FERA Violations and Legal Proceedings: Supreme Court Rules on Foreign Exchange Case
The Supreme Court of India recently delivered a significant judgment in the case of First Global Stockbroking Pvt. Ltd. & Ors. vs. Anil Rishiraj & Anr., dealing with alleged violations under the Foreign Exchange Regulation Act, 1973 (FERA). The case primarily revolved around whether the prosecution initiated under FERA could continue even after its repeal following the enactment of the Foreign Exchange Management Act, 1999 (FEMA).
The Supreme Court upheld the Bombay High Court’s decision, ruling that prosecutions initiated within the stipulated sunset period under FEMA remained valid. This judgment reinforces the principle that even after FERA was repealed, offenses committed before its repeal could still be prosecuted under the old law.
Background of the Case
The case originated when an Enforcement Officer filed a complaint against First Global Stockbroking Pvt. Ltd. and others in the Court of the Chief Metropolitan Magistrate, Mumbai, for alleged violations of FERA. The complaint was filed on February 11, 2002, even though FERA had been repealed on June 1, 2000, following the introduction of FEMA. The appellants sought discharge from the case, arguing that FERA had been repealed and no prosecution could be sustained under a repealed statute.
The Additional Chief Metropolitan Magistrate dismissed their discharge application. The Bombay High Court upheld this decision, leading the appellants to approach the Supreme Court.
Key Legal Issues Considered
- Whether prosecutions under FERA could continue after its repeal under FEMA.
- Whether the Enforcement Officer who filed the complaint had the legal authority to do so.
- Whether the provisions of FEMA saved the prosecution of offenses committed under FERA.
Petitioner’s Arguments (First Global Stockbroking Pvt. Ltd. & Ors.)
The appellants, represented by senior counsel, contended that:
- FERA was repealed on June 1, 2000, and all prosecutions under it should have ceased.
- Section 49(3) of FEMA prohibited the initiation of prosecutions under FERA beyond a two-year sunset period.
- The Enforcement Officer who filed the complaint had lost his authority with the repeal of FERA.
- The High Court erred in interpreting the repeal provisions, leading to an unlawful prosecution.
Respondent’s Arguments (State of Maharashtra)
The State of Maharashtra, represented by the Additional Solicitor General, countered these claims by arguing that:
- Section 49(4) of FEMA allowed for continued prosecution of offenses committed under FERA.
- The complaint was filed within the legally permitted two-year sunset period, making it valid.
- Legal fiction created by Section 49(4) ensured that cases initiated within this period were governed by the provisions of FERA.
- The Enforcement Officer’s authority to file the complaint remained intact under the saving provisions of FEMA.
Supreme Court’s Analysis
The Supreme Court examined the provisions of FEMA, particularly Section 49, which deals with repeal and savings:
- Section 49(3): Bars the initiation of new cases after two years from the date of repeal.
- Section 49(4): Allows continued prosecution of offenses committed under FERA as if the Act had not been repealed.
- Section 49(5): Preserves actions taken under FERA, including appointments and legal proceedings.
The Court observed:
“For the purposes of prosecuting offenses committed under FERA, the provisions of the repealed Act continue to apply as if it had not been repealed. This legal fiction ensures that pending cases and investigations do not lapse due to the repeal.”
Regarding the authority of the Enforcement Officer, the Court held:
“An officer appointed under FERA retains the authority to initiate proceedings during the sunset period under FEMA. The powers conferred under the old law remain valid for prosecuting past offenses.”
Final Judgment
The Supreme Court upheld the High Court’s decision, ruling that:
- The complaint filed against the appellants was valid as it was initiated within the sunset period.
- FERA’s provisions continued to apply for prosecuting past offenses, as provided under FEMA.
- The Enforcement Officer’s authority was preserved under the saving clauses of FEMA.
- The prosecution was not barred by law, and the trial should proceed.
The Court dismissed the appeal, stating:
“The appeal fails, and the same is, accordingly, dismissed. The trial court is directed to expedite proceedings in the pending case.”
Implications of the Judgment
- Reaffirms that the repeal of a statute does not automatically extinguish liabilities incurred under it.
- Clarifies that pending cases under FERA can continue under the legal framework provided by FEMA.
- Establishes that enforcement authorities retain their power to prosecute offenses committed before the repeal.
- Ensures legal continuity in foreign exchange regulation violations.
Conclusion
The Supreme Court’s ruling in this case provides clarity on the legal implications of FERA’s repeal and reinforces the principle that offenses committed under repealed laws can still be prosecuted. This judgment serves as a precedent for cases involving regulatory violations under earlier legal frameworks and ensures that legal proceedings do not become void due to legislative changes.
Petitioner Name: First Global Stockbroking Pvt. Ltd. & Ors..Respondent Name: Anil Rishiraj & Anr..Judgment By: Justice Abhay S. Oka, Justice Sanjay Karol.Place Of Incident: Mumbai, Maharashtra.Judgment Date: 21-09-2023.
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