A.I. Shamsudeen and others vs Special Director, Enforcement Directorate and others

Pratap Singh, J.—The accused in E.O.C.C. Nos. 312, 317, 380, 320, 296, 270, 319, 288, 339, 349, 366, 335, 314, 353, 306, 283, 275,

491, 316, 381 and 494 of 1993 on the file of the Additional Chief Metropolitan Magistrate, Egmore, Madras, have filed these petitions u/s 482 of

the Criminal Procedure Code, praying to call for the records in the above cases and quash the same.

In E.O.C.C. No. 312 of 1993, the respondent has filed the complaint against the petitioner in Crl. O.P. No. 9755 of 1993 for an offence u/s 57

of the Foreign Exchange Regulation Act, 1973 (which I shall hereafter refer to as ""the FERA""). The allegations in the complaint are briefly as

follows :

The Special Director of Enforcement initiated adjudication proceedings against the accused for contravention of certain sections of the Foreign

Exchange Regulation Act and by his order dated October 23, 1989, imposed a total penalty of Rs. 2,50,000 to the accused and directed the

accused to deposit the penalty imposed within 45 days of the date of receipt of the said order, at the office of the Enforcement Directorate,

Madras. The said order was served on the accused. In spite of repeated notices, the accused had not paid the penalty of Rs. 2,50,000. Failure to

pay the penalty, imposed by the Special Director of Enforcement, within 45 days from the date of receipt of the order is an offence punishable u/s

57 of the Foreign Exchange Regulation Act. Hence, the complaint.

In E.O.C.C. No. 317 of 1993, the respondents have filed the complaint against the petitioner in Crl. O.P. No. 9756 for an offence u/s 57 of the

Foreign Exchange Regulation Act, on similar allegations, with regard to the penalty of Rs. 50,000 imposed by the Special Director of Enforcement,

in his order dated October 23, 1989. In E.O.C.C. No. 380 of 1993, the respondents have filed the complaint against the petitioner in Crl. O.P.

No. 9902 of 1993, for the offence u/s 57 of the Foreign Exchange Regulation Act in respect of the penalty of Rs. 4 lakhs imposed on August 12,

1991, on similar allegations. Likewise, in E.O.C.C. Nos. 320 of 1993, 296 of 1993, 270 of 1993 and 319 of 1993, the respondents in the

concerned Crl. O.Ps. have filed the complaint against the petitioners for the offence u/s 57 of the Foreign Exchange Regulation Act, on similar

allegations, with regard to the penalty of Rs. 8,50,000, Rs. 5 lakhs, Rs. 2 lakhs and Rs. 4 lakhs, respectively. Likewise, in E.O.C.C. Nos. 288,

274, 339, 349, 366, 335 and 314 of 1993, the respondents in the concerned Crl. O.Ps. have filed the complaints against the petitioners for the

offence u/s 57 of the Foreign Exchange Regulation Act, on similar allegations, with regard to the penalty of Rs. 50,000, Rs. 50,000, Rs. 70,000,

Rs. 1 lakh, Rs. 5 lakhs, Rs. 1,25,000 and Rs. 1,80,000, respectively. Likewise, in E.O.C.C. Nos. 353, 306, 283, 275, 491, 316, 381 and 494 of

1993, the respondent in the concerned Crl. O.Ps. have filed complaints against the petitioners for the offence u/s 57 of the Foreign Exchange

Regulation Act, on similar allegations, with regard to the penalty of Rs. 5 lakhs, Rs. 1 lakh, Rs. 50,000, Rs. 1 lakh, Rs. 10,05,000, Rs. 2,02,500,

Rs. 1 lakh and Rs. 1 lakh respectively.

The first submission made by learned counsel appearing for the petitioners is that these complaints were filed for offence u/s 57 of the Foreign

Exchange Regulation Act, on the allegations that the accused have not paid the penalties imposed in the adjudication orders for contravention of

the provisions of the Foreign Exchange Regulation Act, within the stipulated time and that the accused have filed appeals against those adjudication

orders before the Appellate Board that the said appeals are pending. Learned counsel would add that if those appeals are allowed and the

adjudication orders, imposing penalties were set aside, the premises on which these complaints were laid would be no longer there and so the filing

of the complaints is premature and that the respondent/complainants ought to have waited till the disposal of those appeals and the complaints, at

this stage, which are premature, are liable to be quashed. With regard to this submission, Mr. P. Rajamanickam, the learned Special Public

Prosecutor for the respondents, would submit that no stay of operation of adjudication orders are passed by the Appellate Board and so the

respondents/complainants need not wait indefinitely till the disposal of the appeals. He would add that the submission that these complaints are

premature, cannot be sustained.

I have carefully considered the first submission made by learned counsel for the petitioners and Mr. P. Rajamanickam. In Crl. O.P. No. 8836 of

1991, my learned brother, Justice Arunachalam, had occasion to consider a similar submission. In that case also, the complaint was filed for the

offence u/s 57 of the Foreign Exchange Regulation Act, 1973, for having failed to pay the penalty imposed by the Special Director, Enforcement,

within 45 days of the receipt of the said order. The first submission made before the learned judge was that against the order imposing penalty

passed by the Special Director, Enforcement, the petitioner had preferred a statutory appeal with an application for stay. It is still pending disposal

before the Foreign Exchange Regulation Appellate Board, New Delhi, and no orders have been passed. Therefore, till the appeal is disposed of ;

or an order is passed in the application for stay, the impugned prosecution cannot be held to be valid in the eye of law. The learned judge had held

that on this ground, the petitioner succeeds and it has to be necessarily rejected. In R.K. Swamy v. Assistant Director, Enforcement Directorate

[1993] LW (Cri.) 407, while dismissing a similar petition to quash a prosecution, initiated against the petitioner therein u/s 57 of the Foreign

Exchange Regulation Act, the same learned judge has stated as follows :

Section 57 of the Act punished persons, who fail to pay the penalty within 45 days prescribed for payment of the penalty imposed, by the

adjudicating authority. The offence is complete on non-payment within that period of 45 days. It may be that in certain cases hardship may be

caused to the accused. But the law laid down by the Supreme Court in P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, , is

that, a mere expectation of success in some proceeding in appeal or reference under the Act cannot come in the way of the institution of the

criminal proceedings. Learned counsel sought to distinguish the said decision, since it related to reassessment proceedings under the Income Tax

Act wherein certain offences under the Indian Penal Code were also involved. On a question of principle, I am unable to hold differently. Further,

S. Natarajan J., as he then was, in Crl. M.P. No. 2288 of 1980 (A.S.G. Jothimani Nadar v. Deputy Director, Enforcement Directorate) had held

that under the Foreign Exchange Regulation Act, it was obvious that a criminal prosecution was an independent proceeding ; not dependent upon

the validity of the order of adjudication, nor was it a continuation of that adjudication proceeding. The courts cannot legislate and have to interpret

only the law as found in the statute.... The remedy, if any, for the petitioner to have the prosecutions not initiated, till the disposal of the statutory

appeals will be at the doors of the Legislature and not before this court.

With respect, I am in total agreement with the view of Justice Arunachalam.

In T.R. Balasubramaniam v. Assistant Director, Enforcement Directorate (Crl. M.P. No. 1277 of 1974), Justice S. Natarajan (as he then was),

had considered the quashing of the complaint filed in C.C. No. 2892 of 1974, on the file of the Chief Metropolitan Magistrate, Egmore, Madras,

with regard to the penalty of Rs. 5 lakhs. In that case, the appeal against the order of penalty lies to the Appellate Board, but as a condition

precedent, the entire penalty must be deposited unless the Appellate Board relaxes the condition and minimises the amount of deposit. Availing of

the discretion granted to the Appellate Board, the petitioner moved the Appellate Board and obtained permission to furnish bank guarantee to the

extent of Rs. 1 lakh for his appeal being entertained by the board. Subsequently, the Board dismissed the appeal and against the dismissal, the

petitioner has preferred A.S. No. 413 of 1975 to the High Court and has also obtained an order of stay of collection proceedings in respect of

penalty amount. In the meanwhile, the Assistant Director has filed the complaint before the Chief Metropolitan Magistrate, Egmore, Madras, u/s

23F of the Foreign Exchange Regulation Act. The learned judge had held that though, under the Act, there is no provision which directly prohibits

the filing of a complaint during the pendency of a proceeding before the Appellate Board or the High Court, the complaint u/s 23F is allowed to be

proceeded with during the pendency of the appeal proceedings, then anomalous results in certain cases are likely to follow. The learned judge has

held that to avoid such a ludicrous situation, the proper course to be followed by the authorities is to await the result of the proceedings before the

Appellate Board or the High Court. This is a case where stay has been granted. Such is not the case in these petitions.

In Plasticraft Industries Vs. Assistant Collector of Central Excise, , the prosecution was under the Central Excise Act. In it, Justice Arunachalam

has observed as follows :

The Supreme Court in catena of decisions has held that the pendency of an appeal before the appellate authorities against adjudication

proceedings would not be a bar for the criminal proceedings to be proceeded with, since the criminal court will have to decide the issues arising

out of the criminal proceedings on the evidence let in before the criminal court independently. However, the observations of the Supreme Court in

Mahendra Singh Dhantwal Vs. Hindustan Motors Ltd., , may be of some significance. The apex court, while dealing with the pendency of the

reassessment proceedings under the Income Tax Act held that such proceedings cannot act as a bar to the institution of the criminal prosecution for

offences under the Income Tax Act and the Indian Penal Code. The institution of criminal proceedings cannot in such circumstances amount to an

abuse of the process of court. However, it may be that in an appropriate case, the criminal court may adjourn or postpone the hearing of a criminal

case in exercise of its discretionary power u/s 309 of the Criminal Procedure Code, if the disposal of any proceeding under the Act which has a

bearing on the proceedings before it, is imminent so that it may take also into consideration the order to be passed therein. Even here the discretion

should be exercised judicially and in such a way as not to frustrate the object of the criminal proceedings. There is no rigid rule which makes it

necessary for a criminal court to adjourn or postpone the hearing of a case before it indefinitely or for an unduly long period, only because some

proceedings which may have some bearing on it is pending elsewhere. On this aspect, learned counsel for the petitioners brought to my notice the

judgment of the Gujarat High Court in Digvijay Cement Co. v. State of Gujarat [1989] 22 ECR 638 wherein S.S. Kapadia J. held that when the

matter was pending before the Tribunal and the possibility of allowing the appeal could not be ruled out, the petitioner cannot be said to have

committed any offence and it was in the interest of justice, stay of criminal proceedings could be ordered, till the hearing of the appeal pending

before the Tribunal. Since I have quoted the view of the Supreme Court relating to exercise of such power in appropriate cases, as a general rule,

the view of the Gujarat High Court cannot be accepted.

In A.R. Antulay Vs. R.S. Nayak and Another, , it was held that deprivation of one statutory right of appeal would amount to denial of

procedure established by law. In the instant case, the question that falls for consideration is whether because an appeal was filed to the Appellate

Board, the consequence of non-payment of penalty imposed in the adjudication order should be stopped till the disposal of the appeal. The

question here is not deprivation of any right of appeal. In view of the settled law that filing of an appeal by itself would not stay the consequence of

the original order, with which proposition alone we are now concerned, the above ruling is not germane to the point in issue in this batch of cases.

It was further contended that the proceedings culminating in the adjudication order is in the nature of civil proceeding and that statutory appeal

is provided to the Appellate Board and the adjudication order gets merged in the Appellate Board''s order and so when the appeal is pending, the

criminal proceedings cannot be initiated for non-payment of the penalty imposed in the adjudication order u/s 57 of the Foreign Exchange

Regulation Act, 1973. There cannot be any dispute with regard to the principle that the original order gets merged with the order of the Appellate

Board. But that does not mean that till the order of the Appellate Board is pronounced, the consequences of the order of the original authority

should get automatically stopped. So I am unable to accept either this submission. In L.E. Mohamed Hussain and Others Vs. Deputy

Superintendent of Customs, R.I.V. Tiruchirapalli and Others, and M.R. Pratap and Another Vs. The Director of Enforcement, , it has been held

that section 23(1)(a) or section 23D of the FERA are not criminal proceedings by virtue of section 23F or section 23D(1), proviso, and they

remain civil proceedings.

In Balaji Oil Traders and Others Vs. Income Tax Officer, Central Circle-V, Bangalore, , a complaint was filed for offence under sections

276C and 277 of the Income Tax Act, 1961. The acts of the assessee that would constitute an offence under sections 276C and 277 of the Act

arise only when he does or omits to do something in the discharge of his statutory obligation. Whether he evaded payment of tax, interest or

penalty chargeable under the Act as provided u/s 276C or made a false statement on verification, etc., as provided u/s 277 of the Act are required

to be first ascertained on an examination of all the facts and circumstances of the case by the concerned Income Tax Officer. It was held that if the

appellate or revisional authority modifies the order of the subordinate authority holding that the acts or omissions complained of either had not

taken place or were not wilful, the complainant cannot pursue his complaint on the strength of the facts earlier placed, which, in the altered

situation, do not at all exist. It was further held that during the pendency of the appellate or revisional proceedings, to continue the prosecution in

the criminal court would amount to prosecuting on uncertain facts which cannot be countenanced and that in such a case, the prosecution

proceedings are liable to be quashed. With respect, in view of the consistent view of this court, with which I agree, I do not apply the ratio of this

case to the cases on hand.

The next submission made by learned counsel appearing for the petitioners was that the court of the Additional Chief Metropolitan Magistrate

at Madras has got no jurisdiction to try these cases inasmuch as the accused are in Kerala State and the orders of adjudication were not passed in

Madras. This contention was rightly repelled by Mr. P. Rajamanickam by pointing out that in all these orders of adjudication, they were directed to

pay the penalty amount at Madras and the failure to pay that amount gives the cause of action for filing of these complaints and so the learned

Additional Chief Metropolitan Magistrate, Madras, has got jurisdiction to try these cases. The sine qua non for the offence is non-payment of the

penalty amount. They are bound to pay the penalty amount at Madras. As such, the court at Madras has got the jurisdiction to try these cases.

Hence, this submission also fails.

Since none of the submissions made by learned counsel finds acceptance with me, these petitions fail and shall stand dismissed.