Rayala Corporation (P) Ltd. & Ors
Vs. Director of Enforcement, New Delhi [1969] INSC 150 (23 July 1969)
23/07/1969 BHARGAVA, VISHISHTHA BHARGAVA,
VISHISHTHA SHELAT, J.M.
VAIDYIALINGAM, C.A.
HEGDE, K.S.
GROVER, A.N.
CITATION: 1970 AIR 494 1970 SCR (1) 639 1969
SCC (2) 412
CITATOR INFO:
R 1970 SC 549 (3,6,20,24,28) RF 1971 SC1511
(6) R 1979 SC1588 (14)
ACT:
Foreign Exchange Regulation Act (7 of 1947),
and Foreign Exchange Regulation (Amendment) Act (39 of 1957), ss.'4(1), 23(1)
and 23D(1) --Section 23(1)(b), if ultra vires Art. 14-- Scope of proviso to s.
23(D)(1)--Defence of India Rules, 1962 R. 132A--Omission by Notification-If
prosecution permissible for offence committed when Rule was in existence.
HEADNOTE:
The premises of the first appellant were
raided by the Enforcement Directorate and certain records were seized.
The second appellant was the first
appellant's managing director. Thereafter, on 25th August 1967, notice was
issued by the respondent to the two appellants to show cause within fourteen
days why adjudication proceedings should not be instituted against them under
s. 23D(1) of the Foreign Exchange Regulation Act, 1947, for violation of ss. 4
and 9 of the Act, on the allegation that 2,44,713.70 Swedish Kronars had been
deposited by them in a bank account in Sweden instead of surrendering the
foreign exchange to an authorised dealer as required by the Act. After
investigation, on 4th November 1967, another notice was issued to the second
appellant stating that out of the total sum mentioned, he had acquired, during
1963 to 1965, Sw. Kr.
88,913.09, that he held the amount in a bank
in Sweden instead of offering it to the Reserve Bank of India and thereby
contravened ss. 4(1) and 9 of the Act, and asking him to show if he had any
special exemption for acquiring the foreign exchange. A similar show cause
notice was issued to the first appellant in. respect of the same amount on 20th
January 1968. On 16th March 1968, in supersession of the show cause notice
dated 25th August 1967, a further notice was addressed to both the appellants
to show cause within 14 days why adjudication proceedings under s. 23D of the
Act should not be held against them in respect of the balance of Sw. Kr.
1,55,801.41 and added that it had since been decided to launch a prosecution in
respect of the Sw.
Kr. 88,913.09 and on the 17th March 1968 a
complaint was filed against both the 'appellants in the Chief Presidency
Magistrate's Court for contravention of ss. 4(1), 5(1)(e) and 9 of the Act,
punishable under s.. 23(1)(b) of Act, and for violation rule 132A(2) of the
Defence of India Rules, 1962, punishable under rule 132A(4). Thereupon, the
appellants fried 'applications in the High Court under s.
561A, Criminal Procedure Code, for quashing
the proceedings in the Magistrate's court, but the applications were dismissed.
In appeal to this Court, it was contended
that: (1) The punishment under s. 23(1)(b) is severer and heavier than the
penalty to which a person is made liable if adjudication proceedings are taken
under s. 23(1)(a), but the section lays down no principles at all for
determining when the person concerned should be proceeded against under s. 23(1)(a)
and when under s. 23(1)(b) and has left it to the arbitrary discretion of the
respondent 'and hence violates Aft. 14 of Constitution; (2) Even if s. 23(1)(b)
is not void the respondent did not act in 'accordance with the 640 requirements
of the proviso to s. 23D(1)which lays down that a con plaint may be made at any
stage of the enquiry, but only if, having regarto the circumstances of the
case, the Director of Enforcement finds the the penalty which 'he is empowered
to impose under s. 23(1)(a) would not be adequate;
and (3) Since the Notification issued by the
Ministry of Home Affairs dated 30th March 1965 provided that R. 132A shall be
omitted except 'as respects things done or omitted to be done under that Rule,
a prosecution in respect of an offence punishable under that Rule could not be
instituted on 17th March 1968 when that Rule had ceased to exist even though it
might be in respect of an offence committed earlier during the period that the
rule was in force.
HELD: (1) The choice whether the proceeding
be taken under s. 23(1)(a) or 23(1)(b) against the person who is liable for
action for contravention under s. 23(1), is not left entirely to the discretion
of the Director of Enforcement but the criterion for making the choice is
indicated in the proviso to s. 23D(1). [648 A-B] The Foreign Exchange
Regulation (Amendment) Act, 1957, amended s. 23(1) and at the same also,
introduced s. 23D.
The intention of the Legislature from such
simultaneous amendment was that the two sections are to be read together.
While providing for alternative proceedings
under s. 23(1)(a) and s. 23(1)(b), the Legislature ensured that the procedure
laid down in s. 23D(1) was to be followed in all cases in which proceedings are
intended to be taken under s. 23 (1 ). Thus, 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. 23D(1) and
initiate proceedings for adjudication of penalty. He cannot at that stage, in
his discretion, choose to file a complaint in a court for prosecution of the
person concerned for the offence under s. 23(1)(b). Though the Legislature has
not used in either of the sub-sections specific words excluding the filing of a
complaint before proceedings for adjudication are taken under s. 23D(1), it
must be presumed that Parliament knew that if provision was made for two
alternative punishments for the same act, one differing from the other, and
without any limitations, such a provision would be void under Art. 14. In view
of the principle that an interpretation which would save a section should be
preferred ss. 23(1) and 23D(1) must be interpreted to mean that the Director of
Enforcement must first initiate proceedings under the principal clause of s.
23D(1) for adjudication of penalty and that he is empowered to file a complaint
in court for the offence under s. 23(1)(b) only when at any stage of the
adjudication enquiry,, he 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. [647 D, F--H; 648 E--H; 649 A--C] Shanti Prasad Jain v. The
Director of Enforcement,.
[1963] 2 S.C.R. 297;. followed.
(2) When such a safeguard is provided by the
Legislature it is necessary that the authority, which takes the steps of
instituting against that person proceedings, in which, a severer punishment can
be awarded, complies strictly with all the conditions laid down by law, that
is, the Director could file a complaint for prosecution in court only if,
having regard to the circumstances of the case, he finds that the. penalty that
he is empowered to impose in the adjudication proceedings would not be
adequate. [650 G- H] .
In the present case, the enquiry had been
instituted by the issue of the show cause notice dated 25th August 1967.
But it does not appear on 641 the record that
even after the issue of that notice, any such material came .before the
respondent which could be relevant for forming an opinion that the penalty
which he.
was empowered to impose for the contravention
in respect Sw. Krs. 88,913.09 would not be adequate. No doubt some
investigation was made, but the investigation would not be part of the enquiry
which had to be held in accordance with the Act and the Adjudication
Proceedings and Appeal Rules, 1957. Neither of the appellants had shown cause
in pursuance of the notice and there was no consideration, of such cause to
decide whether adjudication proceedings should be held or not. Nor were any
statements taken or recorded during an enquiry under s. 23D(1). Whatever
statements were recorded were in the course. of investigation and not in the
course of an enquiry under s. 23D(1). Therefore, the complaint must be held to
have been filed without satisfying the requirements and conditions of the
proviso to s. 23D(1) of the Act, and in .so far as it related to the contravention
of the provisions of ss. 4(1), 5(1)(e) and 9 of the Act, punishable under s.
23(1)(b), it must be held invalid. [651 D-E; 652 C-D, F-G; 653 B-D] (3) The
language used in the Notification of 30th March 1965 only affords protection to
action already taken while the rule was in force, but cannot justify initiation
of a new proceeding which will not be a thing done or omitted to be done under
the rule but, a new act of initiating, a proceeding after the rule had ceased
to exist. The offence alleged against the appellants is in respect of acts done
by them which cannot be held to be acts under that rule.
Unlike case of Wicks v. Director of Public
Prosecutions, [1947] A.C. 362, where an express provision was made. that the
operation of the Emergency Powers (Defence) Act, 1939 (a temporary Act) was not
to be affected by its expiry as respects things, previously done or omitted to,
be done, in.
the present case, the operation of r. 132A of
the Defence of India Rules has not been continued after its omission.
Section 6 of the General Clauses Act, 1897,
also could not be invoked,. because, the section does not apply to temporary
statutes, or rules and omissions. It only applies to repeals to. Central Acts.
Further, the Notification of the Ministry of Home Affairs omitting R. 132A, did
not make any such provision similar to that contained in s. 6 of the General
Clauses Act. Moreover, though s. 4(1) of the Foreign Exchange Regulation Act
was amended simultaneously with the omission of the r. 132A, the Legislature
did not make any provision that an offence previously committed, under r. 132A
would continue to remain punishable as an offence of contravention of s. 4(1)
of the Act nor was any provision made permitting operation of r. 132A itself to
permit institution of prosecutions in respect of such offences. Consequently,
after the omission of r. 132A the complaint is, incompetent even in respect of
the offence under Rule 132A(4). [654 A--D; 655 F H; 656 B--C, E--F; 657 A F] S.
Krishnan & Ors. v. The State of Madras, [1951] S.C.R.
621, applied.
State of M.P.v. Hiralal Sutwala, A.I.R. 1959
M.P. 93, 1.
K. Gas: Plant Manufacturing Co. Ramput v. The
King Emperor, [1947] F.C.R. 141, distinguished.
Seth Jugmendar Das v. State, A.I.R. 1951 All.
703, referred to.
CRIMINAL APPELLATE JURISDICTION: Criminal
Appeals Nos. 18 and 19 of 1969.
Appeal from the judgment and order dated October
16, 1968' of the Madras High Court in Criminal Misc. Petition No. 980 of 1968.
642 A.K. Sen, N.C. Raghavachari, W.S. Sitaram
and R.
Gopalakrishnan, for the appellants.
S.T. Desai, B.D. Sharma and S. P. Nayar., for
the respondent.
P.R. Gokulakrishnan, Advocate-General, Tamil
Nadu and V. Rangam, for the intervener.
Bhargava, J. These appeals, by certificate,
challenge a .common Order of the High Court of Madras dismissing applications
under section 561A of the Code of Criminal Procedure presented by the
appellants in the two appeals for quashing proceedings being taken against them
in the Court of the Chief Presidency Magistrate, Madras, on the basis of a
complaint filed on 17th March; 1968 by the respondent, the Director of
Enforcement, New Delhi. The Rayala Corporation Private Ltd., appellant in
Criminal Appeal No. 18 of 1969, was accused No. 1 in the complaint, while one
M.R. Pratap, Managing Director of .accused No. 1, appellant in Criminal Appeal
No. 19/1969 was accused No. 2.
The circumstances under which the complaint
was filed may be briefly stated.
The premises of accused No. 1 were raided by
the Enforcement Directorate on the 20th and 21st December, 1966 and certain
records were seized from the control of the Manager. Some enquiries were made
subsequently and, thereafter, on the 25th August, 1967, a notice was issued by
the respondent to the two accused to show cause why adjudication proceedings
should not be instituted against them for violation of sections 4 and 9 of the
Foreign Exchange Regulation Act VII of 1947 (hereinafter referred to as
"the Act") on the allegation that a total sum of 2,44,713.70 Swedish
Kronars had been deposited in a Bank account in Sweden in the name of accused
No. 2 at the instance of accused No. 1 which had acquired the foreign exchange
and had failed to surrender it to. an authorised dealer as required under the
provisions of the Act. They were called upon to show cause in writing within 14
days of the receipt of the notice. Thereafter, some correspondence went on
between the respondent and the two accused and, later, on 4th November, 1967,
another notice was issued by the respondent addressed to accused No. 2 alone
stating that accused No. 2 had acquired a sum of Sw. Krs. 88,913.09 during the.
period 1963 to 1965 in Stockholm, was holding that sum in a bank account, and
did not offer or cause it to be offered to the Reserve Bank of India on behalf
of the Central Government, so that he had contravened the provisions of s. 4(1)
and s. 9 of the Act, and affording to him. an opportunity under s. 23(3) of the
Act of showing, within 15 days from the receipt of the notice, that he had
permission or special exemption from the Reserve Bank of India in his favour
for acquiring this amount of foreign exchange ,and for not surrendering the
amount in accordance with law. A similar show cause notice was issued to
accused No. 1 in respect of the same amount on 20th January, 1968, mentioning
the deposit in favour of accused No. 2 and failure of accused No. 1 to
surrender the amount, and giving an opportunity to accused No. 1 to produce the
permission or special exemption from the Reserve Bank of India. On the 16th
March, 1968, another notice was issued addressed to both the accused to show
cause in writing. within 14 days of the receipt of the notice why adjudication
proceedings as contemplated in s.
23-D of the Act should not be held against
them in respect of a sum of Sw. Krs. 1,55,801.41 which were held in a bank
account in Stockholm in the name of accused No. 2 and in respect of which both
the accused had contravened the provisions of ss. 4( 3 ), 4( 1 ), 5(1)(e) and 9
of the Act.
The notice mentioned that it was being issued
in supersession of the first show cause notice dated 25th August, 1967, ,and
added that it had since been decided to launch a prosecution in respect of Sw.
Krs. 88,913.09. The latter amount was the amount in respect of which the two
notices of 4th November, 1967 and 20th January, 1968 were issued to the two
accused, while this notice of 16th March, 1968 for adjudication proceedings
related to the balance of the amount arrived at by deducting this sum from the
original total sum of Sw. Krs. 2,44,71-3.70. The next day, on 17th March, 1968,
a complaint was filed against both the accused in the Court of the Chief
PresidenCy Magistrate, Madras, for contravention of the provisions of ss. 4( 1
), 5( 1 ) (e) and 9 of the Act punishable under s. 23 (1 ) (b) of the Act. In
addition, the complaint also charged both the accused with violation of Rule
132-A(2) of the Defence of India. Rules (hereinafter referred to as "the
D.I. Rs.") Which was punishable under Rule 132-A(4) of the said Rules.
Thereupon, both the accused moved the High
Court for quashing the proceedings sought to be taken against them on the basis
of this complaint. Those applications having been dismissed, the appellants
have come up in these appeals challenging the order of the High Court
dismissing their applications and praying for quashing of the proceedings being
taken on the basis of that complaint.
In these appeals. Mr. A.K. Sen, appearing on
behalf of the appellants, has raised three points. In respect of the
prosecution for violation of ss. 4(1), 5(1)(e) and 9. of the Act punishable
under s. 23 (1 ) (b) of the Act, the principal ground raised is that s.
23(1)(b) of the Act is ultra rites Article 14 of the Constitution inasmuch as
it provides for a punishment heavier and severer than the punishment or penalty
provided for the same acts under s. 23(1)(a) of the Act. In the alternative,
the second point taken is that, even if s. 23 ( 1 ) (b) is not void, the
complaint in 644 respect of the offences punishable under that section has not
been filed properly in accordance with the proviso to s. 23-D (1 ) of the Act,
so that proceedings cannot be competently taken on the basis of that complaint.
The third point raised relates to the charge of violation of R. 132-A(2) of the
D.I. Rs. punishable under R. 132-A(4) of those Rules and is to the effect that
R. 132-A of the D.I.
Rs. was omitted by a notification of the
Ministry of Home Affairs dated 30th March, 1965 and, consequently, a
prosecution in respect of an offence punishable under that Rule could not be
instituted on 17th March, 1968 when that Rule had ceased to exist. On these
three grounds, the order quashing the proceedings being taken on the complaint
in respect of all the offences mentioned in it has been sought in these
appeals.
To appreciate the first point raised before
us and to.
deal with it properly, we may reproduce below
the provisions of s. 23 and s. 23-D(1) of the Act :-- "23. Penalty and
procedure.--(1) If any person contravenes the provisions of section 4, section
5, section 9, section 10, sub- section. (2) of section 12, section 18, section
18A or section 18B or of any rule, direction or order made there under 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) upon conviction by a
Court, be punishable with imprisonment for a term which may extend to two
years, or with fine, or with both.
(IA) If any person contravenes any of the
provisions of this Act, or of any rule, direction or order made there under,
for the contravention of which no penalty is expressly provided, he shall, upon
conviction by a court be punishable with imprisonment for a term which may
extend to two years, or with fine, or with both.
(lB) Any Court trying a contravention under
sub-section (1) or sub-section (IA) and the authority adjudging any
contravention under clause (a) of sub- section (1 ) may, if it thinks fit, and
in addition to any sentence or penalty which it may impose for such
contravention, direct that any currency, security, gold or silver, or goods or
any other money or property, In respect of which the contravention has taken
place, 645 shall be confiscated to the Central Government and further direct
that the foreign exchange holdings, if any, of the person committing the
contravention or any part thereof shall be brought back into India or shall be
retained outside India in accordance with the directions made in this behalf.
Explanation. For the purposes of this
sub-section, property in respect of which contravention has taken place shall
include deposits in a bank, where the said property is converted into such
deposits.
(2) Notwithstanding anything, contained in
section 32 of the Code of Criminal Procedure, 1898 (Act 5 of 1898), it shall be
lawful for any magistrate of the first class, specially empowered in this
behalf by the State Government, and for. any presidency magistrate to pass a
sentence of fine exceeding two thousand rupees on any person convicted of an
offence punishable under this section.
(3) No Court shall take cognizance-- (a) of
any offence punishable under sub- section (1) except upon complaint in writing
made by the Director of Enforcement, or (aa) of any offence punishable under
sub- section (2) of section 191,-- (i) where the offence is alleged to have
been committed by an officer of Enforcement not lower in rank than an Assistant
Director of Enforcement, except with the previous sanction of the Central
Government;
(ii) Where the offence is alleged to have
been committed by a Officer of Enforcement lower in rank than an Assistant
Director of Enforcement, except with the previous sanction of the Director of
Enforcement, or;
(b) of any offence punishable under sub-
section (IA) of this section or section 23F, except upon complaint in writing
made by the Director of Enforcement or any officer authorised in this behalf by
the Central Government or the Reserve Bank by a general or special order;
Provided that where any such offence is the
contravention of any of the provisions of this Act or any rule, direction or
order made there under 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.
646 (4) Nothing in the first proviso to
section 188 of the Code of Criminal Procedure, 1898 (Act 5 of 1898), shall
apply to any offence punishable under this section." 23D. Power to
adjudicate.--(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
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 section 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." A plain reading of s. 23 (1 ) of the Act shows that under
this sub-section provision is made for action being taken against any per-son
who contravenes the provisions. of ss.
4, 5, 9, 10, 12(2), 18,18A or 18B or of any
rule, direction or order made there under and cls. (a) and (b) indicate the two
different proceedings that can be taken for such contravention. Under cl. (a),
the person is liable to a penalty only, and that penalty cannot exceed three
times the value of the foreign exchange in respect of which the contravention
has taken place, or Rs. 5,000/-, whichever is more. This penalty can be imposed
by an adjudication made by the Director of Enforcement in the manner provided
in s. 23D of the Act. The alternative punishment that is provided in cl. (b) is
to be imposed upon conviction by a Court when the Court can sentence the person
to imprisonment for a term which may extend to two years, or with fine, or with
both.
Clearly, the punishment provided under s.. 23
(1)(b) is severer and heavier than the penalty to which the person is made
liable if proceedings are taken under s. 23(1)(a) instead of prosecuting him in
a Court under s. 23 (1)(b).
The argument of Mr. Sen is that this section
lays down no principles at all, for determining when the per-son concerned
should be proceeded 'against under s. 23(1)(a) and when under s. 23(1)(b), and
it would appear that it is left to the arbitrary discretion of the Director of
Enforcement to decide which proceedings should be taken. The liability of a
person for more or less severe punishment for the same act at the sole
discretion and arbitrary choice of the Director of Enforcement, 647 it is
urged, denies equality before law guaranteed under Art. 14 of the Constitution.
The submission made would have carried great
force with us but for our view that the effect of s. 23D of the Act is that the
choice in respect of the proceeding to be taken under s. 23(1)(a) or s,.
23(1)(b) has not been left to the unguided and arbitrary discretion of the
Director of Enforcement, but is governed by principles indicated by that
section,. In this connection, it is pertinent to note that s. 23 (1) of the Act
'as originally enacted in 1947 did not provide for alternative punishment for
the same contravention and contained only one single provision under which any
person contravening any of the provisions of the Act or of any rule, direction
or order made there under was punishable with imprisonment for a term which
could extend to two, years or with fine or with both, with the additional
clause that any Court trying any such contravention might, if it thought fit
and in addition to any sentence which it might impose for such contravention,
direct that any currency, security, gold or silver, or goods or other property
in respect of which the contravention has taken place shall be confiscated. No
question of the applicability of Art. 14 of the Constitution could, therefore,
'arise while the provision stood as originally enacted.
Parliament, by Foreign Exchange Regulation
(Amendment) Act XXXIX of 1957, amended s. 23(1) and, at the same time, also
introduced s. 23D in the Act. It was by this amendment that two alternative
proceedings for the same contravention were provided in s. 23 (1 ). 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 23D(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 s.
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 ss. 23(D and
23D(1) must be read together, so that the procedure laid down in s. 23D(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 trader the principal clause of s. 23D(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 s.
23( 1 )(b). The Director of Enforcement can
only file a complaint by acting Ll4Sup./69--12 648 in accordance with the
proviso to S. 23D(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 s. 23 (1) (b).
The choice of the proceeding to be taken against
the person, who is liable for action for contravention under S. 23 (1), is,
thus, not left entirely to the discretion of the Director of Enforcement, but
the criterion for making the choice is laid down in the proviso to s. 23D(1).
It cannot possibly be contended, and no attempt was made by Mr. Sen to contend,
that, if we accept this interpretation that the right of the Director of
Enforcement to make a complaint to the Court for the offence under s. 23 (1)
(b) can be exercised only in those cases where in accordance with the proviso,
he comes to the opinion that the penalty which he is empowered to impose would
not be adequate, the validity of S. 23 (1) (b) of the Act can still be
challenged.
In this connection, it was urged before us
that the language of the principal clause of s. 23D(1) taken together with the
language of the proviso does not justify an interpretation that a complaint for
an offence under S. 23 (1) (b) cannot be made by the Director of Enforcement
except in accordance with the proviso, particularly because the principal
clause of S. 23D(1) merely lays down the procedure that has to be adopted by
the Director Of Enforcement when proceeding under S. 23 (1) (a), and contains
no. words indicating that such a proceeding must invariably be resorted to by
him whenever he gets information of a contravention mentioned in s. 23(1).
The language does not contain any ,words
creating a bar to his proceeding to file a complaint straightaway instead of
taking proceedings for adjudication under S. 23D(1). It is true that neither in
S. 23(1) itself nor in S. 23D(1) has the Legislature used specific words
excluding the filing of a complaint before proceedings for -adjudication are
taken under S. 23D(1). If any such words had been used, no such controversy
could have been raised as has been put forward before us in these appeals. We
have, however, to gather the intention of the Legislature from the enactment as
a whole.
In this connection, significance -attaches to
the fact that S. 23D(1) was introduced simultaneously with the provision made
for alternative proceedings under S. 23 (1) in its two cls. (a) and (b). It
appears to be obvious that the Legislature adopted this course so as to ensure
that all proceedings under S. 23(1) are taken in the manner laid down in S.
23D(1). Parliament must be credited with the knowledge that, if provision is
made for two alternative punishments for the same act one differing from the
other without any limitations, such a provision would be void under Art. 14 of
649 the Constitution; and that is the reason why Parliament simultaneously
introduced the procedure to be adopted under s. 23D(1) in the course of which
the Director of Enforcement is' to decide whether a complaint is to be made in
Court and under what circumstances he can do so. We have also to keep in view
the general principle of interpretation that, if a particular interpretation
will enure to the validity of a law, that interpretation must be preferred. In
these circumstances, we have no hesitation in holding that, whenever there is a
contravention by .any person which is made punishable under either cl. (a)or
cl. (b) of s. 23(1), the Director of Enforcement must first initiate
proceedings under the principal clause of s..23D( 1 ) and he is empowered to
file a complaint in Court only when he finds that he is required to do so in
accordance with the proviso.
It is by resorting to the proviso only that
he can place that person in greater jeopardy of being liable to a more severe
punishment under s. 23(1)(b) of the Act.
The view we have taken is in line with the
decision of this Court in Shanti Prasad Jain v. The Director of Enforcement(1),
where this Court considered the validity of s. 23(1)(a) and s. 23D which were
challenged on the ground of two alternative procedures being applicable for
awarding punishment for the same act. The Court noticed the position in the
following words :-- "It will be seen that when there is a contravention of
s. 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 s. 23(1)(a), or he may send it on to a Court if he considers
that a more severe penalty than he can impose is called for. Now, the
contention of the appellant is that when the case is. transferred to a Court,
it will be tried in accordance with the procedure prescribed by the Criminal
Procedure Code, but that when the Director himself tries it, he will follow the
procedure prescribed therefore under the Rules framed under the Act, and that
when the law provides for the same offence being tried under two procedures,
which are substantially different, and it is left to the discretion of an
executive officer whether the trial should take place under the one or the
other of them, there is clear' discrimination, and Art. 14 is contravened.
Therefore, s. 23(1)(a) must, it is argued, be
struck down as unconstitutional and the imposition of fine on the appellant
under that section set aside as illegal." (1)" [1963] 2 S.C.R. 297.
650 The Court then distinguished the
provisions of the Act with the law considered in the case of State of West
Bengal v.
Anwar A1i(1) and held -.- "Section 23D
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 than what he is authorised to impose should be
awarded." On this view about the effect of S. 23D, the Court gave the
decision that the power conferred on the Director of Enforcement under S. 23D
to transfer cases to a Court is not unguided and arbitrary, and does not offend
Art. 14 of the Constitution; and s. 23 (1) (a) cannot be assailed as
unconstitutional. In that case, the argument was that s.
23(1)(a) should be struck down, because the
procedure prescribed by it permitted proceedings to be taken by the Director of
Enforcement himself which procedure did not confer the same rights on the
defence as the procedure prescribed for trial if the Director of Enforcement
filed a complaint for the offence under s. 23 (1) (b). In the case before us,
it is s. 23(1)(b) which is challenged and on a slightly different ground that
it provides for a higher punishment than that provided by S. 23 (1) (a). The
answer to both the questions is found in the view taken by us in the present
case as well as by this Court in the case of Shanti Prasad Jain(2) that the
Director of Enforcement, though he has power to try the case under S. 23 (1)
(a), can only send the case to the Court if he considers that a severer
punishment than what he is authorised to impose should be awarded. The Court in
that case also thus accepted the principle that S. 23D limits entirely the
procedure the Director of Enforcement has to observe when deciding whether the
punishment should be under s. 23 (1) (a) or under S. 23 (1) (b).
However, we consider that, in this case,
there is considerable force in the second point urged by Mr. Sen on behalf of
the appellants that the respondent, in filing the complaint on 17th March,
1968, did not act in accordance with the requirements of the proviso to s.
23D(1). We have held above that the proviso to S. 23D(1) lays down the only
manner in which the Director of Enforcement can make a complaint and this
provision has been laid down as a safeguard to ensure that a person, who is
being proceeded against for a contravention under S. 23(1), is not put in
danger of higher and severe punishment at the choice and sweet-will of the
Director of Enforcement. When such a safeguard is provided by legislature, it
is necessary that the authority, which takes the step of instituting against
that person proceedings in which a severe punishment can be awarded, complies
strictly (1) [1952] S.C.R. 284.
(2) [19631 2 S.C.R. 297.
651 with all the conditions laid down by law
to be satisfied by him before instituting that proceeding. in the present case,
therefore, we have to see whether the requirements of the proviso to s. 23D(1)
were satisfied at the stage when the respondent filed the impugned complaint on
17th March, 1968.
The proviso 'to s. 23D(1) lays down that the
complaint may be made at any stage of the enquiry but only if, having regard to
the circumstances, of the case, the Director of Enforcement finds that the
penalty which he is empowered to impose would not be adequate. It was urged by
Mr. Sen that, in this case, the complaint was not filed as a result of the
enquiry under the principal clause of s. 23D(1) at all and, in any case, there
was no material before the respondent on which he could have formed the opinion
that the penalty which he was empowered to impose would not be adequate in
respect of the stun of Sw. Krs. 88,913.09 which, it was alleged, had been
acquired by the two accused during the period 1963 to 1965 and kept in deposit
against law.
Arguments at some length were advanced before
us on the question as to what should be the stage of the enquiry at which the
Director of Enforcement should form his opinion and will be entitled to file
the complaint in Court. It appears to us that it is not necessary in this case
to go into that question. It is true that the enquiry in this case under s.
23D( 1 ) had been instituted by the issue of the show cause notice dated 25th
August, 1967, that being the notice mentioned in Rule 3 (1 ) of the
Adjudication Proceedings and Appeal Rules, 1957. On the record, however, does
not appear that, even after the issue of that notice, any such material came
before the respondent which could be relevant for forming an opinion that the
penalty which he was empowered to impose for the contravention in respect of
the sum of Sw. Krs. 88,913.09 would not be adequate. The respondent, in the
case of accused No. 2, appears to have formed 'a prima. facie opinion that a
complaint should be made against him in Court when he issued the notice on 4th
November, 1967 under the proviso to s. 23(3) of the Act, and a similar opinion
in respect of accused No. 1 when he issued the notice on 20th January, 1968
under the same proviso.
There is, however, no information on the
record to indicate that, by the time these notices were issued, any material
had appeared before the respondent in the course of the enquiry initiated by
him through the notice dated 25th August, 1967 which could lead to the opinion
being formed by the respondent that he will not be in a position to impose
adequate penalty by continuing the ,adjudication proceedings. Even
subsequently, when one of the accused replied to the notice, there does not
appear to have been brought before the respondent any such relevant material.
Mr. S.T. Desai on behalf of the respondent
drew our attention to para. 3(E) of the petition presented by accused No. 1 for
652 certificate under Art. 132(1) and Art. 134(1)(c) of the Constitution in
this case which contains the following pleading :
"In this case, having issued show cause
notice dated 25-8-67 in respect of the subject matter of the pending
prosecution and having taken various acts, taking statements, taking recorded
statements, investigations, the respondent did not hold an enquiry for the
purpose of his forming an opinion that the accused is guilty of violations and
that the penalty is not adequate and as such, the prosecution filed in C.C.
8756 of 68 is liable to be quashed on this ground." Relying on this pleading,
Mr. Desai urged that it amounts to a admission by accused No. 1 that, during
enquiry, various statements were taken and recorded and investigations made, so
that we should not hold that there was no material on the basis of which the
respondent could' have formed the opinion that it was a fit case for making a
complaint. The pleading does not show that any statements were taken or
recorded during the course to the enquiry held under s. 23D( 1 ) of the Act in
the manner laid down by the Adjudication Proceedings and Appeal Rules, 1953
Under those Rules, after a notice is issued, the Director of Enforcement is
required to consider the cause shown by such person in response to the notice
and, if he is of the opinion that adjudication proceedings should be held, he has
to fix a date for the appearance of that person either personally or through
his lawyer or other authorised representative. Subsequently, he has to explain
that the person proceeded against or his lawyer or authorised representative
the offence alleged to have been committed by such person indicating the
provisions of the Act or of the rules, directions or orders made there under in
respect of which contravention is alleged to have taken place, and then he has
to give an opportunity to such person to produce such documents or evidence a
he may consider relevant to the inquiry. It is on the conclusion of such an
inquiry that the Director can impose a penalty under s. 23(1)(a). In the
present case, there is no material at all show that any proceedings were taken
in the manner indicate by the Rules referred to above. There does not appear to
has 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. It is true that there is some material to indicate that, after the issue
of notice dated 25-8-1967, some investigations were carried on by the
respondent; but these investigations would not be part of the inquiry which had
to be held in accordance with Adjudication Proceedings and Appeal Rules, 1957.
It appears that, at one stage, before the complaint was filed, a writ petition
was moved under Art. 226 of the Constitution in the High Court of Madras
praying for the quashing of 653 the notice dated 25th August, 1967. The order
made' by the High Court on one of the interim applications in connection with
that notice shows that, while that writ petition was pending, some
investigations were permitted by the Court, but further penal proceedings in
pursuance of that notice were restrained. This clearly indicates that whatever
statements were recorded by the respondent as mentioned in the petition of
accused No. 1 referred to above must have been in the course of investigation
and not in the course of the inquiry under s. 23D ( 1 ) of the Act. 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. 23D( 1 ) 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. 23D(1) of the Act and is
in violation of the safeguard provided by the Legislature for such
contingencies. The complaint, insofar as it related to the contravention by the
accused of provisions of ss. 4 ( 1 ), 5 ( 1 ) ( e ) and 9 of the Act punishable
under s. 23(1)(13) is concerned, is invalid and proceedings being taken in
pursuance of it must be quashed.
There remains for consideration the question
whether proceedings could be validly continued on the complaint in respect of
the charge under R. 132A(4) of the D.I.Rs.
against the two accused. The two relevant
clauses of Rule 132A are as follows:
"132A. (2) No person other than an
authorised dealer shall buy or otherwise acquire or borrow from, of sell or
otherwise transfer or lend to, or exchange with, any person not being an
authorised dealer, 'any foreign exchange.
. . . . . . . . . . . . . . . . . . . . . .
(4) If any person contravenes any of the
provisions this rule, he shall be punishable with imprisonment for a term which
may extend to two years, or with fine, or with both; and any court trying such
contravention may direct that the foreign exchange in respect of which the
court is satisfied that this rule has been contravened, shall be forfeited to
the Central Government." The charge in the complaint against the two
accused was that they had acquired foreign exchange to the extent of Sw. Krs.
88,913.09 in violation of the prohibition
contained in R. I32A(2) during the period when this Rule was in force, so that
they became liable to punishment under R.132A(4). Rule 132-A as a whole ceased
to be in existence as a result of the notification issued by the Ministry 654
of Home Affairs on 30th March, 1955, by which the Defence of India (Amendment)
Rules, 1965 were promulgated.
Clause 2 of these Amendment Rules reads as
under :-- "In the Defence of India Rules, 1962, rule 132A (relating to
prohibition of dealings in foreign exchange) shall be omitted except as
respects things done or omitted to be done under that rule." The argument
of Mr. Sen was that, even if there was a contravention of R. 132A(2) by the
accused when that Rule was in force, the act of contravention cannot be held to
be a "thing done or omitted to be done under that rule," so that,
after that rule has been omitted, no prosecution in respect of that contravention
can be instituted. He conceded the .possibility that, if a prosecution had
,already been started while R. 132A was in force, that prosecution might have
been competently continued. Once the Rule was omitted altogether, no new
proceeding by way of prosecution could be initiated even though it might be in
respect of an offence committed earlier during the period that the rule was in
force. We are inclined to agree with the submission of Mr. Sen that the
language contained in' el. 2 of the Defence of India (Amendment) Rules, 1965
can only afford protection to action already taken while the rule was in force,
but cannot justify initiation of a new proceeding which will not be a thing
done or omitted to be done under the rule but a new act of initiating a
proceeding after the rule had ceased to exist. On this interpretation, the
complaint made for the offence under R. 132A(4) of the D.I. Rs., after 1st
April, 1965 when the rule was omitted, has to be held invalid.
This view of ours is in line with the general
principle enunciated by. this Court in the case of S. Krishnan and Others' v.
The State of Madras(1), relating to .temporary enactments, in, the following
words :-- "The general rule in regard to a temporary statute is that, in
the absence of special provision to the contrary, proceedings which are being
taken against a person under it will ipso facto terminate as soon as the
statute expires." Mention may also be made to a decision of a learned
single Judge of the Allahabad High Court in Seth Jumendar Das and Others v.
State(2), where a similar view was taken when considering the effect of the
repeal of the Defence of India Act, 1939, and the (1) [1951] S.C.R. 621. (2)
A.I.R. 1951 All. 703.
655 Ordinance No. XII of 1946 which had
amended s. 1 (4) of that Act.
On the other hand, Mr. Desai on behalf of the
respondent relied on a decision of the Privy Council in Wicks v.
Director of Public Prosecutions(1). In that
case, the appellant, whose case came up before the Privy Council, was convicted
for contravention of Regulation 2A of the Defence (General) Regulations framed
under the Emergency Powers (Defence) Act, 1939 as applied to British subjects
abroad by s. 3 (1 )(b) of the said Act. It was held that, at the date when the
acts, which were the subject matter of the charge, were committed, the
regulation in question was in force, so that, if the appellant had been
prosecuted immediately afterwards, the validity of his conviction could not be
open to any challenge at all. But the Act of 1939 was a temporary Act, and after
various extensions it expired on February 24, 1945. The trial of the accused
took place only in May 1946, and he was Convicted and sentenced to four years'
penal servitude on May 28. In these circumstances, the question raised in the
appeal was: "Is a man entitled to be acquitted when he is proved to have
broken a Defence Regulation at a time when that regulation was in operation,
because his trial and conviction take place after the regulation expired
?" The Privy Council took notice of sub- s. (3) of section 11 of the
Emergency Powers (Defence) Act, 1939 which laid down that "the expiry of
this Act shall not affect the operation thereof as respects things previously
done or omitted to be done". It was argued before the Privy Council that
the phrase "things previously done" does not cover offences
previously committed. This argument was rejected by Viscount Simon on behalf of
the Privy Council and it was held that the appellant in that cane could be
convicted in respect of the offence which he had committed when the regulation
was in force. That case, however is distinguishable from the case before us
inasmuch as, in that case, the saving provision laid down that the operation of
that Act itself was not to be affected by the expiry as respects things previously
done or omitted to be done. The Act could, therefore, be held to be in
operation in respect of acts already committed, so that the conviction could be
validly made even after the expiry of the Act in respect of an offence
committed before the expiry. In the case before us, the operation of R. 132A of
the D.I. Rs. has not been continued after its omission. The language used in
the notification only affords protection to things already done under the rule,
so that it cannot permit further application of that rule by instituting a new
prosecution in respect of something already done. The offence alleged against
the accused in the present case is in respect of acts done by them which cannot
be held to be acts under that rule. The difference in the language thus makes
(1) [1947] A.C. 362.
656 it clear that the principle enunciated by
the Privy Council in the case cited above cannot apply to the notification with
which we are concerned.
Reference was next made to a decision of the
Madhya Pradesh High Court in State of Madhya Pradesh v. Hiralal Sutwala(1),
but, there again, the accused was sought to be prosecuted for 'an offence
punishable under an Act on the repeal of which section 6 of the General Clauses
Act had been made applicable. In the case before us, s. 6 of the General
Clauses Act cannot obviously apply on the omission of R. 132A of the D.I.Rs.
for the two obvious reasons that s. 6 only applies to repeals and not to
omissions, and applies when the repeal is of a Central Act or Regulation and
not of a Rule. If s. 6 of the General Clauses Act had been applied no doubt
this complaint 'against the two accused for the offence punishable under R.
132A of the D.I.Rs. could have been instituted even after the repeal of that
rule.
The last case relied upon is 1. K. Gas Plant
Manufacturing Co., (Rampur) Ltd. and Others v. The King Emperor(2). In that
case, the Federal Court had to deal with the effect of sub-s. (4) of section 1
of the Defence of India Act, 1939 and the Ordinance No. XII of 1946 which were
also considered by the Allahabad High Court in the case of Seth Jugmendar Das
& Ors.(2). After quoting the amended sub-s. (4) of s. 1 of the Defence of
India Act, the Court held :- "The express insertion of these saving
clauses was no doubt due to a belated realisation that the provisions of s. 6
of the General Clauses Act (X of 1897) apply only to repealed statutes and not
to expiring statutes, and that the general rule in regard to the expiration of
a temporary statute is that unless it contains some special provision to the
contrary, after a temporary Act has expired, no proceedings can be taken upon
it and it ceases to have any further effect.
Therefore, offences committed against
temporary Acts must be prosecuted and punished before the Act expires and as
soon as the Act expires any proceedings which are being taken against a person
will ipso facto terminate." The Court cited. with approval the decision in
the case of Wicks v. Director of Public Prosecutions(4), and held that, in view
s. 1 (4) of the Defence of India Act, 1939, as amended by Ordinance No. XII of
1946, the prosecution for a conviction for an offence committed when the
Defence of India Act was in force, was valid even after the Defence of India
Act had ceased to be in force. That case is, however, distinguishable from the
case (1) A.I.R. 1959 M.P. 93. (2) [1947] F.C.R. 141.
(3) A.I.R. 1951 All. 703. (4) (1947) A.C.
362.
657 before us in two respects. In that case,
the prosecution had been started before the Defence of India Act ceased to be
in force and, secondly, the language introduced in the amended sub-s. (4) of s.
1 of the Act had the effect of making applicable the principles laid down in s.
6 of the General Clauses Act, so that a legal proceeding could be instituted
even after the repeal of the Act in respect of an offence committed during the
time when the Act was in force. As we have indicated earlier, the notification
of the Ministry of Home Affairs omitting R. 132A of the D.I.Rs. did not make
any such provision similar to, that contained ms. 6 of the General Clauses Act.
Consequently, it is clear that, after the omission of R. 132A of the D.I.Rs.,
no prosecution could be instituted even in respect of an act which was an
offence when that Rule was in force. ' In this connection, Mr. Desai pointed
out to us that, simultaneously with the omission of R. 132A of the D.I.Rs., s.
4(2) of the Act was amended so as to bring the prohibition contained in R.
132A(2) under s. 4(1) of the Act. He urged that, from this simultaneous action
taken, it should be presumed that there was no intention of the Legislature
that acts, which were offences punishable under R. 132A of the D.I.Rs., should
go unpunished after the omission of that rule. It, however, appears that when
s. 4(1) of the Act was amended, the Legislature did not make any provision that
an offence previously committed under R. 132A of the D.I.Rs. would continue to
remain punishable as an offence of contravention of s. 4 ( 1 ) of the Act, nor
was any provision made ' permitting operation of R. 132A itself so as to permit
institution of prosecutions in respect of such offences. The consequence is
that the present complaint is incompetent even in respect of the offence under
R. 132A(4). This is the reason why we hold that this was an appropriate case
where the High Court should have allowed the applications under s. 561A of the
Code of Criminal Procedure and should have quashed the proceedings on this
complaint.
Consequently, as already directed by our
short order dated 2nd May, 1969, the appeals are allowed, the order of the High
Court rejecting the applications under s. 561A of the Code of Criminal
Procedure is set aside, and the proceedings for the prosecution of the
appellants are quashed.
V.P.S. Appeals allowed.
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