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CASE NO.: Appeal (crl.)  1100 of 2006

PETITIONER: State, CBI                                    

RESPONDENT: Sashi Balasubramanian & Anr.                  

DATE OF JUDGMENT: 31/10/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T [Arising out of SLP (Crl..) No.996 of 2006]

S.B. SINHA, J.

    Delay condoned.

    Leave granted.

     Interpretation and/or application of  the  \021Kar  Vivad

Samadhan  Scheme 1998\022 framed under the Finance (No.2)  Act,

1998  is  in question in this appeal which arises out  of  a

judgment  and  order dated 20.01.2005 passed  by  the   High

Court of Madras in Crl.OP Nos.31422 and 36254 of 2004.

    Shorn  of  all  unnecessary details, the  fact  of  the

matter is as under :

     One  M/s  Best Fabrics (for short, \021the Company\022)  had

applied  for  an  advance licence on  29.01.1993   from  the

Office  of  the  Joint Director General  of  Foreign  Trade,

Chennai  for  import  of cotton fabrics showing  the  export

order  for   47136 sets of \021cotton mens ensemble\022 under  the

\021Duty  Exemption Entitlement Certificate\022 (for  short,  \021the

Scheme\022).   Upon scrutiny the application, a recommendation,

however,   was  made  to allow the said  company  to  import

\021cotton  fabrics of 44 inch widths\022.  As the  item  was  not

figuring  in the standard input and output norms  book,  the

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file   was  placed  before  Respondent  No.  1,  Smt.  Sashi

Balasubramanian,  by  Sri  V. Rajpriyan,  Respondent  No.  2

herein,  for  placing  before the  Zonal  Advance  Licensing

Committee  for  recommendations  as  regards  quantity   and

description of the goods to be allowed for import.

     Approval for advance licence was granted by Smt. Sashi

Balasubramanian.  On allegations in regard to the  grant  of

the said licence,  a First Information Report was lodged  on

02.03.1995 for commission of offences under Sections  120-B,

420  and  471 of the Indian Penal Code,  Section 13(2)  read

with  Section 13(1)(d) of the Prevention of Corruption  Act,

1988 and Section 136 of the Customs Act, 1962.

      The  Company  and  its  Directors,  however,  in  the

meanwhile  filed  an application in terms  of  the   Scheme.

Declarations were filed on 31.12.1998.  The charge-sheet  in

the criminal case was filed on 12.04.1999.

    Originally, there were seven accused; three out of them

were the private parties, namely, M/s Best Fabrics, Shri  S.

Vaidyanathan  and  Shri Bharath Bhushan Goyal.   Smt.  Sashi

Balasubramanian,  Respondent No.1  herein,  was  the  Deputy

Director  General of Foreign Trade and Shri V.  Rajpriyan  ,

Respondent  No.2 herein, was the Controller of  Exports  and

Imports.     Apart  from  Respondents  herein,   two   other

officials were also arrayed as accused persons in the charge-

sheet,  namely, Shri S. Ramanathan, Assistant Collector  and

Shri A. Sivaram Kumar, Apprising Officer.

     Accused  Nos. 1 to 4 filed an application for quashing

the  criminal  proceedings as against them before  the  High

Court  of Madras, which was registered as CC No. 34 of 1999.

It  is  stated that by an order dated 29.04.2004,  the  said

application  has been allowed.  No appeal is  said  to  have

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preferred therefrom.

     Respondents thereafter filed an application before the

High Court with the self-same prayer, which by reason of the

impugned judgment has been allowed.

    Appellant is, thus, before us.

     Mr.  Vikas  Singh,  the learned  Additional  Solicitor

General appearing on behalf Appellant urged :

(i)  Having  regard  to the nature of the Scheme,  the  High

    Court committed a manifest error in opining that as the

    private  parties  became  entitled  to  immunity   from

    prosecution,  the official respondents  would  also  be

    covered thereby.

(ii) The  High  Court  misconstrued and  misinterpreted  the

    provisions of Section 95 (iii) of the  Act.

(iii)      Public  Servants were not entitled to any  relief

    under  the  said  Scheme  and far  less  immunity  from

    prosecution.

    Dr.  Manish  Singhvi  and Mr.  T.  Raja,   the  learned

counsel  appearing on behalf of  Respondents, on  the  other

hand submitted :

  (i)  The  High  Court cannot be said to have acted illegally

    and  without  jurisdiction, as Respondents herein  were

    also entitled to the benefit of immunity scheme.

(ii) The  doctrine  of parity is applicable in  the  instant

    case,  and, thus,  as other accused similarly  situated

    had  been  held  to  be  entitled  to  the  benefit  of

    declaration  dated  31.12.1998 made under  the  Scheme,

    there  is no reason as to why Respondents would not  be

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    entitled thereto.

(iii)      Section 95 of the Act cannot be invoked  for  the

    said  offence  and in that view of the  matter,  it  is

    impermissible  in law to split up the offences  between

    private  parties and the public servants,  particularly

    when charges had been framed under Section 120-B of the

    Indian Penal Code.

(iv) As  the  charges  formed part of the same  transaction,

    either   all  the  persons  involved  therein  may   be

    proceeded against  or none at all.

(v)  Section  95(iii)  of  the Act, as the  High  Court  has

    rightly opined, must be held to be inapplicable in  the

    facts and circumstances of the case.

(vi) In  any  event,  even if the allegations  made  against

    Respondents  are taken to be  correct and  accepted  in

    its  entirety, the same does not constitute any offence

    as alleged or at all.

     An  additional submission was made by Mr. T. Raja that

his  client  having worked under the orders  of  Smt.  Sashi

Balasubramanian,  cannot  be  said  to  have  committed  any

offence at all.

     The Parliament enacted the Finance Act, 1998.  It came

into  force with effect from 29.03.1998.  Chapter IV of  the

said Act provides for the \021Kar Vivad Samadhan Scheme, 1998\022.

It  came  into  force  with  effect  from  the  1st  day  of

September, 1998.

    \021Declarant\022 has been defined in Section 87(a) to mean a

person  making  a declaration under Section  88.   \021Disputed

tax\022 has been defined in Section 87(f) to mean the total tax

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determined  and  payable, in respect of an  assessment  year

under  any direct tax enactment but which remains unpaid  as

on  the  date  of making the declaration under  Section  88.

\021Indirect  tax enactment\022 has been defined in Section  87(j)

in the following terms :

         \023(j)  \023indirect  tax  enactment\024  means   the           Customs Act, 1962 (52 of 1962) or the Central           Excise  Act, 1944 (1 of 1944) or the  Customs           Tariff  Act, 1975 (51 of 1975) or the Central           Excise  Tariff Act, 1985 (5 of 1986)  or  the           relevant  Act  and  includes  the  rules   or           regulations made under such enactment;\024

    Section 87(k) of the Act defines the \021person\022 to mean :

         \023(k) \023person\024 includes \026

              (i)  an individual, (ii) a Hindu undivided family, (iii)     a company, (iv) a firm (v)  an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, (vii)     every artificial juridical person, not falling within any of the preceding sub-clauses; (viii)    assessee, as defined in rule 2 of the Central Excise Rules, 1944; (ix) exporter as defined in clause (20) of section 2 of the Customs Act, 1962 (52 of 1962); (x)  importer as defined in clause (26) of section 2 of the Customs Act, 1962 (52) of 1962); (xi) any person against whom proceedings have been initiated and are pending under any direct tax enactment or indirect tax enactment.\024

    Section 88, inter alia, provides :

               \02388.   Subject  to  the  provisions  of  this           Scheme,  where any person makes, on or  after           the  1st  day of September, 1998  but  on  or           before  the  31st day of December,  19998,  a           declaration  to the designated  authority  in           accordance with the provisions of section  89           in    respect    of    tax   arrear,    then,           notwithstanding  anything  contained  in  any           direct   tax   enactment  or   indirect   tax           enactment or any other provision of  any  law           for  the  time  being in  force,  the  amount           payable  under  this Scheme by the  declarant           shall  be  determined at the rates  specified           hereunder, namely :-                     \005         \005         \005           

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         (f)  where the tax arrears is payable under the indirect                tax enactment -

              (i)  in  a  case  where the  tax  arrear                     comprises fine, penalty or interest                     but   does   not   include   duties                     (including drawback of duty, credit                     of  duty or any amount representing                     duty)  or  cesses, at the  rate  of                     fifty  per  cent, of the amount  of                     such fine, penalty or interest, due                     or  interest, due or payable as  on                     the  date  of  making a declaration                     under section 88,                                (ii) in  any other case, at the rate  of                     fifty  per  cent, of the amount  of                     duties (including drawback of duty,                     credit   of  duty  or  any   amount                     representing duty) or cess  due  or                     payable  on  the date of  making  a                     declaration under section 88.\024                             A  declaration  is required to be filed  in  the  form

prescribed  therefor.  Time and manner  of  payment  of  tax

arrears  is provided for in Section 90.  Section 91 provides

for  immunity from prosecution and imposition of penalty  in

certain  cases.   Section  95  provides  for  exceptions  as

regards   the  applicability of the  Scheme,   Clause  (iii)

whereof, which is relevant for our purpose, reads as under :

         \02395. The provisions of this Section shall not           apply \026                     \005         \005         \005                      (iii)      to  any person in respect of  whom                prosecution  for any offence  punishable                under Chapter IX or Chapter XVII of  the                Indian  Penal  Code (45  of  1860),  the                Foreign  Exchange Regulation  Act,  1973                (46  of  1973), the Narcotic  Drugs  and                Psychotropic Substances Act, 1985 (61 of                1985),  the  Terrorists  and  Disruptive                Activities (Prevention) Act, 1987 (28 of                1987), the Prevention of Corruption Act,                1988 (49 of 1988), or for the purpose of                enforcement  of any civil liability  has                been  instituted on or before the filing                of  the  declaration or such person  has                been   convicted  of  any  such  offence                punishable under any such enactment.\024

    The  principal  questions which arise for consideration

are \026

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 (i)  Whether  the Scheme  is applicable in relation  to  a

      public servant ?

(ii) When does a prosecution start ?; (iii)     Whether the offences enumerated under Section 95(iii) are excluded from immunity in terms of Section 91 of the Act ?            The  Scheme  provides for an exception to  the  general

law.   It  provides  for the mode and manner  in  which  the

arrears  of tax was to be collected.   It dealt with  direct

and  indirect taxes only.  Ex facie \021public servants\022  would

not come within the purview of the Act.

            Counsel for Respondents, however, suggest that public

servants  would also come within the purview of the  Act  as

against them also proceedings had been initiated.

                Section  2(k)(xi), while defining a person  undoubtedly

embraces  within  its fold  those against  whom  proceedings

have  been  initiated,  but the same  relate  to  direct  or

indirect tax enactments.  Proceedings contemplated under the

Act  must have a nexus with arrears of tax.  Public servants

who   can  never  file  a  declaration  would  not,  in  our

considered view,  come within the purview thereof.

          Of  course,  there  exists  a  distinction  between   a

\021person\022 and a \021declarant\022.  However, declaration is  to  be

filed  by a person who would come within the purview of  the

said  term, as has been stated in the interpretation  clause

contained in  Section 2(k) of the Act.  Section 88  provides

for  a  declaration to be made by a person and,  \021declarant\022

means  a person making a declaration.  The applicability  of

the  provisions of the Act must be judged in  the  aforesaid

context.

          The  definition of \021person\022 must be read having  regard

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to term \021declarant\022 i.e.  who files a declaration.

          A  public  servant is enjoined with a duty  to  enforce

tax enactments.  A declaration in terms of Section 88 can be

filed  by  a  declarant for determination of the tax  arrear

under  the Scheme at the rates specified thereunder.  Public

servants,  therefore, cannot not take  the  benefit  of  the

scheme.   Section  90 provides for the time  and  manner  of

payment  of  tax  arrear.  The amount of arrear  of  tax  is

required to be determined within a period of sixty days from

the  date  of  receipt of the declaration under Section  91,

whereupon a certificate is to be granted in such form as may

be  prescribed.   The  certificate is granted  only  to  the

declarant,  which  would  contain  the  particulars  of  tax

arrears and the sum payable after such determination towards

full and final settlement of tax arrears.

          The  immunity under the scheme is an not absolute  one.

The designated authority may impose certain conditions while

making an inquiry contained in Section 90.

          The  immunity  granted  is subject  to  the  conditions

provided  in  Section 90.  The immunity is  in  relation  to

institution  of  any  proceeding  for  prosecution  for  any

offence.   Such offence may be either under the  direct  tax

enactment  or indirect enactment.  Immunity is also  granted

from  imposition of penalty under such enactments.  However,

immunity   also  extends  to  matters  covered   under   the

declaration  under Section 88.  Section 95 provides  for  an

exception to the Scheme.  Once the provisions of Section  95

are  attracted, the Scheme shall not apply.  A determination

might  have  been made although the Scheme was not  applied,

but  the same may not per se confer a right of obtaining any

immunity  in terms of  Section 91 of the Act.  Clause  (iii)

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of  Section  95 while laying down the exceptions, enumerates

offences  under Chapter IX or Chapter XVII of  the  IPC  and

certain other statutes.   It also makes an exception,  if  a

proceeding for enforcement of any civil liability  has  been

instituted.   Clause (iii) of Section 95 would be  attracted

if,  inter  alia, any prosecution for any offence enumerated

thereunder  has been instituted on or before the  filing  of

the declaration.

          The  First Information Report in regard to the offences

committed,   as  indicated  hereinbefore,  was   lodged   on

02.03.1995.     The   investigation   started    immediately

thereafter.  The investigation was being carried on  by  the

Central  Bureau  of Investigation (Economic Offences  Wing).

Only  at  a much later stage, namely, more than three  years

thereafter,  i.e. on 31.12.1998,  declarations  were  filed.

Charge-sheet in the criminal case was filed on 12.04.1999.

          It  is in the aforementioned context, interpretation of

the   word  \021prosecution\022  assumes  significance.  The  term

\021prosecution\022  would include institution or commencement  of

a  criminal  proceeding.  It may include also an inquiry  or

investigation. The terms \021prosecution\022 and \021cognizance\022  are

not   interchangeable.   They  carry   different   meanings.

Different   statutes  provide  for  grant  of  sanction   at

different stages.

          \021In  initio\022  means in the beginning.   The  dictionary

meaning  of  \021initiation\022  is cause to begin.  Whereas  some

statutes  provide for grant of sanction before a prosecution

is  initiated,   some  others postulate  grant  of  sanction

before  a cognizance is taken by  Court.  However,   meaning

of the word may vary from case to case.  In its wider sense,

the  prosecution means a proceeding by way of indictment  or

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information, and is not necessarily confined to  prosecution

for an offence.

          The  term  \021prosecution has been instituted\022 would  not

mean  when   charge-sheet has been filed and cognizance  has

been taken.  It must be given its ordinary meaning.

          The  Legislature  with a definite  purpose  thought  of

granting an exemption from the operation of the Act,  if  no

prosecution is initiated under the provisions of the statute

specified  thereunder.  Chapter IX of the Penal  Code  deals

with  public  servants.  Chapter XVII   thereof  deals  with

offences  relating  to   property.   Offences  under   other

enactments    are   of  serious  nature.  Thus,   presumably

commission   of  offences under the  other  Acts  enumerated

therein  were  considered  to  be  serious  enough  by   the

Parliament, so as to exclude the application of the  Scheme,

which includes  Prevention of Corruption Act.

     In any view of the matter, an immunity is granted only

in  respect  of  offences purported to have  been  committed

under direct tax enactment or indirect tax enactment, but by

no  stretch  of imagination, the same would  be  granted  in

respect  of   offences  under the Prevention  of  Corruption

Act.   A  person may commit several offences under different

Acts;   immunity granted in relation to one  Act  would  not

mean  that  immunity granted would automatically  extend  to

others.  By way of example , we may notice that a person may

be  prosecuted for commission of an offence in  relation  to

property  under the Indian Penal Code as also under  another

Act,  say  for  example, the Prevention of  Corruption  Act.

Whereas  charges under the Prevention of Corruption Act  may

fail, no sanction having been accorded therefor, the charges

under the Penal Code  would not.

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     The  High Court has not held that the offences alleged

against  Respondents are so inextricably connected  that  it

cannot  be separated so much so that in the event if  it  be

held  that private parties cannot be proceeded with at  all,

the  case  against  public servants, would invariably  fail.

We, thus, as at present advised, do not intend to delve deep

into  the  said  question.  However, to be fair  to  learned

counsel, we may notice the decisions cited at the bar.

      Reliance   placed  by  Mr.  Singhvi  on   Devarapalli

Lakshminarayana  Reddy and Others v. V. Narayana  Reddy  and

Others   [(1976) 3 SCC 252] has no application to the  facts

and  circumstances of the present case.  The question  which

arose   for  consideration  therein  was  required   to   be

determined in the context of the provisions of Sections  200

and  202 of the 1898 Code vis-‘-vis Sections 200 and 202  of

the 1973 Code.  The question was as to whether cognizance is

taken  before  issuance  of process  or  not.   It  in  that

context, it was stated :

                 \02314.   This   raises  the  incidental           question: What is meant by \023taking cognizance           of  an  offence\024 by a Magistrate  within  the           contemplation of Section 190? This expression           has  not  been defined in the Code. But  from           the  scheme  of  the Code,  the  content  and           marginal  heading  of  Section  190  and  the           caption  of Chapter XIV under which  Sections           190 to 199 occur, it is clear that a case can           be said to be instituted in a court only when           the  court  takes cognizance of  the  offence           alleged  therein.  The  ways  in  which  such           cognizance  can  be  taken  are  set  out  in           clauses  (a), (b) and (c) of Section  190(1).           Whether  the Magistrate has or has not  taken           cognizance of the offence will depend on  the           circumstances   of   the   particular    case           including  the  mode in  which  the  case  is           sought  to  be instituted, and the nature  of           the  preliminary action, if any, taken by the           Magistrate.   Broadly   speaking,   when   on           receiving a complaint, the Magistrate applies           his mind for the purposes of proceeding under           Section  200  and the succeeding sections  in           Chapter XV to the Code of 1973, he is said to           have  taken cognizance of the offence  within

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         the meaning to Section 190(l)(a). It, instead           of  proceeding under Chapter XV, he  has,  in           the  judicial  exercise  of  his  discretion,           taken  action  of some other  kind,  such  as           issuing  a search warrant for the purpose  of           investigation,  or ordering investigation  by           the police under Section 156(3), he cannot be           said   to  have  taken  cognizance   of   any           offence.\024       

    Institution  of  a  prosecution and  institution  of  a

complaint  case  in  a criminal court  stand  on   different

footings.  Whereas summons to an accused in a complaint case

can  be  issued only upon taking cognizance of the  offence,

the  same  would not mean in a case where first  information

report   has   been  lodged  resulting  in   initiation   of

investigation  or where it has been referred  to  police  or

other  authorities for enquiry; even then a prosecution  may

not be held to have been initiated at that stage.

          What  transpires from the said decision is that whereas

before cognizance is taken, application of mind on the  part

of the court is imperative, taking action of some other kind

would  not  mean  that cognizance has been taken.   In  some

cases,  even  after  lodging of the  F.I.R.,  a  preliminary

enquiry  which may not be an investigation into  the  crime,

may be initiated.

    Strong  reliance  has also been placed on  Basir-ul-Haq

and  Others v.  State of West Bengal [(1953) SCR  836].  The

question which arose for consideration therein  was  whether

having  regard  to  the  nature  of  the  offence  allegedly

committed by the accused named therein, it was capable to be

split  up.  In the aforementioned context, it was held  that

if  the offences are inseparable or incapable of being split

up,  the  Court  will have no other option  but  to  pass  a

judgment of acquittal, stating :

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           \02314.  Though, in our judgment, Section  195           does  not bar the trial of an accused  person           for  a distinct offence disclosed by the same           facts  and  which is not included within  the           ambit  of  that section, it has  also  to  be           borne  in  mind that the provisions  of  that           section  cannot  be evaded  by  resorting  to           devices  or  camouflages.  The  test  whether           there  is  evasion of the section or  not  is           whether  the  facts  disclose  primarily  and           essentially an offence for which a  complaint           of  the  court  or of the public  servant  is           required.  In other words, the provisions  of           the section cannot be evaded by the device of           charging  a person with an offence  to  which           that   section  does  not  apply   and   then           convicting  him  of an offence  to  which  it           does,   upon  the  ground  that  such  latter           offence  is  a  minor  offence  of  the  same           character,  or by describing the  offence  as           being one punishable under some other section           of the Indian Penal Code, though in truth and           substance  the offence falls in the  category           of  sections mentioned in Section 195 of  the           Criminal Procedure Code\005.\024

                                  [Emphasis supplied]

     The observations in the said judgment must be held  to

have  been made in the factual matrix obtaining therein  and

not de\022hors the same.

          In  the  instant  case,  resorting  to  any  device  or

camouflage  has not been  alleged.  It is also  not  a  case

that  the  provisions  of  the  Indian  Penal  Code  or  the

Prevention  of  Corruption Act cannot be said  to  have  any

application,  although linked with an offence under  Section

136 of the Customs Act.

          An  ultimate purpose of commission of an offence may be

to commit one offence under one statute, but indisputably in

the process thereof   offences under other statutes may also

be committed.

          In   Hira  Lal  Hari  Lal Bhagwati v.  CBI,  New  Delhi

[(2003)  5  SCC 257] this Court indisputably   proceeded  to

hold  that  the  immunity  was qua  offence  but  Appellants

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therein   before   this  Court  were  the  assessees.    The

prosecution  was also launched therein after  a  declaration

was made.

          We  may  also  notice that Brijesh  Kumar,  J.  in  his

concurring but separate judgment took into consideration the

fact  situation obtaining therein, namely, initiation  of  a

criminal  proceeding  after issuance of  a  declaration  and

after  withdrawal  of the case, in the  High  Court  in  the

following terms :

         \023\005On  the one hand final settlement was  made           after  determining the tax liability  on  the           premise  that  the  appellants  were  neither           convicted   nor  criminal  proceedings   were           pending,   relating  to  any  offence   under           Chapter  IX  or  XVII IPC, yet  the  criminal           proceedings  are  being prosecuted  which  is           apparently  against the very  spirit  of  the           Scheme promulgated under the Finance (No.  2)           Act   of  1998.  If  a  person  against  whom           criminal  proceedings were pending,  relating           to  offence under Chapter IX or XVII  IPC  or           who   stood  convicted  under  any   of   the           provisions  of those chapters, he  would  not           have been eligible to seek benefit under  the           Scheme and after accepting that position  and           the due settlement, there was no occasion  to           initiate    and    continue   the    criminal           proceedings,  which  could  bring  about  the           conviction  of  the  same  persons,  in  case           prosecution ended successfully in  favour  of           the State and against the appellants. If such           a  condition is provided that on a particular           date  a  criminal proceeding  should  not  be           pending  against a person nor should he  have           been  convicted of an offence, as a condition           precedent for a settlement, and on that basis           a  settlement is brought about, it  does  not           mean that later on, one could turn around and           get  the  declarant convicted for a  criminal           offence   too,   after  settlement   of   the           liability.  More so, when in view of  Section           90   sub-section  (4)  of  the   Scheme   the           declarant is obliged to withdraw an appeal or           proceedings  regarding tax liability  pending           before  the High Court or the Supreme  Court,           which had also been done in the case in hand.           That is to say that on one hand the declarant           is   not  permitted  to  pursue  the  remedy,           regarding  tax  liability, which  is  already           pending before the courts of law, as they are           either deemed to be withdrawn by operation of           law  or  they  have  to  be  withdrawn  by  a           positive  act of the party and yet  prosecute

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         such  persons for their conviction  as  well.           The declarant could not be dragged and chased           in  criminal  proceedings after  closing  the           other  opening making it a dead  end.  It  is           highly  unreasonable and arbitrary to  do  so           and   initiation  and  continuance  of   such           proceedings lack bona fides.\024         An accused may be discharged from a criminal case under

Section 245 of the Code, if his civil liability has  been

determined in his favour; but the same must have a direct

nexus  with his criminal liability.  He would not acquire

any  immunity only because civil and criminal liabilities

have  some connection, however, remote the same  may  be.

The connection between the two types of liabilities  must

be  direct  and  proximate.  If in  incurring  the  civil

liability,   he   has   committed   offences    wherewith

determination  thereof has no nexus, the  immunity  would

not extend thereto.

          We   will  give  a  simple  example.   A  person  while

obtaining undue favour from an authority under the  indirect

tax enactment, offers a bribe.  Obtaining of an undue favour

resulting  in  prosecution under the indirect tax  enactment

may  be  a separate offence , but  involvement of the public

servant qua offences under the Prevention of Corruption  Act

would be a separate and distinct one.

          It  is  one thing to say that an Act constitutes   both

civil  and  criminal wrong and in the self same  fact,  when

compounding of offence is effected in relation to the  civil

dispute,  the  High  Court may be justified  in  quashing  a

complaint  under  the criminal case as was done  in  Central

Bureau  of Investigation, SPE, SIU (X), New Delhi v. Duncans

Agro  Industries Ltd., Calcutta  [(1996) 5 SCC 591], but  it

is another thing to say that prosecution under other statute

would  also  fail.  It is in that view of the  matter,  this

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Court stated the law in the following terms :

                 \02326.     After    giving    our     careful           consideration  to the facts and circumstances           of  the case and the submissions made by  the           respective   counsel  for  the  parties,   it           appears  to  us  that  for  the  purpose   of           quashing  the  complaint, it is necessary  to           consider  whether  the  allegations  in   the           complaint prima facie make out an offence  or           not.  It  is not necessary to scrutinise  the           allegations  for  the  purpose  of   deciding           whether  such  allegations are likely  to  be           upheld  in  the trial. Any action by  way  of           quashing  the  complaint is an action  to  be           taken  at the threshold before evidences  are           led in support of the complaint. For quashing           the   complaint  by  way  of  action  at  the           threshold,  it  is, therefore,  necessary  to           consider   whether  on  the   face   of   the           allegations,    a   criminal    offence    is           constituted or not.\024       

     Reliance  has  also been placed on K.C.  Builders  and

Another  v. Assistant Commissioner of Income Tax  [(2004)  2

SCC  731].   The  question  which  arose  for  consideration

therein   was  as  to  whether  mens  rea  is  an  essential

ingredient for imposition of penalty under Section 271(1)(c)

of   the  Income  Tax  Act.   In  that  case,   finding   of

concealment and subsequent levy of penalties had been struck

down  by the Tribunal.  The assessment year was directed  to

be  corrected in terms of Section 154 of the Act.  It was in

that  fact situation, this Court opined that if the Tribunal

has   set  aside  the  order  of  imposing  a  penalty   for

concealment, there would be no concealment in  the  eyes  of

the  law and, therefore, the prosecution should be proceeded

against the accused and, thus, further proceedings would  be

illegal and without jurisdiction, stating :

         \023\005When the Tribunal has set aside the levy of           penalty, the criminal proceedings against the           appellants cannot survive for further           consideration\005\024    

     In  the fact of that case, it was held that the charge

of conspiracy had not been proved  and no case had also been

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made out for establishing the offence of cheating.  The gist

of  the  prosecution case therein was that the  accused  had

filed  false  returns of income before the Department  which

led  concealment  of  income to evade  tax.   The  question,

therefore,  was as to whether there had been any concealment

of income at all.  The said decision, therefore, cannot have

any application whatsoever.

    Reliance  has  also  been placed on Central  Bureau  of

Investigation v. Akhilesh Singh [(2005) 1 SCC 478].  In that

case,  out of the three accused, two were discharged and  in

that  view  of  the matter it was held that   the  basis  of

alleged conspiracy by the respondent therein with Dr. Sanjay

Singh lost its substratum.  It was in the factual matrix  of

the  case  exercise of jurisdiction by the High Court  under

Section  482 of the Code of Criminal Procedure was  held  to

be  not to be suffering from any illegality or  infirmity.

    We may, however, notice that in R.K. Garg etc. v. Union

of  India  and Others [(1981) 4 SCC 675], it was  held  that

only  because  exemption  had been granted  in  relation  to

purchase of  bearer bonds, the same would not mean that  the

offender  shall  stand  immuned from  other  offences  also.

Bhagwati, J. speaking for the majority opined :

         \023\005It will be seen that the immunities granted           under  Section 3, sub-section  (1)  are  very           limited  in  scope. They do not  protect  the           holder  of  Special  Bearer  Bonds  from  any           inquiry   or  investigation  into   concealed           income  which could have been made if he  had           not  subscribed to or acquired Special Bearer           Bonds.  There  is no immunity  from  taxation           given  to  the  black  money  which  may   be           invested in Special Bearer Bonds. That  money           remains subject to tax with all consequential           penalties,    if   it   can   be   discovered           independently of the fact of subscription  to           or  acquisition of Special Bearer Bonds.  The           only  protection  given by  Section  3,  sub-           section  (1) is that the fact of subscription

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         to  or  acquisition of Special  Bearer  Bonds           shall be ignored altogether and shall not  be           relied upon as evidence showing possession of           undisclosed  money. This provision  relegates           the  Revenue  to the position as  if  Special           Bearer  Bonds had not been purchased at  all.           If  without taking into account the  fact  of           subscription  to  or acquisition  of  Special           Bearer Bonds and totally ignoring it as if it           were    non-existent,    any    inquiry    or           investigation into concealed income could  be           carried  out  and  such income  detected  and           unearthed, it would be open to the Revenue to           do  so  and  it  would be no answer  for  the           assessee  to  say that this  money  has  been           invested  by him in Special Bearer Bonds  and           it is therefore exempt from tax or that he is           on that account not liable to prosecution and           penalty for concealment of such income.  This           is  the  main difference between the impugned           Act  and  the  Taxation Laws  (Amendment  and           Miscellaneous  Provisions) Act,  1965.  Under           the  latter Act, where gold is acquired by  a           person  out of his undisclosed income,  which           is  the  same thing as black money, and  such           gold  is tendered by him as subscription  for           the  National Defence Gold Bonds,  1980,  the           income invested in such gold is exempted from           tax,  but  where  Special  Bearer  Bonds  are           purchased out of undisclosed income under the           impugned  Act,  the income  invested  in  the           Special  Bearer Bonds is not exempt from  tax           and  if independently of the fact of purchase           of the Special Bearer Bonds and ignoring them           altogether,  such income can be detected,  it           would be subject to tax. The entire machinery           of   the   taxation  laws  for  inquiry   and           investigation into concealed income  is  thus           left  untouched and no protection is  granted           to  a  person  in  respect of  his  concealed           income  merely  because he has invested  such           income  in  Special  Bearer  Bonds.   It   is           therefore  incorrect to say that as  soon  as           any person purchases Special Bearer Bonds, he           is   immunised   against  the  processes   of           taxation  laws.  Here  there  is  no  amnesty           granted  in  respect  of  any  part  of   the           concealed  income even though it be  invested           in  Special Bearer Bonds. The whole object of           the  impugned  Act is to induce those  having           black money to convert it into white money by           making   it   available  to  the  State   for           productive  purposes,  without  granting   in           return any immunity in respect of such  black           money,  if  it could be detected through  the           ordinary  processes of taxation laws  without           taking  into account the fact of purchase  of           Special Bearer Bonds\005.\024    

    We  may at this stage deal with another contention viz.

that if in the connected matter  where other public servants

were  parties,  ,  no  appeal having  been  filed  from  the

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judgment of the High Court by the C.B.I., this appeal  would

be  maintainable.   This  aspect  of  the  matter  has  been

considered  by  a  three-Judge  Bench  of  this   Court   in

Government of West Bengal v. Tarun K. Roy and Others [(2004)

1 SCC 347], wherein it was categorically stated :

           \023\005Non-filing  of an appeal, in  any  event,           would  not  be  a  ground  for  refusing   to           consider  a  matter on its own  merits.  (See           State of Maharashtra v. Digambar10.)                          29.  In  State  of Bihar v. Ramdeo  Yadav11           wherein  this Court noticed Debdas Kumar1  by           holding: (SCC p.    494, para 4)             \0234.  Shri  B.B. Singh, the learned  counsel           for the appellants, contended that though  an           appeal against the earlier order of the  High           Court has not been filed, since larger public           interest  is  involved in the  interpretation           given by the High Court following its earlier           judgment,  the  matter requires consideration           by   this  Court.  We  find  force  in   this           contention.  In  the  similar  circumstances,           this   Court  in  State  of  Maharashtra   v.           Digambar10  and  in State of W.B.  v.  Debdas           Kumar1 had held that though an appeal was not           filed  against an earlier order, when  public           interest  is  involved in  interpretation  of           law,  the  Court is entitled to go  into  the           question.\024       

[See also Union of India v. Pramod Gupta (Dead) by Lrs.  and

Others \026 (2005) 12 SCC 1]

          In  this  case  also  public interest  is  involved  as

interpretation  of  the  provisions  of  the   Act  were  in

question.   Yet  again  there  cannot  be  any  equality  in

illegality.

[See  Secretary, State of Karnataka and Others   v.  Umadevi

(3) and Others [(2006) 4 SCC 1]

          We,  therefore,  are of the opinion that  the  impugned

judgment cannot be sustained. It is set aside accordingly.

    The  High Court, however, did not go into the merit  of

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the matter.  It proceeded on the basis that the continuation

of      the   prosecution   as   against   Respondents   was

unsustainable  in  law.   Although prosecution  as   against

Respondents herein may  be held to be not maintainable,   in

our  opinion, they are entitled to contend that even if  the

materials brought on records are given face value and  taken

to  be correct in their entirety, no case has been made  out

as against them.

          The  appeal  is allowed, the impugned judgment  is  set

aside with the aforementioned observations.  No costs.