MOHTESHAM MOHD. ISMAIL v. SPL. DIRECTOR, ENFORCEMENT DIRECTORATE AND ANR

Citation: [2007] 10 S.C.R. 804

Court: Supreme Court of India

Bench: S.B. SINHA, H.S. BEDI

Case summary

MOHTESHAM MOHD. ISMAIL v. SPL. DIRECTOR, ENFORCEMENT DIRECTORATE AND ANR.pdf

Judgment text

MOHTESHAM MOHD. ISMAIL -( v. SPL. DIRECTOR, ENFORCEMENT DIRECTORATE AND ANR. OCTOBER 9, 2007 [S. B. SINHA AND HARJIT SINGH BEDI, JJ. ] Foreign Exchange Regulation Act, 1973-ss. 5, 9(J)(b), 9(l)(d) and 9(3) ands. 54-Proceedings under the Act-Againstthe accused- Retraction of confession by the accused-Adjudicating authority imposing penalty-Appeal ofaccused allowed by Appellate Board- Appeal against the order ofthe Board by the AdjudicatingAuthority- High Court maintaining the appeal and setting aside order ofthe Board on Merit--On appeal, held: Power to prefer appeal to High Court is with Central Government-Adjudicating Authority having not been authorised to act on behalfofCentral Government could not prefer ....

the appeal-The Adjudicating Authority being a quasi-judicial authority cannot prefer appeal being dissatisfied with the judgment ofthe appellate authority-High Court was not correct in inter/erring with finding offact arrived at by Appellate Authority-In view of retracted confession, conviction ofthe accused was not correct. Evidence-Confessional statement-Evidentimy value of-Held: Such evidence cannot be treated as substantive evidence. By a Notification, Central Government appointed the respondent-Special Director of Enforcement for the purpose of enforcing the provisions ofForeign Exchange Regulation Act, 1973. The respondent adjudicated the case ofthe appellant and imposed· penalty in terms ofSection 9(3) of the Act. Appeal ofthe appellant thereagainst was allowed by Foreign Exchange Regulation Appellate Board. Respondent preferred app~al against the order of ~the Board before High Court. In the appeal, Board was impleaded as party but Central Government was not.

High Court set aside the question of maintainability ofthe appeal and also set aside the order MOHTESHAMMOHD. ISMAIL v. SPL. DIRECTOR, 805 ENFORCEMENT DIRECTORATE ofthe Board, on merit. Hench the present appeal. > Appellant contended that in view ofSection 54 of the Act, only officers authorised in this behalf could prefer an appeal; and that order ofHigh Court is unsustainable because High Court failed to consider the question that the appellant had retracted from his confession. Respondent contended that in view ofthe Notification, he was authorised to prefer the appeal. Allowing the appeal, the Court HELD : 1. 1. The Central Government for the purpose of enforcing the provisions ofForeign Exchange Regulation Act, 1973 is empowered to appoint officers. From a bare perusal ofSections 5, it would be evident that notifications are required to be issued by the Central Government delegating specific functions under the Act. [Para 11] [813-F] 1. 2. From the Notification dated 22. 09.

1989, 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 itselfis 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 behalfofor representing the Central Government. Itwas filed in its official capacity as the adjudicating authority and not as a delegatee of the Central Government. [Para 12] [813-G, H; 814-A, B] 1. 3.

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 ofany power to prefer an appeal, \- it could not do so. For the purpose ofexercising the functions ofthe Central Government, the officer concerned must be specifically authorized. Only when an officer is so specifically authorized, he can act on behalfof the Central Government and not othenvise. Only because an officer has been appointed for the purpose ofacting in terms ofthe provisions ofthe Act, the same would not by itselfentitle an officer to discharge all or any of the functions of the Central Government. Even ordinarily a quasi-judicial authority cannot 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 ofthe Central Government, should act as an impartial Tribunal.

An adjudicating authority, therefore, in absence ofany power conferred upon it in this behalf by the Central Government, could not prefer any appeal against the order passed by the Appellate Board. [Para 13] [814-C, D, E, F] Director ofEnforcement, Madras v. Rama Arangannal andAnr. , AIR (1981) Madras 80 and Punjab and Haryana High Court in Director ofEnforcement v. Lal Chand and Anr. , (1985) 6 ECC 55, referred to. 2. 1. In the facts and circumstances ofthe case, the High Court, should not have interfered with the findings offact 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. [Para 18H816-E] 2. 2. The jurisdiction ofthe High Court could be exercised only when there existed a question oflaw and not a question offact. The Board, arrived at a finding offact that there did not exist any material for holding that any violation of Section 9(3) of the Act had taken G place.

[Para 14] [815-D] 2. 3. High Court was bound to take into consideration the factum of retraction of the confession by the appellant. It is now a wellsettled principle of law that a confession of a co-accused person cannot be treated as substantive evidence and can be pressed into MOHTESHAMMOHD. ISMAIL v. SPL. DIRECTOR, 807 sen1ice 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. [Para 15] [815-E, F] Haricharan Kurmi etc. v. State ofBihar, AIR (1964) SC 1184, Haroom Haji Abdulla v. State ofMaharashtra, AIR (1968) SC 832, Prakash Kumar alias Prakash Bhutto etc. v. State ofGujarat, [2007] 4 SCC 266, Francis Stanly@Stalin v. Intelligence Officer, Narcotic Control Bureau, Thiriuvanthapuram, (2006) 13 SCALE 386 and The Assistant Collector ofCentral Excise, Rajamundry v. Duncan Agro Industries Ltd. , JT (2000) 8 SC 530, relied on. CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.

1216of2001. From the Judgment and Order dated 10. 4. 2001 ofthe High Court ofKamataka at Bangalore in M. F. A. No. 2857/1994. Harjinder Singh, H. K. Puri. S. K. Puri, Priya Puri, U. Banerjee, V. M. Chauhan and B. K. Sharma for the Appellant. Ashok Bhan and B. Krishna Prasad for the Respondents. The Judgment ofthe Court was delivered by 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, 'the Act') himselfcan prefer an appeal before the High Court against an order passed by the Foreign Exchange Regulation Appellate Board{for short, 'the Board') arises for consideration herein. 2. Before embarking upon the said question, we may briefly state the fact ofthe matter. Appellant herein was served with a show cause notice by the · > Enforcement Directorate on 04. 07.

1991 for alleged contravention ofthe provisions of Section 9(1)(b), 9(1)(d) and 9(3) ofthe 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 ofRs. 2,50,000/- on the appellant in terms ofSection 9(3) ofthe 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 : "12.

It would appear from the above discussion that neither in the documents seized from Champalal Singhvi and those seized from the premises ofYousufKazia, nor in the statements ofChampalal Singhvi and Kazia Brothers, there is any evidence of actual remittance ofany amounts from abroad as alleged, even though prima facie that evidence may indicate distribution ofamounts in India on the instructions from persons abroad.... " It was further observed : ".. . In our opinion, in view ofthe conclusions already made by us that the charge ofcontravention of section 9(3) cannot be made out on the basis ofthe 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 ofthe view that consideration ofthose grounds would amount to expressing opinion in respect ofthe evidence which tends to implicate Kazia brothers and Champalal Singhvi and therefore, any pronouncement on those grounds should be avoided ifpossible. " t 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. H Reliance, in this behalf, was placed on a decision of the Madras High MOHTESHAM MOHD. ISMAIL v. SPL. DIRECTOR, 809 Court in Director ofEnforcement, Madras v. Rama Arangannal and Anr.

, AIR (1981) Madras 80 as well as on a decision of the Punjab & Haryana High Court in Director ofEnforcement v. Lal Chand and Anr. , (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 ofthe 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 : "A 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 ofthe officers ofthe Enforcement Directorate, the law authorizes and requires the officers ofEnforcement 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' Goverprtlent is empowered subject to the conditions and limitations to authorize other officers such as·officers ofthe Central Excise, or a~y Police Officer or any other officer of the Central Government or State Government to exercise the powers and to discharge the functions ofthe 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 ofthe Directors or other officers ofthe Enforcement Directorate in favour ofthe officers other than those of Directors Enforcement consisting of Directors of Enforcement, Additional Directors of Enforcement, Deputy .

\ Directors ofEnforcement, Assistant Directors ofEnforcement and such other class ofofficers ofEnforcement is concerned the Central Government is empowered under Section 5 ofthe 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 ofthe Enforcement Directorate as mentioned in Section 4(3) of the Foreign Exchange Regulation Act, 1973 can exercise the powers by virtue of the provisions ofthe Act. Seetion 54 ofthe Foreign Exchange Regulation Act, 1973, does not specifically mention and provide that the Principal officers ofEnforcement 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 fil~d by the Directors of 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. ...

" On the second contention, it was held : "Thus considered and applying the above principles oflaw to the effect that ifthe sender ofmoney from a foreign land or from foreign country collects money and directs to his own men mIndia to distribute the said amount to the persons concerned to whom it was meant to be paid and then that person under the instructions ofthe former distributes the said amount ofmoney 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 ofremittance or remitting ofmoney or causing to remit money from a foreign land into India for distribution and disbursement, in such a case charge ofSection 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 ofsection. The order passed by the adjudicating MOHTESHAM MOHD. ISMAIL v. SPL. DIRECTOR, 811 } authority appears to be correct, just and proper and has to be restored after setting aside the order ofthe Appellate Board. " 7. Mr. Harjinder Singh, learned Senior Counsel appearing on behalf ofthe appellant, inter alia, would submit that on a plain reading ofSection 54 ofthe 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· : "In 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 ofenforcing the provisions ofthe said Act; and in exercise ofthe powers conferred by Section 51 ofthe said Act hereby empowers him to adjudicate cases ofcontravention ofany ofthe provisions thereof, other than section 13, clause (a) ofsub-section (1) of section 18 and clause (a) of sub-section (1) of section 19 or ofany rule, direction or order made thereunder. " 9. Before embarking upon the rival contentions raised on behalfof the parties, let us have to look at the relevant provisions ofthe Act. 10. Section 3 of the Act provides for classes of officers of Enforcement.

Section 4 ofthe Act empowers the Central Government to appoint such persons, as it thinks fit, to be officers ofEnforcement and for the said purpose confer power thereupon. Sub-section (3) of Section 4 reads as under : "(3) Subject to such conditions and limitations as the Central Government may in1pose, an officer ofEnforcement may exercise the powers and discharge the duties conferred or imposed on him under this Act. " Section 5 providing for delegation of the powers in relation to functions ofthe Director or other officers ofEnforcement, reads as under: "Entrustment offunctions 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 ofthe Central Government or a State · Government to exercise such ofthe powers and discharge such ofthe duties ofthe Director of Enforcement or any other officer ofEnforcement under this Act as may be specified in the order. " Section 9 provides for restrictions on payments; clauses (c) and (d) of sub-section (1) whereof read as under : "Restrictions on payments - 9.

(1) Save as may be provided in, and in accordance with any general or special exemption from the provisiom ofthis sub-section which may be granted conditionally or unconditionally by the Reserve Bank, no person in, or resident in, India shall- " y (c) draw, issue or negotiate any bill ofexchange 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 ofany person resident outside India; (d) make any payment to, or for the credit of, any person by order { ' or on behalf ofany person resident outside India; " 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 MOHTESHAMMOHD. ISMAILv. SPL. DIRECTOR, 813 Board to summon witnesses, etc. Section 54 which provides for an appeal to the High Court, reads as under : "Appeal to High Court 54.

An appeal shall lie to the High Court only on questions oflaw from any decision or order of the Appellate Board under subsection (3) or sub section (4) of section 52: Provided that the High Court shall not entertain any appeal under this section ifit is filed after the expiry ofsixty days ofthe <late of cominunication ofthe decision or order of the Appellate Board, unless the High Court is satisfied that the appellant was prevented by sufficient cause from filing the appeal in time. Explanation. -In 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 ofwhich the respondent, or in a case where there are more than one respodnent, any ofthe respondents, ordinarily resides or carries on business or personally works for gain. " 11.

The Act imposes restrictions on transactions ofmoney from one country to the another. The Central Government for the purpose of enforcing the provisions ofthe Act is empowered to appoint officers. From a bare perusal ofSection 5 ofthe 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 ofenforcing 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 ) lJ'l A exercising the functions ofthe 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 behalfofthe Central Government. The Central Government was not even impleaded as a party to the appeal. First Respondent did not file the appeal on behalfof 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 ofthe High Court that he had general power, in our opinion, is fallacious. For the purpose ofexercising the functions ofthe Central Government, the officer concerned must be specifically authorized. Only when an officer is so specifically authorized, he can act on behalfofthe Central Government and not otherwise.

Only because an officer has been appointed for the purpose of acting in terms ofthe proVisions ofthe Act, the same would not by itselfentitle to an officer to discharge all or any of the functions of the Central Government. Even ordinarily a quasi-judicial authority cannot prefer an appeal being aggrieved by and dissatisfied with the judgment ofthe appellate authority whereby and whereunder its judgment has been set aside. An adjudicating authority, although an officer ofthe 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: "4.

On the question as to the maintainability ofthe appeal, it is seen that the Explanation to Section 54 ofthe Foreign Exchange Regulation Act 1973 treats only the Central Government as an aggrieved party for the purpose offiling an appeal to the High Court in respect oforders passed by the Foreign Exchange Regulation MOHTESHAMMOHD. ISMAILv. SPL. DIRECTOR, 815 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 other authority, In this case, the appeal has been filed by the Director ofEnforcement, 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 ofadjudication has been set aside by the Appellate Board...

" The Punjab and Haryana High Court in Lal Chand (supra) followed Y the said decision. 14. The High Court was, in our considered view, not correct to take a contrary view. Furthermore, the jurisdiction ofthe High Court could be exercised only when there existed a question oflaw and not a question offact. The Board, as noticed hereinbefore, arrived at a finding offact that there did not exist any material for holding that any violation ofSection 9(3) ofthe Act had taken place. 15. Apart therefrom the High Court was bound to take into consideration the facturn ofretraction ofthe confession by the appellant. It is now a well-settled principle of law that a confession ofa 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 ofBihar, AIR (1964) SC 1184; Haroom Haji Abdulla v. State ofMaharashtra, AIR (1968) SC 832 and Prakash Kumar alias Prakash Bhutto etc. v. State ofGujarat, [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 iffound 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 ofthe purported confession from independent sources. 17. In The Assistant Collector ofCentral l;,,xcise, Rajamundry v. Duncan Agro Industries Ltd JT (2000) 8 SC 530, this Court held : "...

The 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. Ifsuch a statement is impaired by any of the vitiating premises enumerated in Section 24 that statement becomes useless in any criminal proceedings. " 18.

In the facts and circumstances ofthe case, the High Court, in our opinion, should not have interfered with the findings offact 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 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. K. K. T. Appeal allowed.