Assistant Director, Enforcement Directorate and another vs Hameed Jahuffer and another

Raju, J.—The above appeal has been filed against the order of the learned single judge, dated August 30, 1993, in W.P. No. 16175 of

1993, whereunder the learned single judge has issued directions as hereunder, while finally disposing of the main writ petition, even at the stage of

hearing for admission, on hearing counsel for the first respondent herein/writ petitioner :

After hearing learned counsel for the petitioner and after perusing the affidavit filed herein, without going into the merits of the case, I think it

suffice to direct the first respondent to dispose of the petitioner''s petition filed u/s 52 of the Act for dispensing with the pre-deposit of the penalty

amount, on the merits and in accordance with law, within eight weeks from the date of receipt of a copy of this order, if the same has not been

disposed of already. Till such time, the further proceedings before the Additional Chief Metropolitan Magistrate''s Court in EOCC No. 309 of

1993 shall stand stayed. However, it is open to the said magistrate to proceed further, if the respondents are able to establish that the petitioner''s

application for dispensing with the pre-deposit of the penalty has been given a disposal. Ordered accordingly. No costs.

The relevant facts necessary to appreciate the issue raised before us are that, for the alleged contravention of certain provisions of the Foreign

Exchange Regulation Act, 1973, hereinafter referred to as ""the Act"", the respondent was proceeded against and apart from ordering the

confiscation of the seized Indian currency of Rs. 50,000 a penalty of Rs. 5,00,000 (five lakhs) came to be imposed by the Special Director,

Enforcement Directorate (Foreign Exchange Regulation) Act, New Delhi, by his order dated August 7, 1990. As per the said order, the penalty

imposed should be paid at the office of the Enforcement Directorate by means of a demand draft in favour of the Additional Director, Enforcement

Directorate, Madras-600 006, within 45 days of receipt of the order. There is no controversy over the position that the said order of adjudication

was duly served on the respondent and he also further filed an appeal to the Foreign Exchange Regulation Appellate Board on September 3,

1990, stated to have been registered also as appeal, FERA, B/683-1990 - as per communication dated June 25, 1992, from the Assistant

Registrar of the Board and the appeal is still pending. According to the respondent, along with the said appeal he also filed an application to

dispense with the predeposit of the penalty u/s 52 of the Act and the Appellate Board has not passed any orders on the said petition also. In the

mean-time, after giving a notice dated September 27, 1990, calling upon the respondent to remit the penalty within 10 days, on threat of action u/s

57 of the Act, which was acknowledged by the respondent on October 10, 1990, the Assistant Director, Enforcement Directorate, Madras, also

filed a complaint u/s 57 of the Act before the Court of the Additional Chief Metropolitan Magistrate, Economic Offences, Egmore, Madras-600

008, and the respondent was served with summons, dated July 14, 1993, in the said proceedings in EOCC No. 309 of 1993.

It was at that stage the respondent filed W.P. No. 16178 of 1993 and the learned judge gave directions as noticed supra. The Department has

filed the above appeal contending, among other things, that the learned single judge ought to have held that the pendency of proceedings by way of

appeal u/s 52 of the Act would not in any manner debar the prosecution u/s 57 of the Act and the officers of the Department are obliged to and

are enjoined by law to act as it has been done in this case. It is also contended that there is no interaction between the proceedings u/s 52 and

section 57 nor could it be stated that action u/s 57 of the Act is interdependent on section 52. Notice has been ordered to the respondents and the

respondent who has been served also is represented by counsel before us. We have heard learned counsel appearing on either side.

C. A. Sundaram, learned counsel appearing for the appellant, invited our attention to certain other decisions connecting the very issue before us

and stated that the matter requires proper consideration and clarification to set right the anomalies and ensure uniformity of the principles and

norms to be applied in a matter like this. In an unreported decision in Criminal M.P. No. 9087 of 1986, dated October 8, 1990. Arunachalam J.

dealt with a petition filed u/s 482 of the Code of Criminal Procedure, seeking to quash the proceedings in C.C. No. 1007 of 1986, on the file of

the Additional Metropolitan Magistrate, Madras, in almost similar circumstances. That was a case where, when the appeal was filed before the

Appellate Board with a petition for dispensing with the deposit of the penalty imposed, the Board merely granted time within which the amount has

to be deposited, but yet the prosecution u/s 57 has been launched and that was challenged before the court in the criminal O.P. The learned judge

held that at the time when the prosecution was launched it suffered no infirmity and that at any rate it was for the petitioner before the learned judge

to urge all the grounds and defend the proceedings. In P. Chidambaram Pillai v. Assistant Director, Directorate of Enforcement, (Criminal M.P.

Nos. 6362 and 9176 of 1986, dated July 17, 1990), Arunachalam J. held that it is settled law that the pendency of an appeal before the Foreign

Exchange Appellate Board does not ipso facto bar a prosecution. Noticing the fact that in that case, the Appellate Board has also subsequently

dismissed the appeal filed by the petitioners therein, the petitions filed u/s 482 of the Code of Criminal Procedure came to be dismissed. In K.M.

Mohamed Yousuf Sulaikha Ummal Vs. Asstt. Director, , Janarthanam J. held that the fact that the appeal had been entertained by the Appellate

Board by assigning a specific number is not by itself sufficient to indicate even by way of implication that the deposit of the penalty amount had

been dispensed with and the appeal had been taken on file and that in the absence of any specific order dispensing with the deposit of the penalty

amount by the Board, the contravention amounting to an offence u/s 56 of the Act gets fruitioned by the elapse of 45 days from the date of receipt

of the adjudication order, which in fact happened in that case and the petitioner before the learned judge in that case had to undergo the ordeal of

trial before the court below. In an unreported decision in L. Kamal Batcha v. Deputy Director of Enforcement (W.P. No. 14431 of 1993, dated

August 31, 1993), Bakthavatsalam J. held as hereunder :

I do not find any illegality or infirmity in the notice issued by the first respondent to the petitioner calling upon the petitioner to pay the penalty

amount, in so far as the petitioner has not yet obtained any orders before the appellate authority in the appeal and in the application, as required u/s

52 of the Act . . . . . when no order has been passed by the appellate authority, I am of the view that the first respondent is right in demanding the

petitioner to pay the penalty amount within a particular time. I am also of the view that the action taken by the first respondent is only a prosecution

and if any orders have been obtained by the petitioner from the Appellate Authority, he can very well produce that order before the criminal court

to defend his rights. As I do not propose to exercise my discretionary power under article 226 of the Constitution of India in favour of the

petitioner, this writ petition is dismissed.

Learned counsel for the respondent relied upon the decision in Estee Hubs and Drives Pvt. Ltd. v. Assistant Commissioner [1987] TLNJ 230,

wherein a Division Bench of this court dealt with a grievance made by an assessee under the Tamil Nadu General Sales Tax Act, 1959, for

coercive action taken u/s 22 of the Madras Revenue Recovery Act, 1864, to attach and bring certain properties of the assessee to sale for

recovering the arrears of tax during the pendency of a revision filed before the Deputy Commissioner of Commercial Taxes, who was not prepared

to dispose of the same in spite of a direction to do so by the Sales Tax Appellate Tribunal. The Division Bench held that it was wholly improper for

the Deputy Commissioner to decline to hear and dispose of the revision and that it was equally improper for the Department to initiate revenue

recovery proceedings in respect of the liability which is the subject-matter of the revision petition. Relying upon the same, it is contended for the

first respondent that the delay or lapse in the disposal of the appeal or the petition for dispensing with the pre-deposit of the penalty by passing

appropriate orders cannot be a ground for penalising the respondent further and that the Appellate Board being a statutory entity over which the

respondent has no control or say, the interests of the respondent ought not to be allowed to be jeopardised in any manner by the lapse of such a

body and that the Department also cannot take undue advantage of the inordinate delay in the disposal of the petitions filed for dispensing with the

pre-deposit of penalty by the Appellate Board.

Learned counsel for the appellant also relied upon a decision of the Supreme Court in P. Jayappan Vs. S.K. Perumal, First Income Tax Officer,

Tuticorin, . For the assessment year 1977-78, the petitioner appears to have filed a return disclosing certain income and the same was accepted,

Thereafter, a search was conducted at the residence of the petitioner u/s 132 of the Income Tax Act, resulting in the seizure of several documents

and account books which revealed suppression of purchases, existence of several bank accounts, fixed deposits, etc. On the view that the

petitioner therein had filed deliberately false returns, complaints were filed against him for offences under sections 276C and 277 of the Act and

sections 193 and 196 of the Indian Penal Code. The petitioner filed petitions u/s 482 of the Criminal Procedure Code, before the High Court to

quash the same contending that the launching of prosecution was premature on the ground that the reassessment proceedings are pending and have

not been completed. This High Court dismissed the petitions. The matter was pursued before the Supreme Court of India by means of special

leave petitions. The apex court held in such circumstances as hereunder (page 702) :

It may be that in an appropriate case a criminal court may adjourn or postpone the hearing of a criminal case in exercise of its discretionary power

u/s 309 of the Code of Criminal Procedure 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 proceeding which may have some bearing

on it is pending elsewhere. But this, however, has no relevance to the question of maintainability of the prosecution. The prosecution in those

circumstances cannot be quashed on the ground that it is a premature one.

On a careful consideration of the relevant provisions of the Act, we are of the view that the pendency of the reassessment proceedings cannot act

as a bar to the institution of the criminal prosecution for offences punishable u/s 276C or section 277 of the Act. The institution of the criminal

proceedings cannot in the circumstances also amount to an abuse of the process of the court. The High Court was, therefore, right in refusing to

quash the prosecution proceeding in the four cases instituted against the petitioner u/s 482 of the Code of Criminal Procedure.

We have carefully considered the scheme underlying the provisions contained in sections 52, 56 and 57 of the Act in the light of the various

decisions placed before us for our consideration. In our view, the ratio of the decision of the Supreme Court in P. Jayappan Vs. S.K. Perumal,

First Income Tax Officer, Tuticorin, would squarely apply to the case on hand and the decisions of the learned single judge referred to supra are

quite in conformity with the principles and ratio laid down by the apex court. Whatever may be the course that might be adopted by the criminal

court on entertaining a complaint u/s 57 of the Act in exercise of its discretionary powers to await or postpone the proceedings before it pending

disposal of the appeal proceedings under the Act which may have a bearing on the proceedings before the criminal court, the pendency of such

proceedings u/s 52 of the Act does not affect in any manner the maintainability of the prosecution and the prosecution launched cannot be

interfered with either on the merits or on the ground that it is a premature move. As a matter of fact, even the very learned judge (Bakthavatsalam

J.), in the earlier decision, has taken such a view and it is only in the case now under challenge in this appeal that he has adopted a different

approach. The discretion to proceed further in the matter by the criminal court on the prosecution launched u/s 57 of the Act has to be left to the

said court itself and it is not for this court exercising jurisdiction under article 226 of the Constitution of India to interfere with or impede the course

of such proceedings.

However, it is necessary to point out as held by the Supreme Court in Uttam Chand and Others Vs. Income Tax Officer, Central Circle,

Amritsar, that the prosecution once instituted may be quashed in the light of the finding recorded by an authority favourable to the assessee under

the Income Tax Act subsequently in respect of the relevant assessment proceeding. Similarly, in a case like the one on hand, if in the appeal

preferred u/s 52 of the Act the order of adjudication is set aside it will have a bearing on the prosecution launched u/s 57 of the Act and the

criminal court cannot ignore such a finding and in an appropriate case it may even drop the proceedings in the light of the order passed in the

appeal preferred u/s 52 of the Act against the order of adjudication on the basis of which the prosecution is launched. This proposition is also

found in para. 5 of the aforesaid judgment of the Supreme Court in P. Jayappan Vs. S.K. Perumal, First Income Tax Officer, Tuticorin, .

We consider it necessary to point out that the right of appeal provided u/s 52 of the Act and the right of launching a prosecution u/s 57 of the

Act have to be harmoniously construed so as to ensure that neither the right of appeal u/s 52 of the Act against an order of adjudication and the

right to seek an order from the appellate authority to dispense with the pre-deposit of the penalty imposed is rendered illusory nor the right of the

authorities u/s 57 of the Act to launch prosecution against the party who fails to deposit the penalty as per the order of adjudication is affected. For

instance, as in the case before us, the respondent who has been indicted by the adjudication officer by imposing a penalty for the alleged violation

of the provisions of the Act, has chosen to avail of the remedy of appeal provided u/s 52 of the Act and also further invoked the jurisdiction of the

Appellate Board under the second proviso to section 52 of the Act to dispense with the pre-deposit of the penalty imposed, and the Appellate

Board is obliged to consider the relief claimed and pass orders thereon, apart from the disposal of the appeal itself, either rejecting the prayer of

the respondent or granting the same either unconditionally or subject to such conditions as the Appellate Board may deem fit without undue delay.

This is a substantial right conferred upon the person condemned of having committed the contravention and this right is part of the right of appeal,

separately and distinctly recognised by means of a specific provision in the form of a proviso to the main provision itself. We are not concerned

with or dealing with a case where the person against whom an order imposing penalty has been passed has not chosen to file an appeal in time

and/or in addition thereto a petition availing of the remedy-under the second proviso to section 52 of the Act. Whatever may be the considerations

in such cases, at least in a case where the appeal has been presented within the period of limitation and with a further application under the second

proviso to section 52 of the Act praying for dispensing with the deposit of the penalty levied, the Appellate Board is obliged to dispose of the claim

made and that too within a reasonable period. In this regard it is useful to note that the statutory provision even enjoins the Appellate Board, of its

own direction, also to pass orders dispensing with the deposit of the penalty provided that the Appellate Board is of the opinion that the deposit to

be made will cause undue hardship to the appellant. Thus, it becomes even mandatory for the Appellate Board to apply its mind to the relief sought

for invoking the second proviso to section 52 of the Act and pass orders thereon, expeditiously or within a reasonable time either way, in terms of

the statutory provisions, and the Appellate Board cannot afford to be either indifferent or delay or postpone matters indefinitely in this regard.

There is no serious controversy about the fact that the Appellate Board is an independent judicial body at any rate not part and parcel of the

administrative hierarchy of the Enforcement Directorate and, therefore, neither the appellant can be said to have any hold or control over the

functioning of the Appellate Board nor could the respondent who had filed the appeal have any role in it, particularly because the Tribunal is

situated at New Delhi and it will be left to the discretion of the Appellate Board as to when it chose to pass orders. If that be the position, the

respondent, a citizen alone cannot be put to a disadvantage or prejudice on account of the mode of functioning of the Appellate Board, particularly

when it was for no fault of the respondent who is the appellant before the Board. Having regard to this peculiar situation arising only on account of

the mode of functioning of the Appellate Board, it becomes necessary for this court to balance fairly, equally and equitably too the rights of a

citizen and the right of the Department by adopting a reasonable and harmonious construction of the provisions contained in section 57 of the Act

so as to make the provisions contained in the second proviso to section 52 of the Act and section 57 of the Act more purposeful and effective so

that substantial justice can be secured to both the parties and smooth and harmonious working of the Act can be ensured. In order to achieve this,

we are of the view that it will be necessary to declare that wherever the competent authority is apprised of the position about the filing of an appeal

well within the time stipulated u/s 52 with a further application invoking the powers of the Appellate Board under the second proviso to section 52

of the Act, it is open to the concerned authorities to consider the question as to whether they should await the orders of the Appellate Board either

way on the application made for dispensing with the deposit of the penalty imposed under the order of adjudication and proceed further u/s 57 of

the Act, thereafter and in accordance with any such orders. We are also of the view that the Appellate Board must so devise its procedure in such

a way as to dispose of such petitions at least for dispensing with the deposit of the penalty within a reasonable and specified time limit so that there

will be no harsh or arbitrary enforcement of the powers u/s 57 of the Act. Any other construction of the relative operation and role of sections 52

and 57 would render the second proviso in section 52 of the Act totally nugatory or otiose and courts have to take care to see that such a situation

is not created resulting in grave injustice to the party to the proceedings of the nature in question.

Consequently, we set aside the order of the learned single judge, allow the appeal and order the dismissal of the writ petition. We make it clear

that the criminal court shall be within its rights, to judicially deal with the situation as pointed out by the apex court in P. Jayappan Vs. S.K.

Perumal, First Income Tax Officer, Tuticorin, and the observations made in this judgment. The Appellate Board entertaining appeal u/s 52 of the

Act shall act in accordance with the observations made hereinabove. No costs.