Full Judgment Text
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PETITIONER:
RAYALA CORPORATION (P) LTD. & ORS.
Vs.
RESPONDENT:
DIRECTOR OF ENFORCEMENT, NEW DELHI
DATE OF JUDGMENT:
23/07/1969
BENCH:
BHARGAVA, VISHISHTHA
BENCH:
BHARGAVA, VISHISHTHA
SHELAT, J.M.
VAIDYIALINGAM, C.A.
HEGDE, K.S.
GROVER, A.N.
CITATION:
1970 AIR 494 1970 SCR (1) 639
1969 SCC (2) 412
CITATOR INFO :
R 1970 SC 549 (3,6,20,24,28)
RF 1971 SC1511 (6)
R 1979 SC1588 (14)
ACT:
Foreign Exchange Regulation Act (7 of 1947), and
Foreign Exchange Regulation (Amendment) Act (39 of 1957),
ss.’4(1), 23(1) and 23D(1) --Section 23(1)(b), if ultra
vires Art. 14-- Scope of proviso to s. 23(D)(1)--Defence
of India Rules, 1962 R. 132A--Omission by Notification-If
prosecution permissible for offence committed when Rule was
in existence.
HEADNOTE:
The premises of the first appellant were raided by the
Enforcement Directorate and certain records were seized.
The second appellant was the first appellant’s managing
director. Thereafter, on 25th August 1967, notice was
issued by the respondent to the two appellants to show
cause within fourteen days why adjudication proceedings
should not be instituted against them under s. 23D(1) of the
Foreign Exchange Regulation Act, 1947, for violation of ss.
4 and 9 of the Act, on the allegation that 2,44,713.70
Swedish Kronars had been deposited by them in a bank account
in Sweden instead of surrendering the foreign exchange to an
authorised dealer as required by the Act. After
investigation, on 4th November 1967, another notice was
issued to the second appellant stating that out of the total
sum mentioned, he had acquired, during 1963 to 1965, Sw. Kr.
88,913.09, that he held the amount in a bank in Sweden
instead of offering it to the Reserve Bank of India and
thereby contravened ss. 4(1) and 9 of the Act, and asking
him to show if he had any special exemption for acquiring
the foreign exchange. A similar show cause notice was
issued to the first appellant in. respect of the same amount
on 20th January 1968. On 16th March 1968, in supersession of
the show cause notice dated 25th August 1967, a further
notice was addressed to both the appellants to show cause
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within 14 days why adjudication proceedings under s. 23D of
the Act should not be held against them in respect of the
balance of Sw. Kr. 1,55,801.41 and added that it had since
been decided to launch a prosecution in respect of the Sw.
Kr. 88,913.09 and on the 17th March 1968 a complaint was
filed against both the ’appellants in the Chief Presidency
Magistrate’s Court for contravention of ss. 4(1), 5(1)(e)
and 9 of the Act, punishable under s.. 23(1)(b) of Act, and
for violation rule 132A(2) of the Defence of India Rules,
1962, punishable under rule 132A(4). Thereupon, the
appellants fried ’applications in the High Court under s.
561A, Criminal Procedure Code, for quashing the proceedings
in the Magistrate’s court, but the applications were
dismissed.
In appeal to this Court, it was contended that: (1) The
punishment under s. 23(1)(b) is severer and heavier than the
penalty to which a person is made liable if adjudication
proceedings are taken under s. 23(1)(a), but the section
lays down no principles at all for determining when the
person concerned should be proceeded against,under s.
23(1)(a) and when under s. 23(1)(b) and has left it to the
arbitrary discretion of the respondent ’and hence violates
Aft. 14 of Constitution; (2) Even if s. 23(1)(b) is not
void the respondent did not act in ’accordance with the
640
requirements of the proviso to s. 23D(1)which lays down that
a con plaint may be made at any stage of the enquiry, but
only if, having regarto the circumstances of the case, the
Director of Enforcement finds the the penalty which ’he is
empowered to impose under s. 23(1)(a) would not be adequate;
and (3) Since the Notification issued by the Ministry of
Home Affairs dated 30th March 1965 provided that R. 132A
shall be omitted except ’as respects things done or omitted
to be done under that Rule, a prosecution in respect of an
offence punishable under that Rule could not be instituted
on 17th March 1968 when that Rule had ceased to exist even
though it might be in respect of an offence committed
earlier during the period that the rule was in force.
HELD: (1) The choice whether the proceeding be taken
under s. 23(1)(a) or 23(1)(b) against the person who is
liable for action for contravention under s. 23(1), is not
left entirely to the discretion of the Director of
Enforcement but the criterion for making the choice is
indicated in the proviso to s. 23D(1). [648 A-B]
The Foreign Exchange Regulation (Amendment) Act, 1957,
amended s. 23(1) and at the same also, introduced s. 23D.
The intention of the Legislature from such simultaneous
amendment was that the two sections are to be read together.
While providing for alternative proceedings under s.
23(1)(a) and s. 23(1)(b), the Legislature ensured that the
procedure laid down in s. 23D(1) was to be followed in all
cases in which proceedings are intended to be taken under s.
23 (1 ). Thus, whenever there is any contravention of any
section or rule mentioned in s. 23 (1) the Director of
Enforcement must first proceed under the principal clause of
s. 23D(1) and initiate proceedings for adjudication of
penalty. He cannot at that stage, in his discretion, choose
to file a complaint in a court for prosecution of the person
concerned for the offence under s. 23(1)(b). Though the
Legislature has not used in either of the sub-sections
specific words excluding the filing of a complaint before
proceedings for adjudication are taken under s. 23D(1), it
must be presumed that Parliament knew that if provision was
made for two alternative punishments for the same act, one
differing from the other, and without any limitations, such
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a provision would be void under Art. 14. In view of the
principle that an interpretation which would save a section
should be preferred ss. 23(1) and 23D(1) must be interpreted
to mean that the Director of Enforcement must first initiate
proceedings under the principal clause of s. 23D(1) for
adjudication of penalty and that he is empowered to file a
complaint in court for the offence under s. 23(1)(b) only
when at any stage of the adjudication enquiry,, he comes to
the opinion that, having regard to the circumstances of the
case, the penalty which he is empowered to impose would not
be: adequate. [647 D, F--H; 648 E--H; 649 A--C]
Shanti Prasad Jain v. The Director of Enforcement,.
[1963] 2 S.C.R. 297;. followed.
(2) When such a safeguard is provided by the Legislature
it is necessary that the authority, which takes the steps of
instituting against that person proceedings, in which, a
severer punishment can be awarded, complies strictly with
all the conditions laid down by law, that is, the Director
could file a complaint for prosecution in court only if,
having regard to the circumstances of the case, he finds
that the. penalty that he is empowered to impose in the
adjudication proceedings would not be adequate. [650 G-
H] .
In the present case, the enquiry had been instituted by
the issue of the show cause notice dated 25th August 1967.
But it does not appear on
641
the record that even after the issue of that notice, any
such material came .before the respondent which could be
relevant for forming an opinion that the penalty which he.
was empowered to impose for the contravention in respect Sw.
Krs. 88,913.09 would not be adequate. No doubt some
investigation was made, but the investigation would not be
part of the enquiry which had to be held in accordance with
the Act and the Adjudication Proceedings and Appeal Rules,
1957. Neither of the appellants had shown cause in
pursuance of the notice and there was no consideration, of
such cause to decide whether adjudication proceedings should
be held or not. Nor were any statements taken or recorded
during an enquiry under s. 23D(1). Whatever statements were
recorded were in the course. of investigation and not in the
course of an enquiry under s. 23D(1). Therefore, the
complaint must be held to have been filed without satisfying
the requirements and conditions of the proviso to s. 23D(1)
of the Act, and in .so far as it related to the
contravention of the provisions of ss. 4(1), 5(1)(e) and 9
of the Act, punishable under s. 23(1)(b), it must be held
invalid. [651 D-E; 652 C-D, F-G; 653 B-D]
(3) The language used in the Notification of 30th March
1965 only affords protection to action already taken while
the rule was in force, but cannot justify initiation of a
new proceeding which will not be a thing done or omitted to
be done under the rule but, a new act of initiating, a
proceeding after the rule had ceased to exist. The offence
alleged against the appellants is in respect of acts done by
them which cannot be held to be acts under that rule.
Unlike case of Wicks v. Director of Public Prosecutions,
[1947] A.C. 362, where an express provision was made. that
the operation of the Emergency Powers (Defence) Act, 1939 (a
temporary Act) was not to be affected by its expiry as
respects things, previously done or omitted to, be done, in.
the present case, the operation of r. 132A of the Defence of
India Rules has not been continued after its omission.
Section 6 of the General Clauses Act, 1897, also could not
be invoked,. because, the section does not apply to
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temporary statutes, or rules and omissions. It only applies
to repeals to. Central Acts. Further, the Notification of
the Ministry of Home Affairs omitting R. 132A, did not make
any such provision similar to that contained in s. 6 of the
General Clauses Act. Moreover, though s. 4(1) of the
Foreign Exchange Regulation Act was amended simultaneously
with the omission of the r. 132A, the Legislature did not
make any provision that an offence previously committed,
under r. 132A would continue to remain punishable as an
offence of contravention of s. 4(1) of the Act nor was any
provision made permitting operation of r. 132A itself to
permit institution of prosecutions in respect of such
offences. Consequently, after the omission of r. 132A the
complaint is, incompetent even in respect of the offence
under Rule 132A(4). [654 A--D; 655 F H; 656 B--C, E--F; 657
A F]
S. Krishnan & Ors. v. The State of Madras, [1951] S.C.R.
621, applied.
State of M.P.v. Hiralal Sutwala, A.I.R. 1959 M.P. 93, 1.
K. Gas: Plant Manufacturing Co. Ramput v. The King Emperor,
[1947] F.C.R. 141, distinguished.
Seth Jugmendar Das v. State, A.I.R. 1951 All. 703,
referred to.
JUDGMENT:
CRIMINAL APPELLATE JURISDICTION: Criminal Appeals Nos.
18 and 19 of 1969.
Appeal from the judgment and order dated October 16,
1968’ of the Madras High Court in Criminal Misc. Petition
No. 980 of 1968.
642
A.K. Sen, N.C. Raghavachari, W.S. Sitaram and R.
Gopalakrishnan, for the appellants.
S.T. Desai, B.D. Sharma and S. P. Nayar., for the
respondent.
P.R. Gokulakrishnan, Advocate-General, Tamil Nadu and
V. Rangam, for the intervener.
Bhargava, J. These appeals, by certificate,
challenge a .common Order of the High Court of Madras
dismissing applications under section 561A of the Code of
Criminal Procedure presented by the appellants in the two
appeals for quashing proceedings being taken against them
in the Court of the Chief Presidency Magistrate, Madras, on
the basis of a complaint filed on 17th March; 1968 by the
respondent, the Director of Enforcement, New Delhi. The
Rayala Corporation Private Ltd., appellant in Criminal
Appeal No. 18 of 1969, was accused No. 1 in the complaint,
while one M.R. Pratap, Managing Director of .accused No. 1,
appellant in Criminal Appeal No. 19/1969 was accused No. 2.
The circumstances under which the complaint was filed may be
briefly stated.
The premises of accused No. 1 were raided by the
Enforcement Directorate on the 20th and 21st December, 1966
and certain records were seized from the control of the
Manager. Some enquiries were made subsequently and,
thereafter, on the 25th August, 1967, a notice was issued by
the respondent to the two accused to show cause why
adjudication proceedings should not be instituted against
them for violation of sections 4 and 9 of the Foreign
Exchange Regulation Act VII of 1947 (hereinafter referred to
as "the Act") on the allegation that a total sum of
2,44,713.70 Swedish Kronars had been deposited in a Bank
account in Sweden in the name of accused No. 2 at the
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instance of accused No. 1 which had acquired the foreign
exchange and had failed to surrender it to. an authorised
dealer as required under the provisions of the Act. They
were called upon to show cause in writing within 14 days of
the receipt of the notice. Thereafter, some correspondence
went on between the respondent and the two accused and,
later, on 4th November, 1967, another notice was issued by
the respondent addressed to accused No. 2 alone stating that
accused No. 2 had acquired a sum of Sw. Krs. 88,913.09
during the. period 1963 to 1965 in Stockholm, was
holding that sum in a bank account, and did not offer or
cause it to be offered to the Reserve Bank of India on
behalf of the Central Government, so that he had contravened
the provisions of s. 4(1) and s. 9 of the Act, and
affording to him. an opportunity under s. 23(3) of the Act
of showing, within 15 days from the receipt of the notice,
that he had permission or special exemp-
643
tion from the Reserve Bank of India in his favour for
acquiring this amount of foreign exchange ,and for not
surrendering the amount in accordance with law. A similar
show cause notice was issued to accused No. 1 in respect of
the same amount on 20th January, 1968, mentioning the
deposit in favour of accused No. 2 and failure of accused
No. 1 to surrender the amount, and giving an opportunity to
accused No. 1 to produce the permission or special exemption
from the Reserve Bank of India. On the 16th March, 1968,
another notice was issued addressed to both the accused to
show cause in writing. within 14 days of the receipt of the
notice why adjudication proceedings as contemplated in s.
23-D of the Act should not be held against them in respect
of a sum of Sw. Krs. 1,55,801.41 which were held in a bank
account in Stockholm in the name of accused No. 2 and in
respect of which both the accused had contravened the
provisions of ss. 4( 3 ), 4( 1 ), 5(1)(e) and 9 of the Act.
The notice mentioned that it was being issued in
supersession of the first show cause notice dated 25th
August, 1967, ,and added that it had since been decided to
launch a prosecution in respect of Sw. Krs. 88,913.09. The
latter amount was the amount in respect of which the two
notices of 4th November, 1967 and 20th January, 1968 were
issued to the two accused, while this notice of 16th March,
1968 for adjudication proceedings related to the balance of
the amount arrived at by deducting this sum from the
original total sum of Sw. Krs. 2,44,71-3.70. The next day,
on 17th March, 1968, a complaint was filed against both the
accused in the Court of the Chief PresidenCy Magistrate,
Madras, for contravention of the provisions of ss. 4( 1 ),
5( 1 ) (e) and 9 of the Act punishable under s. 23 (1 ) (b)
of the Act. In addition, the complaint also charged both the
accused with violation of Rule 132-A(2) of the Defence of
India. Rules (hereinafter referred to as "the D.I. Rs.")
Which was punishable under Rule 132-A(4) of the said Rules.
Thereupon, both the accused moved the High Court for
quashing the proceedings sought to be taken against them on
the basis of this complaint. Those applications having
been dismissed, the appellants have come up in these
appeals challenging the order of the High Court dismissing
their applications and praying for quashing of the
proceedings being taken on the basis of that complaint.
In these appeals. Mr. A.K. Sen, appearing on behalf
of the appellants, has raised three points. In respect of
the prosecution for violation of ss. 4(1), 5(1)(e) and 9. of
the Act punishable under s. 23 (1 ) (b) of the Act, the
principal ground raised is that s. 23(1)(b) of the Act is
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ultra rites Article 14 of the Constitution inasmuch as it
provides for a punishment heavier and severer than the
punishment or penalty provided for the same acts under s.
23(1)(a) of the Act. In the alternative, the second point
taken is that, even if s. 23 ( 1 ) (b) is not void, the
complaint in
644
respect of the offences punishable under that section has
not been filed properly in accordance with the proviso to s.
23-D (1 ) of the Act, so that proceedings cannot be
competently taken on the basis of that complaint. The
third point raised relates to the charge of violation of
R. 132-A(2) of the D.I. Rs. punishable under R. 132-A(4) of
those Rules and is to the effect that R. 132-A of the D.I.
Rs. was omitted by a notification of the Ministry of Home
Affairs dated 30th March, 1965 and, consequently, a
prosecution in respect of an offence punishable under that
Rule could not be instituted on 17th March, 1968 when that
Rule had ceased to exist. On these three grounds, the order
quashing the proceedings being taken on the complaint in
respect of all the offences mentioned in it has been
sought in these appeals.
To appreciate the first point raised before us and to.
deal with it properly, we may reproduce below the provisions
of s. 23 and s. 23-D(1) of the Act :--
"23. Penalty and procedure.--(1) If any
person contravenes the provisions of section
4, section 5, section 9, section 10, sub-
section. (2) of section 12, section 18,
section 18A or section 18B or of any rule,
direction or order made thereunder, he shall-
(a) be liable to such penalty not
exceeding three .times the value of the
foreign exchange in respect of which the
contravention has taken place, or five
thousand rupees, whichever is more, as may
be adjudged by the Director of Enforcement in
the manner hereinafter provided, or
(b) upon conviction by a Court, be
punishable with imprisonment for a term which
may extend to two years, or with fine, or with
both.
(IA) If any person contravenes any of the
provisions of this Act, or of any rule,
direction or order made thereunder, for the
contravention of which no penalty is expressly
provided, he shall, upon conviction by a court
be punishable with imprisonment for a term
which may extend to two years, or with fine,
or with both.
(lB) Any Court trying a contravention
under sub-section (1) or sub-section (IA) and
the authority adjudging any contravention
under clause (a) of sub- section (1 ) may, if
it thinks fit, and in addition to any
sentence or penalty which it may impose for
such contravention, direct that any currency,
security, gold or silver, or goods or any
other money or property, In respect of which
the contravention has taken place,
645
shall be confiscated to the Central Government
and further direct that the foreign exchange
holdings, if any, of the person committing the
contravention or any part thereof shall be
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brought back into India or shall be retained
outside India in accordance with the
directions made in this behalf.
Explanation. For the purposes of this
sub-section, property in respect of which
contravention has taken place shall
include
deposits in a bank, where the said property is
converted into such deposits.
(2) Notwithstanding anything, contained in
section 32 of the Code of Criminal Procedure,
1898 (Act 5 of 1898), it shall be lawful for
any magistrate of the first class, specially
empowered in this behalf by the State
Government, and for. any presidency magistrate
to pass a sentence of fine exceeding two
thousand rupees on any person convicted of an
offence punishable under this section.
(3) No Court shall take cognizance--
(a) of any offence punishable under sub-
section (1) except upon complaint in writing
made by the Director of Enforcement, or
(aa) of any offence punishable under sub-
section (2) of section 191,--
(i) where the offence is alleged to have
been committed by an officer of Enforcement
not lower in rank than an Assistant Director
of Enforcement, except with the previous
sanction of the Central Government;
(ii) Where the offence is alleged to have
been committed by a Officer of Enforcement
lower in rank than an Assistant Director of
Enforcement, except with the previous
sanction of the Director of Enforcement, or;
(b) of any offence punishable under sub-
section (IA) of this section or section 23F,
except upon complaint in writing made by the
Director of Enforcement or any officer
authorised in this behalf by the Central
Government or the Reserve Bank by a general
or special order;
Provided that where any such offence is
the contravention of any of the provisions of
this Act or any rule, direction or order made
thereunder which prohibits the doing of an act
without permission, no such complaint shall be
made unless the person accused of the offence
has been given an opportunity of showing that
he had such permission.
646
(4) Nothing in the first proviso to section
188 of the Code of Criminal Procedure,
1898 (Act 5 of 1898), shall apply to any
offence punishable under this section."
23D. Power to adjudicate.--(1) For the
purpose of adjudging under’ clause (a) of
sub-section (1) of section 23 whether any
person has committed ’a contravention, the
Director of Enforcement shall hold an inquiry
in the prescribed manner after giving that
person a reasonable opportunity of being heard
and if, on such inquiry, he is satisfied that
the "person has committed the contravention,
he may impose such penalty as he thinks fit
in accordance with the provisions of the said
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section 23:
Provided that if, at any stage of the inquiry,
the Director of Enforcement is of opinion.
that having regard to the circumstances of
the case, the penalty which he is. empowered
to impose would not be adequate, he shall,
instead of imposing any penalty himself, make
a complaint in writing to the Court."
A plain reading of s. 23 (1 ) of the Act shows that under
this sub-section provision is made for action being taken
against any per-son who contravenes the provisions. of ss.
4, 5, 9, 10, 12(2), 18,18A or 18B or of any rule, direction
or order made thereunder;and cls. (a) and (b) indicate the
two different proceedings that can be taken for such
contravention. Under cl. (a), the person is liable to a
penalty only, and that penalty cannot exceed three times the
value of the foreign exchange in respect of which the
contravention has taken place, or Rs. 5,000/-, whichever is
more.This penalty can be imposed by an adjudication made by
the Director of Enforcement in the manner provided in s. 23D
of the Act. The alternative punishment that is provided in
cl. (b) is to be imposed upon conviction by a Court when the
Court can sentence the person to imprisonment for a term
which may extend to two years, or with fine, or with both.
Clearly, the punishment provided under s.. 23 (1)(b) is
severer and heavier than the penalty to which the person is
made liable if proceedings are taken under s. 23(1)(a)
instead of prosecuting him in a Court under s. 23 (1)(b).
The argument of Mr. Sen is that this section lays down no
principles at all, for determining when the per-son
concerned should be proceeded ’against under s. 23(1)(a) and
when under s. 23(1)(b), and it would appear that it is left
to the arbitrary discretion of the Director of Enforcement
to decide which proceedings should be taken. The liability
of a person for more or less severe punishment for the same
act at the sole discretion and arbitrary choice of the
Director of Enforcement,
647
it is urged, denies equality before law guaranteed under
Art. 14 of the Constitution.
The submission made would have carried great force with
us but for our view that the effect of s. 23D of the Act is
that the choice in respect of the proceeding to be taken
under s. 23(1)(a) or s,. 23(1)(b) has not been left to the
unguided and arbitrary discretion of the Director of
Enforcement, but is governed by principles indicated by that
section,. In this connection, it is pertinent to note that
s. 23 (1) of the Act ’as origin.ally enacted in 1947 did not
provide for alternative punishment for the same
contravention and contained only one single provision under
which any person contravening any of the provisions of the
Act or of any rule, direction or order made thereunder was
punishable with imprisonment for a term which could extend
to two, years or with fine or with bOth, with the additional
clause that any Court trying any such contravention might,
if it thought fit and in addition to any sentence which it
might impose for such contravention, direct that any
currency, security, gold or silver, or goods or other
property in respect of which the contravention has taken
place shall be confiscated. No question of the
applicability of Art. 14 of the Constitution could,
therefore, ’arise while the provision stood as originally
enacted.
Parliament, by Foreign Exchange Regulation (Amendment)
Act XXXIX of 1957, amended s. 23(1) and, at the same time,
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also introduced s. 23D in the Act. It was by this
amendment that two alternative proceedings for the same
contravention were provided in s. 23 (1 ). In thus
introducing two different proceedings, Parliament put in the
forefront proceedings for penalty to be taken by the
Director of Enforcement by taking up adjudication, while the
punishment to be awarded by the Court upon conviction, was
mentioned as the second type of proceeding that could be
resorted to. Section 23D(1) is also divisible into two
parts. The first part lays down what the Director of
Enforcement has to do in order to adjudge penalty under s.
23 ( 1 ) (a), and the second part, contained in the proviso,
gives the power to the Director of Enforcement to file a
complaint instead of imposing a penalty himself. In our
opinion, these two ss. 23(D and 23D(1) must be read
together, so that the procedure laid down in s. 23D(1) is to
be followed in all cases in which proceedings are intended
to be taken under s. 23 (1). The effect of this
interpretation is that, whenever there is any contravention
of any section or rule mentioned in s. 23( 1 ), the Director
of Enforcement must first proceed trader the principal
clause of s. 23D(1) and initiate proceedings for
adjudication of penalty. He cannot, at that stage, at his
discretion, choose to file a complaint in a Court for
prosecution of the person concerned for the offence under s.
23( 1 )(b). The Director of Enforcement can only file a
complaint by acting
Ll4Sup./69--12
648
in accordance with the proviso to S. 23D(1), which clearly
lays down that the complaint is only to be filed in those
cases where, at any stage of the inquiry, the Director of
Enforcement comes to the opinion that, having regard to the
circumstances of the case, the penalty which he is empowered
to impose would not be adequate. Until this requirement is
satisfied, he cannot make a complaint to the Court for
prosecution of the person concerned under s. 23 (1) (b).
The choice of the proceeding to be taken against the person,
who is liable for action for contravention under S. 23 (1),
is, thus, not left entirely to the discretion of the
Director of Enforcement, but the criterion for making the
choice is laid down in the proviso to s. 23D(1). It cannot
possibly be contended, and no attempt was made by Mr. Sen to
contend, that, if we accept this interpretation that the
right of the Director of Enforcement to make a complaint to
the Court for the offence under s. 23 (1) (b) can be
exercised only in those cases where in accordance with the
proviso, he comes to the opinion that the penalty which he
is empowered to impose would not be adequate, the validity
of S. 23 (1) (b) of the Act can still be challenged.
In this connection, it was urged before us that the language
of the principal clause of s. 23D(1) taken together with the
language of the proviso does not justify an interpretation
that a complaint for an offence under S. 23 (1) (b) cannot
be made by the Director of Enforcement except in accordance
with the proviso, particularly because the principal clause
of S. 23D(1) merely lays down the procedure that has to be
adopted by the Director Of Enforcement when proceeding under
S. 23 (1) (a), and contains no. words indicating that such a
proceeding must invariably be resorted to by him whenever he
gets information of a contravention mentioned in s. 23(1).
The language does not contain any ,words creating a bar to
his proceeding to file a complaint straightaway instead of
taking proceedings for adjudication under S. 23D(1). It is
true that neither in S. 23(1) itself nor in S. 23D(1) has
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the Legislature used specific words excluding the filing of
a complaint before proceedings for -adjudication are taken
under S. 23D(1). If any such words had been used, no such
controversy could have been raised as has been put forward
before us in these appeals. We have, however, to gather the
intention of the Legislature from the enactment as a whole.
In this connection, significance -attaches to the fact that
S. 23D(1) was introduced simultaneously with the provision
made for alternative proceedings under S. 23 (1) in its two
cls. (a) and (b). It appears to be obvious that the
Legislature adopted this course so as to ensure that all
proceedings under S. 23(1) are taken in the manner laid down
in S. 23D(1). Parliament must be credited with the
knowledge that, if provision is made for two alternative
punishments for the same act one differing from the other
without any limitations, such a provision would be void
under Art. 14 of
649
the Constitution; and that is the reason why Parliament
simultaneously introduced the procedure to be adopted under
s. 23D(1) in the course of which the Director of Enforcement
is’ to decide whether a complaint is to be made in Court and
under what circumstances he can do so. We have also to keep
in view the general principle of interpretation that, if a
particular interpretation will enure to the validity of a
law, that interpretation must be preferred. In these
circumstances, we have no hesitation in holding that,
whenever there is a contravention by .any person which is
made punishable under either cl. (a)or cl. (b) of s. 23(1),
the Director of Enforcement must first initiate proceedings
under the principal clause of s..23D( 1 ) and he is
empowered to file a complaint in Court only when he finds
that he is required to do so in accordance with the proviso.
It is by resorting to the proviso only that he can place
that person in greater jeopardy of being liable to a more
severe punishment under s. 23(1)(b) of the Act.
The view we have taken is in line with the decision of
this Court in Shanti Prasad Jain v. The Director of
Enforcement(1), where this Court considered the validity of
s. 23(1)(a) and s. 23D which were challenged on the ground
of two alternative procedures being applicable for awarding
punishment for the same act. The Court noticed the
position in the following words :--
"It will be seen that when there is a
contravention of s. 4 (1 ), action with
respect to it is to be taken in the first
instance by the Director of Enforcement. He
may either adjudge the matter himself in
accordance with s. 23(1)(a), or he may send it
on to a Court if he considers that a more
severe penalty than he can impose is called
for. Now, the contention of the appellant is
that when the case is. transferred to
a Court,
it will be tried in accordance with the
procedure prescribed by the Criminal Procedure
Code, but that when the Director himself tries
it, he will follow the procedure prescribed
therefor under the Rules framed under the
Act, and that when the law provides for the
same offence being tried under two procedures,
which are substantially different, and it is
left to the discretion of an executive officer
whether the trial should take place under the
one or the other of them, there is clear’
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discrimination, and Art. 14 is contravened.
Therefore, s. 23(1)(a) must, it is argued, be
struck down as unconstitutional and the
imposition of fine on the appellant under that
section set aside as illegal."
(1)" [1963] 2 S.C.R. 297.
650
The Court then distinguished the provisions of the Act with
the law considered in the case of State of West Bengal v.
Anwar A1i(1) and held -.-
"Section 23D confers authority on the very officer who has
power to try and dispose of a case to send it on for trial
to -a Court, and that too only when he considers that a more
severe punishment than what he is authorised to impose
should be awarded."
On this view about the effect of S. 23D, the Court gave the
decision that the power conferred on the Director of
Enforcement under S. 23D to transfer cases to a Court is not
unguided and arbitrary, and does not offend Art. 14 of the
Constitution; and s. 23 (1) (a) cannot be assailed as
unconstitutional. In that case, the argument was that s.
23(1)(a) should be struck down, because the procedure
prescribed by it permitted proceedings to be taken by the
Director of Enforcement himself which procedure did not
confer the same rights on the defence as the procedure
prescribed for trial if the Director of Enforcement filed a
complaint for the offence under s. 23 (1) (b). In the case
before us, it is s. 23(1)(b) which is challenged and on a
slightly different ground that it provides for a higher
punishment than that provided by S. 23 (1) (a). The answer
to both the questions is found in the view taken by us in
the present case as well as by this Court in the case of
Shanti Prasad Jain(2) that the Director of Enforcement,
though he has power to try the case under S. 23 (1) (a), can
only send the case to the Court if he considers that a
severer punishment than what he is authorised to impose
should be awarded. The Court in that case also thus
accepted the principle that S. 23D limits entirely the
procedure the Director of Enforcement has to observe when
deciding whether the punishment should be under s. 23 (1)
(a) or under S. 23 (1) (b).
However, we consider that, in this case, there is
considerable force in the second point urged by Mr. Sen on
behalf of the appellants that the respondent, in filing the
complaint on 17th March, 1968, did not act in accordance
with the requirements of the proviso to s. 23D(1). We have
held above that the proviso to S. 23D(1) lays down the only
manner in which the Director of Enforcement can make a
complaint and this provision has been laid down as a
safeguard to ensure that a person, who is being proceeded
against for a contravention under S. 23(1), is not put in
danger of higher and severer punishment at the choice and
sweet-will of the Director of Enforcement. When such a
safeguard is provided by legislature, it is necessary that
the authority, which takes the step of instituting against
that person proceedings in which a severer punishment can be
awarded, complies strictly
(1) [1952] S.C.R. 284.
(2) [19631 2 S.C.R. 297.
651
with all the conditions laid down by law to be satisfied by
him before instituting that proceeding. in the present
case, therefore, we have to see whether the requirements of
the proviso to s. 23D(1) were satisfied at the stage when
the respondent filed the impugned complaint on 17th March,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 17
1968.
The proviso ’to s. 23D(1) lays down that the complaint
may be made at any stage of the enquiry but only if, having
regard to the circumstances, of the case, the Director of
Enforcement finds that the penalty which he is empowered to
impose would not be adequate. It was urged by Mr. Sen that,
in this case, the complaint was not filed as a result of the
enquiry under the principal clause of s. 23D(1) at all and,
in any case, there was no material before the respondent on
which he could have formed the opinion that the penalty
which he was empowered to impose would not be adequate in
respect of the stun of Sw. Krs. 88,913.09 which, it was
alleged, had been acquired by the two accused during
the period 1963 to 1965 and kept in deposit against law.
Arguments at some length were advanced before us on the
question as to what should be the stage of the enquiry at
which the Director of Enforcement should form his opinion
and will be entitled to file the complaint in Court. It
appears to us that it is not necessary in this case to go
into that question. It is true that the enquiry in this
case under s. 23D( 1 ) had been instituted by the issue of
the show cause notice dated 25th August, 1967, that being
the notice mentioned in Rule 3 (1 ) of the Adjudication
Proceedings and Appeal Rules, 1957. On the record, however,
does not appear that, even after the issue of that notice,
any such material came before the respondent which could be
relevant for forming an opinion that the penalty which he
was empowered to impose for the contravention in respect of
the sum of Sw. Krs. 88,913.09 would not be adequate. The
respondent, in the case of accused No. 2, appears to have
formed ’a prima. facie opinion that a complaint should be
made against him in Court when he issued the notice on 4th
November, 1967 under the proviso to s. 23(3) of the Act, and
a similar opinion in respect of accused No. 1 when he issued
the notice on 20th January, 1968 under the same proviso.
There is, however, no information on the record to indicate
that, by the time these notices were issued, any material
had appeared before the respondent in the course of the
enquiry initiated by him through the notice dated 25th
August, 1967 which could lead to the opinion being formed by
the respondent that he will not be in a position to
impose adequate penalty by continuing the ,adjudication
proceedings. Even subsequently, when one of the accused
replied to the notice, there does not appear to have been
brought before the respondent any such relevant material.
Mr. S.T. Desai on behalf of the respondent drew our
attention to para. 3(E) of the petition presented by accused
No. 1 for
652
certificate under Art. 132(1) and Art. 134(1)(c) of the
Constitution in this case which contains the following
pleading :
"In this case, having issued show cause notice
dated 25-8-67 in respect of the subject matter
of the pending prosecution and having taken
various acts, taking statements, taking
recorded statements, investigations, the
respondent did not hold an enquiry for the
purpose of his forming an opinion that the
accused is guilty of violations and that the
penalty is not adequate and as such, the
prosecution filed in C.C. 8756 of 68 is liable
to be quashed on this ground."
Relying on this pleading, Mr. Desai urged that it amounts to
a admission by accused No. 1 that, during enquiry, various
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statements were taken and recorded and investigations made,
so that we should not hold that there was no material on the
basis of which the respondent could’ have formed the opinion
that it was a fit case for making a complaint. The pleading
does not show that any statements were taken or recorded
during the course to the enquiry held under s. 23D( 1 ) of
the Act in the manner laid down by the Adjudication
Proceedings and Appeal Rules, 1953 Under those Rules, after
a notice is issued, the Director of Enforcement is required
to consider the cause shown by such person in response to
the notice and, if he is of the opinion that adjudication
proceedings should be held, he has to fix a date for the
appearance of that person either personally or through his
lawyer or other authorised representative. Subsequently, he
has to explain that the person proceeded against or his
lawyer or authorised representative the offence alleged to
have been committed by such person indicating the provisions
of the Act or of the rules, directions or orders made
thereunder in respect of which contravention is alleged to
have taken place, and then he has to give an opportunity to
such person to produce such documents or evidence a he may
consider relevant to the inquiry. It is on the conclusion
of such an inquiry that the Director can impose a penalty
under s. 23(1)(a). In the present case, there is no
material at all show that any proceedings were taken in the
manner indicate by the Rules referred to above. There does
not appear to has been any cause shown by either of the two
accused, or consideration of such cause by the respondent to
decide whether adjudication proceedings should be held. It
is true that there is some material to indicate that, after
the issue of notice dated 25-8-1967, some investigations
were carried on by the respondent; but these
investigations would not be part of the inquiry which had to
be held in accordance with Adjudication Proceedings and
Appeal Rules, 1957. It appears that, at one stage, before
the complaint was filed, a writ petition was moved under
Art. 226 of the Constitution in the High Court of Madras
praying for the quashing of
653
the notice dated 25th August, 1967. The order made’ by the
High Court on one of the interim applications in connection
with that notice shows that, while that writ petition was
pending, some investigations were permitted by the Court,
but further penal proceedings in pursuance of that notice
were restrained. This clearly indicates that whatever
statements were recorded by the respondent as mentioned in
the petition of accused No. 1 referred to above must have
been in the course of investigation and not in the course of
the inquiry under s. 23D ( 1 ) of the Act. The record
before us, therefore, does not show that any material at all
was available to the respondent in the course of the enquiry
under s. 23D( 1 ) on the basis of which he could have formed
an opinion that it was a fit case for making a complaint on
the ground that he would not be able to impose adequate
penalty. The complaint has, therefore, to be held to have
been filed without satisfying the requirements and
conditions of the proviso to. s. 23D(1) of the Act and is in
violation of the safeguard provided by the Legislature for
such contingencies. The complaint, insofar as it related to
the contravention by the accused of provisions of ss. 4 ( 1
), 5 ( 1 ) ( e ) and 9 of the Act punishable under s.
23(1)(13) is concerned, is invalid and proceedings being
taken in pursuance of it must be quashed.
There remains for consideration the question whether
proceedings could be validly continued on the complaint in
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respect of the charge under R. 132A(4) of the D.I.Rs.
against the two accused. The two relevant clauses of Rule
132A are as follows:
"132A. (2) No person other than an
authorised dealer shall buy or otherwise
acquire or borrow from, of sell or otherwise
transfer or lend to, or exchange with, any
person not being an authorised dealer, ’any
foreign exchange.
. . . . . . . . . . . . . . . . . . . . . .
(4) If any person contravenes any of
the provisions this rule, he shall be
punishable with imprisonment for a term which
may extend to two years, or with fine, or with
both; and any court trying such contravention
may direct that the foreign exchange in
respect of which the court is satisfied that
this rule has been contravened, shall be
forfeited to the Central Government."
The charge in the complaint against the two accused was that
they had acquired foreign exchange to the extent of Sw. Krs.
88,913.09 in violation of the prohibition contained in R.
I32A(2) during the period when this Rule was in force, so
that they became liable to punishment under R.132A(4). Rule
132-A as a whole ceased to be in existence as a result of
the notification issued by the Ministry
654
of Home Affairs on 30th March, 1955, by which the
Defence of India (Amendment) Rules, 1965 were promulgated.
Clause 2 of these Amendment Rules reads as under :--
"In the Defence of India Rules, 1962, rule
132A (relating to prohibition of dealings in
foreign exchange) shall be omitted except as
respects things done or omitted to be done
under that rule."
The argument of Mr. Sen was that, even if there was a
contravention of R. 132A(2) by the accused when that Rule
was in force, the act of contravention cannot be held to be
a "thing done or omitted to be done under that rule," so
that, after that rule has been omitted, no prosecution in
respect of that contravention can be instituted. He
conceded the .possibility that, if a prosecution had
,already been started while R. 132A was in force, that
prosecution might have been competently continued. Once the
Rule was omitted altogether, no new proceeding by way of
prosecution could be initiated even though it might be in
respect of an offence committed earlier during the period
that the rule was in force. We are inclined to agree with
the submission of Mr. Sen that the language contained in’
el. 2 of the Defence of India (Amendment) Rules, 1965 can
only afford protection to action already taken while the
rule was in force, but cannot justify initiation of a new
proceeding which will not be a thing done or omitted to be
done under the rule but a new act of initiating a proceeding
after the rule had ceased to exist. On this interpretation,
the complaint made for the offence under R. 132A(4) of the
D.I. Rs., after 1st April, 1965 when the rule was omitted,
has to be held invalid.
This view of ours is in line with the general principle
enunciated by. this Court in the case of S. Krishnan and
Others’ v. The State of Madras(1), relating to .temporary
enactments, in, the following words :--
"The general rule in regard to a temporary
statute is that, in the absence of special
provision to the contrary, proceedings which
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are being taken against a person under it will
ipso facto terminate as soon as the statute
expires."
Mention may also be made to a decision of a learned single
Judge of the Allahabad High Court in Seth Jugmendar Das and
Others v. State(2), where a similar view was taken when
considering the effect of the repeal of the Defence of India
Act, 1939, and the
(1) [1951] S.C.R. 621. (2) A.I.R. 1951 All. 703.
655
Ordinance No. XII of 1946 which had amended s. 1 (4) of that
Act.
On the other hand, Mr. Desai on behalf of the respondent
relied on a decision of the Privy Council in Wicks v.
Director of Public Prosecutions(1). In that case, the
appellant, whose case came up before the Privy Council, was
convicted for contravention of Regulation 2A of the Defence
(General) Regulations framed under the Emergency Powers
(Defence) Act, 1939 as applied to British subjects abroad by
s. 3 (1 )(b) of the said Act. It was held that, at the date
when the acts, which were the subjectmatter of the charge,
were committed, the regulation in question was in force, so
that, if the appellant had been prosecuted immediately
afterwards, the validity of his conviction could not be open
to any challenge at all. But the Act of 1939 was a
temporary Act, and after various extensions it expired on
February 24, 1945. The trial of the accused took place only
in May 1946, and he was Convicted and sentenced to four
years’ penal servitude on May 28. In these circumstances,
the question raised in the appeal was: "Is a man entitled to
be acquitted when he is proved to have broken a Defence
Regulation at a time when that regulation was in operation,
because his trial and conviction take place after the
regulation expired ?" The Privy Council took notice of sub-
s. (3) of section 11 of the Emergency Powers (Defence) Act,
1939 which laid down that "the expiry of this Act shall not
affect the operation thereof as respects things previously
done or omitted to be done". It was argued before the Privy
Council that the phrase "things previously done" does not
cover offences previously committed. This argument was
rejected by Viscount Simon on behalf of the Privy Council
and it was held that the appellant in that cane could be
convicted in respect of the offence which he had committed
when the regulation was in force. That case, however,is
distinguishable from the case before us inasmuch as, in that
case, the saving provision laid down that the operation of
that Act itself was not to be affected by the expiry as
respects things previously done or omitted to be done. The
Act could, therefore, be held to be in operation in respect
of acts already committed, so that the conviction could be
validly made even after the expiry of the Act in respect of
an offence committed before the expiry. In the case before
us, the operation of R. 132A of the D.I. Rs. has not been
continued after its omission. The language used in the
notification only affords protection to things already done
under the rule, so that it cannot permit further application
of that rule by instituting a new prosecution in respect of
something already done. The offence alleged against the
accused in the present case is in respect of acts done by
them which cannot be held to be acts under that rule. The
difference in the language thus makes
(1) [1947] A.C. 362.
656
it clear that the principle enunciated by the Privy Council
in the case cited above cannot apply to the notification
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with which we are concerned.
Reference was next made to a decision of the Madhya
Pradesh High Court in State of Madhya Pradesh v. Hiralal
Sutwala(1), but, there again, the accused was sought to be
prosecuted for ’an offence punishable under an Act on the
repeal of which section 6 of the General Clauses Act had
been made applicable. In the case before us, s. 6 of the
General Clauses Act cannot obviously apply on the omission
of R. 132A of the D.I.Rs. for the two obvious reasons that
s. 6 only applies to repeals and not to omissions, and
applies when the repeal is of a Central Act or Regulation
and not of a Rule. If s. 6 of the General Clauses Act had
been applied no doubt this complaint ’against the two
accused for the offence punishable under R. 132A of the
D.I.Rs. could have been instituted even after the repeal of
that rule.
The last case relied upon is 1. K. Gas Plant
Manufacturing Co., (Rampur) Ltd. and Others v. The King
Emperor(2). In that case, the Federal Court had to deal
with the effect of sub-s. (4) of section 1 of the Defence of
India Act, 1939 and the Ordinance No. XII of 1946 which were
also considered by the Allahabad High Court in the case of
Seth Jugmendar Das & Ors.(2). After quoting the amended
sub-s. (4) of s. 1 of the Defence of India Act, the Court
held :-
"The express insertion of these saving
clauses was no doubt due to a belated
realisation that the provisions of s. 6 of the
General Clauses Act (X of 1897) apply only to
repealed statutes and not to expiring
statutes, and that the general rule in regard
to the expiration of a temporary statute is
that unless it contains some special provision
to the contrary, after a temporary Act has
expired, no proceedings can be taken upon it
and it ceases to have any further effect.
Therefore, offences committed against
temporary Acts must be prosecuted and punished
before the Act expires and as soon as the Act
expires any proceedings which are being taken
against a person will ipso facto terminate."
The Court cited. with approval the decision in the case of
Wicks v. Director of Public Prosecutions(4), and held that,
in view s. 1 (4) of the Defence of India Act, 1939, as
amended by Ordinance No. XII of 1946, the prosecution for a
conviction for an offence committed when the Defence of
India Act was in force, was valid even after the Defence of
India Act had ceased to be in force. That case is, however,
distinguishable from the case
(1) A.I.R. 1959 M.P. 93. (2) [1947] F.C.R. 141.
(3) A.I.R. 1951 All. 703. (4) (1947) A.C. 362.
657
before us in two respects. In that case, the prosecution had
been started before the Defence of India Act ceased to be in
force and, secondly, the language introduced in the amended
sub-s. (4) of s. 1 of the Act had the effect of making
applicable the principles laid down in s. 6 of the General
Clauses Act, so that a legal proceeding could be instituted
even after the repeal of the Act in respect of an offence
committed during the time when the Act was in force. As we
have indicated earlier, the notification of the Ministry of
Home Affairs omitting R. 132A of the D.I.Rs. did not make
any such provision similar to, that contained ms. 6 of the
General Clauses Act. Consequently, it is clear that, after
the omission of R. 132A of the D.I.Rs., no prosecution could
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be instituted even in respect of an act which was an offence
when that Rule was in force. ’
In this connection, Mr. Desai pointed out to us that,
simultaneously with the omission of R. 132A of the D.I.Rs.,
s. 4(2) of the Act was amended so as to bring the
prohibition contained in R. 132A(2) under s. 4(1) of the
Act. He urged that, from this simultaneous action taken, it
should be presumed that there was no intention of the
Legislature that acts, which were offences punishable under
R. 132A of the D.I.Rs., should go unpunished after the
omission of that rule. It, however, appears that when s.
4(1) of the Act was amended, the Legislature did not make
any provision that an offence previously committed under R.
132A of the D.I.Rs. would continue to remain punishable as
an offence of contravention of s. 4 ( 1 ) of the Act, nor
was any provision made ’ permitting operation of R. 132A
itself so as to permit institution of prosecutions in
respect of such offences. The consequence is that the
present complaint is incompetent even in respect of the
offence under R. 132A(4). This is the reason why we hold
that this was an appropriate case where the High Court
should have allowed the applications under s. 561A of the
Code of Criminal Procedure and should have quashed the
proceedings on this complaint.
Consequently, as already directed by our short order
dated 2nd May, 1969, the appeals are allowed, the order of
the High Court rejecting the applications under s. 561A of
the Code of Criminal Procedure is set aside, and the
proceedings for the prosecution of the appellants are
quashed.
V.P.S. Appeals allowed.
358