LexRAYALA CORPORATION (P) LTD. & ORS. versus DIRECTOR OF ENFORCEMENT, NEW DELHI
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RAYALA CORPORATION (P) LTD .• & ORS.
V.
DIRECTOR OF ENFORCEMENT, NEW DELHI
July 23, 1969
[J.M. SHELAT, V. BHARGAVA,, C. A. VAIDIALINGAM, K. S. HEGDE
AND A. N. GROVER, JJ.J
Foreign Exchange Regulation Act (7 of 1947), and Foreign Exchange
Regulation (Amendment) Act (39 of 1957), ss. 4(1), 23(1) and 23D(I)
-Section 23(1)(b), if ultra vires Art.
14-Scope of proviso to
s.
23 (D) (!)~·Defence of India Rules, 1962, R. 132A-Omission by Noti-
fication-If prosecution permissible for offence committed when Rule was
in existenc.e.
The premises of the first appellant were raided
by the Enforcement
Directorate and certain records were seized.
The second appellant was
the first ·appellant's managing director. Thereafter, on 25th August 1967,
notice was issued by th'e' respondent to the two appellants to sho\v cause
within fourteen days wQy adjudication proceedings should net be instituted
against them under s. Z3D (I) of the Foreign Exchange Regulation Act,
1947, for violation of :ss. 4 and 9 of the Act, on the
allegation that
2,44,713.70 Swedish KrOnafs had been deposited by them in a bank account
in Sweden instead of s:Urrendering the foreign exchange to an :iuthorised
dealer as required by t~ Act. After investigation, on 4th November 1967,
another notice was issu~d to the second appellant stating that out of the
total sum mentionep, he had acquired, during 1963 to 1965, Sw. Kr.
88,913.09, that he helcl_
1the amount in a bank in Sweden instead of offering
it to the Reserve Bank of India and thereby contravened ss. 4(1) and 9
of the Act, and askint
1
• him to show if he had any special exemption for
acquiring the foreign exchange. A similar show cause notice was issued
to the first appellant in, respect of the same amount on 20th January 1968.
On 16th March 1968,: 1n supersession of the show cause notice dated 25th
August 1967, a further notice was addressed to both the appellants to
show cause within 14, days why adjudication proceedings under s. 23D
of the Act should not: be held against them in. respect of the balance of
Sw. Kr. 1,55,801.41 a~d added that it had since been decided to launch
a prosecution in respect df the Sw. Kr. 88,913.09 and on the 17th March
1968 a complaint was· !filed against both the ·appellants in the Chief Presi-
dency Magistrate's Cotjtt for contravention of ss. 4( I), 5 (I) ( e) and 9 of
the Act, punishable under s. 23 (I )(b) of Act, and for violation rule
132A(2) of the Defence of India Rules, 1962, punishable under rule
132A(4). Thereupon,; the appellants filed applications in the High Court
under s. 561A, Criminal Procedure Code., for quashing the proceedings in
the Magistrate's court, but the applications were dismissed.
In appeal to· this Court, it was contended that : (I) The punishment
under s. 23(1)(b) is severer and heavier than the penalty to which a person
is made liable if adjudication P'oceedings are taken under s. 23(1) (a),
but the section Ia'ys down no. principles at an for determining when the
person concerned· shobld be proceeded against undc;:r s.
23 ( 1) ("a) and
when under s. 23(1) (b) and has left it to the arbitrary discretion of the
respondent and h_ence, violates Art. 14 of Constitution;
(2) Even if s.
23 ( 1) (b) is not voi~<·the respondent did not act in accordance with the
640
SUPREME COURT RllPORTS
[ 1970] I S.c.R.
requirements of the proviso to s. 23D( I) which lays down that a com-
plaint may be made at any stage of !he enquiry, but only if, having regard
to the circumstan~ of the case, the Director of Enforcement finds that
the penalty which he is empowered to impose under .s. 23(1)(a) would
not be adequate; and (3) Since the Notification issued by the Ministry of
Home Affairs dated 30th March 1965 provided that R. 132A shall be
omitted except as respec1s things done or omitted 10 be done under that
Rule, a prosecution in respect of an offence punishable under that Rule
could not be instituted on I ?th March 1968 when that Rule had ceased
to exist even though it might be in respect of an oftener. committed earlier ·
during the period that the rule was in force.
HELD : (I) The choice whether the proceeding be taken under s.
23(1)(a) or 23(1)(b) a~t the person who is liable for action for
contravention under L 23 (I ), is not left entirely to the discretion of the
Director of Enforcement but the criterion for making the choice is indi-
cated in the proviso to s. 230(1). [Excerpt shown. Read the full judgment & AI analysis in Lexace.