The Supreme Court has quashed criminal proceedings initiated against Standard Chartered Bank and one of its officials under the erstwhile Foreign Exchange Regulation Act, 1973 (FERA), holding that the Enforcement Directorate (ED) failed to comply with the mandatory requirement of issuing an opportunity notice before launching prosecution.
The bench of Justice J.B. Pardiwala and Justice Manoj Misra observed that the Bombay High Court erred in refusing to entertain the bank’s petition under Section 482 of the Code of Criminal Procedure (CrPC) merely because an alternative remedy of revision under Section 397 CrPC was available.
The bench set aside the Bombay High Court’s 2012 order and quashed the criminal complaints as well as the summoning order issued against the appellants, bringing an end to proceedings that had remained pending for over two decades.
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The prosecution stemmed from transactions undertaken in 1991–92 involving remittances routed through Standard Chartered Bank’s Vostro Account maintained in Mumbai. The Enforcement Directorate alleged that the bank had unlawfully credited funds for the benefit of a person resident outside India in contravention of FERA provisions.
According to the prosecution, banker’s cheques and drafts procured in India were forwarded through the bank’s overseas offices and credited in Mumbai. The bank subsequently realized that the remittances were allegedly inconsistent with exchange control regulations, reversed the entries, blocked approximately ₹30 lakh, and later surrendered the amount to the authorities pursuant to directions issued under Section 33(2) of FERA.
Despite the transactions dating back to 1991–92, the criminal complaints were filed only on May 30, 2002, just before the sunset period for initiating prosecutions under FERA expired following the enactment of the Foreign Exchange Management Act (FEMA).
Before the Bombay High Court, the appellants sought quashing of the criminal complaints under Section 482 CrPC on several grounds, including non-compliance with the mandatory opportunity notice under Section 61(2) of FERA and violation of the constitutional right to a speedy trial.
The High Court declined to interfere, primarily holding that since a revision remedy under Section 397 CrPC was available, petitions under Section 482 CrPC were not maintainable. It further held that delay alone could not justify quashing the prosecution.
The Supreme Court categorically rejected the High Court’s reasoning regarding maintainability.
The Bench reaffirmed that the availability of a revisional remedy under Section 397 CrPC does not bar the inherent jurisdiction of the High Court under Section 482 CrPC. Relying on earlier precedents including Dhariwal Tobacco Products Ltd., Prabhu Chawla, and Akanksha Arora, the Court held that inherent powers remain available wherever intervention is necessary to prevent abuse of the process of court or to secure the ends of justice.
The Court observed that the nomenclature of a petition is not decisive and, if necessary, a High Court may even treat a petition under Section 482 as one under Section 397 instead of dismissing it on technical grounds.
The principal issue before the Court concerned compliance with Section 61(2) of FERA.
The proviso to Section 61(2) mandates that before filing a criminal complaint for contravention involving acts requiring prior permission, the proposed accused must first be given an opportunity to demonstrate that such permission existed.
The Supreme Court held that this requirement is mandatory and forms a jurisdictional precondition before a Magistrate can take cognizance of offences under Sections 56 and 57 of FERA.
Examining the record, the Court found several serious deficiencies.
Firstly, the complaints merely asserted that an opportunity notice had been served.
Secondly, neither the date of the alleged notice nor a copy of the notice was placed on record.
Thirdly, no proof of service was produced before the Magistrate, the High Court, or even before the Supreme Court.
Lastly, the Magistrate took cognizance without recording satisfaction regarding compliance with the statutory requirement.
The Court observed that despite being given opportunities over the years, including by the Supreme Court itself, the Enforcement Directorate failed to produce even the alleged notice or establish that it had ever been served.
Consequently, the Bench concluded that the mandatory safeguard under Section 61(2) had not been complied with, resulting in violation of the principles of natural justice and rendering the criminal complaints legally unsustainable.
Although the finding on Section 61(2) was sufficient to dispose of the case, the Supreme Court also examined the plea regarding violation of the constitutional right to a speedy trial under Article 21.
The Court noted that the complaint had remained pending for nearly 23 years, while the alleged transactions were over three decades old.
Importantly, the Bench found that the delay was largely attributable to the prosecution itself.
Rejecting the prosecution’s attempt to blame the accused, the Court held that the chronology clearly demonstrated persistent inaction and lack of diligence on the part of the Enforcement Directorate.
The Bench emphasized that criminal proceedings cannot continue indefinitely when mandatory statutory safeguards have been ignored and the prosecution itself has failed to diligently pursue the case.
The Court observed that permitting the prosecution to continue after more than three decades would leave the accused in a “state of suspended animation,” contrary to the guarantee of a fair and speedy trial under Article 21 of the Constitution.
Allowing the appeals, the Supreme Court set aside the Bombay High Court’s judgment dated March 22, 2012.
The court quashed Criminal Case Nos. 1503–1504 of 2002 and the summoning order dated May 30, 2002 against the appellants.
The court held that failure to comply with the mandatory opportunity notice under Section 61(2) of FERA vitiated the prosecution.
The court clarified that the availability of a revision remedy under Section 397 CrPC does not bar petitions under Section 482 CrPC.
The court directed the Registry to circulate copies of the judgment to all High Courts.
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