BABULAL RAJMAL JAIN Vs. SPECIAL DIRECTOR, ENFORCEMENT

JUDGEMENT

(1.) THE only question raised in this petition under article 226 of the Constitution is whether it is permissible to initiate prosecution under section 56 of the Foreign Exchange Regulation Act, 1973 ('Act' for short) when adjudication proceedings under Section 50 read with section 51 of the Act are pending and have not resulted in any award of penalty.

(2.) BRIEFLY stated, the facts are that on 3rd December, 1994, on prior information one Vasant Sonu Kawade was apprehended at Sahar International Airport, Mumbai, when he was leaving for Dubai and the search of baggages resulted in recovery of foreign currency notes of US Dollars 5,91,900.00 and UAE Dirhams 260. The said Vasant Kawade admitted in his statement that he had purchased the seized foreign currencies from the petitioner and certain other persons. It seems that the son of the petitioner was also interrogated and he admitted that the petitioner was engaged in illegal sale and purchase of foreign currencies. Statements of other persons named by Vasant Kawade also implicated the petitioner in illegal transaction in foreign exchange. After he was arrested, the Department initiated penalty proceedings against the petitioner under section 50 read with section 51 of the Act and those proceedings are pending. On 7th March, 1996 the Enforcement Officer issued opportunity notice to the petitioner under section 61 of the Act dated 22nd January, 1996 that by purchasing foreign exchange to wit US Dollars 9,73,500.00 and selling US Dollars 9,73,500.00 in the aforesaid manner, the petitioner has contravened the provisions of section 8(1) and 8(2) of the Act, and by attempting to transfer US Dollars 10,000.00, the petitioner also contravened the provisions of section 8(1) read with section 64(2) of the said Act thereby rendering himself liable to be proceeded under section 56 of the Act. The petitioner was given an opportunity of showing proof within 7 days of the receipt of the notice that he had the requisite permission of the Reserve Bank of India for the aforesaid transaction failing which prosecution as contemplated under section 56 of the Act for the aforesaid contravention would be launched against him in the Court of law. The petitioner filed replies opposing the proposed prosecution mainly on the ground that the respondent has no right to initiate prosecution unless and until the adjudication proceedings initiated against him under section 50 have been completed and have resulted in an award of penalty. As the petitioner apprehe-nded that the respondents would launch prosec-ution in spite of his replies, he has approached this Court under article 226 of the Constitution.

(3.) THE arguments of Mr.Chinoy are opposed vehemently by the learned Additional Solicitor General Mr.Dada. It was urged by Mr.Dada that on a true and proper construction of section 56 of the Act there is no bar to the institution of criminal proceedings during the pendency of adjudication proceedings under section 51 of the Act. Mr.Dada urged that this is also evident from the various provisions of the Act including section 35, 41 and proviso to section 61. According to Mr.Dada the phrase "without prejudice to any award of penalty" in section 56 merely means without in any manner affecting the penalty, or in addition to penalty or that both proceedings are permissible in law. Mr.Dada further contended that there is nothing wrong if the prosecution is initiated during the pendency of the adjudication proceedings as the decision is left to a high functionary to decide to prosecute in accordance with the guidelines in the Act. Mr. Dada urged that such a discretion is held to be constitutional by the Supreme Court in Manohar Lal V/s The State of Maharashtra (AIR 1971 Supreme Court 1511). Mr.Dada pointed out that the judgment of the Supreme Court in Ralaya Corporation's case relied upon by Mr.Chinoy was given in the context of section 23(1){a) and (b) and section 23D of the old Act whereunder prosecution was an alternative to the penalty and not in addition to it. Mr.Dada also pointed out that decisions in the case of Uttam Chand (supra) and Didwania (supra) cannot be authoritative for the proposition that no criminal prosecution can be initiated till the adjudication is completed before the final authority. In both these cases, according to Mr.Dada, the final fact finding authority had decided in favour of the assessee and since the judgments had become final, the prosecution was set aside under section 482 of the Cr.P.C.