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Vijay Kumar Mallik v. The Union Of India & Ors.

Jharkhand High Court

Dec 18, 2002

Judgment

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Factual and Procedural Background

This petition under Article 226 of the Constitution challenged the entire criminal prosecution against the petitioner, including an order dated 31 May 2002 under which the learned Special Judge took cognizance of offences described as Section 56 of the Foreign Exchange Regulation Act, 1973 read with Sections 49(3) and (4) of the Foreign Exchange Management Act, 1999 in Case No. FEMA 2 of 2002.

A complaint alleged that a large-scale defrauding of government money (Rs. 7,09,92,000/- for the period 1980–90) occurred based on fake allotment letters. The petitioner was alleged to have participated in obtaining foreign exchange remittances (USD 315,000 and GBP 1,000 during 1991–92) and admitted to multiple factual allegations: opening bank accounts (December 1991) in the names of five children of Dr. K.M. Prasad at Punjab National Bank, Roshnara Road, New Delhi; assisting deposit and withdrawal of funds; assisting with Declaration Forms before the Income Tax Department; depositing foreign exchange drafts in the names of those children; and moving funds (including an asserted transfer of about one crore to Bombay in 1995).

Procedurally, the complaint was initially filed before the Chief Judicial Magistrate and later made over to the Special Judge, who took cognizance by the impugned order. The petitioner contended that prosecution was premature and that the Special Judge lacked jurisdiction; the respondents contended the Special Judge was duly notified by the State Law Department (Notification dated 17 May 2002) to try cases under FEMA and that the prosecution was valid. The Enforcement Officer (complainant) relied on Notification No. 50715E dated 24.9.1993 (Ministry of Finance, Department of Revenue) and powers under the provisions of the repealed and existing statutes as argued in the record.

Legal Issues Presented

Whether initiation of criminal prosecution under the relevant foreign exchange statute was premature while adjudicatory proceedings were pending (i.e., whether prosecution could be launched absent completion of adjudication or formation of an adjudicatory opinion).
Whether the learned Special Judge had jurisdiction to take cognizance of and try offences arising under the Foreign Exchange Management Act, 1999 (and relatedly whether Section 61 of FERA restricted trial jurisdiction to Judicial/Metropolitan Magistrates in the circumstances of this case).
Whether the Special Judge could take cognizance where the complaint was registered as a FEMA case and whether any irregularity in taking cognizance would vitiate the prosecution (including the relevance of Section 460 CrPC).

Arguments of the Parties

Petitioner's Arguments (as set out in the opinion)

The prosecution was premature: under FERA the prosecution, it was submitted, should follow adjudication only after the adjudicating authority forms an opinion that monetary penalty is insufficient; in this case no adjudication had been completed — only a show cause notice had been issued and the petitioner had not yet filed a show cause reply.
Jurisdictional challenge: under Section 61 of FERA the offence was said to be triable exclusively by a Court of Judicial Magistrate First Class or a Metropolitan Magistrate; therefore the Special Judge who took cognizance had no jurisdiction to do so.
Scope of Special Judge's powers: it was argued that the Special Judge was empowered only to try cases but not to take cognizance under the provisions of FERA; since the complaint was registered as a FEMA case, the Special Judge allegedly lacked authority to take cognizance and the order taking cognizance should be quashed.

Respondent's Arguments (as set out in the opinion)

The Special Judge properly took cognizance because he had been duly notified by the Law Department, Government of Jharkhand (Notification dated 17 May 2002) to try cases under the Foreign Exchange Management Act, 1999.
Adjudicatory proceedings and criminal prosecution are separate streams: a criminal trial can lawfully proceed even while adjudicatory proceedings are pending and even if the person is exonerated in adjudication, that does not bar criminal prosecution.
The complainant (Enforcement Officer) was authorized to institute the prosecution by Notification No. 50715E dated 24.9.1993 (Ministry of Finance, Dept. of Revenue) and, pursuant to "sub clause (2) of sub section (2) of Section 61 of the Foreign Exchange Regulation Act" as published in the Gazette, was empowered to file the complaint.
Reliance was placed on Section 460 of the Code of Criminal Procedure (CrPC) to submit that irregularity in taking cognizance does not vitiate the entire proceeding.
The respondents also emphasized the petitioner's admissions and the factual allegations in the complaint as supporting continuation of the criminal process.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court assessed the submissions by reference to the statutory framework, the notifications in the record, and the factual admissions recorded in the complaint and by the petitioner.

Jurisdiction of the Special Judge: The court noted the State Government (with concurrence of the Jharkhand High Court) had issued a notification dated 17 May 2002 empowering Shri Prabhu Tiwary, Special Judge, to try cases under the Foreign Exchange Management Act, 1999. On that basis the court held the Special Judge had jurisdiction to take cognizance of offences under FEMA in the instant matter.
Effect of Section 49(3) of FEMA and transitional provisions: The judgment set out Section 49 of FEMA (including subsection (3) which states "no Court shall take cognizance of an offence under the repealed Act after the expiry of a period of two years from the date of commencement of this Act"). The court observed that clause 3 of Section 49 indicates that after FEMA came into force no court shall take cognizance of an offence under the repealed Act; however, the Special Judge had been authorised to try cases under FEMA and the Special Judge took cognizance for offences under FEMA itself. The court found the petitioner's submissions based on these provisions unsustainable in the factual matrix.
Separation of adjudicatory proceedings and criminal prosecution: The court accepted the respondents' position that adjudication proceedings under the relevant statute and criminal prosecution under Section 56 are separate remedies/proceedings. It held that a criminal prosecution under Section 56 need not await the outcome of adjudicatory proceedings; both may legitimately proceed and such a course is not barred as amounting to double jeopardy.
Irregularity in taking cognizance: The court referenced Section 460 CrPC (as relied upon by respondents) to the effect that even if there is irregularity in taking cognizance, that irregularity will not necessarily vitiate the entire proceeding. The opinion uses this principle to support the proposition that the presence of any technical defect in taking cognizance would not invalidate the criminal process where jurisdiction otherwise exists.
Weight of admissions and factual record: The court recorded there was no denial of the allegations and observed the petitioner had admitted materially incriminating facts recorded in the complaint (bank accounts, withdrawals, deposit of foreign exchange, carriage of funds). The court took these admissions into account when evaluating the contention that the criminal proceedings should be quashed.
Conclusion of analysis: Synthesizing the points above, the court concluded the lower court was duly authorized to proceed and rightly took cognizance of the offences; the petitioner's jurisdictional and procedural objections were found to be untenable in the circumstances.

Holding and Implications

Final Disposition: The petition under Article 226 was dismissed. The court stated: the application has no merit and is dismissed.

Implications:

The direct effect is that the criminal prosecution at issue was allowed to continue; the order of the Special Judge taking cognizance was upheld.
The court expressly accepted that criminal prosecution under Section 56 can proceed independently of and even while adjudicatory proceedings are pending; accordingly, the dismissal permits the trial to continue despite the absence of a concluded adjudication in the record.
The opinion does not indicate that any new legal precedent was being created; it resolves the petition on the statutory interpretation and notifications in the record and by upholding the lower court's jurisdiction and cognizance-taking.

Show all summary ...

1. This application under Article 226 of the Constitution of India has been filed for quashing the entire criminal prosecution initiated as against the petitioner including the order dated 31 st May, 2002, whereby and whereunder the learned Special Judge took cognizance for the offences under Section 56 of the Foreign Exchange Regulation Act, 1973 r/w Sections 49(3) and (4) of the Foreign Exchange Management Act, 1999 in connection with Case No. FEMA 2 of 2002.

2. One complaint case has been filed against the accused persons including the petitioner for defrauding a huge amount of Government money to the extent of Rs. 7,09,92,000/- during the period 1980-90 on the basis of fake allotment letters and the petitioner took active part in getting money by way of certain foreign exchange remittance in total of US $ 3,15,000/- and Pounds 1000 as detailed in Annexure-1 during the year 1991-92. It was found that it was not actually the genuine gift but were suspected to be involved in violations of the provisions of Foreign Exchange Regulation Act. The petitioner admitted to had opened bank accounts in the names of five children of Dr. K.M Prasad, the main accused, with Punjab National Bank Roshnara Road, New Delhi in December, 1991 and he helped those persons to deposit, and withdraw the money from the said Accounts. He had also helped the children of Dr. K.M Prasad for filing the Declaration Forms before the Income Tax Department and he had deposited the foreign exchange drafts and exchanges received in the name of his children. He further admitted that he used to bring money from Patna to Delhi for the purpose of Dr. K.M Prasad and sometimes in 1995 he had carried huge amount of about one crore to Bombay for his sons.

3. Accordingly the case was filed before the learned Chief Judicial Magistrate but later on made over the case to the court of Special Judge, who took cognizance by the order impugned for the offences.

4. Mr. M.M Banerjee, the learned counsel for the petitioner made three fold submissions in challenging the order impugned. Firstly, the petitioner though has not filed his show cause as yet but without forming any opinion in the adjudication proceeding, this case has been filed when it is well settled under the provisions of FERA, the prosecution will be launched only when during the adjudication proceeding the authority comes to the conclusion that the penalty provided in the said adjudication proceeding is not sufficient as well as in the present case no adjudication proceeding has yet been initiated, rather merely a show cause notice has been issued to the petitioner and in hot haste a prosecution report was filed before the court of the Chief Judicial Magistrate, Ranchi.

5. Secondly, he submitted that under the provisions of FERA, the offence is exclusively triable by the Court of Judicial Magistrate, 1 st Class or any Metropolitan Magistrate as envisaged under Section 61 of FERA. But, in the instant case, the Special Judge took cognizance by the order impugned who has got no jurisdiction.

6. Lastly, he submitted that the Special Judge was empowered only to try the case and he had no jurisdiction to take cognizance, as Special Judge was not empowered to take cognizance under the provisions of FERA but the complaint has been registered as FEMA case and the Special Judge has got no authority or jurisdiction to take cognizance of an offence and, therefore, order taking cognizance is fit to be quashed.

7. On the order hand, Mr. A.K Das, learned counsel for the respondents contended before me that the learned Special Judge has rightly took cognizance in the matter and there is no illegality in the order impugned as the learned Special Judge has been duly notified by the Law Depart-, ment, Government of Jharkhand vide Notification dated 17th May, 2002 for trying the case under Foreign Exchange Management Act, 1999. It is further submitted that adjudicatory proceedings and criminal trial are two separate aspects with which a criminal court addresses the criminal justice system and that is entirely different from that of a Tribunal or an adjudicatory proceeding and filing of criminal case cannot be said to be illegal, as it is well settled that even if a person is exonerated of his charges in adjudicatory proceedings, there cannot be any bar for a criminal prosecution against the said person. The Complainant (Enforcement Officer) has been authorized to institute the present prosecution vide Notification No. 50715E dated 24.9.1993 issued by the Government of India, Ministry of Finance, Department of Revenue and in pursuant to sub clause (2) of sub section (2) of Section 61 of the Foreign Exchange Regulation Act published in the Gazette of India, the complainant has been duly empowered to file the present complaint petition and the whole matter will be thrashed out in the trial itself.

8. The learned counsel also drew the attention of the Court to Section 460 of the Code of Criminal Procedure which provides that even if there is irregularity in taking cognizance that will not vitiate the entire proceeding. Therefore, there is no illegality in the order impugned and there is no illegality in the order impugned.

9. There is no denial about the allegations made in the complaint as well as the petitioner admitted to be involved in the crime alongwith the main accused Dr. K.M Prasad. The petitioner admitted that he knew Dr. K.M Prasad and he opened Bank Account with Punjab National Bank in New Delhi in December 1991 in the name of five children of Dr. K.M Prasad and he had also withdrawn money from the Bank through the cheques signed by them. It is true that the complaint was filed before the Chief Judicial Magistrate, Ranchi who was duly authorized to try the case falling under the Foreign Exchange Management Act. There is no denial of the said Notification published by the Law Department, Govt. of Jharkhand dated 17th May, 2002 whereby Shri Prabhu Tiwary, Special Judge was empowered to try the cases under Foreign Exchange Management Act, 1999 also. It is also admitted position that the petitioner received an addendum issued by the Directorate, Ministry of Finance, in the month of April, 2002 in which the petitioner was given 30 days time to file his show cause, but he has not filed his show cause. Criminal Prosecution under Section 56 is not dependent upon the outcome of adjudication proceedings. A prosecution under Section 56 therefore can be launched when the adjudication proceeding is pending. Both the prosecution u/s 56 of FERA and adjudication proceeding u/s 50 FERA are two separate aspects. Adjudicatory proceedings and further prosecution in Criminal court in respect of the same matter is legally permissible as the same is not amounting to double jeopardy.

10. Section 49 of the Foreign Exchange Management Act, 1999 reads as follows:

“Repeal and saving—(1) The Foreign Exchange Regulation Act, 1973 (46 of 1973) is hereby repealed and the Appellate Board constituted under subsection (1) of Sec. 52 of the said Act (hereinafter referred to as the repealed Act) shall stand dissolved.

(2) On the dissolution of the said Appellate Board, the person appointed as Chairman of the Appellate Board and every other person appointed as Member and holding office as such immediately before such date shall vacate their respective offices and no such Chairman or other person shall be entitled to claim any compensation for the premature termination of the term of his offence or of any contract of service.

(3) Notwithstanding anything contained in any other law for the time being in force, no Court shall take cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any contravention under Sec. 51 of the repealed Act after the expiry of a period of two years from the date of commencement of this Act.

(4) Subject to the provisions of sub-section (3) all offences, committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act had not been repealed.

(5) Notwithstanding such repeal,

(a) anything done or any action taken on purported to have been done or taken including any rule, notification, inspection, order or notice made or issued or any appointment, confirmation or declaration made or any licence,. permission, authorization or exemption granted or any document or instrument executed or any direction given under the Act hereby repealed shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act;

(b) any appeal preferred to the Appellate Board under the sub-section (2) of Sec. 52 of the repealed Act but not disposed of before the commence ment of this Act shall stand transferred to and shall be disposed of by the Appellate Tribunal constituted under this Act;.

(c) every appeal from any decision or order of the Appellate Board under sub-section (3) or sub-section (4) of Sec. 52 of the repealed Act shall, if not filed before the commencement of this Act, be filed before the High Court within a period of sixty days of such com mencement:

Provided that the High Court may entertain such appeal after the expiry of the said period of sixty days if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period.

(6) Save as otherwise provided in sub-section (3), the mention of particular matter in sub-sections (2), (4) and (5) shall not be held to prejudice or affect the general application of Sec. 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal.”

11. Clause 3 of Section 49 of FEMA clearly indicates that after coming of FEMA in force, no Court shall take cognizance of an offence under the repealed Act. But the Special Judge, who was duly authorised by Notification to try the cases under FEMA, has taken cognizance for the offences under FEMA also. Thus submissions made by the learned counsel for the petitioner on any score are not sustainable. The Special Judge has duly been empowered by the State Government with the concurrence, of Jharkhand High Court by the said Notification dated 17th May, 2002 to try the cases also under Foreign Exchange Management Act, 1999 and therefore he was having jurisdiction to take cognizance for the said offences.

12. There cannot be any bar for a criminal trial even if no opinion has been formed in the adjudication proceeding and also for the same the entire criminal proceeding cannot be thrown away when there is no denial about the allegation made in the complaint. Where a court has jurisdiction to try, it is immaterial whether it has taken cognizance of the offence without even being empowered to do so.

13. Analysing from any angle of the matters, it is evident that the court below was duly authorized in the matter to pro ceed with the case. Thus, in my view, the court below rightly took cognizance of the offences.

14. In the result, I do not find any merit in this application, which is dismissed.