IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 24/04/2009 C O R A M THE HONOURABLE MRS. JUSTICE PRABHA SRIDEVAN and THE HONOURABLE MR. JUSTICE T.S. SIVAGNANAM W.P. Nos.23744 & 23745 of 2001 and C.M.A. Nos.205 & 206 of 2002 A. Michael .. Writ Petitioner versus 1. The Union of India, rep. by the Secretary, Ministry of Finance, Department of Revenue, Government of India, North Block Secretariat, New Delhi. 2. The Director, Enforcement Directorate, Foreign Exchange Regulation Act, Headquarters Office, Lok Nayak Bhavan, 6th Floor, Khan Market, New Delhi-110 003. 3. The Deputy Director, Enforcement Directorate, Foreign Exchange Regulation Act, Shastri Bhavan, III Block, III Floor, 26, Haddows Road, Chennai-6. .. Respondents Union of India, Rep. by the Director of Enforcement, Enforcement Directorate, Lok Nayak Bhavan, Khan Market, New Delhi-110 003. .. Appellant versus A. Michael .. Respondent in C.M.A.No.205/2002 M. Soosai .. Respondent in C.M.A.No.206/2002 - - - - - Mr. K. Ramasamy, Special Counsel for Enforcement (For Respondents in the W.Ps. & Appellant in C.M.As.) Mr. B. Kumar, Senior Counsel for Mr. B.Sathish Sundar (For the Writ Petitioner & Respondents in C.M.As.) - - - - - PRAYER : W.P. No.23744 of 2001 filed under Article 226 of the Constitution for issuance of mandamus directing the 3rd respondent herein to return and refund all the seized foreign currencies, Travellers Cheques and penalty amounts to the petitioner herein forthwith ordered in the order of adjudication dated 7.1.2000 in Reference No.DD/MAS/1/2000(S.S.) of the 3rd respondent and in the order dated 18.7.2001 in Appeal Nos.263/2000 of the Appellate Tribunal For Foreign Exchange along with interest at 18% per annum from the date of their seizure to the date of payment to the petitioner herein and also to pay the value of the Foreign Currencies which have become invalid due to the failure of the 3rd respondent to encash and deposit in a bank immediately on their seizure. W.P. No.23745 of 2001 filed for a mandamus directing the respondents to file a complaint in writing under Section 56 of the FERA, 1973 at the appropriate court at Chennai prosecuting the officials responsible for the contravention of the provisions of Section 57 of the Foreign Exchange Regulation Act, 1973 on account of their failure to comply with the orders and directions contained in the order of adjudication dated 7.1.2000 in in Reference No.DD/MAS/1/2000(S.S.) of the 3rd respondent and in the order dated 18.7.2001 in Appeal Nos.263/2000 of the Appellate Tribunal For Foreign Exchange. C.M.A. Nos.205 and 206 of 2002 filed against under Section 35 of the Foreign Exchange Management Act, 1999 (hereinafter referred to as FEMA, 1999) against the order of the Appellate Tribunal for Foreign Exchange, New Delhi (hereinafter referred to as the Appellate Tribunal) against order dated 18.7.2001 in Appeal Nos.264 and 574 of 2000 respectively. - - - - - J U D G M E N T PRABHA SRIDEVAN, J. Heard Mr. B. Kumar, learned senior counsel appearing for the writ petitioners and respondents in the appeals and Mr. K. Ramasamy, learned Special Counsel for the respondents in the writ petitions and appellants in the appeals. 2. W.P. No.23744 of 2001 has been filed by A. Michael, the Respondent in CMA.No.205 of 2002 praying for issue of Writ of Mandamus to direct the Deputy Director, Enforcement Directorate, Chennai, the 3rd Respondent to return and refund all the seized Foreign Currencies, Travellers Cheques and the penalty amounts to him forthwith as ordered in the order of adjudication dated 7.1.2000 in reference No.DD/MAS/I/2000 (S.S.) of the 3rd Respondent and the order dated 18.07.2001 in appeal Nos.263 and 574 of 2000 of the Appellate Tribunal for Foreign Exchange along with the interest at 18% per annum from the date of the seizure to the date of payment to the Petitioner and also to pay the value of the Foreign Currencies which have become invalid due to the failure of the 3rd Respondent to encash and deposit in a bank immediately on their seizure. 3. W.P. No.23745 of 2001 has been filed by A. Michael, the Respondent in C.M.A. No.205 of 2002 praying for a issue of Writ of Mandamus to direct the Respondent therein to file a complaint in writing under Section 56 of the Foreign Exchange Regulation Act, 1973, hereinafter referred to as FERA, at the appropriate Court at Chennai prosecuting the officials responsible for the contravention of the provisions of Section 57 of FERA, on account of their failure to comply with the orders and directions contain in the order of adjudication dated 7.1.2000 and the order in appeal dated 18.7.2001. 4. C.M.A. No.205 of 2002 and 206 of 2002 have been filed by the Union of India represented by the Director of Enforcement, New Delhi against the order passed by the Appellate Tribunal for Foreign Exchange, in Appeals Nos.263 of 2000 and 574 of 2000 both dated 18.07.2009. 5. Since the issue involved in the Civil Miscellaneous Appeals and the Writ Petitions are arising out of the same proceedings they are taken up together for disposal. 6. Mr. B. Kumar, learned senior counsel appearing for the respondents raised the following preliminary objections : 1. The Appeals filed by the Director of Enforcement is incompetent and it is only the Central Government who could prefer an appeal. 2. There arises no question of law for consideration in the above appeals. Of the two preliminary objections raised, objection No.2 is required to be considered only if objection No. i is decided against the Respondent. Therefore we proceed to consider the 1st objection. 7. According to the learned senior counsel, the appeals filed by the Director of Enforcement as representing Union of India would not satisfy the requirement of Section 35 of the Foreign Exchange Management Act, 1999 (hereinafter referred to as FEMA). According to him, it is the Central Government which has to file the appeal and not the Director of Enforcement and this question is squarely covered by the decision in Director of Enforcement, Madras vs. Rama Arangannal, A.I.R. 1981 Madras 80 and Mohtesham Mohd. Ismail vs. Spl. Director, Enforcement Directorate, 2007 (220) E.L.T. 3 (SC). 8. Section 35 of the FERA refers to the Central Government being the aggrieved party in an appeal to the High Court. Therefore, the aggrieved party cannot be the Deputy Director or the Directorate of Enforcement unless a specific power is given to him for filing the appeal. The learned senior counsel elicited the various sections which give the Central Government the power to do certain things and according to those provisions, this would show that wherever necessary, the Act specifically empowers the Central Government to authorise the Director of Enforcement or any other officer, for the purposes mentioned in the relevant sections, and since there is no provision in the Act empowering the Central Government to authorise the Director of Enforcement to represent the Union of India, the appeal itself is not maintainable. 9. In A.I.R. 1981 Madras 80 (supra), the adjudication order was passed by the Deputy Director of Enforcement holding the respondents guilty of contravention of the provisions of the Act. The FERA Board allowed the appeal filed by the respondents. Against that, the Director of Enforcement filed the appeal claiming himself to be aggrieved. Even at the initial stage, preliminary objections were raised regarding the maintainability of such an appeal and therefore, the Director of Enforcement filed a miscellaneous petition to amend the cause title by substituting the name of the appellant as Government of India represented by the Director of Enforcement. A learned single Judge of this Court rejected the amendment petition on the ground that though it appears to be an innocuous one, the prayer in the miscellaneous petition really amounts to substitution of a new appellant in the place of the original appellant. It was observed that when the grounds of appeal showed the Director of Enforcement as the appellant, it is not open either to the Director of Enforcement or to the Government of India to say that the appeal is filed by the Government of India and therefore, the amendment petition was dismissed. On the question of maintainability, the learned single Judge held that unless the statute authorised the Director of Enforcement to file an appeal, he cannot do so. The learned single Judge referred to Sections 253 and 256 of the Income Tax Act and Section 37 of the Tamil Nadu General Sales Tax Act and held that many such instances can be cited where the statute specifically authorises the initial quasi judicial authority to file an appeal. But since the statute did not specifically authorise the Director of Enforcement to do so, the appeal was liable to be dismissed as not maintainable on the ground that the Director of Enforcement cannot be said to be an aggrieved person. This decision is referred to in 2007 (220) E.L.T. 3 (SC) (supra). There, the question was whether the Special Director appointed under the FERA can himself prefer an appeal before the High Court against an order passed by the FEMA Board. Before the High Court, the maintainability of the appeal was raised as an issue and reliance was placed on Rama Arangannal's case (supra). The Supreme Court referred to Section 3 of FERA, which provides for the classes of officers of Enforcement as well as Section 4 and Section 5 relating to delegation of powers and held that from a bare perusal of Section 5 of the Act, it would be evident that notifications are required to be issued by the Central Government delegating specific functions under the Act. The Supreme Court held that the adjudicating authority, in the absence of any power conferred upon it in this behalf by the Central Government, could not prefer any appeal against the order passed against the Appellate Board. Therefore, the appeal was allowed. According to the learned senior counsel, this would settle the issue. 10. Learned Special Counsel appearing for the Enforcement Directorate, however, referred to certain notifications of the Ministry of Law. On 11.2.1958, the Ministry of Law issued a notification that the Central Government authorizes the officers specified in the Schedule annexed to the Notification of the Government of India in the Ministry of Law No.S.R.O.351, dated the 25th January, 1958 to act for that Government in respect of Judicial proceedings. The two Senior Central Government Standing Counsel had raised two questions in a letter dated 24.7.1978 and the Assistant Legal Adviser to the Government of India clarified that the Director of Enforcement who is under Item 9 to the Schedule to the Notification dated 25.1.1958 is the officer empowered to sign and verify the pleadings as well as act for the Government and that even if the adjudicating authority is the Director of Enforcement, when he institutes or defends any appeal under Section 54, he will be acting only as an administrative head of the Director of Enforcement and is fully empowered to defend or institute an appeal. The notification dated 16.2.2002 is issued by the Ministry of Home Affairs, viz., the Authentication Orders and Other Instruments Rules, 2002. It is seen here that with regard to the Department of Revenue, Ministry of Finance, the officer who may authenticate the orders and other instruments are the Special Directors/Additional Director/Deputy Director/Deputy Legal Adviser. On 8.11.2001, there is a letter from the Enforcement Directorate which is addressed to the Deputy Director, Enforcement Directorate in New Delhi, which is to the following effect : "It has been decided to file an appeal against the order dated 18.7.2001 with regard to A. Michael and M. Soosai." 11. A. Michael and M. Soosai are the respondents in the present appeals. The Director was also requested to file an application for condonation of delay. On 20.11.2001, a letter is addressed from the Enforcement Directorate at New Delhi to the Deputy Director, Chennai, enclosing extracts of notes for information and other action. It is seen from here that a decision had been taken to file an appeal on the ground that the Tribunal had not considered various points and it failed to appreciate the findings of the Adjudicating Officer. The file notings show that all the officers and authorities in the Enforcement Directorate have agreed with the Deputy Legal Adviser's view that the matter deserves to be contested further. On 18.8.2008, the President of India was pleased to appoint the Director of Enforcement in the rank and pay of Additional Secretary. On 6.3.2009, there was an order empowering the officers in the rank of Assistant Director and above for the purposes of Section 54 of FERA and 35 of FEMA. Therefore, the learned Special Counsel would contend that the decision had been taken only by the Government to file an appeal and the officers who decided on behalf of the Government have also been mentioned in the notifications and notices referred to above and the appeal itself has only been filed by the Union of India represented by the Director. Therefore, all the criteria are satisfied. He submitted that neither Rama Arangannal's case nor Mohtesham Mohd. Ismail's case will come to the aid of the respondents since in Rama Arangannal's case, the Central Government was not a party and the Deputy Director had not filed the appeal representing the Central Government and there are observations in the Supreme Court's decision which clearly come to the aid of the appellant. Learned Special Counsel also relied on various decisions. We will refer only to those judgments which are applicable to the facts of this case. 12. In M.M.T.C. Ltd. vs. Medchl Chemicals and Pharma (P) Ltd., (2002) 108 Company Cases 8, the Supreme Court held as follows : "Even presuming that initially there was no authority in the person who filed the complaint, the company can, at any stage, rectify that defect. At a subsequent stage, the company can send a person who was competent to represent the company." Therefore, according to the Special Counsel, the defect, even assuming there is a defect, is a curable defect. The learned Special Counsel referred to V.S. Mallimath vs. Union of India, (2001) 4 S.C.C. 31, where the Supreme Court held that the expression used in the proviso to Rule 3(b) of the Conditions of Services Rules has to be construed in the wider sense. He also referred to a judgment of P. Sathasivam, J. (as he then was) sitting singly in Application No.177 of 2001 in Insolvency Notice No.39 of 2001, where the same question was raised as to whether the proceedings initiated by the Deputy Director can be said to be done by the Government of India and reliance was placed again on Rama Arangannal's case. It was brought to the notice of the Court then that the Directorate of Enforcement is an ex officio Additional Secretary to the Government of India and reference was made to Pradeep Kumar Biswas vs. Indian Institute of Chemical Biology, (2002) 5 S.C.C. 111, where the Supreme Court explained what is meant to be ex officio appointment. The learned Judge also referred to (2001) 4 S.C.C. 31 (supra), where it was held that the expression 'Government of India' includes all the officers functioning under the three wings and therefore, it was held that the Deputy Director, Enforcement Directorate is an officer of the Government of India coming under the Department of Revenue, Ministry of Finance and is not independent of the Government of India; he is an Officer of the Union and his acts and duties are only official and he is acting for the Government of India. 13. We are of the opinion that this decision fully answers the question raised by the learned senior counsel appearing for the respondents in this case. In fact, in Mohtesham Mohd. Ismail's case (supra), it is true that the Supreme Court held that the appeal filed by the adjudicating authority was not maintainable, but in the course of doing so, an observation was made that before the High Court "No notification was filed to show that the authority concerned was empowered to prefer an appeal on behalf of the Central Government; the Central Government was not even impleaded as a party to the appeal and the first respondent did not file the appeal on behalf of or representing the Central Government. It was filed in his official capacity as the adjudicating authority and not as a delegatee of the Central Government". Therefore, it is clear that when the appeal is filed by the Union of India represented by the Director, then the appeal is filed by the Central Government and the Central Government is the aggrieved party. The Central Government will have to be represented by an officer and the officer in this case is the proper officer as per the various notifications discussed above. In fact, in the letter dated 28.7.1979 signed by the Assistant Legal Adviser to the Government of India in response to queries raised by the Senior Central Government Standing Counsel in his letter dated 24.4.1979, what he says is that the Director of Enforcement is the officer empowered to sign and verify the pleadings as well as act for the Government. The crucial words here are not only signing and verifying the pleadings, but he is specifically empowered "to act for the Government". The Authentication Order and Rules also show that it is the correct officer who has signed the pleadings. The communication from the Government of India, Enforcement Directorate, New Delhi on 8.11.2001 shows that the decision has come from the Government to file an appeal against the said order and not from the local Directorate. It was also pointed out that in Vinith Narain vs. Union of India, A.I.R. 1989 S.C. 889, considering the importance of the Enforcement Directorate, it was decided to upgrade the Director's post to that of an Additional Secretary. In fact, in 108 Company Cases 48 (supra), the objection raised was that the complaint under Section 138 of the Negotiable Instruments Act, 1983 was not maintainable since it was not the proper officer who had initiated the proceedings and that the complaint could only be filed by a person who is in charge or the responsibility of the Government and that a subsequent authorisation would not validate the complaint. The Supreme Court held that in that case, the eligibility criteria prescribed by Section 142 is that the complaint must be the payee or the holder in due course and that the said criteria was satisfied as soon as the complaint was in the name and on behalf of the appellant company. If we adopt the same analogy to this case, the appeals are filed only by the Union of India represented by the officer, who according to us, as per the records produced by the learned Special Counsel, is a person authorised in this behalf. Therefore, the preliminary objection is rejected. 14. Now, we shall proceed to discuss the facts of this case. On 10.06.1997, the Officers of the Enforcement Directorate, Chennai apprehended one A. Balasubramanian @ Balu and M. Soosai, Manager and Cashier respectively of the International Money Exchange Corporation, Chennai hereinafter referred as IMEC, at the entrance of Linghi Chetty Street on N.S.C. Bose Road, Chennai1, and during personal search recovered and seized the foreign currencies of US $10,000/-, UAE Dirhams 4,000/-, OM.4,6000/-, Australian $ 2,415/-, French Francs 23,250/-, UK Pounds 5,520/- in cash, US$ (Travellers cheques) 20,000/- duly discharged and Indian Currencies of Rs.4,300/- along with documents as per Mahazar from the person of Shri.M.Soosai, under Section 34 of the Foreign Exchange Regulation Act, 1973 hereinafter referred as FERA. Documents were recovered from A.Balasubramanian and the Office premises of IMEC under Mahazar. The Department recorded statements from the two persons under Section 40 of FERA and it is stated that they had admitted that the seized Foreign Exchange including the travelers cheques worth US$ 20,000/-, duly discharged, was being taken by them for sale unauthorizedly at Burma Bazar. The further allegation was that the IMEC and said two persons had dealt with the Foreign Exchange without the previous general or special permission of Reserve Bank of India. 15. The showcause notice, dated 8.12.1997, was issued by the Special Director of the Enforcement Directorate to the Respondents herein and IMEC and Mr.A.Balasubramanian, calling upon them to show cause as to why adjudication proceedings as contemplated in Section 51 of the Foreign Exchange Regulation Act, 1973, should not be held against them for the contraventions and as to why the Foreign Exchange of US$ 10,000/-, UAE Dirhams 4,000/-, OM4,600/-, Australian $ 2,415/-, French Francs 23,250/-, UK Pounds 5,520/- and US$ (TCs) 20,000/- seized by the Officers of Enforcement on 10.06.1997 from the possession of Shri.M.Soosai, Cashier, of M/s.IMEC when he was traveling with Shri.A.Balasubramanian, Manager on a motorcycle near Lingi Chetty Street, should not be confiscated to the Central Government under Section 63 of the said Act, being involved in contravention of the provisions of Section 8(1) i bid. 16. The noticees submitted their replies and the matter was taken up for adjudication. Due to the raise in the monetary limit of adjudication of cases, the adjudication stood transferred to the Deputy Director, Enforcement Directorate, Chennai. The Adjudicating Authority by Order-in-Original dated 7.1.2000, held that the charges levelled against Mr.A.Michael, Proprietor of IMEC and Mr.M.Soosai, Cashier IMEC are established beyond reasonable doubt and they are guilty of the charges, and proceeded to impose penalty of Rs.5,000/- for contravention of Section 7 r/w. Section 6 (4), 6 (5) and Section 49 of FERA, Rs.50,000/- for contravention of Section 8 (1) for otherwise transferring the travelers cheques and Foreign Currencies to M.Soosai. Further the Adjudicating Authority ordered confiscation of the seized travelers cheques interms of Section 63 of the Act. Mr.M.Soosai was imposed with the penalty of Rs.30,000/- under Section 8(1) of the Act and Rs.15,000/- under Section 8(1) r/w. Section 64 (2) of the Act. The seized Foreign Currencies of US$ 10,000/- and assorted Foreign Currencies were ordered to be released with a direction to encash the same with a Bank authorized to deal with the same. The charges framed against M/s. IMEC and A. Balasubramanian, Manager were dropped. 17. Aggrieved by the order of the Adjudication, A. Michael and M. Soosai preferred appeals before the Appellate Tribunal for Foreign Exchange, New Delhi. The Tribunal by a common order dated 18.7.2001 allowed the Appeals and set aside the order of the Adjudicating Authority and directed that the seized foreign currencies as well as penalty amount that has already been deposited to be returned. The above Civil Miscellaneous Appeals have been preferred by the Union of India represented by its Director of Enforcement against the common order of the Tribunal dated 18.7.2001. 18. In terms of Section 54 of FERA, (which was repealed with effect from 31.5.2000 and FEMA came into force with effect from 1.4.2000) an appeal shall lie to the High Court only on a question of law from any decision or order of the Appellate Board under Sub Section (3) or Sub Section (4) of Section 52 of FERA. The following questions of law are raised for determination : 1. Despite the facts and circumstances indicated above, the Appellate Tribunal for Foreign Exchange has held that there is no violation of Section 7 read with Sections 6(4), 6(5) and 49 of FERA, 1973 and hence, the question of law has arisen for consideration. 2. Whether the indicated transaction beyond the authorized place of transaction of business in Money Changer's licence, without RBI permission, would tantamount to violation of FKM licence and provisions of FERA, 1973. 3. Whether the respondent was prejudiced as to the non-placement FLM licence terms and conditions on record. 4. Whether the factum of signature and counter signature duly discharged in the TCs for US$20000 seized from Shri. M. Soosai will not be tradable foreign exchange. 5. Whether the discharged TCs of US$20000 in the hands of employees of IMEC for sale to Burma Bazaar would not amount to otherwise transfer in