Back
Madras High Court
KAILASAM
L.E.Mohamed Hussain - Appellant
Versus
Deputy Superintendent of Customs, R.I.V.Tiruchirapalli - Respondent
Decided On : 02/28/1969
FOREIGN EXCHANGE REGULATION ACT - INVESTIGATION OF OFFENCES - JURISDICTION OF POLICE AND DIRECTOR OF ENFORCEMENT - VALIDITY OF SECTIONS 23(1) (A), 23(1) (B) AND 23-F - SCOPE OF SECTION 5(2), CRIMINAL PROCEDURE CODE - POWERS OF DELHI SPECIAL POLICE ESTABLISHMENT - VALIDITY OF SECTIONS 5 AND 6 OF THE DELHI SPECIAL POLICE ESTABLISHMENT ACT 1946.
Fact of the Case:
The petitioner, Messrs. Bheru Manufacturing Co., challenged the validity of Sections 23(1) (a), 23(1) (b) and 23-F of the Foreign Exchange Regulation Act, 1947 (FERA), arguing that they conferred unguided and arbitrary powers on the Director of Enforcement to choose the procedure for imposing punishment on persons charged with offences under the Act. The petitioner also contended that the police lacked the authority to investigate offences under FERA since the Act prescribed its own procedure for investigation and specifically prohibited courts from taking cognizance of an offence without a complaint in writing from the Director of Enforcement. Additionally, the petitioner questioned the jurisdiction of the Special Police Establishment, a central police force, to investigate offences within a State, asserting that police is a State subject.
Finding of the Court:
The Court upheld the validity of Sections 23(1) (a), 23(1) (b), 23-D and 23-F of FERA, relying on previous Supreme Court decisions that held that a special procedure for investigating breaches of foreign exchange regulations is not unconstitutional and that the Director's discretion to choose between adjudication proceedings and criminal prosecution is not arbitrary. The Court also clarified that the adjudication proceedings under Section 23(1) (a) do not become criminal in nature merely because non-payment of the penalty imposed may result in criminal conviction. Regarding the investigation of offences, the Court held that while the police cannot investigate offences under FERA except on the complaint of the concerned officer and with the order of a Magistrate, they retain the power to investigate cognisable offences, such as cheating, even if they may also constitute offences under FERA. The Court further upheld the validity of Sections 5 and 6 of the Delhi Special Police Establishment Act 1946, which empower the Central Government to extend the powers and jurisdiction of the Delhi Special Police Establishment to investigate offences in States with the consent of the State Government, finding that these provisions are within the legislative competence of the Parliament under Item 80, List I, Seventh Schedule of the Constitution of India.
Issues: 1. Whether Sections 23(1) (a), 23(1) (b) and 23-F of the Foreign Exchange Regulation Act, 1947 (FERA) are ultra vires the Constitution for conferring unguided and arbitrary powers on the Director of Enforcement? 2. Whether the police have the authority to investigate offences under FERA in light of the Act's prescribed procedure and the requirement of a complaint in writing from the Director of Enforcement? 3. Whether the Special Police Establishment, a central police force, has jurisdiction to investigate offences within a State, considering that police is a State subject?
Ratio Decidendi: 1. The Court held that the vires of Sections 23(1) (a), 23(1) (b), 23-D and 23-F of FERA are not open to attack on the ground that they are governed by a procedure different from that prescribed by the Criminal Procedure Code (CrPC). The Court relied on previous Supreme Court decisions that upheld the validity of a special procedure for investigating breaches of foreign exchange regulations and found that the Director's discretion to choose between adjudication proceedings and criminal prosecution is not arbitrary. 2. The Court clarified that the adjudication proceedings under Section 23(1) (a) of FERA do not become criminal in nature merely because non-payment of the penalty imposed may result in criminal conviction. The Court also held that while the police cannot investigate offences under FERA except on the complaint of the concerned officer and with the order of a Magistrate, they retain the power to investigate cognisable offences, such as cheating, even if they may also constitute offences under FERA. 3. The Court upheld the validity of Sections 5 and 6 of the Delhi Special Police Establishment Act 1946, which empower the Central Government to extend the powers and jurisdiction of the Delhi Special Police Establishment to investigate offences in States with the consent of the State Government. The Court found that these provisions are within the legislative competence of the Parliament under Item 80, List I, Seventh Schedule of the Constitution of India.
Final Decision: The Court dismissed all the writ petitions filed by the petitioner, Messrs. Bheru Manufacturing Co., upholding the validity of the challenged provisions of FERA and the Delhi Special Police Establishment Act 1946. The Court also held that the Delhi Special Police Establishment has the authority to investigate offences under Section 420 of the Indian Penal Code (IPC), which is a cognisable offence.
ORDER:- In these writ petitions, the power of the Superintendent of Police, Central Bureau of Investigation Economic Offences Wing, to investigate an offence under the Foreign Exchange Regulation Act, 1947 (hereinafter referred to as the Act) and the power of the Director of Enforcement, Ministry of Finance to take proceedings under Sections 23(1) (a) and 23-D of the Act are questioned. In W. P. 3536 of 1968 the petitioner Messrs. Bheru Manufacturing Co. prays for the issue of a writ of quo warranto calling upon the Superintendent of Police, Central Bureau of Investigation to show the validity of his appointment and his exercising powers in Madras State in respect of offences under the Foreign Exchange Regulation Act. The same petitioner in W. P. 3537 of 1968, has prayed for the issue of a writ of prohibition restraining the Enforcement Directorate from taking any action for adjudication under Section 23(1). In the other Writ petitions the same questions that are raised in W. P. 3537 of 1968, are raised. In the circumstances, the batch of writ petitions may be disposed of by a common order.
2. The points that are raised in these writ petitions may be classified under the following heads: Firstly, the validity of Sections 23(1) (a), 23(1) (b) and 23-F are questioned on the ground that they are ultra vires of the Constitution, in that they conferred on the Director unfettered, unguided and arbitrary powers in choosing the procedure for imposing the punishment on persons charged of offences under the Foreign Exchange Regulation Act. It was submitted that as the Director has an option to choose one of the two criminal proceedings without any guidance, the proceedings are violative of the provisions of the Constitution. Secondly, it was contended that as the Foreign Exchange Regulation Act has prescribed its own procedure for investigation of offences under the Act and also specifically provided that no court shall take cognisance of an offence, under the Act except upon a complaint in writing by the Director of Enforcement, the provisions of the Criminal P. C. relating to investigation are, to that extent, not applicable and the police are not entitled to investigate such offences. Thirdly, it was submitted that the Special Police Establishment being a police force under the Central Government, it has no jurisdiction to investigate into offences within any State, as police is a State subject.
3. The challenge about the validity of the power conferred on the Director of Enforcement under Sections 23(1) (a), 23 (1) (b), 23-D and 23-F of the Act may be considered. Section 23(1) runs as follows:
"If any person contravenes the provisions of S. 4, S. 5, S. 9, S. 10 or sub-section (2) of S. 12, S. 17, S. 18-A or Section 18-B or of any rule, direction or order made thereunder, he shall-
(a) be liable to such penalty not exceeding three times the value of the foreign exchange in respect of which the contravention has taken place, or five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement in the manner hereinafter provided, or (b) upon conviction by a court, be punishable with imprisonment for a term which may extend to two years or with fine or with both." .
Section 23(1) (a) confers on the Director power to impose a penalty not exceeding three times the value of the foreign exchange in respect of which the contravention has taken place or five thousand rupees whichever is more. Under sub-section (1) (b) the person who had contravened any of the provisions mentioned in the sub-section is liable, on conviction by a court, to be punished with imprisonment for a term which may extend to two years or with fine, or with both. Section 23(3) provides that no court shall take cognisance of any offence punishable under sub-section (1) except upon complaint in writing made by the Director of Enforcement. Section 23-D(1) prescribes the procedure to be followed by the Director of Enforcement for conducting an en
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
