STANDARD CHARTERED BANK AND ORS. versus DIRECTORATE OF ENFORCEMENT AND ORS.

Citation: [2006] 2 S.C.R. 709 · Decided: 24-02-2006 · Supreme Court of India · Bench: Y.K. SABHARWAL · Disposal: Dismissed

Cited by 1 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

STANDARD CHARTERED BANK AND ORS. 
v. 
DIRECTORATE OF ENFORCEMENT AND ORS. 
FEBRUARY 24, 2006 
[Y.K. SABHARWAL, CJ., C.K. THAKKER AND 
P.K. BALASUBRAMANY AN, JJ.] 
Foreign Exchange Regulation Act, 1973: 
A 
B 
Sections 50, 51, 56 and 68-Constitutional validity of-FERA included C 
in the Ninth Schedule to the Constitution of India-Immunity from challenge 
enjoyed by the provisions of FERA-Show-cause notices issued to a Bank and 
its Officers-High Court rejected challenge to the constitutional validity o/Ss. 
50, 51, 56 and 68-But High Court clarified that S. 68(1) was confined to 
prosecution for penal offences only and not to an adjudication proceeding D 
under FERA-Correctness of-Held: As FERA is included in the Ninth schedule 
to the Constitution, no challenge based on violation of Arts. I 4 or 21, even 
~ 
if it has substance, is maintainable-Further, S. 68 is not merely confined to 
prosecution of penal offences and is equally applicable to adjudication 
proceeding under FERA. 
Section 61-Show-cause notices issued to a Bank and its Officers- E 
Scope and ambit of-Writ of prohibition-Maintainability of-Held: The show. 
cause notices are merely notices of enquiry giving an opportunity to the Bank 
and its Officers of showing that they had the necessary permission from the 
concerned authority under FERA in respect of a particular transaction-The 
Bank and its Officers are entitled to put forward their defences before the F 
1 
criminal court-Hence, writ of prohibi!ion not maintainable. 
Section 50-Adjudication under-Show-cause notices issued to a Bank 
and its Officers-Writ petition for stay of adjudication-Maintainability a/-
Held: It is for the concerned authority to decide any objections put forward 
by the Bank-The Bank and its Officers have a right of appeal under S. 52 G 
to the Appellate Board and a further right of appeal to the High Court under 
S. 54-Hence, writ of prohibition restraining the authority under the FERA 
from proceeding further with the adjudication, not maintainable. 
Section 68(1)-Constitutional validity of-Person in-charge and 
709 
H 
710 
SUPREME COURT REPORTS 
[2006) 2 S.C.R. 
A responsible for conduct of business of company-Prosecution of-Held: In 
view of the fact that FERA has been included in the Ninth Schedule to the 
Constitution, the challenge based on Articles I 4 and 2 I cannot prevail even 
if it has substance-Even if there is any violation by the company of any of 
the provisions of FERA. the person in-charge of the company is given an 
opportunity to show that the alleged contravention by the company took place 
B without his knowledge or in spite of the exercise of all due diligence by him 
to prevent such contravention -Hence, S. 68( I) is not unreasonable. 
Sections 51, 56 and 68---Show-cause notices issued to a Bank and its 
Officers--Adjudication and prosecution-Simultaneous launching of-Held: 
C Adjudication need not precede prosecution---The two proceedings are 
independent of each other and are controlled by the respective provisions 
themselves-Both proceedings can simultaneously be launched and can 
simultaneously be pursued. 
The appellant-Bank filed a writ petition before the High Court 
D seeking a declaration that Sections 50, 51, 56 and 158 of the Foreign 
Exchange Regulation Act, 1973 (FERA) were unconstitutional, invalid and 
void being violative of Articles 14 and 21 of the Constitution of India and 
for a writ of prohibition directing the authorities under the Act from 
proceeding further, based on the show-cause notices i.ssued to the bank 
and its officers. The High Court rejected the challenge to the constitutional 
E validity of the said Sections of FERA, but clarified that Section 68(1) of 
FERA was not applicable to an adjudication proceeding and that it was 
confined to prosecution for penal offences under the Act. Hence the appeal. 
F 
Dismissing the appeal, the Court 
HELD: 1. The challenge to the constitutional validity of Sections 50, 
51, 56 and 68 of The Foreign Exchange Regulation Act, 1973 (FERA) is 
based on the alleged violation of Articles 14 and 21 of the Constitution of 
India. It is admitted that FERA has been included in the Ninth Schedule 
to the Constitution of India, as Item No. 100. Therefore, in terms of Article 
G 318 of the Constitution of India, none of the provisions of FERA can be 
deemed to be void or ever to have become void on the i~round that FERA 
or any of the provisions thereof, are inconsistent with or take away or 

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