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New India Corporation Vs. the Director, Enforcement Derectorate, Government of India and anr. - Court Judgment

LegalCrystal Citation
SubjectCriminal
CourtKarnataka High Court
Decided On
Judge
Reported in1970CriLJ295
AppellantNew India Corporation
RespondentThe Director, Enforcement Derectorate, Government of India and anr.
Excerpt:
.....clause (a) of sub-section (1) of section 23 whether any person has committed a contravention the director of enforcement shall hold an inquiry in the prescribed manner after giving that person a reasonable opportunity of being heard and if, on such enquiry, he is satisfied that the person has committed the contravention, he may impose such penalty as thinks fit in accordance with the provisions of the said section 23: provided that if, at any stage of the the enquiry the director of enforcement is of the opinion that having regard to the circumstances of the case, the penalty which he is empowered to impose would not be adequate, he shall, instead of imposing any penalty himself, make a complaint in writing to the court. ' this observation, in our opinion, clearly means that in every..........writ petitions are occasioned by the four notices served on the petitioners by the director of enforcement directorate, ministry of defence, government of india, calling upon the petitioner to show cause why adjudication proceedings as contemplated by section 23-d of the foreign exchange regulation act, 1947, should not be instituted against him for or in respect of four alleged contraventions by him of specified provisions of said act, sections 4(1), 5(1). (a), 5(1)(d) and 9. the petitioner has presented these petitions almost immediately after the service of the said notices and he prays in each case for the issue of a writ of prohibition, prohibiting the director of enforcement impleaded as the 1st respondent from initiating adjudication proceedings against him.3. in support of.....
Judgment:

Narayana Pai, J.

1. Messrs New India Corporation named as the petitioner in these four Writs Petitions, appears to be the trade name or the name and style under which the deponent of the affidavit V.V. Iyer, is trading. According to the affidavit, except for some period between 1954 and 1958, during which there were , others trading with him in partnership for the rest of the period, he was trading alone as sole proprietor of the trade and business.

2. These four writ petitions are occasioned by the four notices served on the petitioners by the Director of Enforcement Directorate, Ministry of Defence, Government of India, calling upon the petitioner to show cause why adjudication proceedings as contemplated by Section 23-D of the Foreign Exchange Regulation Act, 1947, should not be instituted against him for or in respect of four alleged contraventions by him of specified provisions of said Act, Sections 4(1), 5(1). (a), 5(1)(d) and 9. The petitioner has presented these petitions almost immediately after the service of the said notices and he prays in each case for the issue of a writ of prohibition, prohibiting the Director of Enforcement impleaded as the 1st respondent from initiating adjudication proceedings against him.

3. In support of the prayer, the principal contention raised is that Sections 23 and 23-D of the Foreign Exchange Regulation Act are invalid as being volatile of Article 14 of the Constitution. It is on this basis that it is contended that the proposed adjudication should not therefore be permitted to be even initiated. As the validity of the statute itself is questioned the Union of India has been impleaded as the 2nd respondent.

4. So far as the merits of the case stated in the several notices are concerned, nothing is stated except that the alleged contraventions are said to have taken place several years ago and that to ask the petitioner to search for papers relating to few of the several transactions he had entered into years ago would, in effect, result in extreme harassment to the petitioner.

5. In the common counter-affidavit filed on behalf of the respondents, it is stated that the plea of invalidity of Sections 23 and 23-D of the Act raised by the petitioner is no longer available, the Supreme Court having upheld their validity in the case reported in Shanti Prasad Jain v. Director of Enforcement : [1963]2SCR297 reiterated by the subsequent decision of the Supreme Court in the Union of India v. Sukumar Pyne. : 1966CriLJ946 . Regarding the plea of alleged harassment, it is stated in the counter-affidavit that in the circumstance such a plea is not available and that in any event, the Directorate will furnish the petitioner with whatever clarification' he may require to enable him to defend himself in the adjudication proceedings.

6. The only question for consideration is the alleged invalidity of the Sections 23 and 23D of the Foreign Exchange Regulation Act.

7. Briefly stated, the case of the petitioner is that the impugned sections provide for two different procedures to-punish the alleged contraventions of the provisions of the statute,--one under the normal Code of Criminal Procedure and the other by way of adjudication by the Director of Enforcement in accordance with the special rules prescribed therefor, that the Director of Enforcement is the common authority both for the purpose of initiating adjudication proceedings under Section 23-D and regular prosecution pursuant to Sub-section (3) off Section 23, and that the statute is utterly devoid of any guidance to the Director in the matter of making a choice between the two proceedings. This situation, according to the argument on behalf of the petitioner, is one which comes directly within the principles stated by the Supreme Court in the case of the State of West Bengal v. Ansar Ali : 1952CriLJ510 .

8. Portions of Section 23 which are relevant to the argument are:

23 (1) If any person contravenes the provision of Section 4, S, 5, Section 9, Section 10, Sub-section (2) of Section 12, Section 17, Section 18-A or Section 18-B-or of any rule, direction or order made thereunder, he shall--

a) be liable to such penalty not exceeding three times the value of the foreign exchange in respect of which the contravention has taken place, or five thousand rupees, whichever is more, as maybe adjudged by the Director of Enforcement in the manner hereinafter provided, or

b) upon conviction by a court, be punishable with imprisonment for a term; which may extend to two years, or with fine, or with both.

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23 (3) No court shall take cognisance--a) of any offence punishable under Sub-section (1) except upon complaint in writing made by the Director of Enforcement,

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Provided that where any such offence in the contravention of any of the provisions of this Act or any rule, direction or order made thereunder which prohibits, the doing of an act without permission no such complaint shall be made unless the person accused of the offence has been given an opportunity of showing that he had such permission.

Section 23-D (1) which is relevant to the argument reads:

23-D (1). For the purpose of adjudging under clause (a) of Sub-section (1) of Section 23 whether any person has committed a contravention the Director of Enforcement shall hold an inquiry in the prescribed manner after giving that person a reasonable opportunity of being heard and if, on such enquiry, he is satisfied that the person has committed the contravention, he may impose such penalty as thinks fit in accordance with the provisions of the said Section 23:

Provided that if, at any stage of the the enquiry the Director of Enforcement is of the opinion that having regard to the circumstances of the case, the penalty which he is empowered to impose would not be adequate, he shall, instead of imposing any penalty himself, make a complaint in writing to the court.

9. The manner in which adjudication proceedings under Section 23-D should be held is prescribed under what are called the Adjudication Proceeding and Appeal Rules, 1957. Among other things the rules provide that in taking evidence the Director is not bound to observe the provisions of the Indian Evidence Act. The rules provide for regulation of procedure of the Appellate Board constituted under Section 23-E. They conclude with savings to the effect--

Rule 12. Savings--Nothing in these rules shall be considered as preventing the Director from making a complaint in writing to the court under the proviso to Sub-section (1) of Section 23-D of the Act instead of imposing any penalty himself.

10. The argument, is, first, that Sub-section (1) of Section 23 itself enables recourse being had to one of the two different procedures; second, that the choice between two has to be made at the very inception when the Director of Enforcement considers that there is a contravention of any of the provisions of the statute mentioned in Sub-section (1) of Section 23, calling for action being taken, third that a complaint by the Director of Enforcement under clause (a) of Sub-section (3) of Section 23 is quite different from a complaint which he may make under the proviso to Sub-section (1) of Section 23-D, and that that the two are different is obvious from the fact that a complaint under Section 23(3)(a) has in certain cases necessarily to be preceded by the previous opportunity mentioned in the proviso to Section 23(3).

11. We may at once state that it is not the contention that if Section 23-D (1) alone is taken into account, there is-anything in it to render it invalid as being violative of Article 14 of the Constitution. Indeed, no such contention can at all be raised in view of the express decision of the Supreme Court in the case of Shanti Prasad Jain : [1963]2SCR297 . In paragraph 7 of the judgment which occurs at page 1768 of the report, their Lordships state:

It is not disputed by the appellant that the subject matter of the legislation: viz., Foreign Exchange, has features and problems peculiarly its own, and that it forms a class in itself. A law which prescribes a special procedure for investigation of breaches of foreign exchange regulations will therefore be not hit by Article 14 as it is based on a classification which has a just and reasonable relation to the object of the legislation. The vires of Section 23(1)(a) is accordingly not open to attack on the ground that it is governed by a procedure different from that prescribed by the Code of Criminal Procedure that indeed is not controverted by the appellant that being so, does it make any difference in the-legal position that Section 23-D provides for transfer by the Director of Enforcement of cases which he can try, to the court? We have not here, as in : 1952CriLJ510 a law, which confers on an officer an absolute discretion to send a case for trial either to a court or to a Magistrate empowered to-try cases under a special procedure. Section 23-D confers authority on the very officer who has power to try and dispose-of a case to send it on for trial to a court, and that too only when he considers that a more severe punishment then what he-is authorised to impose, should be awarded. Tn a Judicial system, in which there is a hierarchy of courts of tribunals, presided over by Magistrates or officers belonging to different classes, and there is a devolution of powers among them graded according to their class, a provision such as Section 23-D is necessary for proper administration of justice. While on the one hand a serious offence should not go without being adequately punished by reason of cognisance thereof having been taken by an inferior authority, the accused should on the other hand' have in such cases the benefit of a trial' by superior court that is the principle underlying Section 349 of the Criminal Procedure Code, under which Magistrates-of the second and third class, are empowered to send the case for trial to the District Magistrate or sub-divisional Magistrate, when they consider that a more severe punishment then they can inflict is called for. In our view the power conferred on the Director of Enforcement under Section 23-D to transfer cases to a court Is not unguided or arbitrary, and does not offend Article 14, and Section 23(1)(a) cannot be assailed as unconstitutional.

This paragraph, Mr. Venkatesh Iyer for the Petitioner says, confines, its attention to the position as under Section 23-D.. In the situation contemplated by Section 23-D, he concedes as he has to, the proviso to the Sub-section (1) thereof contains the clearest guidance to the Director of Enforcement in making the choice between continuing his adjudication proceedings to their conclusion or sending the case to a Magistrate by means of a complaint. The distinction however, which he wants to make is that the complaint referred to in the proviso to Section 23D (1) is quite different from the complaint under the proviso to Section 23(3)(a).

12. It seems to us that even this argument has been made unavailable by the same ruling of the Supreme Court. In the immediately preceding paragraph 6 of the same page 1768, their Lordships observe:

It will be seen that when there Is a contravention of Section 4(1), action with respect to it is to be taken in the first instance by the Director of Enforcement. He may either adjudge the matter himself in accordance with Section 23(1)(a), or he may send it on to a court if he considers that a more severe penalty then he can impose is called for.' This observation, in our opinion, clearly means that in every case, the first step that the Director of Enforcement is required by the statute to take is to institute adjudication proceedings. He is empowered or authorised by the statute to make a complaint to the Magistrate functioning under the Code of Criminal Procedure, only if he considers that a more severe penalty then he can impose is called for, and such an opinion he can entertain according to the express provision contained in the statute, only when the stage in the adjudication proceedings referred to in the proviso to Section 23-D (1) is reached. If the only officer on a complaint by whom alone a criminal court can take cognizance of an offence punishable under Sub-section (1) of Section 23 is the Director of Enforcement and if the said officer is empowered to make such a complaint only if he considers that his own powers of punishment are inadequate to meet the situation or the gravity of the offence, and the statute makes provision for the manner in which he can come to entertain such an opinion, then, there can be no doubt whatever that the first step which the Director of Enforcement is required by the statute to take is to institute adjudication proceedings under Section 23-D. The fact that the proviso to Section 23(3) provides for a further safeguard before a complaint Is made does not mean that the said safeguard dispenses with the safeguard of an initial adjudication provided under Section 23D (1). Indeed, the opportunity contemplated by the proviso to Section 23(3) need not necessarily be afforded by means of the issue of a notice, but can also be afforded in the course of an adjudication under Section 23-D (1).

13. It is also not correct, in our opinion to say that Section 23(1) by itself provides for two procedures. that section merely formulates and imposes penalties in respect of offences mentioned therein. In other words, the contraventions of sections specified therein are made punishable offence by it that the said sub-section does not provide for a minimum sentence in the case of an adjudication by the Director while providing for a maximum sentence in the case of a prosecution before a magistrate is the view expressed by the Supreme Court in the subsequent case of Durga Prasad (Sukumar Pyne)? : 1966CriLJ946 . The said case followed and applied the previous decision in the case of Shanti Prasad Jain : [1963]2SCR297 .

14. We are therefore of the opinion that the contentions now raised by the petitioner are fully concluded against him by the said two rulings of the Supreme Court.

15. All the four writ petitions are therefore dismissed.

16. The petitioner will pay the costs of the respondents one set, which we fix at a lump sum of Rs. 200/-.


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