Case Summary: Standard Chartered Bank vs Directorate of Enforcement & Others
Citation: (2006) 02 SC CK 0024 | (2006) 4 SCC 278
Case No: Civil Appeal Nos. 1748, 1749, 1750, 1751, 1944 of 1999, WP (Crl.) No. 165 of 2004, Crl. Appeal Nos. 847, 848 of 2004, 684 of 2005, 246 of 2006
Date of Decision: 24 February 2006
Bench: Hon'ble Chief Justice Y. K. Sabharwal, Justice P. K. Balasubramanyan, Justice C. K. Thakker
Final Decision: Allowed
[Judgment Source] https://www.courtkutchehry.com/Judgement/Search/AdvancedV2?docid=302754
Law Points Raised:
- Constitution of India – Articles 14, 20(3), 21, and 31B – Rights of accused and immunity from challenge for Ninth Schedule laws.
- Foreign Exchange Regulation Act, 1973 – Sections 50, 51, 56, 61, and 68 – Scope of adjudication vs. prosecution; liability of corporations for penal offenses.
- CrPC – Section 482 – Inherent powers of High Court to prevent abuse of process.
- Customs Act – Section 140(1) – Corporate criminal liability.
- FERA – Constitutional validity and procedural interpretation of notice and prosecution.
Ratio Decidendi:
- Companies can be prosecuted for offences requiring mandatory imprisonment even if sentence of imprisonment cannot be imposed on a company.
- FERA being under Ninth Schedule cannot be challenged under Articles 14 and 21.
- Section 68 does not apply to adjudication proceedings and is confined to prosecutions.
- Validity of show-cause notices under Section 61 of FERA is upheld; the accused has opportunity to defend.
- No merit in argument that initiation of adjudication and penal proceedings must be sequential and not parallel.
Final Ruling:
- Supreme Court upheld the power to prosecute companies under FERA.
- Rejected the challenge against Sections 50, 51, 56, and 68 of FERA based on Article 14 and 21.
- Notices under Section 61 are valid and provide sufficient opportunity for defense.
- Constitution Bench ruling in 'Assistant Commissioner vs Valliappa Textiles' overruled.
Relevant Paragraph Highlights:
- Para 1–3: Background of writs and High Court ruling on Section 68.
- Para 4–5: Effect of FERA inclusion in Ninth Schedule.
- Para 6–7: Arguments on Article 14, 21 and interpretation of Section 68.
- Para 9–10: Legality of show-cause notices and right to reply under Section 61.
- Para 11: Role of show-cause notice and reference to East India Commercial Co. case.
Conclusion:
This judgment affirms the prosecution of companies under FERA and upholds the constitutional immunity of the statute under the Ninth Schedule. The Court clarifies that adjudication and prosecution can proceed simultaneously and that issuance of show-cause notices under Section 61 is a lawful step in ensuring compliance. The decision marks a significant interpretation on corporate criminal liability and procedural safeguards under financial statutes.