CHANDRAMAULI KR. PRASAD, J.

1. We have gone through the draft judgment prepared by our noble and learned Brother Sathasivam, J. and we find ourselves unable to subscribe to the view taken by him.

2. Shorn of unnecessary details facts giving rise to the present appeal are that on 22nd May, 1992 various premises in occupation of the appellant Radheshyam Kejriwal besides other persons were searched by the officers of the Enforcement Directorate. The appellant was arrested on 3rd May, 1992 by the officers of the Enforcement Directorate in exercise of the power under Section 35 of the Foreign Exchange Regulation 2 Act, 1973 (hereinafter referred to as the `Act') and enlarged on bail on the same day. Further the appellant was summoned by the officers of the Enforcement Directorate to give evidence in exercise of the power under Section 40 of the Act and in the light thereof his statement was recorded on various dates, viz.

22nd May, 1992, 10th March, 1993, 16th March, 1993, 17th March, 1993 and 22nd March, 1993. On the basis of materials collected during search and from the statement of the appellant it appeared to the Enforcement Directorate that the appellant, a person resident in India, without any general or specific exemption from Reserve Bank of India made payments amounting to Rs.24,75,000/- to one Piyush Kumar Barodia in March/April, 1992 as consideration for or in association with the receipt of payment of U.S. $ 75,000 at the rate of Rs.33/-

per U.S. Dollar by the appellant's nominee abroad in Yugoslavia. It further appeared to the Enforcement Directorate that transaction involved conversion of Indian currency into foreign currency at rates of exchange other than the rates for the time being authorised by the Reserve Bank of India. In the opinion of the Enforcement Directorate the act of the 3 appellant in making the aforesaid payment of Rs.24,75,000/- in Indian currency for foreign currency at the rate of Rs.33/- per US Dollar against the official rate of Dollar i.e. Rs.30/- per Dollar (approximately), contravened the provision of Section 8(2) of the Act. Further the Said payment having been made without any general or special exemption from Reserve Bank of India, the appellant had contravened the provisions of Section 9(1)(f)(i) of the Act and accordingly rendered himself liable to imposition of penalty under Section 50 of the Act. Enforcement Directorate was further of the opinion that by abetting in contravening the provisions of Sections 9(1)(f)(i) and 8(2) of the Act read with the provisions of the Section 64(2) of the Act the appellant has rendered himself liable for penalty under Section 50 of the Act.

3. Accordingly, a show cause notice dated 7th May, 1993 was issued by the Special Director of the Directorate of Enforcement calling upon the appellant to show cause as to why adjudication proceeding as contemplated under Section 51 of the Act be not held against him for the contraventions 4 pointed above. Show cause notice dated 7th May, 1993 referred to above led to institution of proceeding under Section 51 of the Act (hereinafter referred to as the `adjudication proceedings'). The adjudication officer came to the conclusion that the allegation made against the appellant of contravention of the provisions of Section 8, 9(1)(f)(i) and Section 8(2) read with Section 64(2) of the Act cannot be sustained. While doing so the Special Director observed as follows:

6. Being aggrieved, the appellant is before us with the leave of the Court.

7. Mr. Amarendra Sharan, Senior Counsel appearing on behalf of the appellant submits that standard of proof required to bring home the charge in a criminal case is much higher than the adjudication proceeding and once the appellant has been exonerated in the adjudication proceeding, his prosecution is an abuse of the process of Court. Mr. P.P. Malhotra, Additional Solicitor General, however, contends that from the scheme of the Act as reflected from Sections 50 , 51 , 56 of the Act, the plea put forth by the appellant is unsustainable.

8. The submissions made necessitate examination of the scheme of the Act. Section 50 of the Act which is relevant for the purpose reads as follows:

The aforesaid provision provides for mandatory penalty and fixes the outer limit of such penalty on any person contravening the provisions of the Act which is to be adjudged by the Director of Enforcement or any other officer of the Enforcement not below the rank of an Assistant Director empowered by the Central Government. The procedure and the power to adjudicate penalty have been provided under Section 51 of the Act, which reads as follows:

9. From a plain reading of Section 51 of the Act it is evident that for adjudging the penalty under Section 51 of the Act for contravention of the provisions of the Act or any rule, direction or order made thereunder the adjudicating officer is to be satisfied that the person has committed the contravention after holding an inquiry in the prescribed manner and after giving the person concerned a reasonable opportunity of making representation. Thus besides the procedural requirement the sine qua non for imposition of penalty under Section 51 of the Act is that the adjudicating officer has to record its satisfaction that the person concerned has committed the contravention of any of the provisions of the Act or of any rule, direction or order made thereunder.

10. As would be evident from the preamble of the Act, it was enacted for the conservation of foreign exchange resources of the Country and the proper utilization thereof in the economic development of the Country. It is relevant here to mention that the Forty Seventh Report of the Law Commission of India on the Trial and Punishment of Social and Economic Offences 1 quoted the following portion from the Report of the Study Team on Leakage of Foreign Exchange through Invoice Manipulation:

Bearing in mind aforesaid the Legislature in order to ensure that no economic loss is caused by the contravention provided for an appropriate penalty under Section 51 of the Act and to prevent the tendency to violate is curbed by inserting Section 56 of the Act providing for imposing appropriate punishment after due prosecution, relevant portion whereof reads as follows:

12. However, in a case like the present one in which the penalty proceeding under Section 51 of the Act and the prosecution under Section 56 of the Act though launched together but the penalty proceeding culminated earlier exonerating the person, the question would arise as to whether continuance of the prosecution would be permissible or not. In other words, the question with which we are concerned is the impact of the findings which are recorded on the culmination of adjudication proceeding on criminal proceeding and in case in the adjudication proceeding person concerned is exonerated can he ask for dropping of the criminal proceeding on that ground alone. Mr. Malhotra submits that finding in the adjudication proceeding cannot either operate as estoppel or res judicata in case of prosecution under Section 56 of the Act and in this 1 connection, he has drawn our attention to a Constitution Bench judgment of this Court in the case of the Assistant Collector of Customs, Bombay and another vs. L.R. Melwani and another AIR 1970 SC 962, wherein in paragraph 8, it has been held as follows :

We do not find any substance in the submission of Mr. Malhotra and the decision relied on has no bearing in the facts and circumstances of the case.

13. In L.R. Melwani 's case (supra), the accused persons resisted their prosecution on the ground that the Collector of Customs having given the benefit of doubt, in view of the guarantee granted under Article 20 (2) of the Constitution for the same offence they can not be tried more than once. It was also contended that that person once convicted or acquitted can not be tried for same offence again in view of the safeguard provided under Section 403 of Code of Criminal Procedure, 1898, which corresponds to Section 300 of the Code of Criminal Procedure, 1973. In order to get benefit of Section 300 of the Code of Criminal Procedure, 1973, it is necessary for an accused person to establish that not only he had been tried by a Court of competent jurisdiction for an offence but convicted or acquitted of that offence and the said conviction or acquittal is in force. In the aforesaid background the question which fell for consideration before this Court was as to whether the proceeding before the Collector of Customs is a criminal trial by a court of competent jurisdiction for trial of offence. On analysis of the various authorities of this Court, the Constitution Bench came to the conclusion that the 1 Collector of Customs was not a Court of competent jurisdiction for criminal trial. This would be evident from the following passage from the said judgment :-

14. In the present case, it is not the case of the appellant that they were tried by the Enforcement Directorate and therefore further trial by the criminal court is not permissible but their contention is that in the face of the finding in the adjudication proceeding, their continued prosecution is an abuse of the process of the court. In view of what we have observed above, the contention of Mr. Malhotra is without 1 merit and the decision relied on in no way supports his contention.

15. Mr. Malhotra, then contends that finding of the Enforcement Directorate in the adjudication proceedings is not binding or relevant in the criminal court where the appellant is facing the trial. In support of the contention, reliance has been placed on a full Bench decision of the Lahore High Court in the case of B.N. Kashyap vs. Emperor AIR (32) 1945 Lahore 23 and our attention has been drawn to the following passage:

We do not find any substance in this submission of Mr. Malhotra also. We may observe that standard of proof in a criminal case is much higher than that of the adjudication proceeding. The Enforcement Directorate has not been able to prove its case in the adjudication proceeding and the appellant has been exonerated on the same allegation. The appellant is facing trial in the criminal case. Therefore, in our opinion, the determination of facts in the adjudication proceeding cannot be said to be irrelevant in the criminal case. In the case of B.N. Kashyap (Supra), the full Bench had not considered as to the effect of a finding of fact in a civil case over the criminal cases and that will be evident from the following passage from the said judgment :

This Court had the occasion to consider this question in the case of K.G. Premshanker v. Inspector of Police (2002) 8 SCC 87, wherein it has been held as follows :-

Hence, we reject this submission of Mr. Malhotra.

16. Mr. Malhotra submits that finding recorded in the adjudication proceeding is not binding on the criminal proceeding as both the cases have to be decided on the basis of the evidence therein. Reliance has been placed on a 2 decision of this Court in the case of Iqbal Singh Marwah v.

Meenakshi Marwah (2005) 4 SCC 370, relevant portion whereof reads as follows :-

We do not have the slightest hesitation in accepting the broad submission of Mr. Malhotra that finding in an adjudication proceeding is not binding in the proceeding for criminal prosecution. A person held liable to pay penalty in adjudication proceeding can not necessarily be held guilty in criminal trial. Adjudication proceedings are decided on the basis of preponderance of evidence of a little higher degree whereas in a criminal case entire burden to prove beyond all reasonable doubt lies on the prosecution. In the case of Iqbal Singh Marwah (supra) relied on by Mr. Malhotra, the question which fell for consideration was as to whether bar under 2 Section 195 (1) (b) (i) and (ii) operates for taking cognizance when a complaint is filed alleging that will filed by the accused in a probate case is forged and while holding that the bar would not operate if the will is forged before its filing in the court, hence the aforesaid observation of this court has no bearing in the facts and circumstances of this case.

17. It is trite that standard of proof required in criminal proceedings is higher than that required before adjudicating authority and in case accused is exonerated before the adjudicating authority whether his prosecution on same set of facts can be allowed or not is the precise question which falls for determination in this case. There are authorities of this Court in relation to the Income-tax Act in this regard. The first in the series is the judgment of this Court in the case of Uttam Chand and others vs. Income Tax Officer, Central Circle, Amritsar (1982) 2 SCC 543 in which registration of firm was cancelled on the ground that it was not genuine and prosecution initiated for filing false return. However, in appeal, the Income Tax Appellate Tribunal reversed the finding 2 and held the firm to be genuine. Relying on that, this court quashed the prosecution inter alia observing as follows :

In the case of G.L. Didwania and Another vs. Income Tax Officer and Another 1995 Supp (2) SCC 724, on setting aside the order of the assessing authority which led to the prosecution of the assessee by the Income-Tax Appellate Tribunal, this Court held the prosecution not permissible and while doing so observed as follows :

Similar view has been taken by this Court in the case of K.C. Builders and Another vs. Assistant Commissioner of Income Tax (2004) 2 SCC 731, in which it has been held as follows:

18. Mr. Sharan contends that aforesaid principle shall apply with equal force in the prosecution under the Act as the basic principle which these judgments take note of to quash the prosecution is the higher standard of proof required in a criminal case than the adjudication proceeding and no reference at all has been made to the provisions of the Income-

tax Act to come to that conclusion. The decisions referred to above pertain to prosecution under the Income-tax Act and obviously had not adverted to any of the provisions of the Act, particularly Sections 50 , 51 and 56 of the Act points out Mr. P.P. Malhotra, the Additional Solicitor General and therefore these decisions in his submission shall have no bearing on the facts of the present case.

19. We find substance in the submission of Mr. Sharan.

There may appear to be some conflict between the views in the case of Standard Charted Bank (supra) and L.R. Melwani (supra) holding that adjudication proceeding and criminal 2 proceeding are two independent proceedings and both can go on simultaneously and finding in the adjudication proceeding is not binding on the criminal proceeding and the judgments of this Court in the case of Uttam Chand (supra), G.L. Didwania (supra) and K.C. Builders (supra) wherein this Court had taken a view that when there is categorical finding in the adjudication proceeding exonerating the person which is binding and conclusive, the prosecution cannot be allowed to stand. Judgments of this Court are not to be read as statute and when viewed from that angle there does not seem any conflict between the two sets of decisions. It will not make any difference on principle that latter judgments pertain to cases under the Income Tax Act . The ratio which can be culled out from these decisions can broadly be stated as follows :-

In our opinion, therefore, the yardstick would be to judge as to whether allegation in the adjudication proceeding as well as proceeding for prosecution is identical and the exoneration of the person concerned in the adjudication proceeding is on merits. In case it is found on merit that there is no contravention of the provisions of the Act in the adjudication proceeding, the trial of the person concerned shall be in abuse of the process of the court.

20. In the submission of Mr. Malhotra the matter stands squarely covered by the decision of this Court in the case of Standard Chartered Bank (supra) which submission has found favour with learned Brother Sathasivam, J. We deem it expedient to consider the ratio and background of the said case in little detail. In the said case alleging violation of some of the provisions of the Act the Enforcement Directorate issued notices to the Standard Chartered Bank and its officers as to why proceedings for imposition of penalty under Section 2 50 of the Act be not initiated against them. Further notices under Section 61 of the Act were also issued to them calling upon them to produce the necessary permission from the concerned authority for the transaction involved. The Standard Chartered Bank and its officers filed writ petitions in the Bombay High Court challenging the constitutional validity of Sections 50 , 51 and 68 of the Act. The Bombay High Court upheld the constitutional validity of the aforesaid provisions of the Act but at the same time observed that Section 68(1) of the Act shall not be applicable to adjudication proceeding and it is confined to prosecution under the Act. The Bank and its officers aggrieved by the judgment of the Bombay High Court upholding the constitutional validity of the impugned provisions of the Act and the Union of India dissatisfied with the observation of the Court whereby it restricted the application of Section 68(1) of the Act to only criminal prosecution filed separate appeals before the Supreme Court.

This Court upheld the decision of the Bombay High Court so far as the constitutional validity of the aforesaid provisions of the Act is concerned and accordingly dismissed the appeals 3 filed by the Bank and its officers. However, this Court reversed the view of the Bombay High Court in regard to the applicability of Section 68(1) of the Act and held that it shall be applicable to both adjudication proceeding as well as proceeding for prosecution under the Act. In the case in hand we are not concerned with either of the issue.

21. Another contention which was raised in the aforesaid case was that criminal proceeding under Section 56 of the Act could not be initiated before culmination of adjudication proceeding under Section 51 of the Act. It was contended in the said case that there has to be finding in the adjudication proceeding about the violation of the provision of the Act and consequential imposition of a penalty and only thereafter in the light of those findings prosecution under Section 56 of the Act could be launched. It was resisted by the Union of India relying on the words "Without prejudice to any award of penalty by the Adjudicating Officer" in Section 56 of the Act and submission was made that criminal action cannot wait till outcome of the adjudication proceeding. In the context of the 3 aforesaid argument this Court observed that proceedings under Section 51 and 56 of the Act are proceedings independent of each other and can be initiated simultaneously and finding in an adjudication proceeding is not binding on the Court in a proceeding for prosecution under Section 56 of the Act. The effect of finding of exoneration in the adjudication proceeding on criminal proceeding was not an issue and, therefore, the judgment under consideration cannot be said to have decided this question with which we are concerned in the present appeal.

22. A learned Single Judge of the Bombay High Court had the occasion to consider this question in a case under the Foreign Exchange Regulation Act in Criminal Application No. 1070 of 1999 ( Hemendra M. Kothari vs. Shri W.S. Vaigankar, Assistant Director, Enforcement Directorate (FERA), Govt. of India and State of Maharashtra ), decided on 25.04.2007 and on a review of large number of decisions of this Court and other courts it came to the following conclusion :-

The Delhi High Court also considered this question arising out of a case under Foreign Exchange Regulation Act , in detail in the case of Sunil Gulati & Anr. V. R.K. Vohra 145 (2007) DLT 612, and held as follows :-

We respectfully endorse the view taken by the Bombay High Court in the case of Hemendra M. Kothari (supra) and Delhi High Court in Sunil Gulati (supra).

23. Bearing in mind the principles aforesaid we proceed to consider the case of the appellant. In the adjudication proceeding on merit the adjudicating authority has categorically held that "the charges against Shri Radheshyam 3 Kejriwal for contravening the provisions of Section 9(1)(f)(i) and Section 8(2) read with Section 64(2) of the Foreign Exchange Regulation Act, 1973 cannot be sustained". In the face of the aforesaid finding by the Enforcement Directorate in adjudication proceeding that there is no contravention of any of the provisions of the Act, it would be unjust and an abuse of the process of the court to permit the Enforcement Directorate to continue with the criminal prosecution.

24. In the result the appeal is allowed, the impugned judgment of the learned Metropolitan Magistrate and the order affirming the same by the High Court are set aside and appellant's prosecution is quashed.

................................................J [HARJIT SINGH BEDI] ................................................J [CHANDRAMAULI KR. PRASAD] NEW DELHI FEBRUARY 18, 2011.

dated 10.08.2001 passed by the High Court of Calcutta in C.R.R. No. 3593 of 1997 whereby the learned single Judge of the High Court dismissed the application filed by the appellant herein under Sections 401 and 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as `the Code') for quashing the criminal proceedings initiated against him vide Complaint Case No. 965 of 1995 under Section 56 of the Foreign Exchange Regulation Act, 1973 (hereinafter referred to 3 as "the FERA") pending in the Court of 9th Metropolitan Magistrate, Calcutta.

2) BRIEF FACTS:

C/93 was issued by the Special Director, Enforcement Directorate, FERA, Government of India, New Delhi to five persons including the appellant herein for holding inquiry under Section 51 of the FERA for the purpose of adjudicating the penalty under Section 50 for contravening the provisions of Sections 8(2) and 9(1)(f)(i) of the FERA which provides that no person shall make or receive any payment except with the special permission of the Reserve Bank of India. A search was conducted in the premises of one Shri Piyush Kumar Barodia at Calcutta wherefrom certain documents were found including the telephone diary. Apart from certain incriminating documents found against some other persons, some entries resembling to the name of the appellant herein were also found. After interrogating several persons, the Department came to the conclusion that Piyush Kumar Barodia was engaged in the transaction of providing dollars 3 abroad by receiving the money in Indian currency in India. He used to send money through his younger brother placed at Bombay, who in turn, used to give the same to one Shri Babu Bhai Umaidmal Jain @ Bhansali and Bhansali used to send the money to one Shri Anil Bhai at London and the Anil Bhai used to deliver equivalent amount of foreign exchange to the agents of such intending persons abroad.

(b) On 09.12.1994, the Enforcement Directorate, before receiving the reply from the appellant herein, in response to the notice dated 07.05.1993, issued another show cause notice under Section 61 of the FERA for taking cognizance of the offences committed on account of the contravention of the provisions of the FERA. On 07.09.1995, without waiting for the reply of the appellant in response to the two notices, one under Section 51 for adjudication of penalty proceedings and other under Section 61 for taking cognizance of the offence, a complaint was filed by the Department under Section 56 of the FERA alleging violation of provisions contained in Sections 8(2) and 9(1)(f)(i) of the FERA. The Special Director, Enforcement Directorate, FERA, New Delhi after going through the entire 3 record and the evidences, vide order dated 18.11.1996, acquitted the appellant by holding that no penalty could be imposed as there is no proper evidence to connect the appellant with the contravention of any of the provisions of the FERA and accordingly directed to drop the proceedings and discharged the notices.

(c) Though no triable issue remained after the final adjudication by the Special Director, Enforcement Directorate, the criminal proceedings were not dropped by the Department.

On 27.03.1997, the appellant filed an application before the Metropolitan Magistrate, Calcutta for dropping the proceedings. Vide order dated 02.09.1997, the Metropolitan Magistrate rejected the said application and held that there is no bar to proceed with the criminal case as the proceeding before the FERA Board is separate.

(d) Being aggrieved by the said order, on 04.12.1997, the appellant filed an application under Sections 401 and 482 of the Code before the High Court of Calcutta for quashing of the criminal proceedings. The High Court, by the impugned order dated 10.08.2001, rejected the prayer for quashing of the 3 criminal proceedings. Against the said order, the appellant has filed this appeal by way of special leave before this Court.

3) Heard Mr. Amarendra Sharan, learned senior counsel for the appellant and Mr. P.P. Malhotra, learned ASG for the respondents.

4) The main question that arises for consideration in this appeal is whether the Enforcement Directorate (ED) FERA can prosecute the appellant in a proceeding under Section 56 of the FERA when on the self-same facts and cause of action, the respondent-adjudicating authority dropped the charges framed under Section 50 of the FERA.

5) Since I have briefly stated the factual details in the earlier paragraphs, there is no need to traverse the same once again.

However, it is not in dispute that the residential premises of the appellant, a business man was searched by the office of the Enforcement Directorate on 22.05.1992 and certain documents were seized. Based on the same, on 07.05.1993, a show cause notice was served against him by the Enforcement Directorate directing him to show cause as to why adjudication proceedings as contemplated under Section 51 of 4 the FERA should not be proceeded against him for contravening the provisions of Sections 8(2) and 9(1)(f)(i) of the FERA. The appellant submitted his reply to the show cause notice. Thereafter, adjudication proceedings in respect of the show cause notice dated 07.05.1993 was instituted before the Special Director, Enforcement Directorate, FERA, New Delhi.

After considering the submissions of both sides, Special Director passed an order dated 18.11.1996 holding that the Enforcement Directorate had failed to make out a prima facie case in support of charges of violation of Sections 8(2) and 9(1)(f)(i) of the FERA and directed that the aforementioned Departmental proceedings be dropped. It is relevant to point out that in the meantime i.e. on 26.07.1995, the respondents filed a complaint against the appellant in the Court of Chief Metropolitan Magistrate, Calcutta on the same cause of action which was taken cognizance by the Magistrate. According to the appellant, inasmuch as the same issues having already been adjudicated by the authority concerned, the Magistrate ought to have dropped the complaint and the continuation of the proceedings would result in abuse of the process of the 4 Court. Aggrieved by the order of the Magistrate in not dropping the proceedings and continuing the same, the appellant preferred revision before the High Court being CRR No. 3593 of 1997. By the impugned order, the High Court accepting the stand of the Department refused to quash the criminal proceedings and dismissed the revision.

6) In order to appreciate the claim of the appellant, it is useful to refer the relevant provisions of FERA which are applicable to the issue raised. They are:

7) Mr. Amarendra Sharan, learned senior counsel for the appellant, after taking through the above provisions as well as the order dated 18.11.1996 of the Special Director, Enforcement Directorate, dropping the departmental proceedings submitted that in view of the said conclusion and of the fact that the Department had not challenged the same by way of further appeal, there cannot be criminal prosecution for the same cause of action under Section 56(1) of FERA.

8) I have gone through the order of the Special Director dated 18.11.1996. I have already pointed out that pursuant to the search and seizure, after issuance of show cause notice and opportunity of hearing, the Special Director, Enforcement Directorate passed the above order. After considering all the materials and finding that no incriminating documents relating to foreign exchange transactions and further finding that the charges against the appellant for contravening the provisions of Sections 8 (2) and 9(1)(f)(i) read with Section 64 (2) of FERA cannot be sustained, the Special Director dropped the proceedings initiated against the appellants and others.

Admittedly, the Department had not challenged the said conclusion by way of an appeal to the Foreign Exchange Regulation Appellate Board as per Section 52 of the FERA. It is the claim of the appellant that since there is a categorical finding by the Special Director exonerating the appellant from all charges leveled against him, the Department is not permitted to initiate criminal proceedings under Section 56 of the FERA. It is the stand of the appellant that in view of the language used in sub-section (1) of Section 56 , namely, 4 "without prejudice to any award or penalty by the adjudicating officer under this Act....", and in the light of the categorical conclusion by the Special Director dropping all the charges, the Enforcement Department is estopped from initiating prosecution.

9) In support of the above claim, learned senior counsel for the appellant relied on the following decisions:-

25.08.1961 and the return was filed on 08.09.1961. The 4 appellant showed his business income from firms in Delhi and Bombay. The assessment was made on 31.10.1961 by the officer concerned taking the income to be of Rs. 35,699/-.

There was another firm, M/s Young India and Transport Company in which the minor children of the appellant and his two employees were partners. In the assessment proceeding, the assessing authority reached the conclusion that it was not a genuine firm and the instrument of partnership was invalid and inoperative. Therefore, the proceedings under Sections 147 and 148 of the Income Tax Act were initiated against the appellant and his assessment was reopened. In pursuance of the notice under Section 148, the appellant filed his return showing his income as Rs. 29,500/-. By an order dated 17.03.1969, the Income Tax Officer assessed the income of the appellant as Rs. 52,634/- and this figure was arrived at by adding the income of M/s Young India and Transport Company and for the same assessment year as though it was the income of the appellant. The appellant made a statement in the verification to the return filed on 02.12.1971 and delivered an account/statement which according to the 4 assessing authority was false or the assessee knew or believed to be false. On the basis of this assessment, the prosecution was launched and the complaint by the authorised authority was filed on 09.09.1977. Meanwhile, the appellant-assessee filed an appeal before the Income Tax Appellate Tribunal and the Tribunal by its order dated 24.02.1977 allowed the appeal and held that there was no substantial material to hold that the appellant was the owner of the entire business. The Appellate Tribunal also observed that the assessing authority arrived at wrong conclusion from the facts on record and held that the business run in the name of M/s Young India and Transport Company belonged to the assessee and accordingly the appellate authority deleted the addition of Rs. 23,134/-

from the total income of the assessee. After the Appellate Tribunal passed the order, allowing the appeal in favour of the appellant, the assessee filed a petition before the Magistrate to drop the criminal proceedings. The Magistrate by his order dated 02.09.1979 dismissed the said application and held that the prosecution has got a right to lead evidence in support of his complaint and the court can come to the conclusion 4 whether or not any criminal offence is made out. The Magistrate also observed that the order of the Tribunal can be taken only as evidence. Aggrieved by the same, the appellant-

assessee filed an application under Section 482 of the Code before the High Court and the High Court dismissed the same in limine which was challenged before this Court. The question before this Court was whether the prosecution can be sustained in view of the order passed by the Tribunal. In the factual scenario, this Court held as under:

The ratio laid down in the decision is that in view of conclusion of the Income Tax Appellate Tribunal, the Department is not permitted to continue the criminal proceeding which was pending before the Magistrate and the finding of the Appellate Tribunal is a conclusive one. Based on such conclusion, this Court quashed the criminal proceeding and allowed the appeal of the assessee.

11) The second decision being K.C.Builders (supra) also arose under the Income Tax Act . Here again, relying on the earlier decision in G.L. Didwania (supra), this Court held as under:

12) The third decision being P.S. Rajya (supra), relates to power of the Court under Section 482 of the Code in respect of quashing of complaint/FIR. In this decision, it was held that if the issue in the criminal proceeding is identical to the departmental proceeding which could not be established, the Department is not permitted to pursue the same charge in the criminal proceeding.

13) The last decision relied on by the counsel is Uttam Chand (supra). This decision also arose under the Income Tax Act . Without adverting to any statutory provisions and the earlier decisions, confining to the facts of this case, noting the finding recorded by the Income Tax Appellate Tribunal that one Smt. Janak Rani was a partner of the assessee firm and that the firm was a genuine firm, this Court quashed the 4 criminal proceeding initiated against her for filing false returns.

14) The first two decisions admittedly arose from the Income Tax Act . It is not demonstrated before us that whether identical provisions, namely, Sections 50 , 51 and 56 of the FERA are available in the Income Tax Act . Even otherwise, in the light of the language used in Section 56(1) of the FERA, there cannot be any bar irrespective of the decision under Section 50 , which I will elaborate in the succeeding paragraphs. The third decision relied on by the appellant relates to power of the Court under Section 482 of the Code for quashing the complaint/FIR and the last decision relied on has to be confined to the facts of that case since no other material was available. In other words, there is no ratio for being considered for other cases.

15) Now, let me consider the stand of the Department as projected by Mr. P.P. Malhotra, learned ASG. After taking through Sections 50 , 51 and 56 of the FERA, Mr. Malhotra submitted that both the proceedings, namely, the departmental adjudication and imposition of penalty as 5 covered by Sections 50 and 51 and the prosecution covered by Section 56 of the Act can go hand in hand and there is no bar from simultaneous operation of these two systems. He also submitted that all the decisions relied on by the learned counsel for the appellant have no bearing on the issue in the case on hand since no one has dealt with the provisions of FERA, more particularly, Sections 50 , 51 and 56 . In support of his claim, he relied on the following decisions:- 1) Standard Chartered Bank and Others vs. Directorate of Enforcement and Others , (2006) 4 SCC 278; 2) K.G. Premshanker vs. Inspector of Police and Another , (2002) 8 SCC 87; 3) Assistant Collector of Customs vs. L.R. Malwani , 1969 (2) SCR 438; 4) Iqbal Singh Marwah and Another vs. Meenakshi Marwah and Another , (2005) 4 SCC 370 and 5) B.N. Kashyap vs. Emperor, AIR (32) 1945 Lahore 23 Full Bench.

16) The first decision i.e. Standard Chartered Bank (supra), is a three-Judge Bench decision and arose on the very same provisions, namely, Sections 50 , 51 and 56 of the FERA.

Since, at the outset, Mr. Amarendra Sharan has pointed out 5 that the question in that decision was not the one relating to the issue being considered in the case on hand, let me first note down the facts and points determined by the three-Judge Bench. On receipt of notices under the FERA for showing cause why adjudication proceedings for imposition of penalty under Sections 50 and 51 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 appellant Bank and its officers of showing that they had the necessary permission from the authority concerned 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 writ of prohibition restraining the authorities under the FERA from proceeding with the proposed adjudication and the proposed prosecution, in terms of the Act. In another writ petition which 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 5 and 68 of the FERA, but clarified that Section 68(1) of 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 as well as the Union of India have filed Civil Appeals before this Court.

Initially, those appeals came up before a Bench of two learned Judges which referred the same to a bench of three Judges by order dated 20.04.2004. The three-Judge Bench doubted the correctness of a decision relied on by the Bank and its officers in Asstt. Commr. vs. Velliappa Textiles Ltd. (2003) 11 SCC 405 which was a judgment of a Bench of three Judges and by order dated 16-7-2004 [ ANZ Grindlays Bank Ltd. Vs. Directorate of Enforcement , (2004) 6 SCC 531] referred the question to a Constitution Bench. The Constitution Bench, by judgment dated 5-5-2005 (Standard Chartered Bank vs. Directorate of Enforcement (2005) 4 SCC 530) overruled the decision in Asstt. Commr. vs. Velliappa Textiles Ltd .

(supra) and sent 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 5 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 the three-Judge Bench has narrowed down and proceeded on the basis that the appellant-Banks are liable to be prosecuted for offences under the FERA. Since the Bench elaborately considered the scope and applicability of Sections 50 , 51 , and 56 of the FERA with which I am concerned, I extract the entire discussion and the ultimate conclusion.

17) The next decision heavily relied on by the Department is K.G. Premshanker (supra) which is also a three-Judge Bench decision. In this case, this Court has considered the effect of 5 the decision of the civil court on the criminal proceedings and initiation of civil and criminal proceedings against the same person belonging to the same cause. The following discussion and conclusion are relevant:

33. Hence, the observation made by this Court in V.M. Shah case1 that the finding recorded by the criminal court stands superseded by the finding recorded by the civil court is not correct enunciation of law. Further, the general observations made in Karam Chand case are in context of the facts of the case stated above. The Court was not required to consider 5 the earlier decision of the Constitution Bench in M.S. Sheriff case as well as Sections 40 to 43 of the Evidence Act.

34. In the present case, after remand by the High Court, civil proceedings as well as criminal proceedings are required to be decided on the evidence, which may be brought on record by the parties."

18) In L.R. Malwani (supra), which is also a Constitution Bench decision, though various questions of law posed before the Bench, I am concerned with question Nos. 1 and 2 which reads thus:

In those appeals, the case of the prosecution was that the accused persons and some other unknown persons had entered into a conspiracy at Bombay and other places in the beginning of October, 1959 or thereabout for the purpose of smuggling foreign goods into India and in pursuance of that conspiracy they had smuggled several items of foreign goods in the years 1959 and 1960. In that connection, an enquiry was 6 held by the Customs authorities. In the course of the enquiry, some of the goods said to have been smuggled were seized.

After the close of the enquiry those goods were ordered to be confiscated. In addition, penalty was imposed on some of the accused. Thereafter, on February 19, 1965, the Assistant Collector of Customs, Bombay after obtaining the required sanction of the Government filed a complaint against five persons including the appellants in Criminal Appeal No. 35 of 1967 (accused Nos. 1 and 2 in the case) under Section 120-B , I.P.C. read with Clauses (37), (75), (76) and (81) of Section 167 of the Sea Customs Act, 1878 (Act VIII of 1878) as well as under Section 5 of the Imports and Exports (Control) Act, 1947. Before the commencement of the enquiry in that complaint, the 1st accused filed the application mentioned above on August 3, 1965. In the enquiry held by the Collector of Customs, he gave the benefit of doubt to accused Nos. 1 and 2. This is what he stated therein:

Despite the above finding, the Assistant Collector in his complaint sought to prosecute these accused persons. The Constitution Bench has considered the contention that "the finding of the Collector of Customs referred to earlier operated as an issue estoppeld in the present prosecution". The following conclusion of the Constitution Bench is relevant:

19) It is relevant to point that the above dictum of the Constitution Bench in L.R. Malwani (supra) was relied on by a three-Judge Bench in Standard Chartered Bank (supra).

20) In Iqbal Singh Marwah (supra), about the binding nature of the decision in criminal court in respect of the same issue, it was held:

21) In B.N. Kashyap (supra), the Full Bench of the Court while considering Sections 40 to 43 of the Evidence Act, 1872 has held that finding on certain facts by a civil Court in action in personam is not relevant before the Criminal Court when it is called upon to give a finding on the same facts. Similarly the finding on certain facts by the Criminal Court is not relevant before the civil Court when it is called upon to give a finding on the same facts.

22) The above decisions, particularly, the decision in Standard Chartered Bank (supra) which arose under the FERA and dealt with the scope of Sections 50 , 51 and 56 which in turn relied on and followed in the decision of Constitution Bench in L.R. Malwani (supra) is directly on the point raised in this appeal. In fact, this Court, in para 21, in the Standard Chartered Bank (supra) considered the very scope of the words "without prejudice to any award of penalty by the adjudicating officer under this Act" as mentioned in Section 56 of the Act.

23) Considering the interpretation relating to Sections 50 , 51 and 56 by various decisions, I am of the view that in a statute relating to economic offences, there is no reason to restrict the scope of any provisions of the Act. These provisions ensure that no economic loss is caused by the alleged contravention by the imposition of an appropriate penalty after adjudication under Section 51 of the Act and to ensure that the tendency to violate is guarded by imposing appropriate punishment after due transaction in terms of Section 56 of the Act. In fact, it is relevant to point out that Section 23D of the Foreign Exchange Regulation Act, 1947 had a proviso, which indicates that the adjudication for the imposition of penalty should precede making of complaint in writing to the court concerned for prosecuting the offender. The absence of a similar proviso to Section 51 or to Section 56 of the present 1973 Act is a clear indication that the Legislature intended to treat the two proceedings as independent of each other. There is nothing in the present Act to indicate that a finding in adjudication is binding on the Court in a prosecution under Section 56 of the Act or that the prosecution under Section 56 depends upon 6 the result of adjudication under Section 51 of the Act. It is reiterated that the two proceedings are independent and irrespective of the outcome of the decision under Section 50 , there cannot be any bar in initiating prosecution under Section 56 . The scheme of the Act makes it clear that the adjudication by the concerned authorities and the prosecution are distinct and separate. No doubt, the conclusion of the adjudication, in the case on hand, the decision of the Special Director dated 18.11.1996, may be a point for the appellant and it is for him to put forth the same before the Magistrate.

Inasmuch as FERA contains certain provisions and features which cannot be equated with the provisions of Income Tax Act or the Customs Act and in the light of the mandate of Section 56 of the FERA, it is the duty of the Criminal Court to discharge its functions vest with it and give effect to the legislative intention, particularly, in the context of the scope and object of FERA which was enacted for the economic development of the country and augmentation of revenue.

Though the Act has since been repealed and not available at 6 present, those provisions cannot be lightly interpreted taking note of the object of the Act.

24) In view of the above analysis and discussion, I agree with the conclusion arrived at by the Metropolitan Magistrate, Calcutta as well as the decision of the High Court.

Consequently, the appeal fails and the same is dismissed.

...........................................J. (P. SATHASIVAM) NEW DELHI;

FEBRUARY 18, 2011.