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CASE NO.: Appeal (crl.)  35 of 2004

PETITIONER: The Special Director and Anr.                            

RESPONDENT: Mohd. Ghulam Ghouse and Anr.                             

DATE OF JUDGMENT: 09/01/2004

BENCH: DORAISWAMY RAJU & ARIJIT PASAYAT

JUDGMENT: J U D G M E N T (Arising out of SLP(Crl.)No. 2914 of 2003)

ARIJIT PASAYAT,J

       Leave granted.

        The interim order passed by a Division Bench of the  Bombay High Court is under challenge by the Union of India  and the Special Director, Enforcement Directorate, Ministry  of Finance, Govt. of India. Respondent No.1 filed a writ  petition before the Bombay High Court questioning legality  of the show cause notice no.T-4/144/SDE/(AKB)/B/2002 dated  31st May, 2002 issued by the appellant No.1 and prayed  that the same may be quashed and set aside, for allegedly  being illegal, null and void.  A prayer for interim relief  was made to the effect that pending hearing and final  disposal of the writ petition, the Court be pleased to pass  an order of injunction restraining the respondents i.e.  present appellants before this Court and the State of  Maharashtra (respondent No.3 in the present appeal) and/or  his subordinates or any other officer acting on his behalf   from initiating any proceeding pursuant to the show cause  notice referred to above, as issued by the present  appellants. The High Court passed the following order on  11.9.2002:                  "Rule. Status quo".          According to the appellants the writ petition is  thoroughly misconceived as it challenges a show cause notice  and in any event the final relief as sought for by  respondent No.1-writ petitioner in relation to the show  cause notice should not have been granted by an interim  order of the nature passed by withholding any further action   in this regard . It was pointed out that respondent No.1 is  responsible for financial irregularities involving nearly  Rupees 270 crores and documents have been forged, accounts  have been manipulated; and in any event respondent No.1 was  free to canvass all the points that were taken in the writ  petition before the authority issuing the notice. Instead of  doing that he rushed to the High Court and unfortunately the  High Court not only entertained the writ application but  also granted interim relief which was in effect allowing the

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writ petition even before it was heard on merits. The final  relief sought for itself, in substance, was granted by the  interim order. There was clear violation of the provisions  of Foreign Exchange Regulation Act, 1973 (in short the  ’FERA’) and Foreign Exchange Management Act, 1999 (in short  the ’FEMA’). The Enforcement Directorate has clearly  indicated in the notice the various infractions which led to  such large scale illegal transactions of more than Rupees  270 crores. Respondent No.1 (writ petitioner) was clearly  guilty of various provisions of FERA and FEMA. The High  Court should have thrown out the writ petition at the  threshold.           Per contra, learned counsel for respondent No.1  submitted that the show cause notice is clearly unfounded in  law, cannot stand the test of legal scrutiny and the High  Court was justified not only in entertaining writ petition  but also in granting the interim protection.           This Court in a large number of cases has deprecated  the practice of the High Courts entertaining writ petitions  questioning legality of the show cause notices stalling  enquiries as proposed and retarding investigative process to  find actual facts with the participation and in the presence  of the parties. Unless, the High Court is satisfied that the  show cause notice was totally non est in the eye of law for  absolute want of jurisdiction of the authority to even  investigate into facts, writ petitions should not be  entertained for the mere asking and as a matter of routine,  and the writ petitioner should invariably be directed to  respond to the show cause notice and take all stands  highlighted in the writ petition. Whether the show cause  notice was founded on any legal premises is a jurisdictional  issue which can even be urged by the recipient of the notice  and such issues also can be adjudicated by the authority  issuing the very notice initially, before the aggrieved   could approach the Court. Further, when the Court passes an  interim order it should be careful to see that the statutory  functionaries specially and specifically constituted for the  purpose are not denuded of powers and authority to initially  decide the matter and ensure that ultimate relief which may  or may not be finally granted in the writ petition is  accorded to the writ petitioner even at the threshold by the  interim protection, granted.  

In the instant case, the High Court has not indicated  any reason while giving interim protection. Though, while  passing interim orders, it is not necessary to elaborately  deal with the merits, it is certainly desirable and proper  for the High Court to indicate the reasons which has weighed  with it in granting such an extra ordinary relief in the  form of an interim protection. This admittedly has not been  done in the case at hand.  

       While issuing notice on 7.7.2003, this Court had  granted interim stay of the impugned interim order. The  respondent had entered appearance and we have heard the   learned senior counsel on either side. In the fitness of  things, taking into account the above circumstances, we  dispose of the appeal with a direction that the proceedings  emanating from the show cause notice shall be continued, but  the final order passed pursuant thereto shall not be  communicated to the respondent No.1 (writ petitioner)  without leave or further orders of the High Court. The writ  petition shall be disposed of on merits in accordance with

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law. Any observation made in this appeal shall not be  construed to be expression of any opinion on the merits of  the matter pending before the High Court. Since the  controversy is of a very limited as well as serious nature,  the High Court may explore the possibility of early disposal  of the writ petition. The appeal is allowed to the extent  indicated with no order as to costs.