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CASE NO.: Appeal (crl.)  1216 of 2001

PETITIONER: Mohtesham Mohd. Ismail

RESPONDENT: Spl. Director, Enforcement Directorate & Anr

DATE OF JUDGMENT: 09/10/2007

BENCH: S.B. Sinha & Harjit Singh Bedi

JUDGMENT: J U D G M E N T

S.B. SINHA, J :

1.      A short but an interesting question as to whether a Special Director  appointed under the Foreign Exchange Regulation Act, 1973 (for short, \021the  Act\022) himself can prefer an appeal before the High Court against an order  passed by the Foreign Exchange Regulation Appellate Board (for short, \021the  Board\022) arises for consideration herein.

2.      Before embarking upon the said question, we may briefly state the  fact of the matter.             Appellant herein was served with a show cause notice by the  Enforcement Directorate on 04.07.1991 for alleged contravention of the  provisions of Section 9(1)(b), 9(1)(d) and 9(3) of the Act, alleging, inter  alia, that during the period June 1989 to July 1990, he caused to remit  various payments aggregating to Rs.2,81,73,700/- to India from United Arab  Emirates (UAE) through persons other than authorized dealers.  Cause was  shown thereto by the appellant.  The Special Director, however, adjudicated  the matter and by an order dated 06.10.1993 imposed a penalty of  Rs.2,50,000/- on the appellant in terms of Section 9(3) of the Act.  Penalty  was also imposed on one Shri Champalal Singhvi.

3.      Aggrieved by and dissatisfied therewith, an appeal was preferred by  the appellant before the Board.  The Board allowed the said appeal, inter  alia, holding :          

\02312.  It would appear from the above discussion that  neither in the documents seized from Champalal Singhvi  and those seized from the premises of Yousuf Kazia, nor  in the statements of Champalal Singhvi and Kazia  Brothers, there is any evidence of actual remittance of  any amounts from abroad as alleged, even though prima  facie that evidence may indicate distribution of amounts  in India on the instructions from persons abroad\005.\024

It was further observed :

\023\005In our opinion, in view of the conclusions already  made by us that the charge of contravention of section  9(3) cannot be made out on the basis of the facts as  assumed by the Department, it is not necessary to  consider other grounds on which the adjudication order  has been impugned in this appeal.  We are of the view  that consideration of those grounds would amount to  expressing opinion in respect of the evidence which tends

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to implicate Kazia brothers and Champalal Singhvi and  therefore, any pronouncement on those grounds should  be avoided if possible.\024     

                4.      Respondents herein preferred an appeal thereagainst before the High  Court.   The Central Government was not impleaded as a party therein.  The  appellate authority, namely, the Board, however, was impleaded as a party,  although it should not have been.   

5.      Before the High Court, the appellant, inter alia, raised a question in  regard to the maintainability of the appeal at the instance of the respondents  herein on the premise that it was the Central Government who could prefer  an appeal and not the adjudicating authority itself.  Reliance, in this behalf,  was placed on a decision of the Madras High Court in Director of  Enforcement, Madras v. Rama Arangannal and Another  [AIR 1981 Madras  80) as well as on a decision of the Punjab & Haryana High Court in Director  of Enforcement v. Lal Chand and Another [(1985) 6 ECC 55 : CFC (P&H)  24].

6.      Before the High Court, it was furthermore contended that the finding  of fact arrived at by the Board cannot be interfered with by the High Court  having regard to the scope and purport of Section 54 of the Act.  On the first  contention, the High Court opined that as the respondent has been appointed  under the Act, in terms whereof he was authorized to enforce the provisions   thereof, an appeal at its instance would be maintainable, stating :              \023A perusal of sub-section (3) of Section 4 of the  Foreign Exchange Regulation Act, 1973 per se reveals  that unless and until the Central Government has put  certain conditions or limitations on the powers of the  officers of the Enforcement Directorate, the law  authorizes and requires the officers of Enforcement  Directorate to exercise powers and to discharge the duties  conferred and imposed upon them under the Act.  No  doubt, under Section 5 of the Foreign Exchange  Regulation Act, 1973 the Central Government is  empowered subject to the conditions and limitations to  authorize other officers such as officers of the Central  Excise, or any Police Officer or any other officer of the  Central Government or State Government to exercise the  powers and to discharge the functions of the Enforcement  Directorate or any other officer of the Enforcement  Directorate under the Act as may be specified.  So far as  the entrustment of the functions of or authorization to  exercise powers of the Directors or other officers of the  Enforcement Directorate in favour of the officers other  than those of Directors Enforcement consisting of  Directors of Enforcement, Additional Directors of  Enforcement, Deputy Directors of Enforcement,  Assistant Directors of Enforcement and such other class  of officers of Enforcement is concerned the Central  Government is empowered under Section 5 of the Act to  confer those powers on the officers referred to as above  i.e., the officers of the Customs Department, Central  Excise etc.  But, the officers of the Enforcement  Directorate as mentioned in Section 4(3) of the Foreign  Exchange Regulation Act, 1973 can exercise the powers  by virtue of the provisions of the Act.  Section 54 of the  Foreign Exchange Regulation Act, 1973, does not  specifically mention and provide that the Principal  officers of Enforcement Directorate cannot file the  appeal.  It cannot be assumed in the absence of such a bar  that the Enforcement Directorate could not file the  appeal.  The appeal could be filed by the Directors of

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Enforcement  as instrumentality of the Central  Government in matters covered by the Foreign Exchange  Regulation Act, 1973, in cases decided against the  Department, as appeals could be filed either under the  Income Tax Act, or under the Land Acquisition Act.   Explanation (2) to section 54 of the Foreign Exchange  Regulation Act, 1973 cannot be read as providing that the  appeal cannot be filed by the Directors of Enforcement  which is instrumentality of the Government of India or  the Central Government\005.\024

       On the second contention, it was held :

    \023Thus considered and applying the above  principles of law to the effect that if the sender of money  from a foreign land or from foreign country collects  money and directs to his own men in India to distribute  the said amount to the persons concerned to whom it was  meant to be paid and then that person under the  instructions of the former distributes the said amount of  money to the persons for whom it has been sent and to  them is paid in Indian currency, it can well be said to be a  case of remittance or remitting of money or causing to  remit money from a foreign land into India for  distribution and disbursement, in such a case charge of  Section 9(3) of the Act may be found to have been  established and in the present case the charge against the  respondent remitting the amount otherwise than in  accordance with law under Act in India stands  established.  Thus, considered in our opinion the order of  the Appellate Board is not only erroneous on facts, but  also is erroneous in law as it is based on failure to apply  its mind to the essential requisites of section.  The order  passed by the adjudicating authority appears to be  correct, just and proper and has to be restored after  setting aside the order of the Appellate Board.\024   

7.      Mr. Harjinder Singh, learned Senior Counsel appearing on behalf of  the appellant, inter alia,  would submit that on a plain reading of Section 54  of the Act, it would appear that only officers authorized in this behalf could  prefer an appeal.   

    It was further submitted that the High Court having failed to consider  the question that the appellant had retracted from his confession, the  impugned judgment is wholly unassailable.

8.      Mr. Ashok Bhan, learned Counsel appearing on behalf of the  respondents, however, relied upon a notification dated 22.09.1989, which  reads as under :

       \023In exercise of the power conferred by sub- section (1) of Section 4, read with clause (e) of section  3 of the Foreign Exchange Regulation Act, 1973 (46 of  1973), the Central Government hereby appoints Shri  S.S. Ranjhan to be an officer of Enforcement with the  designation of Special Director of Enforcement, for the  purpose of enforcing the provisions of the said Act; and  in exercise of the powers conferred by Section 51 of the  said Act hereby empowers him to adjudicate cases of  contravention of any of the provisions thereof, other  than section 13, clause (a) of sub-section (1) of section  18 and clause (a) of sub-section (1) of section 19 or of  any rule, direction or order made thereunder.\024

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9.      Before embarking upon the rival contentions raised on behalf of the  parties, let us have to look at the relevant provisions of the Act.

10.     Section 3 of the Act provides for classes of officers of Enforcement.   Section 4 of the Act empowers the Central Government to appoint such  persons, as it thinks fit, to be officers of Enforcement and for the said  purpose confer power thereupon.  Sub-section (3) of Section 4 reads as  under :

\023(3) Subject to such conditions and limitations as the  Central Government may impose, an officer of  Enforcement may exercise the powers and discharge the  duties conferred or imposed on him under this Act.\024   

       Section 5 providing for delegation of the powers in relation to  functions of the Director or other officers of Enforcement, reads as under :

\023Entrustment of functions of Director or other officer  of enforcement -  5. The Central Government may, by order and subject to  such conditions and limitations as it thinks fit to impose,  authorise any officer of customs or any Central Excise  Officer or any police officer or any other officer of the  Central Government or a State Government to exercise  such of the powers and discharge such of the duties of the  Director of Enforcement or any other officer of  Enforcement under this Act as may be specified in the  order.\024                          Section 9 provides for restrictions on payments;  clauses (c) and (d) of  sub-section (1) whereof  read as under :

\023Restrictions on payments  - 9. (1) Save as may be provided in, and in accordance  with any general or special exemption from the  provisions of this sub-section which may be granted  conditionally or unconditionally by the Reserve Bank, no  person in, or resident in, India shall-         \005                    \005            \005            \005 (c)     draw, issue or negotiate any bill of exchange or  promissory note or acknowledge any debt, so that  a right (whether actual or contingent) to receive a  payment is created or transferred in favour of any  person resident outside India; (d)     make any payment to, or for the credit of, any  person by order or on behalf of any person resident  outside India;         \005                    \005            \005            \005\024

       Section 52 of the Act provides for an appeal to the Board.  Section 53  thereof provides for the powers of the adjudicating officers and the Board to  summon witnesses, etc.  Section 54 which provides for an appeal to the High  Court, reads as under :

\023Appeal to High Court  54. An appeal shall lie to the High Court only on  questions of law from any decision or order of the  Appellate Board under sub-section (3) or sub section (4)  of section 52: Provided that the High Court shall not entertain any  appeal under this section if it is filed after the expiry of  sixty days of the date of communication of the decision  or order of the Appellate Board, unless the High Court is  satisfied that the appellant was prevented by sufficient

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cause from filing the appeal in time. Explanation. \027In this section and in section 55, "High  Court" means- (i)     the High Court within the jurisdiction of which the  aggrieved party ordinarily resides or carries on  business or personally works for gain; and  (ii)    where the Central Government is the aggrieved  party, the High Court within the jurisdiction of  which the respondent, or in a case where there are  more than one respodnent, any of the respondents,  ordinarily resides or carries on business or  personally works for gain.\024                  11.     The Act imposes restrictions on transactions of money from one  country to the another.  The Central Government for the purpose of  enforcing the provisions of the Act is empowered to appoint officers.  From  a bare perusal of Section 5 of the Act, it would be evident that notifications  are required to be issued by the Central Government delegating specific  functions under the Act.   

12.     From the notification dated 22.09.1989, whereupon reliance has been  placed by Mr. Bhan, it would appear that the officer authorized by the  Central Government for the purpose of enforcing the provisions of the Act   was specifically empowered to adjudicate upon the dispute.  The said  notification itself is a pointer to the fact that for the purpose of exercising the  functions of the Central Government under one provision or the other, the  officer concerned must be specifically empowered in that behalf.  A general  empowerment would, however, be permissible.  Before the High Court,  no  notification was filed to show that the authority concerned was empowered  to prefer an appeal on  behalf of the Central Government.  The Central  Government was not even impleaded as a party to the appeal.  First  Respondent did not file the appeal on behalf of or representing the Central  Government.  It was filed in its official capacity as the adjudicating authority   and not as a delegatee of the Central Government.  

13.     An adjudicating authority exercises a quasi-judicial power and  discharges judicial functions.  When its order had been set aside by the  Board, ordinarily in absence of any power to prefer an appeal, it could not  do so.  The reasonings of the High Court that he had general power, in our  opinion, is fallacious.  For the purpose of exercising the functions of the  Central Government, the officer concerned must be specifically authorized.   Only when an officer is so specifically authorized, he can act on behalf of  the Central Government and not otherwise.  Only because an officer has  been appointed for the purpose of acting in terms of the provisions of the  Act, the same would not by itself entitle to an officer to discharge all or any  of the functions of the Central Government.  Even ordinarily a quasi-judicial  authority can not  prefer an appeal being aggrieved by and dissatisfied with  the judgment of the appellate authority whereby and whereunder its  judgment has been set aside.  An adjudicating authority,  although an officer  of the Central Government, should act as  an impartial Tribunal.  An  adjudicating authority, therefore, in absence of any power conferred upon it  in this behalf by the Central Government,  could not prefer any appeal  against the order passed by the Appellate Board.

       The Madras High Court in Rama Arangannal (supra)  opined :

       \0234. On the question as to the maintainability of the  appeal, it is seen that the Explanation to Section 54 of the  Foreign Exchange Regulation Act 1973 treats only the  Central Government as an aggrieved party for the  purpose of filing an appeal to the High Court in respect  of orders passed by the Foreign Exchange Regulation  Appellate Board under that section. Therefore, only the  Central Government can file and prosecute an appeal  against the order of the Appellate Board, and not any

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other authority, In this case, the appeal has been filed by  the Director of Enforcement, who is the initial authority  who passed the adjudication order against the  respondents and whose order has been set aside by the  Appellate Board on an appeal filed by them. Therefore,  the Director of Enforcement cannot be said to be  aggrieved by the order of the Appellate Board merely  because its order of adjudication has been set aside  by  the Appellate Board\005\024                  The Punjab and Haryana High Court in Lal Chand (supra) followed  the said decision.   

14.     The High Court was, in our considered view, not correct to take a  contrary view.   

    Furthermore, the jurisdiction of the High Court could be exercised  only when there existed a question of law and not a question of fact.  The  Board, as noticed hereinbefore, arrived at a finding of fact that there did not  exist any material for holding that any violation of Section 9(3) of the Act  had taken place.   

15.     Apart therefrom the High Court was bound to take into consideration  the factum of retraction of the confession by the appellant.  It is now a well- settled principle of law that a confession of a co-accused person cannot be  treated as substantive evidence and can be pressed into service only when  the court is inclined to accept other evidence and feels the necessity of  seeking for an assurance in support of the conclusion deducible therefrom.   [See Haricharan Kurmi etc. v. State of Bihar - AIR 1964 SC 1184;  Haroom  Haji Abdulla v. State of Maharashtra  - AIR 1968 SC 832; and Prakash  Kumar alias Prakash Bhutto etc.  v. State of Gujarat - (2007) 4 SCC 266].

16.     We may, however, notice that recently in Francis Stanly @ Stalin v.  Intelligence Officer, Narcotic Control Bureau, Thiruvanthapuram [2006 (13)  SCALE 386], this Court has emphasized that confession only if found to be  voluntary and free from pressure, can be accepted.  A confession purported  to have been made before an authority would require a closure scrutiny.  It is  furthermore now well-settled that the court must seek corroboration of the  purported confession from independent sources.

17.     In The Assistant Collector of Central Excise, Rajamundry  v. Duncan  Agro Industries Ltd. - JT 2000 (8) SC 530], this Court held :

\023\005The inculpatory statement made by any person under  Section 108 is to non-police personnel and hence it has  no tinge of inadmissibility in evidence if it was made  when the person concerned was not then in police  custody. Nonetheless the caution contained in law is that  such a statement should be scrutinised by the court in the  same manner as confession made by an accused person to  any non-police personnel. The court has to be satisfied in  such cases, that any inculpatory statement made by an  accused person to a gazetted officer must also pass the  tests prescribed in Section 24 of the Evidence Act. If  such a statement is impaired by any of the vitiating  premises enumerated in Section 24 that statement  becomes useless in any criminal proceedings.\024     

18.     In the facts and circumstances of the case, the High Court, in our  opinion, should not have interfered with the findings of fact arrived at by the  Appellate Board; without arriving at a finding that the same was perverse or  in arriving thereat, the Board ignored legal principles.

19.     For the reasons aforementioned, the impugned judgment cannot be

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sustained, which is set aside accordingly.  The appeal is allowed.  However,  in the facts and circumstances of the case, there shall be no order as to costs.