Monotosh Saha Vs.
Spl. Director, Enforcement Directorate & ANR  INSC 1402 (21 August
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 5188 OF 2008 (Arising
out of SLP (C.) No. 1830 of 2007) Monotosh Saha ..Appellant Versus Special
Director, Enforcement Directorate And Anr. ..Respondents
Dr. ARIJIT PASAYAT,
in this appeal is to the order passed by a Division Bench of the Calcutta High
Court dismissing the appeal filed by the appellant under Section 35 of Foreign
Exchange Management Act, 1999 (in short the `Act').
facts in a nutshell are as follows:
Memorandum was issued
by the Enforcement Directorate, Ministry of Finance. On the basis of certain
statements recorded it was indicated therein that M/s Godsons (India) and its
proprietor, the present appellant had acquired foreign exchange contravening
the provisions of Section 8(1) of the Foreign Exchange Regulation Act, 1973 (in
short the `Foreign Exchange Act') thereby rendering him liable to be proceeded
under Section 50 of the Foreign Exchange Act. The memorandum was issued under
Rule 3 of the Adjudication Proceedings and Appeal Rules, 1974 (in short
`Adjudication Rules'). The reply to the show cause notice was filed by the
appellant. The Special Director, of Foreign Exchange Act passed an order on
13th May, 2005 imposing penalty of Rs.25 lakhs on the appellant. The appellant
preferred an appeal before the Appellate Tribunal (Foreign Exchange) (in short
the `Tribunal') and filed an application for dispensing with the requirement of
pre-deposit. By order dated 7.3.2006 the Tribunal passed an order directing
deposit of 60% of the penalty amount for the purpose of entertaining the
appeal. An appeal was filed under Section 35 of the Act which came to be
dismissed by the High Court holding that no case for hardship was made out
either before the Tribunal or before it and, therefore, there was no scope of
interference with the order of the Tribunal. However, time permitting the
deposit was extended.
support of the appeal, learned counsel for the appellant submitted that a case
for dispensing with pre- deposit was made out. In any event, in compliance with
this Court's interim order dated 5.2.2007 the amount of Rs.10,00,000/- has been
deposited with the concerned Directorate.
counsel for the respondents on the other hand submitted that the appellant did
not make out a case for dispensing with pre-deposit and, therefore, the order
of the Tribunal as affirmed by the High Court does not suffer from any
relating to grant of stay pending disposal of the matters before the concerned
forums have been considered in several cases. It is to be noted that in such
matters though discretion is available, the same has to be exercised
applicable principles have been set out succinctly in Silliguri Municipality
and Ors. v. Amalendu Das and Ors. (AIR 1984 SC 653) and M/s Samarias Trading
Co. Pvt. Ltd. v. S. Samuel and Ors. (AIR 1985 SC 61) and Assistant Collector of
Central Excise v. Dunlop India Ltd. (AIR 1985 SC 330).
is true that on merely establishing a prima facie case, interim order of
protection should not be passed. But if on a cursory glance it appears that the
demand raised has no leg to stand, it would be undesirable to require the
assessee to pay full or substantive part of the demand. Petitions for stay
should not be disposed of in a routine matter unmindful of the consequences
flowing from the order requiring the assessee to deposit full or part of the
demand. There can be no rule of universal application in such matters and the
order has to be passed keeping in view the factual scenario involved. Merely
because this Court has indicated the principles that does not give a license to
the forum/authority to pass an order which cannot be sustained on the
touchstone of fairness, legality and public interest. Where denial of interim
relief may lead to public mischief, grave irreparable private injury or shake
citizens' faith in the impartiality of public administration, interim relief
can be given.
has become an unfortunate trend to casually dispose of stay applications by
referring to decisions in Siliguri Municipality and Dunlop India cases (supra)
without analysing factual scenario involved in a particular case.
19 of the Act reads as follows:
"19(1). Save as
provided in sub-section (2), the Central Government or any person aggrieved by
an order made by an Adjudicating Authority, other than those referred to in
sub- section (1) of section 17, or the Special Director (Appeals), may prefer
an appeal to the Appellate Tribunal :
5 Provided that any
person appealing against the order of the Adjudicating Authority or the Special
Director (Appeals) levying any penalty, shall while filing the appeal, deposit
the amount of such penalty with such authority as may be notified by the
Provided further that
where in any particular case, the Appellate Tribunal is of the opinion that the
deposit of such penalty would cause undue hardship to such person, the
Appellate Tribunal may dispense with such deposit subject to such conditions as
it may deem fit to impose so as to safeguard the realisation of penalty."
significant expressions used in the provisions are "undue hardship to such
person" and "safeguard the realization of penalty". Therefore,
while dealing with the application twin requirements of considerations i.e.
consideration of undue hardship aspect and imposition of conditions to safeguard
the realization of penalty have to be kept in view.
noted above there are two important expressions in Section 19(1). One is undue
hardship. This is a matter within the special knowledge of the applicant for
waiver and has to be established by him. A mere assertion about undue hardship
would not be sufficient. It was noted by this Court in S. Vasudeva v. State of
Karnataka and Ors. (AIR 1994 SC 923) that under Indian conditions expression
"Undue hardship" is normally related to economic hardship. "Undue"
which means something which is not merited by the conduct of the claimant, or
is very much disproportionate to it. Undue hardship is caused when the hardship
is not warranted by the circumstances.
a hardship to be `undue' it must be shown that the particular burden to have to
observe or perform the requirement is out of proportion to the nature of the
requirement itself, and the benefit which the applicant would derive from
compliance with it.
word "undue" adds something more than just hardship. It means an excessive
hardship or a hardship greater than the circumstances warrant.
other aspect relates to imposition of condition to safeguard the realization of
penalty. This is an aspect which the Tribunal has to bring into focus. It is
for the Tribunal to impose such conditions as are deemed proper to safeguard
the realization of penalty. Therefore, the Tribunal while dealing with the
application has to consider materials to be placed by the assessee relating to
undue hardship and also to stipulate condition as required to safeguard the
realization of penalty.
above position was highlighted in Benara Valves Ltd. and Ors. v. Commissioner
of Central Excise and Anr. (2006 (13) SCC 347). The decision was rendered in
relation to Section 35F of the Central Excise Act, 1944 where also identical
the instant case Tribunal has rightly observed that the rival stands have to be
examined in detail with reference to material on record.
only other question that needs to be examined is whether any reduction of the
amounts to be deposited as directed by the Tribunal is called for.
the appellant had deposited the amount which was directed to be deposited.
However, for the balance amount demanded with a view to safeguard the
realization of penalty the appellant shall furnish such security as may be
stipulated by the Tribunal. On that being done, the appeal shall be heard
without requiring further deposit if the appeal is otherwise free from defect.
appeal is disposed of accordingly.
(Dr. ARIJIT PASAYAT)