STANDERED CHARTERED BANK Vs. DIRECTORATE OF ENFORCEMENT

JUDGEMENT

(1.) Leave granted in SLP (Crl. ) No. 5892/2004. On receipt of notices under the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as the FERA) for showing cause why adjudication proceedings for imposition of penalty under Sections 50 and 51 of the 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 Union of India, in its turn has filed C. A. Nos. 1751 and 1944 of 1999 challenging the very decision, to the extent the High Court restricted the application of Section 68 (1) of the FERA.

(2.) Civil Appeal No. 1750/1999 is filed by the Standard Chartered Bank to which also notices have been issued under the Act. That challenges the dismissal of the writ Petition No. 509/1994 filed by the appellant therein, which was disposed of along with Writ Petition No. 1972 of 1994, by a common judgment.

(3.) These appeals which came up before a Bench of two learned Judges, were referred to a Bench of three Judges by order dated 20-4-2004. When the matters came up before a three Judge Bench, the three Judge Bench doubted the correctness of a decision relied upon by the bank and its officers in Assistant Commissioner, assessment-II, Bangalore and others v. Valliappa Textiles Ltd. and another (2003 (II) SCC 405) which was a Judgment of a Bench of three judges and by order dated 16-7-2004 referred the question to a Constitution Bench. The matters, thus, came up before a Constitution Bench, which, by Judgment dated 5-5-05, (reported in 2005 (4) SCC 530) overruled the decision in Assistant Commissioner, assessment-II, Bangalore and others. v. Valliappa textiles Ltd. and another (2003 (11) SCC 405) and sent down these appeals for being heard on merits by a Division Bench. The question that was decided was whether in a case where an offence was punishable with a mandatory sentence of imprisonment, a company incorporated under the Companies Act, can be prosecuted, as the sentence of imprisonment cannot be imposed on the company. The majority in the Constitution Bench, held that there could be no objection to a company being prosecuted for penal offences under the FERA and the fact that a sentence of imprisonment and fine has to be imposed and no imprisonment can be imposed on a company or an incorporated body, would not make Section 56 of the fera inapplicable and that a company did not enjoy any immunity from prosecution in respect of offences for which a mandatory punishment of imprisonment is prescribed. In the light of the said decision of the Constitution Bench, the controversy before us has narrowed down and we have to proceed on the basis that the appellant banks are liable to be prosecuted for offences under the FERA.