Holding

Non‑compliance with a Section 40 summons constitutes a contravention of the FERA and is punishable under Section 56, regardless of any monetary value involved.

Summary

The Enforcement Directorate issued summons under Section 40 of the Foreign Exchange Regulation Act, 1973 to M. Samba Siva Rao and others, who refused to comply with the directions. The Delhi High Court held that such refusal did not attract Section 56 of the Act and dismissed the complaints. On appeal, the Supreme Court examined the purpose of the Act, the binding nature of a Section 40 summons, and the meaning of "in any other case" in Section 56(1)(ii). It held that non‑compliance with a Section 40 summons is a contravention of the Act and falls within the ambit of Section 56, irrespective of any monetary value involved. Consequently, the High Court judgments were set aside and the complaints were allowed to proceed. The Court emphasized a purposive construction of the statute and rejected a restrictive interpretation limiting Section 56 to money‑value offences.

Issues considered

Whether refusal to obey a summons issued under Section 40 of the Foreign Exchange Regulation Act, 1973 attracts the provisions of Section 56 of the Act.
Whether the expression "in any other case" in Section 56(1)(ii) limits the offence to violations involving a monetary value.
Whether the power to summon under Section 40 becomes meaningless if non‑compliance is not punishable under Section 56.

Legislation cited

Code of Criminal Procedure, 1973s. 5
Foreign Exchange Regulation Act, 1973s. 40, s. 56
Indian Penal Code, 1860s. 174, s. 193, s. 228

Subjects

Foreign Exchange Regulation ActSection 40Section 56summonsnon‑compliancepenal statutesstatutory interpretationenforcement directoratejudicial proceeding

Judgment

ENFORCEMENT DIRECTORATE AND ANR. A
v.
M. SAMBA SIVA RAO AND ORS.

MAY 9, 2000

[G.B. PATTANAIK, DORAISWAMY RAJU AND S.N. VARIAVA, JJ.] B

Foreign Exchange Regulation Act, 1973:

Sections 40 and 56 Summons-Issue of-Refusal to comply with
directions under-Held: Amounts to contravention of the provisions of the C
Act. Hence, S.56 is attracted and punishable thereunder S.56 cannot be
restricted only to violations in respect of the money value involved.
Provisions-Are a complete Code in themselves.

Words and phrases:
D
"Jn any other case" Meaning of-Jn the context of S. 56(J)(ii) of the
Foreign Exchange Regulation Act, 1973.

The appellant Directorate summoned the respondents under Section 40
of the Foreign Exchange Regulation Act, 1973 but they refused to comply E
with the direction under the summons. High Court dismissed the complaint
filed by the appellant holding that Section 56 of the Act was not attracted for
violation of Section 40 of the Act Hence this appeal.

The following question arose before this Court :-
F
Whether refusal on the part ofa person, who is summoned under Section
40 of the Foreign Exchange Regulation Act, 1973 to comply with the directions
under the summons, would attract the provisions of Section 56 of the Act?

Allowing the appeal, this Court
G
HELD: 1.1. The Foreign Exchange Regulation Act, 1973 was enacted
by the Parliament bash:ally for the conservation of the foreign exchange
resources of the country and the proper utilisation thereof in the interest of
economic development of the country. The Act having been enacted in the
interest of national economy, the provisions thereof should be construed so H
51
52 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A as to make it workable and the provisions should receive a fair construction
without doing any violence to the language employed by the Legislature. The
provisions of Section 40 itself which confers power on the officer of
Enforcement Directorate, to summon a"ny person whose attendance, he:
considers necessary during the cours1~ of any investigation, makes it binding
B as provided under Section 40(3). These principles should be borne in mind,
while interpreting the provisions of Section 40 and its effect, if a person
violates or disobeys the directions issued under Section 40. [57-8-C)

1.2. Sections 56(1) (i) and (ii) are material for deciding the quantum of
punishment and there is no reason why the expression in any other case' in
C Section 56(1 )(ii) should be given any restrictive meaning to the effect that it
must be in relation to the money value involved. The summons issued under
Section 40, if not obeyed, must be held to be a contravention of the provisions
of the Act and at :any rate, a contravention of a direction issued under the Act,
and, therefore, such contravention would squarely come within the ambit of
Section 56 of the Act. (57-G-H; 58-A)
D
2.1. The view of the High Court that Section 56 would bring within its
sweep only such violation or contravention which under different provisions of
the Act have been deemed to be a contravention under the Act like Section 43(4),
Section 8(1) read with Section 45(1). Section 49 and so on is not acceptable
since such an interpretation would malke the power to summons under Section
E 40 meaningless and the provisions ofSection 40(3) making it a bounden duty
for the persons summoned to attend purposeless. [58-H; 59-A)

2.2. Therefore, the ultimate c:onclusion of the High Court in the
impugned judgment that the Union of India can prosecute the accused for
F offences under the provisions of Section 174 or any other relevant provision
under Chapter 10 of the Penal Code, 1860 relating to contempt of the lawful
authority of public servants, is not su:1tainable in law. [59-G)

2.3. Bearing in mind the purpose for which an officer of the Enforcement
Directorate has been empowered to summon persons, either to give evidence
G or to produce a document and the provisions of the Act, making the persons
summoned, bound to state the truth and further the investigation in question
having been made to be judicial proceeding within the meaning of Sections
193 and 228 of the IPC, on a plain literal meaning being given to the language
used in Section 56 of the Act, it has to be held that the directions given under
the summons under Section 40 would come within the purview of Section 56
H and, therefore, would be punishabl.e thereunder. [59-H; 60-A-B)
ENFORCEMENT DIRECTORATE v. M. SAMBA SIVA RAO [PA TTANAIK, J.] 53
Central Bureau of Investigation v. State of Rajasthan, (1996] 9 SCC A
735, relied on.

P. V. Prabhakara Rao v. Enforcement Directorate, Hyderabad, (1998)
Crl. LJ. 2507 AP, approved.

/tty v. Asst. Director, (1992) 58 ELT 172 Ker and C. Sampath Kumar v. B
A.N. Dyaneswaran, Criminal DPs Nos. 5468 and 5629of1996, decided on
1-8-1997 Mad, overruled.

.
;
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal Nos.1294-
1300of1999.
c
From the Judgment and Order dated 9.7.99 of the Delhi !ligh Court in
Crl. M. (M) Nos. 500, 1299/97, 477/98, 3094/97, 1509/98, 502/97 and 541 of1998.

Soli J. Sorabjee, Attorney General, Mukul Rohtagi, Additional Solictor
General, Ashok Panda, A.K. Ganguly, Tufail A. Khan, Naveen Kumar Matta,
D
Ms. Lata Krishnamurthy, P. Parmeshwaran, R.K. Handoo, K.V. Mohan, Rohit
P. Ranjan, P. Ojha, K.V. Mohan, S.C. Ghosh, Satish Vig, D. Mahesh Babu,
Rohit Minocha, Ajay Kumar Yadav and Ashim Roy for the appearing parties.

The Judgment of the Court was delivered by
E
PATTANAIK, J. All these appeals are directed against a common
judgment of a learned Single Judge of Delhi High Court and a common
question of law arises and as such they are heard together and are being
disposed of by this common judgment. The question for consideration in all
these appeals is whether refusal on the part of a person, who is summoned
under Section 40 of the Foreign Exchange Regulation Act, 1973 (hereinafter F
referred to as 'the Act') to comply with the directions under the summons,
would attract the provisions of Section 56 of the Act? The High Court by the
impugned judgment came to the conclusion that the provisions of Section 56
of the Act will not get attracted for violations of the directions under Section
40 of the Act and, accordingly, the complaints filed for such violation and G
cognizance taken in the complaint cases have been quashed.

Mr. Mukul Rohtagi, the learned Additional Solicitor General, contended
that the power having been conferred on the officers of the Enforcement
Directorate to summon any person, whose attendance is necessary, either to
... give evidence or to produce a document, in course of any investigation or H
54 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A proceeding under the Act and the Act itself having made it binding on the
person summoned to attend, as provided in sub- section (3) of Section 40,
the refusal on the part of the person summoned to carry out the obligation
under the statute, should be seriously viewed and must be held to be a
contravention of the provisions of the Act, making such contravention
B punishable under Section 56 of the Act, and the High Court was in error in
quashing the complaints filed.

Mr. R.K. Handoo, the learned counsel appearing for the accused
respondents in some of the appeals as well as Mr. A.K.Ganguly, the learned
senior counsel, appearing for the accused in some of the appeals, however
C contended that the orders/directions, violation of which is punishable under
Section 56 of the Act are those statutory orders or directions and the summon~
issued under Section 40 has no statutory character and, therefore, the said
violation by the person summoned, cannot be made punishable under Section
56 of the Act. It was also further contended that the 'offence' not bein~
defined under the Act, one will have to examine the definition of 'offence' in
D General Clauses Act and on such an examination, it would appear that the
impugned violation cannot be held to be an 'offence' and, therefore, cannot
be made punishable under Section 56 of the Act, and the High Court, therefore
was fully justified in quashing the complaints filed. For better appreciation of
the contentions raised, it would be necessary to extract the provisions of
E Section 40 and Section 56 of the Act in extenso:

"Section 40: Power to summon persons to give evidence and produce
documents- (I )Any Gazetted officer of Enforcement shall have power
to summon any person whose attendance he considers necessary
either to give evidence or to produce a document during the course
F of any investigation or procce.ding under this Act.

(2)A summons to produce documents may be for the production of
certain specified documents of a certain description in the possession
or under the control of the person summoned.

G (3 )All persons so summoned shall be bound to attend either in person
or by authorised agents, as such officer may direct; and all persons
so summoned shall be bound to state the truth upon any subject
respecting which they are examined or make statements and produce
such documents as may be required;

H Provided that the exemption under Section 132 of the Code of Civil ....
ENFORCEMENTDIRECTORATEv. M. SAMBA SIVA RAO [PATTANAIK, J.] 55
Procedure, 1908, shall be applicable to any requisition for attendance A
under this Section.

(4) Every such investigation or proceeding as aforesaid shall be deemed
to be a judicial proceeding within the meaning of Sections 193 and 228
of the Indian Penal Code.
B
Section 56: Offences and prosecutions: (!)Without prejudice to any
award of penalty by the adjudicating officer under this Act, if any
person contravenes any of the provisions of this Act [other than
Section 13, Clause (a) ofsub-section(I) of(Section 18, Section 18A),
clause (a) of sub-section (I) of Section 19, sub-section(2) of Section
44 and Sections 57 and 58] or of any rule, direction or order made c
thereunder, he shall, upon conviction by a Court, be p1mishable-

(i) in the case of an offence the amount or value involved in which
exceeds one lakh of rupees with imprisonment for a term which shall
not be less than six months, but which may extend to seven years and
with fine; D

Provided that the Court may, for any adequate and special reasons to
be mentioned in the judgment, impose a sentence of imprisonment for
a term of less than six months;

(ii) in any other case, with imprisonment for a term which may extend E
to three years or with fine or with both.

(2)1f any person convicted of an offence under this Act [not being an
.
offence under Section 13 or clause (a) of sub-section (!)(Section 18
or Section 18A) or clause (a) of sub-section(!) of Section 19 or sub-
section (2) of Section 44 or section 57 or Section 58] is again convicted F
of an offence under this Act [not being an offence under Section 13
or clause (a) of sub-section (I) of [Section 18 or Section 18A] or
clause (a) of sub-section (I) of Section 19 or sub-section (2) of
Section 44 or Section 57 or Section 58], he shall be punishable for the
second and for every subsequent offence with imprisonment for a G
term which shall not be less than six months but which may extend
to seven years and with fine:

Provided that the Court may, for any adequate and special reasons to
be mentioned in the judgment, impose a sentence of imprisonment for
~
a term of less than six months. H
56 SUPREME COURT REPORTS (2000] SUPP. I S.C.R.

A (3) Where a person having been convicted of an offence under this
Act [not being an offence under Section 13 or clause (I) of sub-sec.( I)
of [section 18 or section ISA] or clause (a) of sub-section (1) of
Section 19 or sub-section (2) of section 44 or section 57 or section 58]
is again convicted of an offence under this Act [not being an offence
under Section 13 or clause (a) of sub-section (!) of [section 18 or
B section ISA], or clause (a) o:f sub-section (!)of Section 19 or sub-
section (2) of Section 44 or Section 57 or section 58], the court by
which such person is convic:ted may, in addition to any sentence
which may be imposed on him under this section, by order, direct that,
that person shall not carry on such business as the court may specify,
c being a business which is likely to facilitate the commission of such
offence, for such period not exceeding three years, as may be specified
by the court in the order.

(4) For the purpose of sub-section(!) and (2), the following shall not
be considered as adequate and special reasons for awarding a sentence
D of imprisonment for a term of less than six months, namely-

(i) the fact that the accused has been convicted for the first time of
an offence under this Act.

(ii) the fact that in any proceeding under this Act, other than a
E prosecution, the accused has been ordered to pay a penalty or goods
in relation to such proceedings have been ordered to be confiscated
or any other penal action has been taken against him for the same
offence;

(iii) the fact that the accused was not the principal offender and was
F acting m~:rely as a carrier of goods or otherwise was a secondary party
in the commission of the offonce;
(iv) the age of the accused.

(5) For the purposes of sub-sections (1) and (2), the fact that an
G offence under this Act has caused no substantial harm to the general
public or to any individual shall be an adequate and special reason
for awarding a sentence of imprisonment for a term of less than six
months.
(6) Nothing in [the proviso to Section 188 of the Code of Criminal
H Procedure, 1973] shall apply to any offence punishable under this.
ENFORCEMENT DIRECTORATE v. M. SAMBA SIVA RAO [PA TTANAIK, J.) 57
Section." A
The answer to the questions raised would depend upon an analysis and
interpretation of the aforesaid two provisions of the Act The Foreign Exchange
Regulation Act, 1973 was enacted by the Parliament, basically for .the
conservation of the foreign exchange resources of the country and the proper
utilisation thereof in the interest of economic development of the country. The B
Act having been enacted in the interest of national economy, the provisions
thereof should be construed so as to make it workable and the interpretation
given should be purposive and the provisions should receive a fair construction
without doing any violence to the language employed by the Legislature. The
provisions of Section 40 itself, which confers power on the officer of C
Enforcement Directorate, to summon any person whose attendance, he
considers necessary during the course of any investigation, makes it binding
as provided under sub- section (3) of Section 40, and the investigation or the
proceeding in course of which such summons are issued have been deemed
to be a judicial proceeding by virtue of sub-section (4) of Section 40. These
principles should be borne in mind, while interpreting the provisions of D
Section 40 and its effect, if a person violates or disobeys the directions issued
under Section 40. Before embarking upon an in-depth inquiry into the provisions
of the Act for the purpose of interpretation of Sections 40 and Section 56,
it would be appropriate to notice some of the decisions given by different
H~~moo~~~ E

A learned Sine.Je Judge of the Kerala High Court considered this
question in the case of !tty v. Assistant Director, (1992) 58 E.L.T.172 (Ker.).
On a conjoint reading of Sections 40 and 56 of the Act, the learned Judge
came to the conclusion that the failure to obey the summons issued under
Section 40(1) cannot be held to be a contravention of the provisions of the F
Act, Rule, direction or order inasmuch as it is only when directions pertaining
to some money value involved is dis-obeyed, such disobedience is punishable
under Section 56 of the Act. The learned Judge applied the ordinary rules of
construction that penal statutes should receive a strict construction and the
person to be penalised must come squarely within the plain words of the G
enactment. We are unable to accept the constructions put in the aforesaid
judgment as in our view clauses (i) and (ii) of Section 56(1) are material for
deciding the quantum of punishment and further, there is no reason why the
expression "in any other case" in Section 56( I)(ii) should be given any
restrictive meaning to the effect that it must be in relation to the money value
involved, as has been done by the Kerala High Court. The summons issued H

•
58 SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A under Section 40, if not obeyed, must be held to be a contravention of th¢
provisions of the Act and at any rate, a contravention of a direction issued
under the Act, and therefore, such t'9ntravention would squarely come within
the ambit of ~ection 56 of the Act. The question came up for consideration
before a leanied Single Judge of the Madras High Court in the case of C.
B Sampath Kumar v. A.N. Dyaneswaran in Criminal O.P. No. 5468 and 5629 of
1996 and was disposed of by the learned Judge of the Madras High Court
by judgment dated 1.8.97. The Mad!lis High Court also came to the conclusion
that the entire Section 56 of the Act is identified and substantiated only in
terms of the extent and value of the money involved in the offence, and
therefore, violation or contravention of ~ummons, issued under Section 40 of
C ti:ie Act un-related to the money involved in the investigation cannot be held
to be punishable under Section 56. Against the aforesaid judgment of the
Madras High Court, the department had preferred appeals to this Court, which
were registered as Criminal Appeal Nos. 143-144/98, but the question raised
was not necessary to be answered as the persons concerned appeared before
the Enforcement Authorities and were arrested by the said Enforcement
D Authority and, therefore, this Court kept the questions of law open by its
order dated 20th July, 1998. In yet another case, the question arose for
consideration before the Madras High Court in Criminal 0.P. No. 5718/96 and
a learned Single Judge did not agree with the earlier decision of the said High
Court in Criminal O:P. Nos. 5468 and 5629 of 1996 and referred the matter to
E a Division Bench by his Order dated 13th of August, 1997 and it was submitted
at the Bar that the Division Bench has not yet disposed of the matter. The
question came up for. consideration before the Andhra cf>radesh High Court
in the case of P. V. Prabhakara Rao v. Enforcement Directorate, Hyderabqd
& Anr., reported in 1998 Crl.LJ.2507 and the said High Court has taken the
view that failure to attend and give statement in pursuance of summons
F issued under Section 40 of the Act, clearly amounts to disobeyance of the
directions given by the concerned authority and therefore, provisions of sub-
section ( l) of Section 56 applies. 11ne learned Judge of Andhra Pradesh High
Court interpreted the expression "in any other case" in clause (ii) of Section
56( l) to mean that the said provision would get attracted even though no
G amount or value is involved in the contravention in question. The aforesaid
view of the Andhra Pradesh High Court appears to us, is the correct
. interpretation of the provisions contained in Sections 40 and 56 of the Act.

The learned Judge of the Delhi High Court in the impugned Judgment
is of the view that Section 56 would bring within its sweep only such violation
H or contravention which under different provisions of the Act have been
ENFORCEMENT DIRECTORATE v. M. SAMBA SIVA RAO [PA TTANAIK, J.) 59
deemed to be a contravention under the Act like Section 43(4), Section 8(1) A
read with Sec.45(1 ), Section 49 and so on. We are unable to accept this
interpretation put by the learned Judge as in our view such interpretation
given, would make the power to summons under Section 40 meaningless and
the provisions of sub-section(3) of Section 40 making it bounden duty for the
persons summoned to attend purposeless. The learned Judge of the Delhi
High Court also committed the same error as the learned Single Judge of the B
Kerala High Court in interpreting-clause (ii) of Section 56(1) by holding that
the same is identified and substantiated only in terms of the money involved
in the offence. On behalf of the department, an argument had been advanced
before the learned Single Judge of the Delhi High Court that the provisions
of the Foreign Exchange Regulation Act is a complete code in itself but the C
same contention did not find favour with the learned Single Judge: Obviously,
the judgment of this Court in the case of Central Bureau of Investigation v.
State of Rajasthan and Ors., [1996] 9 SCC 735 had not been brought to the
notice of the High Court. In the aforesaid case, one of the questions for
consideration before this Court was whether the provisions of Sections 4 and
5 of the Code of Criminal Procedure would come in aid of the investigation D
of the offence under FERA by a member of police force like an officer of DSPE
in accordance with the Code of Criminal Procedure? This Court held:

" ............ But FERA is a self-contained code containing comprehensive
provisions of investigation, inquiry and trial for the offences under E
that Act. The provisions under FERA gives power to the officers of
the Directorate of Enforcement or other officers duly authorised by
the Central Government under FERA to search, confiscate, recover,
arrest, record statements of witnesses etc. FERA contains provisions
for trial of the offences under FERA and imposition of punishment for
such offences. FERA, being a special law, containing provisions for F
investigation, enquiry, search, seizure, trial and imposition of
punishment for offences under FERA, Section 5 of the Code of Criminal
Procedure is not applicable in respect of offences under FERA."

In view of the aforesaid authoritative pronouncement of this Court, the G
ultimate conclusion of the learned Single Judge of the Delhi High Court in the
impugned Judgment that the Union of India can prosecute the accused for
offences under the provisions of Section 174 or any other relevant provision
under chapter IO of the IPC relating to contempts of the lawful authority of

- public servants, is not sustainable in law. As has been stated earlier, bearing
in mind the purpose for which an officer of Enforcement Directorate have H
60 SUPREME COURT REPORTS (2000] SUPP. J_ S.C.R.

· A been empowered to summon persons, either to give evidence or to produce
a document and the provisions of the Act, making the persons summoned,
bound to state the truth and ¥her the investigation in question having been
made to be a judicial proceeding within the meaning of Sections 193 and 228
of the Indian Penal Code, on a plain literal meaning being given to the
language used in Section 56 of the Act, we are of the considered opinion that
B violation or contravention of the directions given under the summons under
Section 40 would come within the purview of Section 56 and, therefore would
be punishable thereunder, and !the impugned judgment of the Delhi High
Court as well the judgment of Kerala High Court must be held to have been
wrongly decided.
c We, therefore, set aside the impugned judgments of the learned Single
Judge of Delhi High Court and allow these appeals and direct that the
complaint proceedings may be proceeded with, in accordance with law.

vss Appeals allowed.