companies, by sub-Section (1) introduces a deeming provision that the person who was in charge of and was responsible to the company for the conduct of the business of the company, shall also be deemed to be guilty along with the company of the contravention of the provisions of the Act and liable to be proceeded against and punished accordingly. The proviso, no doubt, indicates that a person liable to punishment could prove that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention. Sub-Section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 993), the meaning of punishment is given as, infliction of a penalty in retribution for an offence; penalty imposed to ensure application and enforcement of a law. Going by Black s Law Dictionary (8th ed.) it is, a sanction-such as a fine, penalty, confinement, or loss of property, right or privilege-assessed against a person who has violated the law. According to Jowitts Dictionary of English Law Vol. 2 (2nd ed. By John Burke), punishment is the penalty for transgressing the law. It is significant to notice that Section 68, both in sub-Section (1) and in sub-Section (2) uses the expression, shall be liable to be proceeded against and punished accordingly. There does not appear to be any reason to confine the operation of Section 68 only to a prosecution and to exclude its operation from a penalty proceeding under Section 50 of the Act, since the essential ingredient of both is the contravention of the provisions of the Act. A company is liable to be proceeded against under both the provisions. Section 68 is only a provision indicating who all in addition can be proceeded against when the contravention is by a company or who all should or can be roped in, in a contravention by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , confines the expression punished only to a punishment for a criminal prosecution. An imposition of a penalty can also be a punishment. The second part of the reasoning appears to be self-contradictory. If a person includes a company, there is no reason to confine Section 68 to a prosecution only, because the company as a person is liable to be proceeded against under Section 50 and Section 56 of the Act, though in a criminal prosecution the punishment by way of imprisonment can be imposed only on the officer or officers of the company referred to in Section 68 of the Act. Section 68 only indicates the manner in which a contravention by a company can be dealt with and it does not show that it is confined in its operation only to prosecutions against a company. It is a general provision relating to a contravening company, which is to be proceeded against whether it be under Section 50 or under Section 56 of the Act. The fact that a fine alone can be imposed on a company in a prosecution under Section 56 of the Act, cannot enable us to confine the operation of Section 68 to criminal prosecutions alone under the Act. We see no reason to whittle down the scope of Section 68 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected this contention. In view of our conclusions recorded earlier, the said argument which is reiterated before us in support of this appeal, has only to be rejected. The order of the High Court does not call for interference and this appeal deserves to be dismissed. Criminal Appeal Nos. 847 and 848 of 2004 : 34. The accused has filed these appeals challenging the orders of the High Court of Delhi. Criminal Appeal No. 847 of 2004 is filed by the accused challenging the decision dismissing an application filed by the appellant under Section 482 of the Code of Criminal Procedure, by following the decision of this Court in Santram Paper Mills v. Collector of Central Excise, Ahmedabad [(1998) 8 SCC 335] and taking the view that an adjudication proceeding is independent of the criminal liability under the Act. The contention of the appellant was that since in the adjudication proceedings no penalty was imposed and there was no finding of personal involvement of the appellant, the prosecution had also to be quashed. We have held that the two proceedings are independent of each other and the finding on the adjudication is not conclusive on a prosecution under the Act. Hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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