RADHEYSHYAM KEJRIWAL v. STATE OF WEST BENGAL AND ANR.

• A proceedings it is found that the alleged offender has not infringed any of the provisions of the Act, there will be no occasion for the Directorate of Enforcement to prosecute the person concerned. It would then be incongruous and unreasonable for the Directorate of Enforcement to B prosecute a person for violating FERA, when in the adjudication proceedings against him, it had been found that the person had not violated any of the provisions of FERA. It was in this context that the scheme of FERA should be understood as indicating that there should first be an adjudication and thereafter, if the Directorate of c Enforcement feels that the penalty is inadequate, to consider the launching of a prosecution.

21. The learned Additional Solicitor General contended that under FERA, adjudication and prosecution are two separate and distinct procedures with distinct purposes. There was no bar either in FERA or in any other law, to an adjudication and prosecution being launched in respect of an alleged contravention of FERA. Counsel submitted that the law has permitted it by providing two separate modes for dealing with the person who contravenes the law in relation to foreign exchange. While the primary purpose of imposing of the penalty is in the interests of revenue and the preservation of foreign exchange, the primary purpose of prosecution is to serve as a strong deterrent to persons or companies contravening the provisions of the Act and to send a message to society at large. Counsel pointed out that Section 56 of FERA which deals with offences and prosecutions, commences with the words "without prejudice to any award of penalty by the adjudicating officer under this Act". A person contravening any of the provisions shall upon conviction by a court will be punished, even if a penalty has been imposed on him. There was no warrant for reading the words "without prejudice to" as restricting the right of the authorities under the Act to proceed with the adjudication first and to

• RADHEYSHYAM KEJRIWAL v. STATE OF WEST BENGAL [P. SATHASIVAM, J.] 933

commence the prosecution only at its conclusion. Counsel A also emphasised that the two proceedings are independently dealt with. Counsel pointed out that even in respect of FERA of 1947 in Shanti Prasad Jain v. Director of Enforcement this Court had upheld a special procedure under the statute holding that it was not violative of Article B 14 of the Constitution. It is submitted that the purpose of the Act is to bring the accused to book, more so in case of a serious offence and it could not have been the intention of the legislature to await a long time for an adjudication to be completed by way of an appeal and a c second appeal and then only to commence the prosecution.

22. The Act was enacted, as indicated by its preamble, for the conservation of foreign exchange resources of the country and the proper utilisation thereof in the economic D development of the country. When interpreting such a law, in the absence of any provision in that regard in the Act itself, we see no reason to restrict the scope of any of the provisions of the Act, especially in the context of the presence of the "without prejudice" clause in Section 56 E of the Act dealing with offences and prosecutions. We find substance in the contention of the learned Additional Solicitor General that the Act subserves a twin purpose. One, to ensure that no economic loss is caused by the alleged contravention by the imposition of an 1ppropriate F penalty after an adjudication under Section 51 of the Act and two, to ensure that the tendency to violate is curbed by imposing an appropriate punishment after a due prosecution in terms of Section 56 of the Act. The contention that as a matter of construction-since the G provisions could not be attacked as violative of the rights under Part Ill of the Constitution-we should interpret the provisions of the Act and hold that an adjudication has to precede a prosecution cannot be accepted as we see nothing in the provisions of the Act justifying such a H

934 SUPREME COURT REPORTS [2011] 4 S.C.R. • A construction. On the scheme of the Act, the two proceedings are seen to be independent and the launching of the one or the other or both is seen to be controlled by the respective provisions themselves. In the context of the inclusion of this Act in the Ninth Schedule, the reliance B placed on the decision in Rayala Corpn. (P) Ltd. v. Director of Enforcement cannot enable this Court to deem the provisions as arbitrary and to read them down or understand them in the manner suggested by the learned Senior Counsel. The very purpose of the Act and the very c object of inclusion of the Act in the Ninth Schedule justifies an interpretation of the provisions as they stand on the basis that there is nothing arbitrary or unreasonable in the provisions and in the scheme as enacted. We may also notice that Section 23-0 of the Foreign Exchange Regulation Act, 1947 which was considered in Rayala D Corpn. (P) Ltd. had a proviso, which indicated that the adjudication for the imposition of penalty should precede the making of a complaint in writing to the court concerned for prosecuting the offender. The absence of a similar proviso to Section 56 or to Section 51 of the present Act, E is also a clear indication that the legislature intended to treat the two proceedings as independent of each other. Obviously, the legislature must be taken to have been conscious of the interpretation placed on the corresponding provisions by this Court in the decisions F above referred to when the 1973 Act was enacted and it was also included in the Ninth Schedule to ward off any challenge on the ground that it would be violative of Article 14 of the Constitution, unless understood or read in a particular fashion. G

23. The learned Senior Counsel appearing for the appellant in criminal appeal arising out of SLP (Crl.) No. 5892 of 2004 in which the Full Bench decision of the Calcutta High Court is challenged, supported the H arguments raised by the learned Senior Counsel in Civil

• RADHEYSHYAM KEJRIWAL v. STAfE OF WEST BENGAL [P. SATHASIVAM, J.] 935

Appeal No. 1750 of 1999. The Full Bench of the Calcutta A High Court in the judgment under appeal has, on a consideration of the relevant aspects, answered the reference made to it by holding that a complaint under Section 56 of FERA can never be said to be premature if it is instituted before the awarding of penalty under Section B 50 of the Act and such criminal proceeding being an independent proceeding, can be initiated during the pendency of an adjudication proceeding under Section 51 of FERA, 1973. Therein, the Full Bench has referred to the decision of the Madras High Court in A.S.G. Jothimani c Nadar v. Dy. Director, Enforcement Directorate and that of the Andhra Pradesh High Court in Anilkumar Aggarwal v. K.C. Basu which also take the same view as the one taken by the Full Bench in the judgment under challenge. The Court has also derived support for its view from the decisions of this Court in Asstt. Collector of Customs v. LR. Melwani and in P. Jayappan v. S.K. Perumal. We see no reason not to approve the answer given by the Full Bench to the question referred to it for decision. On the whole, we are satisfied that there is no justification in accepting the argument that unless an adjudication proceeding under Section 51 of the Act is completed, a prosecution under Section 56 of FERA cannot be initiated. Both proceedings can simultaneously be launched and can simultaneously be pursued. F

24. Counsel submitted that the devising of a special machinery for adjudication, the limiting of the "without prejudice" clause in Section 56 to any award of penalty and not the initiation of proceedings under Section 51 of the Act, the making of a contravention of any of the provisions G of this Act as the key to both proceedings, would all indicate that an adjudication should precede a prosecution under Section 56 of the Act. There is nothing in the Act to indicate that a finding in an adjudication is binding on the court in a prosecution under Section 56 of the Act. There H

936 SUPREME COURT REPORTS [2011] 4 S.C.R.

• A is no indication that the prosecution depends upon the result of the adjudication. We have already held that on the scheme of the Act, the two proceedings are independerJ. The finding in one is not conclusive in the other. In the context of the objects sought to be achieved by the Act, B the elements relied on by the learned Senior Counsel, would not justify a finding that a prosecution can be launched only after the completion of an adjudication under Section 51 of the Act. The decision in K.C. Builders v. CIT is clearly distinguishable. The Court proceeded as if under c the Income Tax Act, the prosecution is dependent on the imposition of penalty. That was a case where the prosecution was based on a finding of concealment of income and the impositipn of penalty. When the Tribunal held that there was no concealment, and the order levying penalty was cancelled: t:lccording to this Court, the very foundation for the prosecution itself disappeared. This Court held that it is settled law that levy of penalties and prosecution under Section 276-C of the Income Tax Act are simultaneous and hence, once the penalties are cancelled on the ground that there was concealment, the quashing of the prosecution under Section 276-C of the Income Tax Act was automatic. We have held already that on the scheme of FERA, the adjudication and the prosecution are distinct and separate. Hence, the ratio of the above decision is not applicable. That apart, there is merit in the submission of the learned Additional Solicitor General that the correctness of the view taken in K.C. Builders may require reconsideration as the reasoning appears to run counter to the one adopted by the Constitution Bench in Asstt. Collector of Customs v. L.R. G Melwani and in other decisions not referred to therein. For the purpose of these cases, we do not think it necessary to pursue this aspect further. Suffice it to say, that the ratio of that decision has no application here."

17Copy pinpoint17. The next decision heavily relied on by the Department

• RADHEYSHYAM KEJRIWAL v. STATE OF WEST BENGAL [P. SATHASIVAM, J.] 937

is K. G. Premshanker (supra) which is also a three-Judge A Bench decision. In this case, this Court has considered the effect of the decision of the civil court on the criminal proceedings and initiation of civil and criminal proceedings against the same person belonging to the same cause. The following discussion and conclusion ·~re relevant: B ~·

"30. What emerges from the aforesaid discussion is - (1) the previous judgment which is final can be relied upon as provided under Sections 40 to 43 of the Evidence Act; (2) in civil suits between the same parties, principle of res judicata may apply; (3) in a criminal case, Section 300 c CrPC makes provision that once a person is convicted or acquitted, he may not be tried again for the same offence if the conditions mentioned therein are satisfied; (4) if the criminal case and the civil proceedings are for the same cause, judgment of the civil court would be relevant if D· conditions of any of Sections 40 to 43 are satisfied, but it cannot be said that the same would be conclusive except as provided in Section 41. Section 41 provides which judgment would be conclusive proof of what is stated therein. E

31. Further, the judgment, order or decree passed in a previous civil proceeding, if relevant, as provided under Sections 40 and 42 or other provisions of the Evidence Act then in each case, the court has to decide to what extent it is binding or conclusive with regard to the matter(s) decided therein.

32. In the present case, the decision rendered by the Constitution Bench in M.S. Sheriff case would be binding, wherein it has been specifically held that no hard-and-fast rule can be laid down and that possibility of conflicting decision in civil and criminal courts is not a relevant consideration. The law envisages "such an eventuality . when it expressly refrains from making the decision of one court binding on the other, or even relevant, except for H

938 SUPREME COURT REPORTS [2011] 4 S.C.R.

A limited purpose such as sentence or damages".

33. Hence, the observation made by this Court in V.M. Shah case 1 that the finding recorded by the criminal court stands superseded by the finding recorded by the civil court is not correct enunciation of law. Further, the general 8 observations made in Karam Chand case are in context of the facts of the case stated above. The Court was not required to consider the earlier decision of the Constitution Bench in M.S. Sheriff case as well as Sections 40 to 43 of the Evidence Act. c

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

18Copy pinpoint18. In L.R. Malwani (supra), which is also a Constitution Bench decision, though various questions of law posed before the Bench, I am concerned with question Nos. 1 and 2 which reads thus: E "(i) Whether the prosecution from which these Criminal Revision Petitions arose is barred under Article 20(2) of the Constitution as against accused Nos. 1 and 2 in that case by reason of the decision of the Collector of Customs in the proceedings under the Sea Customs Act ? F (ii) Whether under any circumstance the finding of the Collector of Customs that the 1st and 2nd accused are not . proved to be guilty operated as an issue estoppel in the criminal case against those accused ?"

G In those appeals, the case of the prosecution was that the accused persons and some other unknown persons had entered into a conspiracy at Bombay and other places in the beginning of October, 1959 or thereabout for the purpose of smuggling foreign goods into India and in pursuance of that H

• RADHEYSHYAM KEJRIWAL v. STATE OF WEST BENGAL [P. SATHASIVAM, J.] 939

conspiracy they had smuggled several items of foreign goods in the years 1959 and 1960. In that connection, an enquiry was held by the Customs authorities. In the course of the enquiry, some of the goods said to have been smuggled were seized. After the close of the enquiry those goods were ordered to be confiscated. In addition, penalty was imposed on some of the accused. Thereafter, on February 19, 1965, the Assistant Collector of Customs, Bombay after obtaining the required sanction of the Government filed a complaint against five persons including the appellants in Criminal Appeal No. 35 of 1967 (accused Nos. 1 and 2 in the case) under Section 120- c B, l.P.C. read with Clauses (37), (75), (76) and (81) of Section 167 of the Sea Customs Act, 1878 (Act VIII of 1878) as well as under Section 5 of the Imports and Exports (Control) Act, 194 7. Before the commencement of the enquiry in that complaint, the 1st accused filed the application mentioned 0 above on August 3, 1965. In the enquiry held by the Collector of Customs, he gave the benefit of doubt to accused Nos. 1 and 2. This is what he stated therein:

"As regards Mis. Larmel Enterprises (of which accused No. 1 is the proprietor and accused No. 2 is the Manager) E although it is apparent that they have directly assisted the importers in their illegal activities and are morally guilty. Since there is no conclusive evidence against them to hold them as persons concerned in the act of unauthorised importation, they escape on a benefit of doubt." F

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

"9. The rule laid down in that decision was adopted by this Court in Pritam Singh v. State of Punjab, AIR 1956 SC 415 and again in N.R. Ghose alias Nikhil Ranjan Ghose H

940 SUPREME COURT REPORTS (2011] 4 S.C.R.

• A v. State of West Bengal, (1960) 2 SCR 58. But before an accused can call into aid the above rule, he must establish that in a previous lawful trial before a competent court, he has secured a verdict of acquittal which verdict is binding on his prosecutor. In the instant case for the reasons B already mentioned, we are unable to hold that the proceeding before the Collector of Customs is a criminal trial. From this, it follows that the decision of the Collector does not amount to a verdict of acquittal in favour of accused Nos. 1 and 2." c 19. It is relevant to point that the above dictum of the Constitution Bench in LR. Malwani (supra) was relied on by a three-Judge Bench in Standard Chartered Bank (supra).

20Copy pinpoint20. In Iqbal Singh Marwah (supra), about the binding nature of the decision in criminal court in respect of the same issue, it was held:

"32. Coming to the last contention that an effort should be made to avoid conflict of findings between the civil and criminal courts, it is necessary to point out that the standard of proof required in the two proceedings are entirely different. Civil cases are decided on the basis of preponderance of evidence while in a criminal case the entire burden lies on the prosecution and proof beyond reasonable doubt has to be given. There is neither any statutory provision nor any legal principle that the findings recorded in one proceeding may be treated as final or binding in the other, as both the cases have to be decided on the basis of the evidence adduced therein. While examining a similar contention in an appeal against an order directing filing of a complaint under Section 476 of the old Code, the following observations made by a Constitution Bench in M.S. Sheriff v. State of Madras give a complete answer to the problem posed: (AIR p. 399, paras 15-16) H

RADHEYSHYAM KEJRIWAL v. STATE OF WEST 941

BENGAL [P. SATHASIVAM, J.]

"15. As between the civil and the criminal proceedings we are of the opinion that the criminal matters should be given precedence. There is some difference of opinion in the High Courts of India on this point. No hard- and-fast rule can be laid down but we do not consider that the possibility of conflicting decisions in the civil and criminal courts is a relevant consideration. The law envisages such an eventuality when it expressly refrains from making the decision of one court binding on the other, or even relevant, except for certain limited purposes, such as sentence or damages. The only relevant consideration c here is the likelihood of embarrassment.

16. Another factor which weighs with us is that a civil suit often drags on for years and it is undesirable that a criminal prosecution should wait till everybody concerned has forgotten all about the crime. The public interests demand that criminal justice should be swift and sure; that the guilty should be punished while the events are still fresh in the public mind and that the innocent should be absolved as early as is consistent with a fair and impartial trial. Another reason is that it is undesirable to let things slide till memories have grown too dim to trust.

This, however, is not a hard-and-fast rule. Special considerations obtaining in any particular case might make some other course more expedient and just. For F example, the civil case or the other criminal proceeding may be so near its end as to make it inexpedient to stay it in order to give precedence to a prosecution ordered under Section 476. But in this case we are of the view that the civil suits should be stayed till the criminal proceedings G have finished."

21Copy pinpoint21. In B.N. Kashyap (supra), the Full Bench of the Court while considering Sections 40 to 43 of the Evidence Act, 1872 has held that finding on certain facts by a civil Court in action in personam is not relevant before the Criminal Court when it H

942 SUPREME COURT REPORTS [2011) 4 S.C.R. • A is called upon to give a finding on the same facts. Similarly the finding on certain facts by the Criminal Court is not relevant before the civil Court when it is called upon to give a finding on the same facts.

22Copy pinpoint22. The above decisions, particularly, the decision in 8 Standard Chartered Bank (supra) which arose under the FERA and dealt with the scope of Sections 50, 51 and 56 which in tum relied on and followed in the decision of Constitution Bench in L.R. Malwani (supra) is directly on the point raised in this appeal. In fact, this Court, in para 21, in the Standard Chartered C Bank (supra) considered the very scope of the words "without prejudice to any award of penalty by the adjudicating officer under this Act" as mentioned in Section 56 of the Act.

23Copy pinpoint23. Considering the interpretation relating to Sections 50, D 51 and 56 by various decisions, I am of the view that in a statute relating to economic offences, there is no reason to restrict the scope of any provisions of the Act. These provisions ensure that no economic loss is caused by the alleged contravention by the imposition of an appropriate penalty after adjudication under Section 51 of the Act and to ensure that the tendency to violate is guarded by imposing appropriate punishment after due transaction in terms of Section 56 of the Act. In fact, it is relevant to point out that Section 230 of the Foreign Exchange Regulation Act, 1947 had a proviso, which indicates that the adjudication for the imposition of penalty should precede making of complaint in writing to the court concerned for prosecuting the offender. The absence of a similar proviso to Section 51 or to Section 56 of the present 1973 Act is a clear indication that the Legislature intended to treat the two proceedings as independent of each other. There is nothing in the present Act to indicate that a finding in adjudication is binding on the Court in a prosecution under Section 56 of the Act or that the prosecution under Section 56 depends upon the result of adjudication under Section 51 of the Act. It is reiterated that the two proceedings are independent and irrespective of

• RADHEYSHYAM KEJRIWAL v. STATE OF WEST BENGAL [P. SATHASIVAM, J.] 943

the outcome of the decision under Section 50, there cannot be any bar in initiating prosecution under Section 56. The scheme of the Act makes it clear that the adjudication by. the concerned authorities and the prosecution are distinct and separate. No doubt, the conclusion of the adjudication, in the case on hand, the decision of the Special Director dated 18.11.1996, may be B a point for the appellant and it is for him to put forth the same before the Magistrate. Inasmuch as FERA contains certain provisions and features which cannot be equated with the provisions of Income Tax Act or the Customs Act and in the light of the mandate of Section 56 of the FERA, it is the duty of the c Criminal Court to discharge its functions vest with it and give effect to the legislative intention, particularly, in the context of the scope and object of FERA which was enacted for the economic development of the country and augmentation of revenue. Though the Act has since been repealed and not 0 available at· present, those provisions cannot be lightly interpreted taking note of the object of the Act.

24Copy pinpoint24. In view of the above analysis and discussion, I agree with the conclusion arrived at by the Metropolitan Magistrate, Calcutta as well as the decision of the High Court. E Consequently, the appeal fails and the same is dismissed.

B.B.B. Appeal allowed.