REPORTABLE   IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

  CRIMINAL APPEAL NO.1097 OF 2003

RADHESHYAM KEJRIWAL  ..… APPELLANT

VERSUS

STATE OF WEST BENGAL & ANR.         ..... RESPONDENTS

J U D G M E N T  

CHANDRAMAULI KR. PRASAD, J.

1. We have gone through the draft  judgment prepared by  

our  noble  and learned  Brother  Sathasivam,  J.  and we  find  

ourselves unable to subscribe to the view taken by him.  

2. Shorn  of  unnecessary  details  facts  giving  rise  to  the  

present appeal are that on 22nd May, 1992 various premises in  

occupation  of  the  appellant  Radheshyam  Kejriwal  besides  

other persons were searched by the officers of the Enforcement  

Directorate. The appellant was arrested on 3rd May, 1992 by  

the officers of the Enforcement Directorate in exercise of the  

power under Section 35 of the Foreign Exchange Regulation

Act, 1973 (hereinafter referred to as the ‘Act’) and enlarged on  

bail on the same day.  Further the appellant was summoned  

by the officers of the Enforcement Directorate to give evidence  

in exercise of the power under Section 40 of the Act and in the  

light thereof his statement was recorded on various dates, viz.  

22nd May,  1992,  10th March,  1993,  16th March,  1993,  17th  

March, 1993 and 22nd March, 1993.  On the basis of materials  

collected  during  search  and  from  the  statement  of  the  

appellant it appeared to the Enforcement Directorate that the  

appellant, a person resident in India, without any general or  

specific exemption from Reserve Bank of India made payments  

amounting to Rs.24,75,000/- to one Piyush Kumar Barodia in  

March/April, 1992 as consideration for or in association with  

the receipt of payment of U.S. $ 75,000 at the rate of Rs.33/-  

per  U.S.  Dollar  by  the  appellant’s  nominee  abroad  in  

Yugoslavia. It further appeared to the Enforcement Directorate  

that transaction involved conversion of  Indian currency into  

foreign currency at rates of exchange other than the rates for  

the time being authorised by the Reserve Bank of India.  In the  

opinion  of  the  Enforcement  Directorate  the  act  of  the  

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appellant  in  making  the  aforesaid  payment  of  

Rs.24,75,000/- in Indian currency for foreign currency at the  

rate of Rs.33/- per US Dollar against the official rate of Dollar  

i.e.   Rs.30/-  per  Dollar  (approximately),  contravened  the  

provision of Section 8(2) of the Act.  Further the Said payment  

having been made without any general or special exemption  

from Reserve Bank of India, the appellant had contravened the  

provisions  of  Section  9(1)(f)(i)  of  the  Act  and  accordingly  

rendered himself liable to imposition of penalty under Section  

50  of  the  Act.  Enforcement  Directorate  was  further  of  the  

opinion  that  by  abetting  in  contravening  the  provisions  of  

Sections 9(1)(f)(i) and 8(2) of the Act read with the provisions of  

the Section 64(2) of the Act the appellant has rendered himself  

liable for penalty under Section 50 of the Act.  

3. Accordingly,  a  show cause  notice  dated 7th May,  1993  

was  issued  by  the  Special  Director  of  the  Directorate  of  

Enforcement calling upon the appellant to show cause as to  

why adjudication proceeding as contemplated under Section  

51 of the Act be not held against him for the contraventions  

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pointed above. Show  cause  notice  dated  7th May,  1993  

referred to above led to institution of proceeding under Section  

51  of  the  Act  (hereinafter  referred  to  as  the  ‘adjudication  

proceedings’). The adjudication officer came to the conclusion  

that the allegation made against the appellant of contravention  

of the provisions of Section 8, 9(1)(f)(i) and Section 8(2) read  

with Section 64(2) of the Act cannot be sustained.  While doing  

so the Special Director observed as follows:

The  payment  alleged  to  have  been  made  by  Shri  Radheshyam  Kejriwal  amounting  to  Rs.24,75,000/- has to be examined in the context of  Section 9(1)(f)(i) and Section 8(2) r/w Section 64(2)  of  Foreign  Exchange  Regulation  Act,  1973.  The  important ingredients for sustaining the conviction  under the above provisions would require the proof  of payment having been made to the credit of any  person @ exchange other than the rate which has  been authorized by the Reserve Bank of India.  In  the case before me, it has not been proved beyond  reasonable doubt whether a sum of Rs.24,75,000/-  has  actually  been  paid  or  not.   There  is  no  documentary evidence except the statement of Shri  Piyush Kumar Barodia and the retracted statement  of  Shri  Radheshyam  confirming  the  fact  that  Rs.24,75,000/-  was  exchanged  @  of  Rs.33/-  per  dollar.   Therefore,  it  is  very  relevant  to  take  the  above  facts  and  circumstances  into  consideration  before  coming to a conclusion as to the correctness  

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of  the  statements  given  by  S/Shri  Radheshyam  Kejriwal  and  Piyush  Kumar  Barodia.   The  documentary evidence available and the statements  of the other co-accused will definitely throw further  light in the matter.

After considering all the above facts, I find that  the  only  evidence  available  against  Shri  Radheshyam Kejriwal is the fact that his telephone  number and name are mentioned in the documents  seized from Shri Piyush Kumar Barodia and the fact  that some transactions have been noted against his  name  which  do  not  match  the  sum  of  Rs.24,75,000/-  which  was  alleged  to  have  been  transferred.  Secondly, there is no evidence to show  that  he  was  indulging  in  any  foreign  exchange  transaction  to  transfer  money  abroad.   In  conclusion, the benefit of doubt will have to be given  to Shri Radheshyam Kejriwal in the absence of any  further  evidence and also the fact  that both Raju  Poddar  and  Babubhai  Umaidmal  have  denied  having  taken  part  in  any  such  transaction.  Significantly, on enquiry,    it was found that Shri  Sirish  Kumar  Barodia,  brother  of  Shri  Piyush  Kumar  Barodia  staying  at  Bombay,  was  not  available  for  the  past  year  during  which  these  transactions took place. Shri Piyush Kumar Barodia  is absconding, therefore, his case is being decided  on merits. However, since the charges against Shri  Radheshyam  Kejriwal  for  contravening  the  provisions of Section 9(1)(f)(i) and Section 8(2) read  with  Section  64(2)  of  the  Foreign  Exchange  Regulation Act, 1973 cannot sustained, the charges  against Shri Piyush Kumar Barodia can also not be  sustained.   Therefore,  the  charges  against  S/Shri  Raju Poddar, Sirish Kumar Barodia and Babubhai  Umaidmal  Jain  @  Babubhai  Bhansali,  are  not  sustainable  for  contravening  the  provisions  of  

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Section 9(1)(f)(i) and 8(2) read with Section 64(2) of  the Foreign Exchange Regulation Act, 1973.

In  view  of  the  foregoing,  the  proceedings  initiated  against  S/Shri  Piyush  Kumar  Barodia,  Radheshyam Kejriwal,  Raju Poddar,  Sirish Kumar  Barodia  and  Babubhai  Umaidmal  Jain  and  Babubhai  Bhansali,  vide  the  impugned  Memorandum, are hereby dropped.”

It  is  common ground that the Enforcement Directorate  

has not challenged this order and it has attained finality.  

4. It is relevant to state that any person contravening the  

provisions  of  Sections  8  and  9  of  the  Act  besides  other  

provisions is also liable to be prosecuted under Section 56 of  

the  Act  without  prejudice  to  any  award  of  penalty  by  the  

adjudicating  officer  under  Section  51 of  the  Act.   However,  

before  launching  such  prosecution  for  contravening  such  

provisions  of  the  Act  which  prohibits  the  doing  of  an  act  

without  permission,  the  proviso  to  Section  61(2)  of  the  Act  

mandates giving an opportunity  to the person concerned to  

show that  he  had such permission.   Accordingly,  by  notice  

dated  29th December,  1994  the  appellant  was  given  an  

opportunity to show permission granted by the Reserve Bank  

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of  India.   Appellant  replied  to  that  but  did  not  produce  

any permission.

  5. The  Enforcement  Directorate  on  the  same  allegation  

which was the subject matter of adjudication proceeding laid  

complaint against the appellant for prosecution under Section  

56  of  the  Act  before  the  Metropolitan  Magistrate.  After  the  

issuance  of  process  and  exoneration  in  the  adjudication  

proceeding  appellant  filed  application  for  dropping  the  

proceedings, inter alia, contending that on the same allegation  

the  adjudication  proceedings  having  been  dropped  and  the  

appellant exonerated, his continued prosecution is an abuse of  

the process of the Court. The Metropolitan Magistrate by order  

dated 2nd September, 1997 rejected his prayer.  Aggrieved by  

the same appellant preferred criminal revision application and  

reiterated the same submission but it did not find favour with  

the Calcutta High Court and by the impugned order dated 10th  

August, 2001, it rejected the revision application. While doing  

so it observed as follows:

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“Therefore,  the  contention  of  Mr.  Ghosh  is  unacceptable  that in the adjudication proceedings  being  held  by  the  department  concerned  the  allegations  against  the  petitioner  having  not  been  found  established  the  prosecution  against  him  before a Court of law cannot have any legs to stand  upon, since the same departmental authority which  held  the  enquiry  against  him  and  found  no  materials  for  establishing  his  guilt  cannot  be  expected to lodge the prosecution on the self-same  allegations against that person before a Court and  cannot be expected to take a different stand on the  self-same materials as available against him on the  record.  As we have noted above, the Enforcement  Officer  who  has  investigated  into  the  case  is  a  different agency from that of the adjudicating officer  and, what is more important, it cannot be taken for  granted that the Court will take the same view on  the materials  on record which have prompted the  departmental  authority  to  find the allegations not  substantiated. As it has been already pointed out,  the procedure according to which the trial of such  an accused by the Court it held has some special  features  and  the  two  testing  processes  are  so  divergent  that  there  is  ample  scope  for  the  two  parallel  authorities  to  hold  even  diametrically  opposite views so far as the question of proof of the  charge against the accused is concerned. The most  of  decisions  relied  upon  by  Mr.  Ghosh  and  discussed above in respect of his above contention  cannot  be  attracted  to  our  present  case  for  the  simple  reason  that  none  of  those  judicial  pronouncements  are  relating  to  a  case  under  the  Foreign Exchange Regulation Act the provisions of  which cannot be equated with those of the Income  Tax Act or Customs Act.”

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

of the Court.

7. Mr.  Amarendra  Sharan,  Senior  Counsel  appearing  on  

behalf of the appellant submits that standard of proof required  

to bring home the charge in a criminal case is much higher  

than the adjudication proceeding and once the appellant has  

been  exonerated  in  the  adjudication  proceeding,  his  

prosecution  is  an abuse  of  the  process  of  Court.   Mr.  P.P.  

Malhotra, Additional Solicitor General, however, contends that  

from the scheme of the Act as reflected from Sections 50, 51,  

56  of  the  Act,  the  plea  put  forth  by  the  appellant  is  

unsustainable.   

8. The  submissions  made  necessitate  examination  of  the  

scheme of the Act.  Section 50 of the Act which is relevant for  

the purpose reads as follows:

50. Penalty.— If any person contravenes any  of  the  provisions of  this  Act other  than  section  13,  clause (a) of sub-section (1) of section 18, section 18A  and clause (a) of sub-section (1) of Section 19 or of   any  rule,  direction  or  order  made  thereunder,  he  shall  be  liable  to  such  penalty  not  exceeding  five  times  the  amount  or  value  involved  in  any  such  

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contravention or five thousand rupees, whichever is  more,  as  may  be  adjudged  by  the  Director  of   Enforcement or any other officer of Enforcement not  below  the  rank  of  an  Assistant  Director  of  Enforcement specially empowered in this  behalf  by  order  of  the  Central  Government  in  either  case   hereinafter referred to as the adjudicating officer.

The aforesaid provision provides for mandatory penalty  

and  fixes  the  outer  limit  of  such  penalty  on  any  person  

contravening the provisions of the Act which is to be adjudged  

by  the  Director  of  Enforcement  or  any  other  officer  of  the  

Enforcement  not  below  the  rank  of  an  Assistant  Director  

empowered  by  the  Central  Government.  The  procedure  and  

the  power  to  adjudicate  penalty  have  been  provided  under  

Section 51 of the Act, which reads as follows:

51.  Power  to  adjudicate.—  For  the  purpose  of  adjudicating  under  section  50 whether  any person  has  committed  a  contravention  of  any  of  the   provisions of this Act other than those referred to in  that section or of any rule, direction or order made   thereunder,  the  adjudicating  officer  shall  hold  an   inquiry  in  the  prescribed  manner  after  giving  that   person  a  reasonable  opportunity  for  making  a  representation in the matter 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  that   section.

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9. From a plain reading of Section 51 of the Act it is evident  

that for adjudging the penalty under Section 51 of the Act for  

contravention of the provisions of the Act or any rule, direction  

or  order  made  thereunder  the  adjudicating  officer  is  to  be  

satisfied  that  the  person  has  committed  the  contravention  

after holding an inquiry in the prescribed manner and after  

giving  the  person  concerned  a  reasonable  opportunity  of  

making  representation.  Thus  besides  the  procedural  

requirement the  sine qua non for imposition of penalty under  

Section 51 of the Act is that the adjudicating officer has to  

record  its  satisfaction  that  the  person  concerned  has  

committed the contravention of any of the provisions of the Act  

or of any rule, direction or order made thereunder.   

10. As would be evident from the preamble of the Act, it was  

enacted for the conservation of foreign exchange resources of  

the Country and the proper utilization thereof in the economic  

development of the Country.   It  is relevant here to mention  

that the Forty Seventh Report of the Law Commission of India  

on the Trial and Punishment of Social and Economic Offences  

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quoted  the  following  portion  from  the  Report  of  the  Study  

Team  on  Leakage  of  Foreign  Exchange  through  Invoice  

Manipulation:

“…like  the  Customs  Act,  there  should  be  a  provision  that  for  an  offence  in  the  Foreign  Exchange Regulation Act, both adjudication by the  Director of Enforcement and conviction by a Court  of  law  are  possible.  The  two  should  not  be  alternatives as at  present.  We would also suggest  that  in more and more cases,  prosecution should  also be launched apart from adjudication so as to  have a deterrent effect.”

Bearing  in  mind  aforesaid  the  Legislature  in  order  to  

ensure that no economic loss is caused by the contravention  

provided for an appropriate penalty under Section 51 of the  

Act  and  to  prevent  the  tendency  to  violate  is  curbed  by  

inserting  Section  56  of  the  Act  providing  for  imposing  

appropriate  punishment  after  due  prosecution,  relevant  

portion whereof reads as follows:  

“56.  Offences  and  prosecutions.—  (1) Without  prejudice  to  any  award  of  penalty  by  the  adjudicating  officer  under  this  Act,  if  any  person  contravenes any of  the  provisions of  this  Act other   than  section  13,  clause  (a)  of  sub-  section  (1)  of   section 18, section 18 A, clause (a) of sub- section (1)   

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of  section  19,  sub-  section  (2)  of  section  44  and  sections 57 and 58, or of any rule, direction or order   made  thereunder,  he  shall,  upon  conviction  by  a  court, be punishable,-  

xxx xxx xxx xxx

11. With deepest respect we are entirely in agreement with  

the conclusion of our learned Brother Sathasivam, J. that the  

proceedings  under  Section  51  and  56  of  the  Act  are  

independent of each other and the finding in an adjudication  

proceeding under Section 51 of the Act is not binding in the  

proceeding for prosecution under Section 56 of the Act and  

both can go hand in hand.  Further, the prosecution can be  

launched  even before  conclusion  of  adjudication  proceeding  

under Section 51 of the Act.   In fact, it has explicitly been said  

by this Court in the case of  Standard Chartered Bank  and  

others vs.  Directorate of Enforcement and others (2006) 4  

SCC 278 which is as follows :

“24.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 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  

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independent.  The finding in one is not conclusive in  the other.  In the context of the objects sought to be  achieved by the Act,  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.”

12. However,  in  a  case  like  the  present  one  in  which  the  

penalty  proceeding  under  Section  51  of  the  Act  and  the  

prosecution  under  Section  56  of  the  Act  though  launched  

together  but  the  penalty  proceeding  culminated  earlier  

exonerating  the  person,  the  question  would  arise  as  to  

whether continuance of the prosecution would be permissible  

or  not.   In  other  words,  the  question  with  which  we  are  

concerned is the impact of the findings which are recorded on  

the  culmination  of  adjudication  proceeding  on  criminal  

proceeding and in case in the adjudication proceeding person  

concerned  is  exonerated  can  he  ask  for  dropping  of  the  

criminal  proceeding  on  that  ground  alone.   Mr.  Malhotra  

submits  that  finding  in  the  adjudication  proceeding  cannot  

either  operate  as  estoppel  or  res  judicata  in  case  of  

prosecution  under  Section  56  of  the  Act  and  in  this  

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connection,  he  has  drawn  our  attention  to  a  Constitution  

Bench judgment of this Court in the case of   the Assistant  

Collector  of  Customs,  Bombay  and  another  vs.  L.R.  

Melwani  and  another AIR  1970  SC  962,  wherein  in  

paragraph 8, it has been held as follows :

“8.  We  shall  now take  up  the  contention  that  the   finding of the Collector of Customs referred to earlier   operated  as  an  issue  estoppel  in  the  present   prosecution.  The issue estoppel rule is but a facet of   the doctrine of autre fois acquit.”

                                      xxxx         xxxx        xxxx       xxxx    

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  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. 1and 2.”

We do not find any substance in the submission of  

Mr. Malhotra and the decision relied on has no bearing in the  

facts and circumstances of the case.

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13. In  L.R.  Melwani’s  case  (supra),  the  accused  persons  

resisted their prosecution on the ground that the Collector of  

Customs  having  given  the  benefit  of  doubt,  in  view  of  the  

guarantee granted under Article 20 (2) of the Constitution for  

the same offence they can not be tried more than once.  It was  

also contended that that person once convicted or acquitted  

can  not  be  tried  for  same  offence  again  in  view  of  the  

safeguard  provided  under  Section  403  of  Code  of  Criminal  

Procedure,  1898,  which  corresponds  to  Section  300  of  the  

Code of Criminal Procedure, 1973. In order to get benefit of  

Section 300 of  the  Code  of  Criminal  Procedure,  1973,  it  is  

necessary for an accused person to establish that not only he  

had been tried  by  a Court  of  competent  jurisdiction  for  an  

offence but convicted or acquitted of that offence and the said  

conviction or acquittal is in force.  In the aforesaid background  

the question which fell for consideration before this Court was  

as to whether the proceeding before the Collector of Customs  

is a criminal trial by a court of competent jurisdiction for trial  

of offence.  On analysis of the various authorities of this Court,  

the  Constitution  Bench  came  to  the  conclusion  that  the  

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Collector of Customs was not a Court of competent jurisdiction  

for criminal  trial.   This would be evident from the following  

passage from the said judgment :-

“…….  Hence  the  question  is  whether  that  prosecution  is  barred  under  Article  20  (2)  of  the  Constitution  which  says  that  no  person  shall  be  prosecuted and punished for the same offence more  than once.  This Article has no direct bearing on the  question at issue.  Evidently those accused persons  want to spell out from this Article the rule of autre  fois acquit embodied in S.403, Criminal Procedure  Code.   Assuming  we  can  do  that,  still  it  is  not  possible  to  hold  that  a  proceeding  before  the  Collector of Customs is a prosecution for an offence.  In order to get the benefit of Section 403, Criminal  Procedure Code or Article 20 (2), it is necessary for  an accused person to establish that he  had been  tried by a “Court of competent jurisdiction” for an  offence  and  he  is  convicted  or  acquitted  of  that  offence  and  the  said  conviction  or  acquittal  is  in  force…..”

14. In the present case, it is not the case of the appellant  

that  they  were  tried  by  the  Enforcement  Directorate  and  

therefore further trial by the criminal court is not permissible  

but their contention is that in the face of the finding in the  

adjudication  proceeding,  their  continued  prosecution  is  an  

abuse of the process of the court.  In view of what we have  

observed  above,  the  contention  of  Mr.  Malhotra  is  without  

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merit  and  the  decision  relied  on  in  no  way  supports  

his contention.

15. Mr.  Malhotra,  then  contends  that  finding  of  the  

Enforcement Directorate in the adjudication proceedings is not  

binding or relevant in the criminal court where the appellant is  

facing the  trial.   In  support  of  the  contention,  reliance  has  

been placed on a full Bench decision of the Lahore High Court  

in  the  case  of   B.N.  Kashyap vs.  Emperor AIR (32)  1945  

Lahore 23 and our attention has been drawn to the following  

passage:

“There is no reason in my judgment as to why  the decision of the civil Court particularly in an action  in personam should be allowed to have that sanctity.   There appears to be no sound reason for that view.   To hold that when a party has been able to satisfy a   civil court as to the justice of his claim and has in the   result succeeded in obtaining a decree which is final  and binding upon the parties,  it would not be open  to  criminal  Courts to  go behind the  findings of  the  civil  Court  is  to  place  the  latter  without  any  valid  reason  in  a  much  higher  position  than  what  it   actually occupies in the system of administration in  this country and to make it master not only of cases   which it is called upon to adjudicate but also of cases  which  it  is  not  called upon  to  determine  and  over  which it has really no control.   The fact is that the   issues in the two cases although based on the same  facts (and strictly speaking even parties in the two   

1

proceedings) are not identical  and there appears to  be no sufficient reason for delaying the proceedings  in the criminal Court, which unhampered by the civil   Court, is fully competent to decide the questions that   arise  before  it  for  its  decision  and  where  in  the  nature of things there must be a speedy disposal.”

We do not find any substance in this submission of Mr.  

Malhotra also.  We may observe that standard of proof in a  

criminal  case is  much higher  than that  of  the  adjudication  

proceeding.  The Enforcement Directorate has not been able to  

prove its case in the adjudication proceeding and the appellant  

has been exonerated on the same allegation.    The appellant is  

facing trial in the criminal case.  Therefore, in our opinion, the  

determination of facts in the adjudication proceeding cannot  

be said to be irrelevant in the criminal case.  In the case of  

B.N. Kashyap (Supra), the full Bench had not considered as  

to the effect of a finding of fact in a civil case over the criminal  

cases and that will be evident from the following passage from  

the said judgment :

“I  must,  however,  say  that  in  answering  the  question, I have only referred to civil cases where the  actions  are  in  personam  and  not  those  where  the   proceedings or actions are in rem.  Whether a finding  of  fact  arrived  at  in  such  proceedings  or  actions  

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would  be  relevant  in  criminal  cases,  it  is   unnecessary  for me to  decide  in  this  case.   When  that question arises for determination, the provisions  of Section 41, Evidence Act, will have to be carefully  examined.”  

This Court had the occasion to consider this question in  

the case of K.G. Premshanker v. Inspector of Police (2002)  

8 SCC 87, wherein it has been held as follows :-

“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 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 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.”

Hence, we reject this submission of Mr. Malhotra.

16. Mr.  Malhotra  submits  that  finding  recorded  in  the  

adjudication  proceeding  is  not  binding  on  the  criminal  

proceeding as both the cases have to be decided on the basis  

of  the  evidence  therein.   Reliance  has  been  placed  on  a  

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decision of this Court in the case of Iqbal Singh Marwah v.  

Meenakshi  Marwah  (2005)  4  SCC  370, relevant  portion  

whereof reads as follows :-

“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....”   

We do not have the slightest hesitation in accepting the  

broad  submission  of  Mr.  Malhotra  that  finding  in  an  

adjudication proceeding is not binding in the proceeding for  

criminal prosecution.  A person held liable to pay penalty in  

adjudication proceeding can not necessarily be held guilty in  

criminal  trial.   Adjudication proceedings are decided on the  

basis  of  preponderance  of  evidence  of  a  little  higher  degree  

whereas in a criminal case entire burden to prove beyond all  

reasonable doubt lies on the prosecution.  In the case of Iqbal  

Singh Marwah (supra) relied on by Mr. Malhotra, the question  

which  fell  for  consideration  was  as  to  whether  bar  under  

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Section 195 (1) (b) (i)  and (ii)  operates for taking cognizance  

when a complaint is filed alleging that will filed by the accused  

in  a  probate  case  is  forged and while  holding  that  the  bar  

would not operate if the will is forged before its filing in the  

court,  hence  the aforesaid  observation of  this  court  has no  

bearing in the facts and circumstances of this case.    

17. It  is  trite  that  standard  of  proof  required  in  criminal  

proceedings is higher than that required before adjudicating  

authority  and  in  case  accused  is  exonerated  before  the  

adjudicating authority whether his prosecution on same set of  

facts can be allowed or not is the precise question which falls  

for determination in this case.  There are authorities of this  

Court in relation to the Income-tax Act in this regard. The first  

in  the  series  is  the  judgment  of  this  Court  in  the  case  of  

Uttam Chand and others vs. Income Tax Officer, Central  

Circle, Amritsar (1982) 2 SCC 543 in which registration of  

firm was cancelled on the ground that it was not genuine and  

prosecution  initiated  for  filing  false  return.   However,  in  

appeal, the Income Tax Appellate Tribunal reversed the finding  

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and held the firm to be genuine.  Relying on that, this court  

quashed the prosecution inter alia observing as follows :

“1. Heard counsel, special leave granted   In view of   the  finding  recorded  by  the  Income  Tax  Appellate   Tribunal  that  it  was  clear  on  the  appraisal  of  the   entire  material  on  the  record  and  Shrimati  Janak   Rani was a partner of the assessee firm and that the   firm was  a  genuine  firm,  we  do  not  see  how the  assessee can be prosecuted for filing false returns.  We,  accordingly,  allow this  appeal  and  quash  the   prosecution.

2.  There will be no order as to costs.”

In the case of  G.L. Didwania and Another vs. Income  

Tax Officer and Another 1995 Supp (2) SCC 724, on setting  

aside  the  order  of  the  assessing authority  which led to  the  

prosecution  of  the  assessee  by   the  Income-Tax  Appellate  

Tribunal, this Court held the prosecution not permissible and  

while doing so observed as follows :

“4.  In  the  instant  case,  the  crux  of  the  matter  is  attracted  and  whether  the  prosecution  can  be  sustained  in  view  of  the  order  passed  by  the   tribunal.   As  noted  above,  the  assessing  authority   held  that  the  appellant-assessee  made  a  false  statement in respect of income of M/s. Young India   and Transport Company and that finding has been  set aside by the Income Tax Appellate Tribunal.  If   that is the position then we are unable to see as to  how criminal proceedings can be sustained.”

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Similar view has been taken by this Court in the case of  

K.C. Builders and Another vs. Assistant Commissioner of  

Income Tax (2004) 2 SCC 731, in which it has been held as  

follows:

 “26. In our view,  once the finding of concealment  and  subsequent  levy  of  penalties  under  Section  271(1)(c)  of  the  Act  has  been  struck  down  by  the   Tribunal,  the  assessing  officer  has  no  other   alternative except to correct his order under Section  154 of the Act as per the directions of the Tribunal.   As  already  noticed,  the  subject-matter  of  the   complaint before this Court is concealment of income  arrived at on the basis of the finding of the assessing   officer.   If  the  Tribunal  has set  aside  the  order  of   concealment and penalties, there is no concealment  in the eye of the law and, therefore, the prosecution   cannot  be proceeded with  by the  complainant  and  further  proceedings will  be  illegal  and  without  jurisdiction.  The Assistant Commissioner of Income  Tax cannot proceed with  the prosecution even after   the order of concealment has been set aside by the  Tribunal.  When the Tribunal has set aside the levy  of  penalty,  the  criminal  proceedings  against  the   appellants  cannot survive for further consideration.   In our view, the High Court has taken the view that   the charges have been framed and the matter is in  the stage of further cross-examination and, therefore,  the prosecution may proceed with  the trial.   In  our  opinion,  the  view taken  by the  learned  Magistrate   and the High Court is fallacious.  In our view, if the  trial  is allowed to proceed further after the order of  the  Tribunal  and  the  consequent  cancellation  of  penalty,  it  will  be  an  idle  and  empty  formality  to   

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require  the  appellants  to  have  the  order  of  the  Tribunal exhibited as a defence document inasmuch  as  the  passing  of  the  order  as  aforementioned  is   unsustainable and unquestionable.”

 18. Mr. Sharan contends that aforesaid principle shall apply  

with equal force in the prosecution under the Act as the basic  

principle  which  these  judgments  take  note  of  to  quash the  

prosecution  is  the  higher  standard  of  proof  required  in  a  

criminal  case  than  the  adjudication  proceeding  and  no  

reference at all has been made to the provisions of the Income-

tax Act to come to that conclusion.  The decisions referred to  

above pertain to prosecution under  the  Income-tax Act  and  

obviously had not adverted to any of the provisions of the Act,  

particularly Sections 50, 51 and 56 of the Act points out Mr.  

P.P. Malhotra, the Additional Solicitor General and therefore  

these decisions in his submission shall have no bearing on the  

facts of the present case.  

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

There may appear to be some conflict between the views in the  

case  of  Standard  Charted  Bank  (supra)  and  L.R.  Melwani  

(supra)  holding  that  adjudication  proceeding  and  criminal  

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proceeding are two independent proceedings and both can go  

on simultaneously and finding in the adjudication proceeding  

is not binding on the criminal proceeding and the judgments  

of  this  Court  in  the  case  of  Uttam  Chand  (supra),  G.L.  

Didwania (supra) and K.C. Builders (supra) wherein this Court  

had taken a view that when there is categorical finding in the  

adjudication  proceeding  exonerating  the  person  which  is  

binding and conclusive, the prosecution cannot be allowed to  

stand.  Judgments of this Court are not to be read as statute  

and when viewed from that  angle  there  does  not  seem any  

conflict between the two sets of decisions.  It will not make any  

difference on principle that latter judgments pertain to cases  

under the Income Tax Act.  The ratio which can be culled out  

from these decisions can broadly be stated as follows :-

(i) Adjudication proceeding and criminal prosecution can  

be launched simultaneously;

(ii)Decision in adjudication proceeding is not necessary  

before initiating criminal prosecution;

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(iii)Adjudication proceeding and criminal proceeding are  

independent in nature to each other;

(iv)The finding against the person facing prosecution in  

the  adjudication  proceeding  is  not  binding  on  the  

proceeding for criminal prosecution;

(v)Adjudication  proceeding  by  the  Enforcement  

Directorate is not prosecution by a competent court of  

law to  attract  the  provisions of  Article  20 (2)  of  the  

Constitution or Section 300 of  the Code of  Criminal  

Procedure;

(vi)The finding in the adjudication proceeding in favour of  

the  person  facing  trial  for  identical  violation  will  

depend upon the nature of finding. If the exoneration  

in adjudication proceeding is on technical ground and  

not on merit, prosecution may continue; and

(vii) In  case  of  exoneration,  however,  on  merits  where  

allegation  is  found to  be  not  sustainable  at  all  and  

person  held  innocent,  criminal  prosecution  on  the  

same  set  of  facts  and  circumstances  can  not  be  

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allowed  to  continue  underlying  principle  being  the  

higher standard of proof in criminal cases.  

In our opinion, therefore, the yardstick would be to judge  

as to whether allegation in the adjudication proceeding as well  

as proceeding for prosecution is identical and the exoneration  

of the person concerned in the adjudication proceeding is on  

merits.   In  case  it  is  found  on  merit  that  there  is  no  

contravention of the provisions of the Act in the adjudication  

proceeding, the trial of the person concerned shall be in abuse  

of the process of the court.

20. In  the  submission  of  Mr.  Malhotra  the  matter  stands  

squarely covered by the decision of this Court in the case of  

Standard  Chartered  Bank  (supra) which  submission  has  

found favour with learned Brother Sathasivam, J. We deem it  

expedient to consider  the  ratio  and background of  the  said  

case in little detail.  In the said case alleging violation of some  

of  the  provisions  of  the  Act  the  Enforcement   Directorate  

issued notices to the Standard Chartered Bank and its officers  

as to why proceedings for imposition of penalty under Section  

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50 of the Act be not initiated against them.  Further notices  

under Section 61 of the Act were also issued to them calling  

upon  them  to  produce  the  necessary  permission  from  the  

concerned  authority  for  the  transaction  involved.  The  

Standard Chartered Bank and its officers filed writ petitions in  

the Bombay High Court challenging the constitutional validity  

of Sections 50, 51 and 68 of the Act.  The Bombay High Court  

upheld the constitutional validity of the aforesaid provisions of  

the Act but at the same time observed that Section 68(1) of the  

Act shall not be applicable to adjudication proceeding and it is  

confined to prosecution under   the Act.   The Bank and its  

officers aggrieved by the judgment of the Bombay High Court  

upholding  the  constitutional  validity  of  the  impugned  

provisions of the Act and the Union of India dissatisfied with  

the  observation  of  the  Court  whereby  it  restricted  the  

application  of  Section  68(1)  of  the  Act  to  only  criminal  

prosecution filed separate appeals before the Supreme Court.  

This Court upheld the decision of the Bombay High Court so  

far as the constitutional validity of the aforesaid provisions of  

the Act is concerned and accordingly dismissed the appeals  

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filed  by  the  Bank  and  its  officers.   However,  this  Court  

reversed the view of the Bombay High Court in regard to the  

applicability of Section 68(1) of the Act and held that it shall  

be  applicable  to  both  adjudication  proceeding  as  well  as  

proceeding for prosecution under the Act.  In the case in hand  

we are not concerned with either of the issue.

21. Another  contention  which  was  raised  in  the  aforesaid  

case was that criminal proceeding under Section 56 of the Act  

could  not  be  initiated  before  culmination  of  adjudication  

proceeding under Section 51 of the Act. It was contended in  

the said case that there has to be finding in the adjudication  

proceeding about the violation of the provision of the Act and  

consequential  imposition of a penalty and only thereafter in  

the light of those findings prosecution under Section 56 of the  

Act could be launched. It was resisted by the Union of India  

relying  on  the  words  “Without  prejudice  to  any  award  of  

penalty by the Adjudicating Officer” in Section 56 of the Act  

and submission was made that criminal action cannot wait till  

outcome of the adjudication proceeding. In the context of the  

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aforesaid  argument  this  Court  observed  that  proceedings  

under  Section  51  and  56  of  the  Act  are  proceedings  

independent of each other and can be initiated simultaneously  

and finding in an adjudication proceeding is not binding on  

the Court in a proceeding for prosecution under Section 56 of  

the  Act.   The  effect  of  finding  of  exoneration  in  the  

adjudication  proceeding  on  criminal  proceeding  was  not  an  

issue and, therefore, the judgment under consideration cannot  

be  said  to  have  decided  this  question  with  which  we  are  

concerned in the present appeal.

22. A learned Single Judge of the Bombay High Court had  

the  occasion to  consider  this  question in  a  case  under  the  

Foreign Exchange Regulation Act in Criminal Application No.  

1070 of 1999 (Hemendra M. Kothari vs. Shri W.S. Vaigankar,  

Assistant Director,  Enforcement Directorate (FERA),  Govt.  of  

India and State of Maharashtra), decided on 25.04.2007 and  

on a review of  large number of  decisions of  this Court  and  

other courts it came to the following conclusion :-

“21. It may be noted that in the present case  the applicant was exonerated by the Dy. Director of  

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Enforcement,  who  was  adjudicating  authority,  in  the adjudication proceedings. Admittedly that order  was not challenged in appeal by the respondent and  thus  that  order  has  become final.  I  have  already  noted  the  facts  and  findings  of  the  adjudicating  authority in detail. The adjudicating authority had  clearly  come to  the  conclusion that  there  was no  material  to  hold  the  present  applicant  guilty  for  contravention of the provisions of FERA and he was  completely  exonerated.  When in  the  departmental  proceedings  before  the  adjudicating  authority,  the  department  could  not  establish  the  charges,  it  is  difficult to imagine how the department could prove  the same charges before the criminal  Court  when  the  standard  of  proof  may  be  much  higher  and  stringent  than  the  standard  of  proof  required  in  departmental proceedings.”

The  Delhi  High  Court  also  considered  this  question  

arising out of a case under Foreign Exchange Regulation Act,  

in detail in the case of Sunil Gulati & Anr. V. R.K. Vohra 145  

(2007) DLT 612, and held as follows :-

“In  case  of  converse  situation  namely  where  the  accused  persons  are  exonerated  by  the  competent  authorities/Tribunal  in  adjudication  proceedings,  one  will  have  to  see  the  reasons  for  such  exoneration  to  determine  whether  these  criminal  proceedings should still  continue.   If  the  exoneration  in  departmental  adjudication  is  on  technical ground or by giving benefit of doubt and  not on merits or the adjudication proceedings were  on  different  facts,  it  would  have  no  bearing  on  criminal  proceedings.   If,  on  the  other  hand,  the  exoneration  in  the  adjudication  proceedings  is  on  merits and the concerned person(s) is/are innocent,  

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and the criminal prosecution is also on the same set  of  facts  and  circumstances,  the  criminal  prosecution  cannot  be  allowed  to  continue.   The  reason is obvious criminal complaint is filed by the  departmental  authorities  alleging  violation/contravention of the provisions of the Act  on the part of the accused persons.  However, if the  departmental  authorities  themselves,  in  adjudication proceedings,  record a categorical  and  unambiguous  finding  that  there  is  no  such  contravention of the provisions of the Act, it would  be  unjust  for  such  departmental  authorities  to  continue with the criminal complaint and say that  there  is  sufficient  evidence  to  foist  the  accused  persons with criminal liability when it is stated in  the departmental proceedings that  ex facie there is  no such violation.  The yardstick would, therefore,  be to see as to whether charges in the departmental  proceedings  as  well  as  criminal  complaint  are  identical  and  the  exoneration  of  the  concerned  person in the departmental proceedings is on merits  holding  that  there  is  no  contravention  of  the  provisions of any Act.”

We respectfully endorse the view taken by the Bombay  

High Court in the case of Hemendra M. Kothari (supra) and  

Delhi High Court in Sunil Gulati (supra).   

23. Bearing in mind the principles aforesaid we proceed to  

consider  the  case  of  the  appellant.  In  the  adjudication  

proceeding  on  merit  the  adjudicating  authority  has  

categorically held that “the charges against Shri Radheshyam  

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Kejriwal for contravening the provisions of Section 9(1)(f)(i) and  

Section 8(2) read with Section 64(2) of the Foreign Exchange  

Regulation Act, 1973 cannot be sustained”.  In the face of the  

aforesaid  finding  by  the  Enforcement  Directorate  in  

adjudication proceeding that there is no contravention of any  

of the provisions of the Act, it would be unjust and an abuse of  

the process of the court to permit the Enforcement Directorate  

to continue with the criminal prosecution.

24. In  the  result  the  appeal  is  allowed,  the  impugned  

judgment of the learned Metropolitan Magistrate and the order  

affirming  the  same  by  the  High  Court  are  set  aside  and  

appellant’s prosecution is quashed.

…………………...........................J      [HARJIT SINGH BEDI]

 ................................................J

    [CHANDRAMAULI KR. PRASAD] NEW DELHI FEBRUARY 18, 2011.  

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3

      REPORTABLE IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO. 1097 OF 2003

Radheshyam Kejriwal                                      .... Appellant(s)

Versus

State of West Bengal & Anr.              .... Respondent(s)

J U D G M E N T  

P. Sathasivam, J.

1)  This appeal is filed against the final judgment and order  

dated  10.08.2001  passed  by  the  High  Court  of  Calcutta  in  

C.R.R. No. 3593 of 1997 whereby the learned single Judge of  

the High Court dismissed the application filed by the appellant  

herein under Sections 401 and 482 of the Code of Criminal  

Procedure,  1973  (hereinafter  referred  to  as  ‘the  Code’)  for  

quashing the criminal proceedings initiated against him vide  

Complaint  Case  No.  965  of  1995  under  Section  56  of  the  

Foreign Exchange Regulation Act, 1973 (hereinafter referred to  

3

as  “the  FERA”)  pending  in  the  Court  of  9th Metropolitan  

Magistrate, Calcutta.

2) BRIEF FACTS:

a)   On 07.05.1993, a show cause notice bearing No. T-4/2-

C/93  was  issued  by  the  Special  Director,  Enforcement  

Directorate,  FERA,  Government  of  India,  New  Delhi  to  five  

persons  including  the  appellant  herein  for  holding  inquiry  

under Section 51 of the FERA for the purpose of adjudicating  

the penalty under Section 50 for contravening the provisions  

of Sections 8(2) and 9(1)(f)(i) of the FERA which provides that  

no person shall make or receive any payment except with the  

special permission of the Reserve Bank of India.    A search  

was  conducted  in  the  premises  of  one  Shri  Piyush  Kumar  

Barodia at Calcutta wherefrom certain documents were found  

including  the  telephone  diary.  Apart  from  certain  

incriminating documents found against some other persons,  

some entries resembling to the name of the appellant herein  

were  also  found.   After  interrogating  several  persons,  the  

Department  came  to  the  conclusion  that  Piyush  Kumar  

Barodia was engaged in the transaction of  providing dollars  

3

abroad by receiving the money in Indian currency in India.  He  

used to send money through his younger  brother placed at  

Bombay, who in turn, used to give the same to one Shri Babu  

Bhai Umaidmal Jain @ Bhansali and Bhansali used to send  

the money to one Shri Anil Bhai at London and the Anil Bhai  

used to deliver equivalent amount of foreign exchange to the  

agents of such intending persons abroad.  

(b)   On  09.12.1994,  the  Enforcement  Directorate,  before  

receiving the reply from the appellant herein, in response to  

the  notice  dated  07.05.1993,  issued  another  show  cause  

notice under Section 61 of the FERA for taking cognizance of  

the offences committed on account of the contravention of the  

provisions of the FERA.  On 07.09.1995, without waiting for  

the reply of the appellant in response to the two notices, one  

under Section 51 for adjudication of penalty proceedings and  

other under Section 61 for taking cognizance of the offence, a  

complaint was filed by the Department under Section 56 of the  

FERA alleging violation of provisions contained in Sections 8(2)  

and 9(1)(f)(i) of the FERA.  The Special Director, Enforcement  

Directorate,  FERA, New Delhi after going through the entire  

3

record  and  the  evidences,  vide  order  dated  18.11.1996,  

acquitted the appellant by holding that no penalty could be  

imposed  as  there  is  no  proper  evidence  to  connect  the  

appellant with the contravention of any of the provisions of the  

FERA and accordingly directed to drop the proceedings and  

discharged the notices.   

(c)   Though  no  triable  issue  remained  after  the  final  

adjudication by the Special Director, Enforcement Directorate,  

the criminal proceedings were not dropped by the Department.  

On 27.03.1997, the appellant filed an application before the  

Metropolitan  Magistrate,  Calcutta  for  dropping  the  

proceedings.  Vide order dated  02.09.1997, the Metropolitan  

Magistrate rejected the said application and held that there is  

no bar to proceed with the criminal  case as the proceeding  

before the FERA Board is separate.   

(d)   Being  aggrieved  by  the  said  order,  on 04.12.1997,  the  

appellant filed an application under Sections 401 and 482 of  

the Code before the High Court of Calcutta for quashing of the  

criminal proceedings.  The High Court, by the impugned order  

dated  10.08.2001,  rejected  the  prayer  for  quashing  of  the  

3

criminal proceedings.    Against the said order, the appellant  

has filed this appeal by way of special leave before this Court.

3) Heard Mr. Amarendra Sharan, learned senior counsel for  

the  appellant  and  Mr.  P.P.  Malhotra,  learned  ASG  for  the  

respondents.

4) The main question that arises for consideration in this  

appeal is whether the Enforcement Directorate (ED) FERA can  

prosecute the appellant in a proceeding under Section 56 of  

the FERA when on the self-same facts and cause of action, the  

respondent-adjudicating  authority  dropped  the  charges  

framed under Section 50 of the FERA.

5) Since I have briefly stated the factual details in the earlier  

paragraphs, there is no need to traverse the same once again.  

However, it is not in dispute that the residential premises of  

the appellant, a business man was searched by the office of  

the  Enforcement  Directorate  on  22.05.1992  and  certain  

documents were seized.  Based on the same, on 07.05.1993, a  

show cause notice was served against him by the Enforcement  

Directorate  directing  him  to  show  cause  as  to  why  

adjudication proceedings as contemplated under Section 51 of  

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the  FERA  should  not  be  proceeded  against  him  for  

contravening the provisions of Sections 8(2) and 9(1)(f)(i) of the  

FERA.  The appellant submitted his reply to the show cause  

notice.  Thereafter, adjudication proceedings in respect of the  

show cause notice dated 07.05.1993 was instituted before the  

Special Director, Enforcement Directorate, FERA, New Delhi.  

After  considering  the  submissions  of  both  sides,  Special  

Director passed an order dated 18.11.1996 holding that the  

Enforcement Directorate had failed to make out a prima facie  

case in support  of  charges of  violation of  Sections 8(2)  and  

9(1)(f)(i)  of  the  FERA  and  directed  that  the  aforementioned  

Departmental proceedings be dropped.  It is relevant to point  

out that in the meantime i.e. on 26.07.1995, the respondents  

filed a complaint against the appellant in the Court of Chief  

Metropolitan Magistrate, Calcutta on the same cause of action  

which was taken cognizance by the Magistrate.  According to  

the appellant,  inasmuch as the same issues having already  

been adjudicated by the authority concerned, the Magistrate  

ought to have dropped the complaint and the continuation of  

the proceedings would result in abuse of the process of the  

4

Court.   Aggrieved  by  the  order  of  the  Magistrate  in  not  

dropping  the  proceedings  and  continuing  the  same,  the  

appellant preferred revision before the High Court being CRR  

No. 3593 of 1997.  By the impugned order, the High Court  

accepting the stand of the Department refused to quash the  

criminal proceedings and dismissed the revision.   

6) In order  to  appreciate  the  claim of  the  appellant,  it  is  

useful  to  refer  the  relevant  provisions  of  FERA  which  are  

applicable to the issue raised.  They are:

“Penalty

50. If any person contravenes any of the provisions of this  Act [other than section 13, clause (a) of sub-section (1) of  section 18, section 18A and clause (a) of sub-section (1) of  section  19]  or  of  any  rule,  direction  or  order  made  thereunder, he shall be liable to such penalty not exceeding  five  times  the  amount  or  value  involved  in  any  such  contravention or five thousand rupees, whichever is more, as  may  be  adjudged  by  the  Director  of  Enforcement  or  any  other  officer  of  Enforcement  not  below  the  rank  of  an  Assistant  Director  of  Enforcement  specially  empowered  in  this  behalf  by  order  of  the  Central  Government  (in  either  case hereinafter referred to as the adjudicating officer).

Power to adjudicate

51. For the purpose of adjudging under section 50 whether  any  person  has  committed  a  contravention  of  any  of  the  provisions of this Act (other than those referred to in that  section) or of any rule, direction or order made thereunder,  the  adjudicating  officer  shall  hold  an  inquiry  in  the  prescribed  manner  after  giving  that  person  a  reasonable  opportunity for making a representation in the matter and if,  

4

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  that  section.

Offences and Prosecutions

56. (1)  Without  prejudice  to  any award of  penalty  by  the  adjudicating officer under this Act, if any person contravenes  any  of  the  provisions  of  this  Act  [other  than  section  13,  clause (a) of sub-section (1) of section 18, section 18A clause  (a) of sub-section (1) of section 19, sub-section (2) of section  44 and sections 57 and 58], or of any rule, direction or order  made thereunder, he shall, upon conviction by a court, be  punishable, -(i) in the case of an offence the amount or value  involved  in  which  exceeds  one  lakh  of  rupees,  with  imprisonment for a term which shall  not be less than six  months, but which may extend to seven years and with fine:

Provided that the court may, for any adequate and special  reasons  to  be  mentioned  in  the  judgement,  impose  a  sentence of imprisonment for a term of less than six months;  (ii)  in any other case, with imprisonment for a term which  may extend to three years or with fine or with both.”

7) Mr.  Amarendra Sharan,  learned senior  counsel  for  the  

appellant, after taking through the above provisions as well as  

the  order  dated  18.11.1996  of  the  Special  Director,  

Enforcement  Directorate,  dropping  the  departmental  

proceedings submitted that in view of the said conclusion and  

of the fact that the Department had not challenged the same  

by way of further appeal, there cannot be criminal prosecution  

for the same cause of action under Section 56(1) of FERA.   

4

8) I  have  gone  through  the  order  of  the  Special  Director  

dated 18.11.1996.  I have already pointed out that pursuant to  

the search and seizure, after issuance of show cause notice  

and opportunity of hearing, the Special Director, Enforcement  

Directorate passed the above order.  After considering all the  

materials  and  finding  that  no  incriminating  documents  

relating to foreign exchange transactions and further finding  

that  the  charges  against  the  appellant  for  contravening  the  

provisions of Sections 8 (2) and 9(1)(f)(i) read with Section 64  

(2) of FERA cannot be sustained, the Special Director dropped  

the proceedings initiated against  the  appellants  and others.  

Admittedly,  the  Department  had  not  challenged  the  said  

conclusion  by  way  of  an  appeal  to  the  Foreign  Exchange  

Regulation Appellate Board as per Section 52 of the FERA.  It  

is the claim of the appellant that since there is a categorical  

finding by the Special Director exonerating the appellant from  

all  charges  leveled  against  him,  the  Department  is  not  

permitted to initiate criminal proceedings under Section 56 of  

the FERA.  It is the stand of the appellant that in view of the  

language  used  in  sub-section  (1)  of  Section  56,  namely,  

4

“without prejudice to any award or penalty by the adjudicating  

officer under this Act….”, and in the light of the categorical  

conclusion by the Special Director dropping all  the charges,  

the  Enforcement  Department  is  estopped  from  initiating  

prosecution.  

9) In support of the above claim, learned senior counsel for  

the appellant relied on the following decisions:-

1) G.L.  Didwania and Another vs.  Income Tax officer  

and Another, 1995 Supp (2) SCC 724;  

2) K.C.  Builders  and  Another vs.  Assistant  

Commissioner of Income-Tax, (2004) 2 SCC 731;

3) P.S. Rajya vs. State of Bihar, (1996) 9 SCC 1 and  

4) Uttam  Chand  and  Others vs.  Income  Tax  Officer,  

Central Circle, Amritsar, (1982) 2 SCC 543.

10) The  first  decision,  being  G.L.  Didwania  (supra) arose  

under  the  Income  Tax  Act.  The  appellant  therein  was  an  

assessee and for  the assessment year 1960-61,  he filed his  

return of income showing his income as Rs. 26,224/- in the  

prescribed  form and  the  verification  was  signed  by  him on  

25.08.1961  and  the  return  was  filed  on  08.09.1961.  The  

4

appellant showed his business income from firms in Delhi and  

Bombay.  The  assessment  was  made  on  31.10.1961  by  the  

officer  concerned  taking  the  income  to  be  of  Rs.  35,699/-.  

There  was  another  firm,  M/s  Young  India  and  Transport  

Company in which the minor children of the appellant and his  

two employees were partners. In the assessment proceeding,  

the assessing authority reached the conclusion that it was not  

a genuine firm and the instrument of partnership was invalid  

and  inoperative.  Therefore,  the  proceedings  under  Sections  

147 and 148 of the Income Tax Act were initiated against the  

appellant and his assessment was reopened.  In pursuance of  

the notice under Section 148, the appellant  filed his return  

showing  his  income  as  Rs. 29,500/-.   By  an  order  dated  

17.03.1969, the Income Tax Officer assessed the income of the  

appellant as Rs. 52,634/- and this figure was arrived at by  

adding  the  income  of  M/s  Young  India  and  Transport  

Company and for the same assessment year as though it was  

the income of the appellant. The appellant made a statement  

in  the  verification  to  the  return  filed  on  02.12.1971  and  

delivered  an  account/statement  which  according  to  the  

4

assessing authority was false or the assessee knew or believed  

to be false.  On the basis of this assessment, the prosecution  

was launched and the complaint by the authorised authority  

was filed on 09.09.1977.  Meanwhile, the appellant-assessee  

filed an appeal before the Income Tax Appellate Tribunal and  

the Tribunal by its order dated 24.02.1977 allowed the appeal  

and held that there was no substantial material to hold that  

the  appellant  was  the  owner  of  the  entire  business.  The  

Appellate Tribunal also observed that the assessing authority  

arrived at wrong conclusion from the facts on record and held  

that the business run in the name of M/s Young India and  

Transport Company belonged to the assessee and accordingly  

the  appellate  authority  deleted  the  addition  of  Rs. 23,134/-  

from the  total  income of  the  assessee.   After  the  Appellate  

Tribunal passed the order, allowing the appeal in favour of the  

appellant, the assessee filed a petition before the Magistrate to  

drop the criminal  proceedings.  The Magistrate by his order  

dated 02.09.1979 dismissed the said application and held that  

the prosecution has got a right to lead evidence in support of  

his  complaint  and  the  court  can  come  to  the  conclusion  

4

whether  or  not  any  criminal  offence  is  made  out.   The  

Magistrate also observed that the order of the Tribunal can be  

taken only as evidence. Aggrieved by the same, the appellant-

assessee filed an application under Section 482 of the Code  

before the High Court and the High Court dismissed the same  

in  limine which  was  challenged  before  this  Court.   The  

question before this Court was whether the prosecution can be  

sustained in view of the order passed by the Tribunal.  In the  

factual scenario, this Court held as under:

“4. … …. As noted above, the assessing authority held that  the appellant-assessee made a false statement in respect of  income  of  M/s  Young  India  and  Transport  Company  and  that finding has been set aside by the Income Tax Appellate  Tribunal. If that is the position then we are unable to see as  to how criminal proceedings can be sustained.”

The  ratio  laid  down  in  the  decision  is  that  in  view  of  

conclusion  of  the  Income  Tax  Appellate  Tribunal,  the  

Department  is  not  permitted  to  continue  the  criminal  

proceeding which was pending before the Magistrate and the  

finding of the Appellate Tribunal is a conclusive one.  Based on  

such conclusion, this Court quashed the criminal proceeding  

and allowed the appeal of the assessee.  

4

11) The  second  decision  being  K.C.Builders  (supra) also  

arose under the Income Tax Act.  Here again, relying on the  

earlier decision in G.L. Didwania (supra), this Court held as  

under:

“31. It is a well-established principle that the matter which  has been adjudicated and settled by the Tribunal need not  be dragged into the criminal courts unless and until the act  of the appellants could have been described as culpable.”

12) The third decision being  P.S. Rajya (supra), relates to  

power of the Court under Section 482 of the Code in respect of  

quashing of complaint/FIR.  In this decision, it was held that  

if  the  issue  in  the  criminal  proceeding  is  identical  to  the  

departmental proceeding which could not be established, the  

Department is not permitted to pursue the same charge in the  

criminal proceeding.

13) The  last  decision  relied  on  by  the  counsel  is  Uttam  

Chand (supra).   This decision also arose under the Income  

Tax Act.  Without adverting to any statutory provisions and  

the earlier decisions, confining to the facts of this case, noting  

the finding recorded by the Income Tax Appellate Tribunal that  

one Smt.  Janak Rani was a partner of the assessee firm and  

that  the  firm  was  a  genuine  firm,  this  Court  quashed  the  

4

criminal  proceeding  initiated  against  her  for  filing  false  

returns.  

14) The first two decisions admittedly arose from the Income  

Tax  Act.   It  is  not  demonstrated  before  us  that  whether  

identical  provisions,  namely,  Sections 50,  51 and 56 of  the  

FERA are available in the Income Tax Act.  Even otherwise, in  

the light of the language used in Section 56(1) of the FERA,  

there  cannot  be  any  bar  irrespective  of  the  decision  under  

Section  50,  which  I  will  elaborate  in  the  succeeding  

paragraphs.   The  third  decision  relied  on  by  the  appellant  

relates to power of the Court under Section 482 of the Code for  

quashing the complaint/FIR and the  last  decision relied on  

has to be confined to the facts of  that case since no other  

material was available.  In other words, there is no ratio for  

being considered for other cases.   

15) Now,  let  me  consider  the  stand  of  the  Department  as  

projected  by  Mr.  P.P.  Malhotra,  learned  ASG.   After  taking  

through Sections 50, 51 and 56 of the FERA, Mr. Malhotra  

submitted  that  both  the  proceedings,  namely,  the  

departmental  adjudication  and  imposition  of  penalty  as  

5

covered by Sections 50 and 51 and the prosecution covered by  

Section 56 of the Act can go hand in hand and there is no bar  

from simultaneous operation of these two systems.  He also  

submitted  that  all  the  decisions  relied  on  by  the  learned  

counsel for the appellant have no bearing on the issue in the  

case on hand since no one has dealt with the provisions of  

FERA, more particularly, Sections 50, 51 and 56.  In support  

of his claim, he relied on the following decisions:- 1) Standard  

Chartered  Bank  and  Others vs.  Directorate  of  

Enforcement  and  Others,  (2006)  4  SCC  278;  2)  K.G.  

Premshanker vs. Inspector of Police and Another, (2002) 8  

SCC 87; 3)  Assistant  Collector  of  Customs vs.  L.R.  

Malwani,  1969 (2)  SCR 438; 4)  Iqbal Singh Marwah and  

Another vs. Meenakshi Marwah and Another, (2005) 4 SCC  

370 and 5) B.N. Kashyap vs. Emperor, AIR (32) 1945 Lahore  

23 Full Bench.

16) The  first  decision  i.e.  Standard  Chartered  Bank  

(supra), is a three-Judge Bench decision and arose on the very  

same provisions, namely, Sections 50, 51 and 56 of the FERA.  

Since, at the outset, Mr. Amarendra Sharan has pointed out  

5

that the question in that decision was not the one relating to  

the issue being considered in the case on hand, let me first  

note down the facts and points determined by the three-Judge  

Bench.   On receipt  of  notices  under  the  FERA for  showing  

cause why adjudication proceedings for imposition of penalty  

under  Sections  50  and  51  be  not  initiated  against  the  

appellant  Bank and some of  its  officers and further notices  

under  Section  61 of  the FERA giving an opportunity  to the  

appellant Bank and its officers of showing that they had the  

necessary  permission  from  the  authority  concerned  for  the  

transaction involved, the appellant Bank filed Writ Petition No.  

1972 of 1994, seeking a declaration that the relevant sections  

of the FERA are unconstitutional, being violative of Articles 14  

and 21 of the Constitution of India and for  writ of prohibition  

restraining the authorities  under the FERA from proceeding  

with the proposed adjudication and the proposed prosecution,  

in terms of the Act. In another writ petition which was filed by  

the officers of the Bank as CWP No. 2377 of 1996 challenging  

the individual notices, the High Court of Bombay rejected the  

challenge to the constitutional validity of Sections 50, 51, 56  

5

and 68 of the FERA, but clarified that Section 68(1) of FERA  

was not applicable to an adjudication proceeding and that it  

was confined to a prosecution for penal offences under the Act.  

Being aggrieved, the appellant-Bank and its officers as well as  

the Union of India have filed Civil Appeals before this Court.  

Initially, those appeals came up before a Bench of two learned  

Judges which referred the same to a bench of three Judges by  

order dated 20.04.2004.  The three-Judge Bench doubted the  

correctness of a decision relied on by the Bank and its officers  

in Asstt. Commr. vs. Velliappa Textiles Ltd. (2003) 11 SCC  

405 which was a judgment of a Bench of three Judges and by  

order  dated  16-7-2004  [ANZ  Grindlays  Bank  Ltd. Vs.  

Directorate of Enforcement, (2004) 6 SCC 531] referred the  

question to a Constitution Bench. The Constitution Bench, by  

judgment  dated  5-5-2005  (Standard  Chartered  Bank vs.  

Directorate of Enforcement (2005) 4 SCC 530) overruled the  

decision  in  Asstt.  Commr. vs.  Velliappa  Textiles  Ltd.  

(supra) and sent these appeals for being heard on merits by a  

Division Bench. The question that was decided was whether in  

a  case  where  an offence  was  punishable  with  a  mandatory  

5

sentence of imprisonment, a company incorporated under the  

Companies  Act,  can  be  prosecuted,  as  the  sentence  of  

imprisonment  cannot  be  imposed  on  the  company.  The  

majority in the Constitution Bench, held that there could be  

no objection to a company being prosecuted for penal offences  

under the FERA and the fact that a sentence of imprisonment  

and  fine  has  to  be  imposed  and  no  imprisonment  can  be  

imposed on a company or an incorporated body, would not  

make Section 56 of the FERA inapplicable and that a company  

did  not  enjoy  any immunity  from prosecution in  respect  of  

offences for which a mandatory punishment of imprisonment  

is  prescribed.  In  the  light  of  the  said  decision  of  the  

Constitution  Bench,  the  controversy  before  the  three-Judge  

Bench has narrowed down and proceeded on the basis that  

the appellant-Banks are liable  to be prosecuted for  offences  

under the FERA.  Since the Bench elaborately considered the  

scope and applicability of Sections 50, 51, and 56 of the FERA  

with which I am concerned, I extract the entire discussion and  

the ultimate conclusion.

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“20. The learned Senior Counsel for the appellants in Civil  Appeal  No.  1750  of  1999,  in  addition  to  adopting  the  arguments of  the learned Senior Counsel  already adverted  to,  also  contended that  on the  scheme of  the  Act,  it  was  incumbent  on  the  Directorate  of  Enforcement  to  first  adjudicate  in  terms  of  Section  51  of  FERA  and  only  if  satisfied, proceed with the prosecution under Section 56 of  the Act. According to counsel, under the scheme of FERA,  the adjudication proceedings must first be commenced and  only after they are completed, the Directorate of Enforcement  can,  in  the  light  of  the  findings  in  the  adjudication  for  penalty, decide to initiate a prosecution and seek to impose  or not to impose a further punishment under Section 56 of  the  Act.  It  is  submitted  that  the  adjudication  proceedings  would give an idea to the authorities under the Act as to the  gravity of the violation and the opportunity to decide whether  the  contravention  deserved  also  a  punishment  by  way  of  prosecution. They would decide whether the penalty imposed  under  Section 50 of  the  Act  is  adequate  or  not.  If  in  the  adjudication 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 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  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  

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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 commence the prosecution only at its conclusion.  Counsel  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  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  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  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 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  appropriate  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  provisions  could  not  be  attacked  as  violative  of  the  rights  under  Part  III  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 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 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  object of inclusion of the Act in the Ninth Schedule justifies  

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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-D of the Foreign Exchange Regulation Act,  1947 which was considered in  Rayala 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, 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 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.

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  arguments  raised  by  the  learned Senior Counsel in Civil Appeal No. 1750 of 1999. The  Full  Bench  of  the  Calcutta  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 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 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. L.R. 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.

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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 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  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 independent. The finding in  one  is  not  conclusive  in  the  other.  In  the  context  of  the  objects sought to be achieved by the Act, 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 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 imposition of penalty. When  the Tribunal held that there was no concealment, and the  order levying penalty was cancelled, according 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.  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.”

17) The next decision heavily relied on by the Department is  

K.G. Premshanker (supra) which is also a three-Judge Bench  

decision.  In this case, this Court has considered the effect of  

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the decision of the civil court on the criminal proceedings and  

initiation of civil  and criminal  proceedings against the same  

person belonging to the same cause.  The following discussion  

and conclusion are relevant:

“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 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 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. 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  limited  purpose such as sentence or damages”. 33. Hence, the observation made by this Court in V.M. Shah  case1 that the finding recorded by the criminal court stands  superseded by the finding recorded by the civil court is not  correct enunciation of law. Further, the general observations  made in Karam Chand case are in context of the facts of the  case stated above. The Court was not required to consider  

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“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)

“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  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 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 have finished.”

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21) In  B.N. Kashyap (supra),  the Full  Bench of the Court  

while considering Sections 40 to 43 of the Evidence Act, 1872  

has held that finding on certain facts by a civil Court in action  

in personam is not relevant before the Criminal Court when it  

is called upon to give a finding on the same facts.  Similarly  

the  finding  on  certain  facts  by  the  Criminal  Court  is  not  

relevant before the civil Court when it is called upon to give a  

finding on the same facts.  

22) The  above  decisions,  particularly,  the  decision  in  

Standard Chartered Bank (supra) which arose  under  the  

FERA and dealt  with  the  scope  of  Sections  50,  51  and 56  

which  in  turn  relied  on  and  followed  in  the  decision  of  

Constitution Bench in L.R. Malwani (supra) is directly on the  

point raised in this appeal.  In fact, this Court, in para 21, in  

the  Standard Chartered Bank (supra) considered the very  

scope of the words “without prejudice to any award of penalty  

by the  adjudicating officer  under  this  Act”  as mentioned in  

Section 56 of the Act.   

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23) Considering the interpretation relating to Sections 50, 51  

and 56 by various decisions, I am of the view that in a statute  

relating to economic offences, there is no reason to restrict the  

scope of any provisions of the Act.  These provisions ensure  

that no economic loss is caused by the alleged contravention  

by the imposition of an appropriate penalty after adjudication  

under Section 51 of the Act and to ensure that the tendency to  

violate is guarded by imposing appropriate punishment after  

due transaction in terms of Section 56 of the Act.  In fact, it is  

relevant to point out that Section 23D of the Foreign Exchange  

Regulation Act, 1947 had a proviso, which indicates that the  

adjudication  for  the  imposition  of  penalty  should  precede  

making  of  complaint  in  writing  to  the  court  concerned  for  

prosecuting the offender.  The absence of a similar proviso to  

Section 51 or to Section 56 of the present 1973 Act is a clear  

indication  that  the  Legislature  intended  to  treat  the  two  

proceedings as independent of each other.  There is nothing in  

the present Act to indicate that a finding in adjudication is  

binding on the Court in a prosecution under Section 56 of the  

Act or that the prosecution under Section 56 depends upon  

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the result of adjudication under Section 51 of the Act.  It is  

reiterated  that  the  two  proceedings  are  independent  and  

irrespective of the outcome of the decision under Section 50,  

there  cannot  be  any  bar  in  initiating  prosecution  under  

Section 56.  The scheme of the Act makes it  clear that the  

adjudication by the concerned authorities and the prosecution  

are distinct  and separate.   No doubt,  the conclusion of  the  

adjudication, in the case on hand, the decision of the Special  

Director dated 18.11.1996, may be a point for the appellant  

and it is for him to put forth the same before the Magistrate.  

Inasmuch as FERA contains certain provisions and features  

which cannot be equated with the provisions of Income Tax  

Act  or the Customs Act and in the light of  the mandate of  

Section 56 of the FERA, it is the duty of the Criminal Court to  

discharge  its  functions  vest  with  it  and  give  effect  to  the  

legislative intention, particularly,  in the context of the scope  

and  object  of  FERA  which  was  enacted  for  the  economic  

development  of  the  country  and  augmentation  of  revenue.  

Though the Act has since been repealed and not available at  

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present, those provisions cannot be lightly interpreted taking  

note of the object of the Act.   

24) In view of the above analysis and discussion, I agree with  

the  conclusion  arrived  at  by  the  Metropolitan  Magistrate,  

Calcutta  as  well  as  the  decision  of  the  High  Court.  

Consequently, the appeal fails and the same is dismissed.  

       ………….…………………………J.                  (P. SATHASIVAM)                                  

   NEW DELHI; FEBRUARY 18, 2011.                    

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