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M.R. Pratap and anr. Vs. the Director of Enforcement, New Delhi - Court Judgment

LegalCrystal Citation
SubjectFERA
CourtChennai High Court
Decided On
Case NumberWrit Petn. Nos. 3004 and 3005 of 1969
Judge
Reported inAIR1972Mad18; (1971)IIMLJ95
ActsForeign Exchange Regulation Act, 1947- Sections 23-D; Foreign Exchange Regulation (Amendment) Act 1957 - Sections 4(3), 5(1), 9, 23(1), 23-D and 23-D(1) ; Code of Criminal Procedure (CrPC) , 1898 - Sections 556 and 561-A; Indian Penal Code (IPC), 1860 - Sections 120-B and 196; Defence of India (Amendment) Rules, 1964 - Rule 132-A; ;Industrial Disputes Act, 1947; Madhya Pradesh Co-operative Societies Act, 1912; Uttar Pradesh Municipal Act - Sections 69-A
AppellantM.R. Pratap and anr.
RespondentThe Director of Enforcement, New Delhi
Cases ReferredIn Lakshmichand v. State of U. P.
Excerpt:
fera - enquiry proceedings - section 23d of foreign exchange regulation act, 1947, sections 4, 5, 9 and 23 of foreign exchange regulation (amendment) act, 1957, sections 556 and 561a of criminal procedure code, 1898, sections 120b and 196 of indian penal code, 1860, rule 132a of defence of india (amendment) rules, 1964, industrial disputes act, 1947, madhya pradesh co-operative societies act, 1912 and section 69a of uttar pradesh municipal act - petition to quash proceedings for prosecution by respondent - section 19a confers power upon officer of enforcement specially authorised by central government to search suspected persons - section 19c provides powers to stop and search conveyance - section 19d confers power to search premises on officer of certain rank - section 19e and 19f.....order1. m. r. pratap, the petitioner in w. p. 3004 of 1969, is the managing director of messrs. rayala corporation (pvt) ltd. the petitioner in w. p. 3005 of 1969. the company is carrying on the business of manufacture of halda typewriters out of the materials imported from abroad. the respondent in both the petitions is the director of enforcement new delhi, appointed by the central government under the foreign exchange regulation act, 1947 (hereinafter referred to as the act) for the purpose of enforcing the provisions of that act. on 20th and 21st december 1966, the premises of the company were raided by the enforcement directorate and certain records were seized at that time. some enquiries were made subsequently. on 25th august 1967, a notice was issued by the respondent to the.....
Judgment:
ORDER

1. M. R. Pratap, the petitioner in W. P. 3004 of 1969, is the Managing Director of Messrs. Rayala Corporation (Pvt) Ltd. the petitioner in W. P. 3005 of 1969. The company is carrying on the business of manufacture of Halda typewriters out of the materials imported from abroad. The respondent in both the petitions is the Director of Enforcement New Delhi, appointed by the Central Government under the Foreign Exchange Regulation Act, 1947 (hereinafter referred to as the Act) for the purpose of enforcing the provisions of that Act. On 20th and 21st December 1966, the premises of the company were raided by the Enforcement Directorate and certain records were seized at that time. Some enquiries were made subsequently. On 25th August 1967, a notice was issued by the respondent to the petitioners asking them to show cause as to why adjudication proceedings should not be instituted against them for violation of certain provisions of the Act on the allegation that a total sum of (Swedish Kronars) 2,44,713.70 had been deposited in a bank account in Sweden in the name of Pratap at the instance of the company and that the said Pratap had failed to surrender it to an authorised dealer as required under the provisions of the Act. They were required to show cause in writing within 14 days of the receipt of the notice. Thereafter, some correspondence went on between the petitioners and the respondent. On 14-11-1967, another notice was issued by the respondent addressed to Pratap stating that he had acquired a sum of S. W, Krs. 88,913.09 during period 1963 to 1965 in Stockholm that he was holding that sum in bank account and did not offer or cause it to be offered to the Reserve Bank of India on behalf of the Central Government and that he had contravened certain provisions of the Act. He was called upon to explain within 15 days from the date of receipt of that notice. A similar show cause notice was issued to the company in respect of the same amount on 20th January 1968 mentioning the deposit in the name of Pratap and failure of the company to surrender the amount and giving an opportunity to the company to produce the permission or special exemption from the Reserve Bank of India. On 16th March 1968, another notice was issued to both the petitioners to show cause in writing within 14 days from the date of receipt of that notice why adjudication proceedings as contemplated by Section 23-D of the Act should not be taken against them in respect of a sum of S. W. Krs,. 1,55,801.41 which was said to be held in a bank account in Stockholm in the name of Pratap. It was alleged that in respect of that amount both the petitioners had contravened certain provisions of the Act. That notice also mentioned that it was being issued in supersession of the first show cause notice dated 25th August 1967 and further added that it had since been decided to launch a prosecution in respect of Sw. Krs. 88,913..09. This amount of Sw. Krs. 88,913.09 was the respect amount in respect of which the two notices of 4th November 1967 and 20th January 1968 were issued to the two petitioners, while the notice dated 16th March 1968 for the adjudication proceedings related to the balance of the amount arrived at by deducting that sum from the original sum of Sw. Krs. 2,44,713.70. On 17th March 1968, a complaint (C. C. No. 8736 of 1968 on the file of the Chief Presidency Magistrate, Madras) was filed against both the petitioners for contravention of certain provisions of the Act. In addition, the complaint also charged that the two petitioners had violated certain provisions of the Defence of India rules. Thereupon, the two petitioners moved this court under Section 561-A, Criminal P. C. praying that the prosecution may be quashed. This court quashed the complaint in respect of one of the offences alleged therein and dismissed the petitions otherwise. This court, however, granted certificates to the petitioners to the effect that the cases were fit for appeals to the Supreme Court.

2. The petitioners then moved the Supreme Court in Crl. Ap. Nos. 18 and 19 of 1969. On 2-5-1969 the Supreme Court allowed the appeals and quashed the complaint. The detailed reasons for the judgment were given on 23-7-1969 (vide Rayala Corporation v. Director of Enforcement, AIR 1970 SC 494).

3. One Lennart Schussler, a foreigner, is one of the directors of the company. He happened to pass though New Delhi on his way to Sweden on 9-4-1966. The Enforcement Directorate officers questioned him and he was detained by an order of the Foreign Registration officer. A show cause notice was issued to him by the respondent as to way adjudication proceedings should not be held against him. As Lennart Schussler was against him. As Lennart Schussler was prohibited from leaving India, he filed W. P. 48 of 1969 on the file of the Supreme Court praying to quash the prohibitory order passed by the Foreign Registration Officer and for the issue of a writ of Habeas corpus. When that writ petition was pending, the respondent obtained sanction of the State of Madras to prosecute Pratap and Lennart Schussler under Section 120-B, I. P. C. read with Foreign Exchange Regulation Act and filed a complaint (Case No, 5438 of 1969 on the file of the Chief Presidency Magistrate, Madras) on the allegations that those two accused conspired and committed acts in violation of the provisions of the Act. Against this complaint, Pratap and Lennart Schussler filed two petitions in this court praying to quash the complaint. This court rejected those applications but granted certificates for appeal to the Supreme Court. Appeals Nos. 113 & 163 of 1969 were filed against those orders before the Supreme Court. The Supreme Court dismissed those appeals holding that the prosecution under Section 120-B, I. P. C. could be proceeded with. Lennart Schussler has since left India after giving bank guarantee for a sum of Rs. 1,50,000. On 6-9-1969, the respondent issued separate notices to Pratap and the company asking them to show cause way adjudication proceedings should not be held. These writ petitions have been filed challenging the validity of those notices and praying that those notices may be quashed on the ground that they are void and illegal and without jurisdiction.

4. Mr. V. K. Thiruvenkatachari appearing for the petitioners, urged the following contentions:--

(I) Prosecution having been once launched, though it has been quashed, there is no jurisdiction under the Act to hold adjudication proceedings for the same alleged violation;

(ii) The present Director of Enforcement, Mr. Wagh filed the second complaint in C. C. 5438 of 1969 alleging commission of certain offences and has come to the definite conclusion that the petitioners have violated certain provisions of the Act. He has already pre-judged the issue against the petitioners and has thereby rendered himself incompetent to hold the adjudication proceedings; and

(iii) The Director himself conducted or supervised the investigation and hence he is disentitled to hold the enquiry.

5. To appreciate the foregoing contentions, it is necessary to refer to certain section of the Act. The important sections are Ss. 23 & 23-D. Omitting portions which are not relevant, Sec. 23 reads thus:

'23 (1) If any person contravenes the provisions of Section 4, S. 5, S. 9 or sub-section (2) of S. 12 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 may be adjudged by the Director of Enforcement in the manner hereinafter provided or

(b)....................................

(2)....................................

(3) No court shall take cognisance--sub-section (1) except upon complaint in writing made by the Director of Enforcement, or

(b).............................

(4)..............................

Section 23-D reads:

23-D(1). For the purpose of adjudging under C1. (a) of Sub-section (1) of S. 23 whether any person has committed 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 inquiry, he is satisfied that the person has committed the contravention, he may impose such penalty as he thinks fit in accordance with the provisions of the said S. 23:

Provided that, if at any stage of the inquiry, the Director of Enforcement is of 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;

(2) While holding an enquiry under this section, the Director of Enforcement shall have power to summon and enforce the attendance of any person to give evidence or to produce a document or any other thing which, in the opinion of the Director of Enforcement may be useful for, or relevant to, the subject-matter of the inquiry

(3).......................

6. In AIR 1970 SC 494 the Supreme Court considered the scope of Section 23(1) and 23-D (1). The question considered was whether the Director of Enforcement, without following the procedure under Section 23-D, is entitled to straightway file a complaint under Section 23(1). As already noticed, except issuing notices to the petitioners stating that adjudication proceedings would be instituted, such proceedings were not initiated and conducted in accordance with the rules framed under the Act. All that was done was to call upon the petitioners to offer their explanations, and thereafter some investigation was made. Afterwards a complaint was straightway filed. Section 23(1) no doubt not in terms say that the prosecution could be launched for the contravention of the provisions of the Sections enumerated therein only if certain conditions are satisfied. But Sec. 23-D, which was introduced by Parliament by the Foreign Exchange Regulation (Amendment) Act 1957, makes it clear that the procedure laid down in Sec. 23-D(1) should be first followed in all cases in which proceedings are intended to be taken under Section 23 (1), the Director of Enforcement must first proceed under the principal clause of Section 23-D(1) and initiate proceedings for adjudication of penalty. He can at that stage, at his discretion, choose to file a complaint in a court for prosecution of the person concerned for the offence under S. 23(1). As to what the Director of Enforcement should do is pointed out by the Supreme Court at page 498:--

'In thus introducing two different proceedings Parliament put in the forefront proceedings for penalty to be taken by the Director of Enforcement by taking up adjudication, while the punishment to be awarded by the court, upon conviction, was mentioned as the second type of proceeding that could be resorted to. Section 23-D(1) is also divisible into two parts. The first part lays down what the Director of Enforcement has to do in order to adjudge penalty under Section 23(1)(a), and the second part, contained in the proviso, gives the power to the Director of Enforcement to file a complaint instead of imposing a penalty himself. In our opinion, these two Sections 23(1) and 23-D(1) must be read together, so that the procedure laid down in Section 23-D(1) is to be followed in all cases in which proceedings are intended to be taken under S. 23(1). The effect of this interpretation is that whenever there is any contravention of any section or rule mentioned in S. 23(1), the Director of Enforcement must first proceed under the principal clause of S. 23-D(1) and initiate proceedings for adjudication of penalty. He cannot at that stage, at his discretion, choose to file a complaint in a court for prosecution of the person concerned for the offence under Section 23(1)(b). The Director of Enforcement can only file a complaint by acting in accordance with the proviso to Section 23-D(1), which clearly lays down that the complaint is only to be filed in those cases where, at any stage of the inquiry, the Director of Enforcement comes to the opinion that, having regard to the circumstances of the case, the penalty which he is empowered to impose would not be adequate. Until this requirement is satisfied, he cannot make a complaint to the court for prosecution of the person concerned under Section 23 (1) and (b).'

7. In the above view, the Supreme Court quashed the complaint filed by the respondent against the petitioners as the respondent did not follow the procedure under Section 23-D(1). So far as the complaint filed against Pratap and Lennart Schussler alleging commission of offences as a result of conspiracy punishable under Section 120-B, I. P. C. is concerned, the Supreme Court held that this prosecution could proceed even though the procedure under Section 23-D(1) has not been followed. It is contended on behalf of the petitioners that the initiation of the complaint against these two petitioners, though that complaint was quashed by the Supreme Court, precludes the respondent from initiating proceedings under Section 23-D(1). In this connection reference was made to the affidavit of one Sri Ramachandran, who as the then Director of Enforcement, filed the first complaint. That affidavit appears to have been filed before the Supreme Court at the time of the hearing of Crl. Ap. 18 and 19 of 1969 perhaps finding that the Director of Enforcement had not expressed his conclusion that the penalty which he was empowered to impose would not be adequate and that, therefore, he filed the compliant. In that affidavit, Sri Ramachandran alleged'

'That during the course of the enquiry in the case of Messrs Rayala Corporation (P) Ltd., and another on the material before me an having regard to the circumstances of the case, I came to the conclusion that the penalty that I was empowered to impose would not have been adequate and that the case required to be tried by a Magistrate and, therefore, filed a complaint on the 17th March 1968.'

But the Supreme Court declined to give any weight to that affidavit. On the materials placed before the Supreme Court, it was observed at page 501-

'there is no material at all to show that any proceedings were taken in the manner indicated by the rules referred to above. There does not appear to have been any cause shown by either of the two accused, or consideration of such cause by the respondent to decide--whether adjudication proceedings should be held...............'

At page 502 it was observed:

'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. 23-D(1) on the basis of which he could have 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. 23-D (1)of the Act and is in violation of the safeguard provided by the Legislature for such contingencies'.

8. From the foregoing observations of the Supreme Court, the position comes to this. Notwithstanding the affidavit of the said Sri Ramachandran, the prescribed procedure under Section 23-D(1) was not followed before the complaint was a filed and there was no finding that the complaint became necessary on account of the respondent's opinion that the punishment which he could impose would not be adequate. Mr. Thiruvenkatachari contended that notwithstanding the absence of such a finding, the fact that a complaint was filed was itself sufficient to disentitle the respondent from initiating proceedings under Section 23-D. I am unable to accept this argument. There is no indication in the Act that once prosecution is laid under Section 23(1) without complying with Section 23-D, such an initiation or prosecution would be a bar against initiation of proceedings under S. 23-D(1). All that has happened is that an irregularity was committed in filing the prosecution without following the proper procedure of holding the enquiry first under Section 23-D(1). On account of that irregularity the prosecution has been quashed. there is nothing in principle nor on authority that once such an irregularity is committed, the correct procedure cannot be followed. The argument advanced on behalf of the petitioner, if accepted, would lead to undesirable results. The intendment of the legislation would be defeated if this contention were to prevail. The irregularity in the procedure would not obliterate the liability of the persons against whom such irregular proceeding was taken. Cases are not uncommon where, on account of some initial defect, they may fail in the first instance, but it could be properly instituted subsequently after following the prescribed procedure. For instance, if a complaint which requires prior sanction is filed without prior sanction and is dismissed for want of sanction, there is nothing in law to prevent the authority concerned from obtaining the sanction and filing a fresh complaint for the same alleged offence. I do not find any substance in the argument that the filing of the complaint under Section 23(1) without following the procedure under Section 23-D(1) bars the initiation of proceedings under Section 23-D(1).

9. The next contention urged on behalf of the petitioners is that the respondent, by reason of the allegation made in the complaint filed against Pratap and Lennart Schussler, has indicated clearly that he has come to a definite conclusion that certain provisions of the Act have been violated by the petitioners and that inasmuch as he has already pre-judged the issue, he is disqualified to hold the adjudication proceedings. In the complaint filed by Sri Ramachandran against the present petitioners in C. C. No, 8736 of 1968, elaborate details were given to make out a case of commission of several offences under the Act. Practically the allegations made in that complaint were repeated by his successor. Mr. Wagh in his complaint in C. C. 5438 of 1969. After setting out the several facts, it was stated in that complaint in paragraph 9:

'Thus it is clear that A. 1 and A. 2 agreed to commit illegal acts, namely, acquisition by A. 2 of foreign exchange illicitly and retaining the same abroad without surrendering the same to the Government of India and also to defraud the Government of India of Foreign Exchange thereby contravening Ss. 4(3), 5(1)(e) and 9 of the Foreign Exchange Regulation Act and Rule 132-A of the Defence of India (Amendment) Rules 1964 and further that between August 1963 and 1966 A. 1 and A. 2 in pursuance of the said agreement did commit acts in contravention of Sections 4(3), 5(1)(e) and 9 of the Forgone Exchange Regulation Act and Rule 132-A of the Defence of India (Amendment) Rules 1964, and thereby committed offence punishable under Section 120-B, I.P.C. read with Sections 4(3), 5(1)(e) and 9 of the F.E.R. Act and Rule 132-A of the defence of India (Amendment) rules 1964.' That complaint was wound up with the prayer that the said complaint may be tried along with C. C. 8736 of 1968. Referring to the aforesaid allegation it is contended on behalf of the petitioners that it is unequivocally clear from the above passage that Mr. Wagh has already come to the conclusion that the petitioners have contravened the provisions of the Act referred to therein an thereby committed the offences mentioned therein. It is, therefore, contended that in the adjudication proceedings the said Mr. Wagh cannot be expected to keep an open mind and consider the matter without bias. It is, therefore, contended that the proceedings initiated by him should not be allowed to be proceeded with. In support of the contention that bias is a serious infirmity in a quasi-judicial proceeding, certain decisions were referred to on behalf of the petitioners. In Manaklal v. Dr. Prem Chand, : [1957]1SCR575 , the Supreme Court dealt with a case of a complaint against an advocate filed under the Legal Practitioners' Act. The matter was enquired into by a Tribunal consisting of three members, one of whom happened to be an advocate who had appeared on behalf of the complainant in some other proceeding. It was contended that participation of that advocate in the Tribunal caused fatal infirmity in the constitution of the Tribunal itself. In dealing with this question, Gajendragadkar, J., as he then was, speaking for the Court, observed at page 429: It is well settled that every member of a tribunal that is called upon to try issues in judicial or quasi-judicially; and it is of the essence of judicial decisions and judicial administration that judges should be able to act impartially, objectively and without any bias. In such cases the test is not whether in fact a bias has affected the judgment; the test always is and must be whether a litigant could reasonably apprehend that a bias attributable to a member of the Tribunal might have operated against him in the final decision of the tribunal. It is in this sense that it is often said that justice must not only be done but must also appear to be done. As Viscount Cave LC. has observed in Frome United Breweries Co. v. Bath Justices, 1926 AC 586. 'This rule has been asserted, not only in the case of courts of Justice and other judicial tribunals, but in the case of authorities which, though in no sense to be called courts, have to act as Judges on the rights of others.' In dealing with cases of bias attributed to members constituting tribunals, it is necessary to make a distinction between pecuniary interest and prejudice so attributed. It is obvious that pecuniary interest, however small it may be in a subject-matter of the proceedings, would wholly disqualify a member from acting as a Judge. But where pecuniary interest is not attributed but instead a bias is suggested, it often becomes necessary to consider whether there is a reasonable ground for assuming the possibility of a bias and whether it is likely to produce in the minds of the litigant or the public at large a reasonable doubt about the fairness of the administration of justice. It would always be a question of fact to be decided in each case. 'The principle' says Halsbury 'Nemo debet esse Judex in causa propria sua precludes a justice, who is interested in the subject-matter of a dispute, from acting as a justice therein' (Halsbury's Laws of England, Vol. XXI page 535 para 952). In our opinion, there is and can be no doubt about the validity of this principle and we are prepared to assume that this principle applies not only to the justices as mentioned by Halsbury but to all tribunals and bodies which are given jurisdiction to determine judicially the right of parties.'

10 In Nageswara Rao v. A. P. Road Transport Corpn., : AIR1959SC308 the Supreme Court had to consider the question whether the Secretary Transport Department, who heard the representations of those who objected to the proposal of nationalising certain transport scheme, had bias or not in the matter of hearing. After giving a personal hearing, the Secretary placed the papers before the Chief Minister in charge of the Transport Department to make the order approving the scheme. The order was issued in the name of the Governor authenticated by the Secretary in charge of the Transport department. Subba Rao J., as he then was, speaking for the court, observed that the facts were such that the State Government gave hearing to the objectors in the manner prescribed by the rules made by the Governor. The learned Judge observed at page 1039 after referring to certain decisions.:

'The aforesaid decisions accept the fundamental principle of natural justice that in the case of quasi-judicial proceedings, the authority empowered to decide the dispute between opposing parties must be one without bias towards one side or other in the dispute. It is also a matter of fundamental importance that a person interested in one party or the other should not even formally, take part in the proceedings though in fact he does not influence the mind of the person, who finally decides the case. This is on the principle that justice should not only be done, but should manifestly and undoubtedly be seen to be done. In the instant case the hearing given by the Secretary, Transport Department; certainly offends the said principle of natural justice and the proceeding and the hearing given, in violation of that principle, are bad.'

11. In a similar case relating to the approval of a scheme of nationalisation of transport, the Supreme Court in A.P.S.R.T. Corporation v. Satyanarayana Transports, : AIR1965SC1303 had to consider the question whether the approval of the scheme by the Minister for Transport was vitiated on the ground of personal bias of the said Minister. On the basis of the affidavit filed before the High Court it was found that the Minister was incompetent to deal with the matter on account of his personal bias. Their Lordships of the Supreme Court agreed with that view and observed at page 1306:

'It is an elementary rule of natural justice that a person who tries a cause should be able to deal with the matter before him objectively, fairly and impartially. As has been observed in the Jewitt's Dictionary of English law 'anything which tends or may be regarded as tending to cause such a person to decide a case otherwise than on evidence must be held to be biased'. If a person has a pecuniary interest in the case brought before him, that is an obvious case of bias which disqualifies him to try the cause. If a person is hostile to a party whose cause he is called upon to try, that again would introduce the infirmity of bias and would disqualify him from trying the cause. In dealing with cases of bias, it is necessary to remember that 'no one can act in a judicial capacity if his previous conduct gives ground for believing that the cannot act with an open mind'. The broad principle which is universally accepted is that a person trying a cause even in quasi judicial proceedings, must not only act fairly, but must be able to act above suspicion of unfairness. As was observed in Frankin v. Minister of Town and Country Planning, 1948 AC 87, 'the use of the word 'bias' should be confined to its sphere. its proper significance is to denote a departure from the standard of evenhanded justice which the law requires from those who occupy judicial office of those who are commonly regarded as holding a quasi-judicial office, such as an arbitrator. The reason for this clearly is that having to adjudicate as between two or more parties, he must come to his adjudication with an independent mind, without any inclination or bias towards one side or the other in dispute.'

12. In Andhra Scientific Co. v. Seshagiri Rao, : (1961)IILLJ117SC an enquiry under the Industrial Disputes Act, 1947, was held against a workman by the General Manager. At a particular stage of the enquiry, the Managing Director of the employer company took over the enquiry after it became necessary to examine the General Manager as a witness. The evidence established that the Managing Director himself had actively procured evidence for the purpose of securing a conclusion against the workman. It was held that the enquiry was not conducted in a manner which ensured fair play required by principles of natural justice.

13. Placing reliance upon the foregoing observations it was contended on behalf of the petitioners that having regard to the specific allegation made by Mr. Wagh in the complaint referred to above, it is clear that Mr. Wagh has already come to the conclusion that the petitioners are guilty of certain offences and that, therefore, it is impossible for the petitioners to expect a fair enquiry before the said Mr. Wagh. On behalf of the respondent it is contended that the Supreme Court has found that no enquiry was at all held as contemplated under the Act, that there was much less a finding by any officer about the guilt of the petitioner and that, therefore, there is no bar against Mr. Wagh from holding the enquiry. It is further contended that what Mr. Wagh alleged is only based upon records placed before him and not as a result of any enquiry conducted by him and that therefore, it cannot be said that Mr. Wagh applied his mind and made those statements. It is also contended that under the Act it is the Director who alone can file a complaint and that the fact that he happened to file a complaint cannot disqualify him from holding an enquiry. It is pointed out that what has been stated in the complaint is based upon prima facie materials gathered from the records and that unless it can be said that the said officer has irrevocably come to the conclusion that the petitioners are guilty, there is no room to attribute any bias to him. To show that when an official act is done in a routine manner, no bias could be attributed, certain decisions were cited on behalf of the respondent. In Federal Trade Co. v. Cement Institute (1947) 333 US 683, the Federal Trade Commission which had to hold a quasi judicial enquiry, made an ex parte investigation and came to certain conclusions and expressed the opinion in the reports made to the Congress and to the President. It was contended that the said Commission was disentitled to hold an enquiry. In repelling this argument, it was observed at page 701:

'In the first place, the fact that the Commission had entertained such views as the result of its prior ex parte investigations did not necessarily mean that the minds of its members were irrevocably closed on the subject of the respondents' basing point practices. Here in contrast to the Commissioner's investigations, members of the cement industry were legally authorised participants in the hearings. They produced evidence--volumes of it. They were free to point out to the Commission by testimony, by cross-examination of witnesses, and by arguments, conditions of the trade practices under attack which they thought kept these practices within the range of legally permissible business activities.

Moreover, Marquette's position, if sustained, would to a large extent defeat the confessional purposes which prompted passage of the Trade Commission Act. Had the entire membership of the Commission disqualified in the proceedings against these respondents, this complaint could not have been acted upon by the Commission or by any other Government agency. Congress has provided for no such contingency. It has not directed that the Commission disqualify itself under any circumstances, has not provided for substitute commissioners should any of its members disqualify, and has not authorised any other Government agency to hold hearings, made findings, and issue, cease and desist orders in proceedings against unfair trade practices.'

14. In Kondala Rao v. Andhra Pradesh S. R. T. Corpn., : [1961]1SCR642 , the approval of a scheme of nationalisation of bus service under the Motor Vehicles Act, 1939, by the Minister in charge of Transport was attacked on the ground that it was vitiated by legal bias. The Minister concerned happened to preside over a sub-committee constituted to implement the scheme. The scheme was sponsored by the Andhra Pradesh State Road Transport Corporation, which was constituted under the Motor Vehicles Act. It was contended that the State Government had control over the Corporation and that on that account the approval of the scheme by the Minister was vitiated by bias. In repelling this argument, Subba Rao, J. as he then was, speaking for the Court observed at page 90-

'Though under the provisions of the Act, the State Government has some control, it cannot be said either legally or factually that the said Corporation is a department of the State Government. The State Government therefore, in deciding the dispute between the said undertaking and the operators of private buses is only discharging its statutory functions. This objection, therefore, has no merits. Nor can we say that it has been established that the Minister in charge of the portfolio of transport has been actuated by personal bias. The fact that he presided over the sub-committee constituted to implement the scheme of nationalisation of bus services in the West Godavari district does not in itself establish any such bias.'

15. In Morgan v. Bowker (1963) 2 WLR 860 on which reliance was next placed on behalf of the respondent, an enquiry conducted by certain Justices under the English Obscene Publications Act, 1959, arose for consideration. Certain films and photographs were seized from a business premises and were examined by some Justices, who, thereafter issued summons to the defendant. The defendant objected stating that the Justices could not be expected to approach the matter with open mind inasmuch as they had examined the articles before issuing summons and that the case should be heard by different Justices. The Justices decided that they could properly hear the case and passed certain orders. In appeal, it was contended that the Justices were biased inasmuch as they had already applied their mind before issuing summons. Rejecting this contention, Lord Parker C. J. observed at page 865.

'For my part, I feel that there is nothing whatsoever in this point, and I would go further any say that it is a point that ought never to have been taken. Justices must come to a prima facie view when the articles are brought before them, as these Justices did. They are not determining the matter; they are merely deciding whether a summons should issue. It seems to me quite wrong to suggest that because they have taken a prima facie view, they are in some way biased or incapable of approaching with an open mind the hearing of the summons. I feel that there is nothing whatsoever in that objection.'

16. In Dukharan Gupta v. Co-op. Agr. Association : AIR1960MP273 a Bench of the Madhya Pradesh High Court had to consider the validity of an enquiry held by a Secretary under the Madhya Pradesh Co-operative Societies Act, 1912, after having filed a complaint against the person concerned. It was contended that on account of the filing of the complaint the Secretary was personally prejudiced against the accused and that, therefore, the enquiry was biased. In rejecting this contention, the court observed at page 277-

'The Secretary of the Association had, no doubt filed a Criminal complaint against the petitioner. But he did so not in his personal capacity but by virtue of the office he held. It cannot therefore, be maintained that the opponent No. 2 the Secretary of the Association, was in any way personally prejudiced against the petitioner and the enquiry held by him was consequently biased.'

It does not appear from the facts of that case as to the nature of the complaint and on what allegations the complaint was based and how far the allegations made in the complaint had a bearing upon the matter that arose for enquiry.

17. On behalf of the respondent, cases in which sanction to prosecute was given by certain officers and which were subsequently tried by the same officers, were cited to show that even in such cases it was not held that there was any bias. In Queen Empress v. Saratchandra Rakhit. ILR (1889) Cal 766 a Sessions Judge sanctioned the prosecution under Section 195 Cri P. C. The same Judge tried that person for an offence punishable under Section 196 I. P. C. In Pandia Mahar In re, AIR 1924 Nag 23, a Sessions Judge sanctioned the prosecution on the allegation that the accused intentionally gave false evidence. Subsequently, the same Judge tried the case. In both these cases it was held that mere sanctioning the prosecution did not incapacitate the Judge from trying the case. In Rameshwar Bhartia v. State of Assam : 1953CriLJ163 a distinction has been made between sanction to prosecute and direction to prosecute. A District Magistrate in that case sanctioned the prosecution of a person for violation of certain provisions of Assam Food Grains Control Order 1947. The same Magistrate as Additional District Magistrate, tried and convicted the accused. It was contended that as the officer had given sanction for the prosecution. he was personally interested in the case within the meaning of Section 556 Cri P. C. and that, therefore, the trial and conviction were illegal. The Supreme Court rejected this contention holding that by mere giving sanction to prosecute the officer did not become personally interested and that the trial and contended in that case, placing strong reliance upon the observations of the Privy Council in Gokulchand Dwarkadas v. King that granting sanction was an important and substantial matter and not a mere formality and that, therefore, sanctioning prosecution meant that all the relevant facts were considered before sanctioning the prosecution. Rejecting that contention, Chandrasekhara Aiyer J. Speaking for the court observed at page 132:

'This however, is no authority for the position that a sanction stands on the same footing as a direction. It is true that the facts should be known to the sanctioning authority; but it is not at all necessary that the authority should embark also on an investigation of the facts, deep or perfunctory, before according the sanction. The decision lends no support to the view that wherever there is a sanction, the sanctioning authority is disabled under Section 556 of the Code. from trying the case initiated as a result of the sanction. On other hand, there is plenty of support for the opposite view.'

18. From these decisions what follows is this; If an officer comes to a prima facie conclusion on the basis of certain facts and takes action either by sanctioning the prosecution or by issuing show cause notice, he cannot be said to have determined any issue or to have come to any definite conclusion on any matter. Sanctioning prosecution or issuing show cause notice is a necessary preliminary before taking further action in certain cases. If they are mere formalities, the doing of those acts would not by itself disqualify the authority concerned from holding the enquiry. In the instant case, the complaint of the petitioners is not on account of what the respondent stated in the show cause notice. Their grievance is that in filing the complaint even before holding the adjudication enquiry the respondent has come to the definite conclusion that the petitioners have committed certain offences. The filing of the complaint by the respondent is not the first step in the adjudication As pointed out by the Supreme Court in AIR 1970 SC 494 the first step was to hold the adjudication enquiry and the filing of the complaint would arise only if, in the course of the adjudication proceedings, the officer holding the enquiry 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. The position has been reversed in the instant case. Instead of holding the adjudication enquiry in the first instance, the respondent filed the complaint first making allegations with a view to make out that the petitioners have violated certain provisions of the Act. Therefore, the foregoing decision, on which reliance was placed on behalf of the respondent, in which sanctioning the prosecution was the first step and hearing the case was the next step, do not strictly apply to the facts of these cases under consideration.

19. Reliance was next placed on behalf of the respondent upon the decision of the Patna High Court in Anil Bihari v. State of Bihar : (1967)IILLJ540Pat . In that case, the papers relating to a delinquent officer were scrutinised by the law Secretary conducted the enquiry. His findings were challenged on the basis that they were biased. It was contended that before the enquiry was started, the law Secretary had expressed the opinion on the papers sent by him and that, therefore, his conclusions after the enquiry were biased. That contention was repelled in the view that the mere looking into the papers and giving of opinion would not necessarily mean that he had been in any way influenced. On the facts of that case it was found that the enquiry was conducted with scrupulous regard to fair play that maximum latitude was shown to the delinquent officer and that no objection was taken at any stage. it was held for these reasons that the objection was not tenable.

20. On behalf of the respondent it was next contended that under the Act the respondent is the only authority competent to file the complaint under S. 23(1) and is the only authority competent to adjudicate under Section 23-D and that by the principle of doctrine of necessity, the respondent alone is competent to file the complaint as well as to hold the adjudication proceedings. It is therefore, contended that the fact that the respondent filed the complaint cannot disqualify him from holding the adjudication proceeding. A number of decisions were cited in support of the contention that where the necessity, of the case requires the same officer to take both the actions. he cannot be disqualified on the ground of bias when he takes action at the second stage. Dealing on the subject of misconduct, bias and like factors, the learned author Morris D. Forkosch in this Treatise on Administrative Law, observed at page 321:--

'The right to a fair hearing is the right to be judged impartially, without any factor entering into the determination save what is contained in a proper record, since 'a fair trial by an unbiased and non-partisan trier or the facts is of the essence of the adjudicatory process..........' Reason is the touchstone from which this aspect of fairness springs; given the facts, men's rationale being is to judge.'

Dealing with the question whether the said rule is invariable without any exception, the learned author observed at page 326:

'To the preceding discussion of bias and prejudice there is one exception, born of necessity, which concedes its presence as ordinarily reversible error but nevertheless ignores its presence when judicial review occurs. The reason is based upon certain facts, namely, administrative action is required (before judicial review may occur) one and only one agency or administrator can act; bias and prejudice are conceded; disqualification, however, will result in a continuation of existing conditions which may prove a source of evil; judicial review is not prevented; on such review the Court will, in effect though not in law or fact, check the entire record to ascertain whether the agency's decision is a legally correct one.'

Continuing, the learned author further observed at page 327:

'From the very necessity of the case has grown the rule that disqualification will not be permitted to destroy the only tribunal with power in the premises. If the law provides for a substitution of personnel on a board or court, or if another Tribunal exists to which resort may be had, a disqualified member may not act. But where no such provision is made, the law cannot be nullified or the doors to justice barred because of prejudice of disqualification of a member of a court or an administrative tribunal.'

21. In Jaffs v. New Zealand Dairy Production and Marketing Board (1967) 2 WLR 136 a certain dairy board had financial interest in an industry. the board was enjoined with a duty of making an adjudication on certain applications and no other party was competent to perform those duties. The question arose whether on account of the financial interest of the board, it was disqualified from doing certain things. The Privy Council referred to the dictum of Blackburn, J. in Mersey Docks Trustees v. Gibbs, (1866) 1 HL 93 that it is contrary to the general rule of law to make a person judge in his own cause, and observed at page 143:--

'It is clear from the provisions of the Act of 1961 that it was the intention of the New Zealand legislature to make an exception from the general rule? In their Lordships' opinion the conclusion is inescapable that it was intended that the Board should decide zoning questions even though its pecuniary interest might be affected.'

In Lakshmichand v. State of U. P. : AIR1962All117 the President of the Municipal Board alone was by virtue of Section 69-A of the U. P. Municipal Act. competent to hold an enquiry. That President held an enquiry against an officer of the municipality and submitted a report to the Government. The Government accepted the report and issued a notice to the delinquent officer to show cause why he should not be dismissed cause why he should not be dismissed from service. That officer prayed for the issue of a writ quashing the proceedings, his main contention being that the President, who conducted the enquiry was biassed against him. The court referred to the Principle of natural justice that no one should be the judge in his own cause and that a person who has a bias against another person should not try the case against that person and observed that on account of the doctrine of necessity that principle cannot be accepted and that the said principle applies not only to courts of Justice or Judicial tribunals but also to other authorities who have to act judicially.

22. The question is whether these decisions which lay down the principle of doctrine of necessity is applicable to the facts of these cases under consideration. I do not think so. It is true that the respondent is the only officer charged with the duty of holding an enquiry under Section 23-D and also with the duty of filing the complaint under Section 23(1). As pointed out by the Supreme Court in AIR 1970 SC 494 the proper procedure which the respondent should have accepted was first to hold the enquiry under Sec. 23-D and then to file the complaint under S. 23(1) if he was of the opinion that the penalty which he was empowered to impose would not be adequate. That is the procedure contemplated under the Act. But the process has been reversed in the instant case. Instead of holding the enquiry first, the complaint was first laid. After filing the complaint the proceeding is sought to be initiated for adjudication. The question is whether, in these circumstances, the doctrine of necessity can be availed of. Certainly not. The mistake committed by the respondent and the respondent is not entitled to take advantage of his own mistake.

23. The relevant passage in the complaint filed by the respondent, is already extracted in paragraph 9(Supra). It is on account of the allegations made in that complaint that the petitioners apprehend that the respondent cannot be reasonably expected to hold an unbiased enquiry in the adjudication proceedings. The passage extracted above is not a mere passage setting out the facts. The complaint sets out elaborately various acts with a view to make out the commission of an offence of conspiracy by Pratap and Lennart Schussler. So far as the company is concerned the allegations are made in paragraph 7 of the complaint stating that the company which was permitted to hold foreign exchange for import of raw materials from abroad had utilised the foreign exchange for purposes other than that for which it was granted. It is by adverting to the said violations and certain other acts said to have been committed by Pratap and Schussler, that the respondent alleged what offences had been made out. The allegation is positive and unequivocal. The question is, is it likely that the respondent will take an unbiased view of the matter in the adjudication proceedings after having made these categorical allegations? No doubt, Mr. Wagh has stated in his counter affidavit that he has not taken any decision. He assures the court that the case of the petitioners will be dealt with by him on merits after seeing their reply to the show cause notices and after examining all the materials furnished by them. His assurance may be genuine and bona fide. It is also true that the petitioners do not attribute any personal bias against Mr. Wagh. But the whole question is whether a person placed in the position of the petitioners would feel rest assured that they will have an unbiased enquiry and that they will have an unbiased enquiry and that there is no likelihood at all of any pre-conceived idea of Mr. Wagh being imported in the conduct of the enquiry against them. After having read the complaint I am unable to agree with the contention urged on behalf of the respondent that he will keep an open mind and hold the enquiry, however honest his assurances may be.

24. In the course of the arguments Mr. Thiruvenkatachari made a passing reference to the alleged participation of Mr. Wagh in the investigation before the complaint was filed. He contended that adjudication is a quasi judicial function whereas conducting investigation is merely executive and that Mr. Wagh in his capacity as Director of Enforcement had either conducted or supervised the investigation and is qualified on that account. In this connection he drew my attention to certain powers. Section 19-A confers power upon an officer of the enforcement specially authorised in this behalf by the Central Government to search suspected persons. Any officer of the enforcement authorised by the Central Government can under S. 19-C stop and search any conveyance. Section 19-D confers power upon an officer of enforcement of certain rank to search premises. But Section 19-E confers power only upon the Director of Enforcement to examine persons. Similarly Section 19-F confers power only upon the Director of Enforcement to summon a person to give evidence and to produce documents. Mr. Thiruvenkatachari, pointing out the distinction between Ss. 19A to 19D on the one hand, which refer generally to an officer of enforcement and Ss. 19E and 19F on the other which specifically refer to the Director of Enforcement contended that the Director of Enforcement is not expected to take part in the investigation. Mr. Wagh has in the counter affidavit denied that he either conducted the investigation or supervised the investigation. I accept his statement. In that view, it is unnecessary to consider the question whether the Director of Enforcement is or is not entitled to participate in the investigation before holding the enquiry under Section 23-D.

25. It was contended on behalf of the petitioner that the entire Enforcement Directorate is prejudiced against the petitioners and that the petitioners cannot have a fair and unbiased enquiry. I am afraid this is a very exaggerated and unfounded complaint. All that the petitioners are entitled to is to have a fair and unbiased enquiry. They cannot make a sweeping complaint against all in the Enforcement Directorate simply because certain complaints have been filed against them. All that they are entitled to is that the enquiry against them should be held by a person who has not expressed any view upon the alleged guilt of the petitioners.

26. To sum up my conclusions are these. The filing of the two complaints does not bar action being taken under S. 23-D. The impugned notices are not invalid on account of the filing of the two complaints. The order of the Supreme Court quashing one of the complaints also does not affect the validity of the impugnged notices. Notwithstanding the quashing of the complaint in C. C. 8736 of 1968 and notwithstanding the pendency of C. C. 5438 of 1969, action can be continued against the petitioners in pursuance of the impugned notices. Mr. Wagh is however on account of the allegations made by him in his complaint. C. C. 5438 of 1969 disqualified to hold the enquiry against the petitioners on the merits of the complaints, to continue the enquiry at the stage at which it stands at present. It is open to the Central Government to pass suitable orders to give effect to these directions by making suitable appointment if the enquiry against petitioners should be continued in pursuance of the impugned notices. The writ petitions are ordered in these terms. No. order as to costs.

27. Order accordingly.


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