New Delhi Television Limited vs Reserve Bank Of India And 2 Ors

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Mr. Hiten Venegaonkar with Mr. D. P. Singh, Ms. Priya Singhania, Mr. Satya Prakash, Mr. Anjan Chanda and Mr.Praful Wable i/b. Mr.S. P. Singh and Ms.Dona Datta for respondent nos.2 and 3.

CORAM :- S. C. DHARMADHIKARI & SMT. BHARATI H. DANGRE, JJ.

Reserved on 9 th March, 2018 Pronounced on 26 th June, 2018

JUDGMENT :

- (Per S. C. Dharmadhikari, J.)

1. In view of the detailed orders passed by this court from time

to time, the writ petition is admitted.

2. Rule. Respondents waive service. By consent of all parties,

Rule is made returnable forthwith and the writ petition is finally

disposed of by this judgment.

3. By this petition under Article 226 of the Constitution of

India and prior to its amendment, the petitioner desires that this

court should issue a writ of mandamus or any other writ, order or

direction analogous to that writ, directing respondent no. 1 to

this writ petition to guide the petitioner in making of an

application styled as an application for compounding and to take

on file and determine the compounding application within the

time frame prescribed by the Foreign Exchange (Compounding

Proceedings) Rules, 2000 (hereinafter referred to as "the

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Compounding Rules") or such other time frame as may be

prescribed by this court.

4. Then, prayer clause (b) claims the following relief:-

"(b) that this Hon'ble Court may be pleased to issue a writ of prohibition, or any writ, order or direction analogous to the writ of prohibition, restraining the Respondent No. 2 from proceeding with adjudication proceedings in the SCN No.F.No.T-4/2D/2015 dated 13 November 2015 until the decision of Respondent No. 1 on the compounding applications which will be filed by the Petitioner after guidance is forthcoming."

5. It is in pursuance of this prayer clause, which we have

reproduced, that the petitioner amended the writ petition and

sought the following reliefs:-

"(a1) wholly in the alternative to prayer clause (a), that this Hon'ble Court may be pleased to issue a writ of certiorari, or any writ, order or direction analogous to the writ of certiorari, calling for the records of the case and after going through the same and examining the legality thereof to quash and/or cancel the letters/orders dated 24 January 2017 addressed by the Respondent No. 1 to the Petitioner purporting to return compounding applications on grounds that 'guidance' is liable to be sought thereon by the Petitioner;

(a2) that this Hon'ble Court may be pleased to issue a writ of certiorari, or any writ, order or direction analogous to the writ of certiorari, calling for the records of the case and after going through the same and examining the legality thereof to quash and cancel the letter/order/direction dated 6 March 2017 issued/passed by Respondent No. 2 to Respondent No. 1 in relation to the compounding applications of the Petitioner;

(a3) that this Hon'ble Court may be pleased to issue a writ of certiorari, or any writ, order or direction analogous to the writ of certiorari, calling for the records of the case and after going through the same and examining the legality thereof to quash and cancel the Order sheet/Hearing Note dated 20 April 2017 passed by Respondent No. 2;

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(a4) that this Hon'ble Court be pleased to strike down and declare that the proviso to Rule 8(2) of the Foreign Exchange (Compounding Proceedings) Rules, 2000 inserted vide 2017 Notification introduced by the Foreign Exchange (Compounding Proceedings) Amendment Rules, 2017, ultra vires, unconstitutional, non est and violative of Article 14 of the Constitution of India;

(a5) that this Hon'ble Court may be pleased to issue a writ of certiorari, or any writ, order or direction analogous to the writ of certiorari, calling for the records of the case and after going through the same and examining the legality thereof to quash and cancel the letters dated 15 December 2018 and 1 January 2018 issued by Respondent No. 1 to the Petitioner in relation to seek guidance from the AD Bank;

(a6) that this Hon'ble Court may be pleased to issue a writ of certiorari, or any writ, order or direction analogous to the writ of certiorari, calling for the records of the case and after going through the same and examining the legality thereof to quash and cancel the letter dated 1 December 2017 issued by Respondent No. 2 to Respondent No. 1 in relation to the compounding applications of the Petitioner;"

6. It would be necessary to set out the factual background, in

which this petition has been filed by the petitioner company

incorporated under the Companies Act, 1956. The petitioner

carries on business of operating news channels. The petitioner

company was established by Dr. Prannoy Roy an eminent

journalist, claiming to be a pioneer in the introduction of

electronic media in the space of news broadcasting. The first

respondent is the Reserve Bank of India (RBI) constituted under

the Reserve Bank of India Act, 1934. It has been conferred with

wide-ranging powers under the Foreign Exchange Management

Act, 1999 (hereinafter referred to as "the FEMA"). The second

respondent-Directorate of Enforcement is constituted under

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section 36 of the FEMA. It exercises powers of investigation in

relation to the contraventions of the FEMA. The third respondent

is the Union of India.

7. The petitioner submits that vide GSR No. 383(E) dated 3 rd

May, 2000, foreign Exchange (Compounding Proceedings) Rules,

2000 have been notified in pursuance of powers conferred by

section 46 read with section 15(1) of the FEMA. A

comprehensive regime is contained within the said Rules, which

contemplates the "Compounding Authority" to be either an officer

of the first respondent or the second respondent, with certain

monetary thresholds imposed in relation to powers for

compounding, depending on the nature of the violation and

prescribes procedures to be followed in relation to compounding

generally. Under Rule 8, specifically, it is the statutory duty of the

Compounding Authority to call for any information, record or any

other documents relevant to the compounding application and to

pass an order of compounding after affording an opportunity of

being heard to all concerned "as expeditiously as possible and not

later than 180 days from the date of application".

8. Respondent no. 2 initiated adjudication proceedings against

the petitioner and its Directors vide Show Cause Notice No.F.No.T-

4/2-D/2015 dated 13th November, 2015 issued under section 13 of

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the FEMA, copy of which is annexed as Exhibit 'B' to the petition.

The alleged FEMA violations cited in the show cause notice

related to section 3(d), read with sections 6(3)(a), 6(3)(b) and

6(3)(j) of the FEMA, read with Regulations 6(2)(ii) and (iv) of

the FEM (Transfer or Issue of any Foreign Security) Regulations,

2004, Regulation 5(1) and 10B of FEM (Transfer or Issue of

Security to Persons Resident Outside India) Regulations, 2000

and Regulation 3 of the FEM (Guarantees) Regulations, 2000.

9. The petitioner and its Directors filed replies dated 30 th

March, 2016 and 18th April, 2016 stating therein that the

Petitioner and/or its Directors have not contravened any

provisions of the FEMA as alleged in the show cause notice.

10. The petitioner states that although it was satisfied that

there was no FEMA contravention warranting compounding,

nevertheless, with a view to avert negative publicity, which, in

turn, was adversely affecting the goodwill, reputation, growth

prospects and sentiments of existing and prospective investors of

the petitioner, with a view to ensure that actions were adopted in

the best interests of the petitioner's shareholders and

stakeholders, the petitioner took a decision to seek compounding,

in the larger interest of the petitioner's stakeholders. Amongst

the factors that weighed with the petitioner in arriving at its

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considered decisions were that apart from adverse publicity on

various media platforms, including on social media, the

adjudication proceedings would entail several years to complete,

which would hamper day to day functioning of the petitioner and

also prove to be a significant drain on resources of the petitioner.

Even though the petitioner was certain that the end result will

eventually be in favour of the petitioner, to avoid the prejudicial

effect of such proceedings, including protracted litigation and

related legal costs, the petitioner filed two compounding

applications bearing C.A.No.3998/2016 and C.A.No.3999/2016,

both dated 7th May, 2016 with respondent no. 1. The petitioner

filed its compounding applications with respondent no. 1, since as

per the said Rules, the jurisdiction for compounding lay with

respondent no. 1. The copies of the said compounding

applications are annexed as Exhibit 'E' and Exhibit 'F'. These

compounding applications filed by the petitioner encompassed all

the contraventions under the FEMA and the relevant regulations

made thereunder as alleged by respondent no. 2's show cause

notice.

11. Based on having instituted compounding applications dated

7th May, 2016, by a letter dated 11 th May, 2016, the petitioner

requested respondent no. 2 to keep its investigation proceedings

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in abeyance. After this letter, respondent no. 2 did not proceed

with the adjudication proceedings and kept the same in abeyance,

until 31st March, 2017.

12. Respondent no. 1, vide letters bearing Reference

No.FE.Co.CEFA/1411/15.20.67/2016-17 dated 05th August, 2016

and FE.Co.CEFA/1690/15.20.67/2016-17 dated 12th August, 2016

returned the compounding applications dated 7th May, 2016 on

the ground that certain administrative actions were required to

be completed by the petitioner. These administrative actions,

namely, reporting the concerned Step Down Subsidiaries,

reconciling the remittances/guarantees made to the JV and

reporting pending APRs in that regard, were immediately

complied with and accordingly, the petitioner once again filed two

compounding applications, both dated 19th August, 2016 bearing

CA Nos. 4113/2016 and 4114/2016, respectively.

13. During the discussions held by the petitioner's counsel with

the Overseas Investment Division (OID) of respondent no. 1 in

relation to the matter of the compounding applications dated 19 th

August, 2016, it was pointed out that there were certain other

additional technical/procedural contraventions which may also

require compounding as a direct consequence of the compounding

applications dated 19th August, 2016. In order to immediately

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compounding application dated 24th October, 2016 with

respondent no. 1 being CA No. 4195/2016, copy of which is

annexed as Exhibit 'K' to the petition.

14. By its letter dated 24th January, 2017 bearing Reference

No.FE.CO.CEFA/7579/15.20.67/2016-17 and FE.CO.CEFA/7581/

15.20.67/2016-17, respondent no. 1 returned all of the three

compounding applications of the petitioner (two dated 19th

August, 2016 and one dated 24th October, 2016) advising the

petitioner to approach its OID and Foreign Investment Division

(FID) for further guidance, in the matter of compounding.

15. Upon receipt of the aforereferred letters dated 24 th January,

2017 issued by respondent no. 1, the petitioner, acting through its

legal counsel, met with the concerned officers in the FID and OID

of respondent no. 1 on several occasions to seek guidance in the

matter of compounding. During these meetings, the concerned

officers informed the petitioner's counsel that all the transactions

undertaken by the petitioner, whether FDI or ODI, would be

required to be set forth in a simplified manner.

16. Accordingly, vide the petitioner's counsel letters, both dated

11th April, 2017, the details of all such transactions were set forth

in a simplified manner, by way of various charts and submitted to

the FID and OID. After submission of the said letters dated 11 th

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April, 2017 with FID and OID, neither the FID nor the OID have

responded till date to the petitioner. In the meanwhile, vide letter

dated 31st March, 2017, respondent no. 2 restarted the

adjudication proceedings and fixed the date of hearing on 20 th

April, 2017.

17. On 20th April, 2017, the petitioner and its Directors' counsel,

vide letter dated 20th April, 2017 requested respondent no. 2 to

keep the adjudication proceedings in abeyance till respondent no.

1 provides guidance to the petitioner in the matter of

compounding. Respondent no. 2, however, rejected the

petitioner's request of keeping the adjudication proceedings in

abeyance, vide its order dated 20th April, 2017. The next date of

hearing before respondent no. 2 was on 6th July, 2017.

18. The petitioner's counsel also submitted letters dated 23rd

June, 2017 with the FID and OID, with a copy to respondent no.1's

Cell for effective implementation of FEMA, as a reminder to seek

guidance in the matter. Neither the FID nor the OID have

provided any guidance and the request for guidance remained

pending.

19. The petitioner submits that respondent no. 1 has been

compounding similar contraventions during the pendency of the

proceedings/investigations before respondent no. 2. In fact, a few

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cases concern compounding by respondent no.1 of contraventions

even when investigations under the Prevention of Money

Laundering Act, 2002 (hereinafter referred to as "the PMLA")

were ongoing. However, in the case of the petitioner, respondent

no. 1 has been returning the compounding applications.

20. The petitioner is aggrieved by the fact that respondent no.2

is continuing proceedings against the petitioner and its Directors

under the FEMA, despite the legal entitlement of the petitioner

and its Directors to seek compounding. Also, when respondent

no. 2, on the basis of information available to it, can undertake

adjudication proceedings, the basis on which respondent no. 1

claims inability to compound alleged offences, is irreconcilable.

21. The petitioner submits that without in any manner seeking

to be trammeling the realm of merits of the show cause notice,

vide letter dated 28th February, 2014, respondent no. 1 in relation

to one of the contraventions alleged in the show cause notice

relating to Regulation 6(2)(ii) of the Foreign Exchange

Management (Transfer or Issue of any Foreign Security)

Regulations, 2004 advised the AD Bank of the petitioner to call

for the information from the petitioner to enable it to advise the

petitioner to opt for compounding. Thus, initially, respondent

no.1 was itself participating in the process that would facilitate

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the petitioner to opt for the compounding, but when the petitioner

approached respondent no.1 for compounding the very allegation,

the compounding application was returned. While one of the

allegations in the show cause notice is that the petitioner

deposited certain sums with Bank of Baroda, which according to

respondent no. 2 amounts to violation of section 3(d) of the

FEMA, no corollary show cause notice has been issued by

respondent no. 2 to the Bank of Baroda.

22. This writ petition was filed in this court on 1 st July, 2017. An

affidavit in reply was filed by the Directorate of Enforcement-

respondent no. 2 and after the preliminary submissions, it was

stated that the adjudication proceedings relating to the show

cause notice dated 13th November, 2015 have been initiated

against the petitioner for contravention of the provisions of the

FEMA and the Rules/Regulations made under the Act, as

mentioned in the show cause notice. The petitioner and its

Directors have filed replies dated 30th March, 2016 and 18th April,

2016, in which, they have pleaded not guilty to the contraventions

alleged in the show cause notice.

23. The petitioner informed the second respondent regarding

filing of compounding application with the RBI and requested for

keeping the adjudication proceedings in abeyance. The

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Enforcement Directorate, in para 8 of this affidavit stated that it

is not bound to wait for the outcome of the application filed by the

petitioner with the RBI and the Enforcement Directorate was

entitled in law to proceed with the ongoing adjudication

proceedings. Hence, the request for keeping the proceedings in

abeyance was not granted. However, the Enforcement

Directorate did not proceed in the adjudication for some time as

the matter was under further investigation. However, the fact

remains that the first respondent-RBI returned the compounding

applications to the petitioner explaining the grounds for doing so.

This information was communicated to the second respondent by

the first respondent by their letter dated 14 th March, 2017. Thus,

the compounding applications were returned. Secondly, the RBI

also forwarded a list of contraventions admitted by the petitioner,

some of which were not mentioned in the show cause notice dated

13th November, 2015. The contravention detected by the RBI

related to the NDTV-I Holdings Limited and NDTV Networks PLC,

both of which are apparently under investigation of the second

respondent. Then, a reference is made to the petitioner's

application dated 20th April, 2017 filed before the adjudicating

authority, requesting that the adjudication proceedings be held in

abeyance till they seek guidance from the FID and OID of the first

respondent. However, the second respondent inquired as to

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whether there is any provision in law enabling it to hold the

proceedings in abeyance, in absence of which, no cognizance can

be taken of this application. The petitioner also very fairly stated

that there was no legal provision, but it is the discretion of the

authority to take the application or not. The adjudicating

authority rejected this application dated 20th April, 2017 on the

ground that there is no such provision in the Foreign Exchange

(Compounding Proceedings) Rules, 2000. Thus, it was denied

that there was any provision, under which, the petitioner can

insist on keeping the proceedings in abeyance till the

compounding application is considered. Finally, what is argued is

that by an application dated 20th February, 2017 of the

Department of Revenue, Ministry of Finance, amendments have

been made in the Compounding Rules and which completely deal

with the argument of the petitioner that they have a right to seek

compounding of their offences. This is the sum and substance of

the affidavit in reply dated 25th July, 2017.

24. Thereafter, the petitioner filed a rejoinder affidavit on 4 th

August, 2017 reiterating the legal contentions as raised in the

petition as also the factual position narrated in this rejoinder. The

petitioner also pointed out that the petitioner's application to

keep the proceedings before the second respondent in abeyance

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should have been granted because there is absolutely nothing,

which would indicate contravention of the provisions of the

PMLA/FEMA. This is nothing but an unlawful interference in the

right of the petitioner to seek compounding and the issue is

apparently raised to prejudice the court. The petitioner pointed

out that there was no question of the second respondent directing

the first respondent, much less by a letter dated 6 th March, 2017,

not to compound the offence on the ground of the alleged

investigation under the PMLA in Aircel's case. The petitioner

pointed out that it was summoned by the second respondent in

connection with this case as a witness and not as an accused. In

any event, before the communication of the second respondent to

the RBI dated 6th March, 2017, the learned Special Judge-

CBI/PMLA, vide two separate orders dated 2nd February, 2017 has

already discharged all the accused in the Aircel's case. Exhibit 'B'

and 'C' to the rejoinder are the copies of these orders of the

learned Special Judge. For these reasons, it was submitted that

the communication dated 6th March, 2017 cannot interfere with

the petitioner's right to seek compounding nor it can bind the RBI.

In these circumstances, this affidavit-in-rejoinder reaffirm that

the petition deserves to succeed.

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25. What we have on record thereafter is an affidavit in reply of

the RBI and which, apart from containing the preliminary

submissions, also says on merits that the application of the

petitioner for compounding cannot be granted. The RBI is not

inclined to grant an order of compounding having regard to the

nature of the contravention and with a view that the matter will

have to be further investigated by the Directorate of Enforcement.

This affidavit of the RBI is dated 7 th August, 2017. Pertinently,

after these affidavits of the respective respondents, this court was

persuaded to pass a detailed order. That order dated 9 th August,

2017 reads as under:-

"1 Yesterday, when we invited attention of the learned counsel representing the first respondent - Reserve Bank of India to the communications at Exhibits - J and K, Shri Sharma, the learned counsel on instructions of Shri R. Seetaraman, DGM, OID, FED stated that Reserve Bank of India will immediately address a letter to the petitioner calling upon the petitioner to submit necessary data/ documents to enable its Foreign Investment Division, OID, FED, Central Office Mumbai to provide necessary guidance to the petitioner as stated in the aforesaid communications. He states that on the petitioner supplying necessary data/ documents, necessary guidance will be provided to the petitioner within 20 days from the date on which necessary documents/ data are provided by the petitioner. We accept the said statement.

2 Place the Writ Petition high upon board on 22nd August, 2017. The learned counsel appearing for the second and third respondents states on instructions that the said respondents agree for adjourning the hearing fixed today at 3.00 pm by fixing a date for hearing on some other date after 22nd August, 2017. We accept the said statement."

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26. Pursuant to that order, an application seeking leave to

amend the petition was filed and on that date itself, the chamber

summons seeking amendment to the petition was allowed.

Thereafter, the petitioner filed a rejoinder affidavit to the counter

affidavit of the RBI and it reiterated the contentions raised in the

earlier affidavit-in-rejoinder filed to the second respondent's

affidavit-in-reply. It also raised additional contentions. An

additional counter affidavit on behalf of the RBI was also filed on

22nd August, 2017, in which, it was stated the the compounding

applications submitted by the petitioner were returned by the

Compounding Authority for the reasons mentioned in the letter

dated 24th January, 2017. As on 6 th March, 2017, neither there

was any old compounding application filed by the petitioner

pending before the RBI nor any fresh application has been filed by

the petitioner thereafter. In these circumstances, the first

respondent reiterated that the writ petition deserves to be

dismissed, as the reasons for returning the compounding

applications are well founded.

27. Since the amended copy of the petition was supplied,

counter affidavit on behalf of the Enforcement Directorate-second

respondent came to be filed dated 22nd August, 2017, in which,

after reiterating the earlier stand, it is stated as under:-

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"i) Pursuant to the directions of the Hon'ble Supreme Court in December 2010, the CBI initiated investigation into the 2G Spectrum Scam. Eventually the CBI filed a Charge Sheet dated 29th August, 2014 against certain accused persons in the court of the Special Judge (CBI) (2G Spectrum Cases), Patiala House Courts, New Delhi.

("Aircel-Maxis Case"). The offences alleged in the charge sheet were that Mr. Dayanidhi Maran (the then Minister of Communications and Information Technology of the Govt. Of India) in criminal conspiracy with Mr.Kalanithi Maran, Mr.Ralph Marshall, Mr.T. Ananda Krishnan, Astro All Asia Networks Plc, UK ("Astro") and Maxis Communications Berhad, Malaysia ("Maxis") illegally facilitated the sale of shares of Aircel Limited, India ("Aircel Ltd.") held by Mr.C. Sivasankaran to Global Communication Services Holdings Limited, Mauritius, ("GCSHL") a wholly owned subsidiary of Maxis. After Maxis acquired the shares of Aircel Ltd., Mr. Dayabnidhi Maran granted licence etc. to Aircel for which he received Rs.742.58 crores as illegal gratification from Maxis through Astro and other associate entities including the subsidiaries of Astro under the garb of equity contribution in companies controlled by his brother Mr.Kalanithi Maran viz. Sun Direct TV Pvt. Ltd., India ("SDTPL") and South Asia FM Limited, India ("SAFL").

ii) Although New Delhi Television Ltd. ("NDTV Ltd.") was not named as an accused in the CBI Charge Sheet, it was established in the Charge sheet that Rs.742.58 crores was paid by Astro to SDTPL and SAFL through its subsidiaries based in Mauritius as illegal gratification to Mr.Dayanidhi Maran. Out of this amount approximately Rs.193 crores was paid to SAFL from February 2008 to October 2010 by Astro, directly and indirectly. This amount was paid on the basis of a Share Subscription Agreement and a Joint Venture & Shareholder's Agreement, both dated 10 th Jan 2008. One of the companies through which part of the aforesaid amount was routed to SAFL was a company called AH Multi Soft Pvt Ltd. ("AHMPL"), a company incorporated in India. Investigation under PMLA from SAFL revealed that a group company of NDTV Ltd. called NDTV News Ltd. ("NDTV News") had purchased the primary equity shares of SAFL for an amount of Rs.5.1 crores (Rs.1.72 crore paid on 30.08.2007 and Rs.3.39 crore paid on 28.02.2008). These shares were subsequently acquired by AHMPL from NDTV News for the same amount of Rs.5.1 crores on 23.07.2009 and passed on to the Mauritius based subsidiary of Astro. NDTV News was also a party to the above agreement. The above facts show the connection between NDTV Ltd. with Astro in

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receiving funds from Mauritius based subsidiary of Astro through AHMPL, in Aircel-Maxis Case.

iii) Maxis was to acquire Aircel Limited by purchasing its shares for an amount of about UD$ 800 million. It was to do so through its subsidiary GCSHL. For this purpose GCSHL applied in January 2006 to Foreign Investment Promotion Board (FIPB) for the approval of the Central Government. Under the applicable rules, then Finance Minister was empowered to grant such approval if the amount involved in foreign investment was up to Rs.600 crores. If the amount involved in foreign investment was more than Rs.600 crores it was the Cabinet Committee on Economic Affairs ("CCEA") which was competent to grant the approval. Accordingly in such cases then Finance Minister was required to forward the application to CCEA. In the Aircel Maxis case, the Finance Minister did not follow this procedure and himself granted the approval on 20.03.2006 even though the amount involved in foreign investment was approximately Rs.3500 crores. This he did on the erroneous basis that for the purpose of computing the amount involved, the premium to be paid on the share was liable to be ignored.

iv) The investigation into the aforesaid aspect of the approval granted by the then Finance Minister was pending at the time of filing of the CBI Charge Sheet on 29 th August 2014. This fact was expressly stated in the Charge Sheet. It was also stated that further investigation under Section 173(8) of the Cr.PC 1973 was continuing in that regard.

v) Prior to the filing of the charge sheet in the Aircel Maxis case, the CBI, ACB, New Delhi had registered the FIR no.RC-DAI-2011-A-0022 on 09.10.2011 for investigation into the offences u/s 7, 13(2) read with 13(1)(d) of PC Act and Section 120B of IPC prior to filing of the Charge Sheet by the CBI in this case. The said FIR lodged by the CBI disclosed the above said offences which were/are scheduled offences under the PMLA, 2002. The Enforcement Directorate, therefore, recorded a case being ECIR No.05/DZ/2012 dated 7th February 2012 under the PMLA for investigation of the offence of money laundering as defined u/s 3 punishable under Section 4 of the Act, against the persons accused in the said FIR. The Enforcement Directorate thereafter filed a Prosecution Complaint dated 8th January 2016 under the PMLA before the Hon'ble Special Judge (PMLA) Patiala House Courts, New Delhi. In the Complaint, although NDTV News was not

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arrayed as an accused, its connection with SAFL was set out in detail. The sale of its shares in SAFL by NDTV News to AHMPL for approximately Rs.5.10 crores was also noticed in the Complaint. The fact that the investigation was ongoing was also mentioned in the Complaint and leave of the Hon'ble Special Judge was sought to file a further supplementary Complaint under PMLA on the basis of the outcome of the ongoing investigation.

vi) On 27th February 2016 the Learned Special Judge took cognizance of the case made out by the Enforcement Directorate in the said Complaint and directed issue of process to the accused. At the same time the Learned Special Judge granted leave to the Enforcement Directorate to continue with the ongoing investigation and to take action thereon in accordance with law.

vii) During Financial year 2010-2011, Astro paid an amount of US$ 40 million through its subsidiary South Asia Creative Assets Ltd. (SACAL) to NDTV Lifestyle Holdings (P) Limited ("NLHL"), a subsidiary of NDTV Limited, ostensibly for acquiring 49% stake in the company. Significantly, at that time the worth of NLHL was only a few thousand US dollars. The amount paid by Astro/SACAL was therefore far in excess of the value of the shares. Before receiving the amount of US$ 40 million from Astro, NLHL in the same F. Y. transferred Rs.183.25 crores to another associate company of NDTV Limited i.e. NDTV Networks Plc., U. K. ("NNPLC") in U. K. Subsequently NNPLC has undergone voluntary liquidation in the same Financial Year.

viii) The Enforcement Directorate therefore has a serious suspicion that NDTV Ltd. is involved in money laundering activities and it is possible that the result of the ongoing investigation will establish this fact.

ix) The US$ 40 million was paid by NLHL to NNPLC ostensibly towards the acquisition of shares held by NNPLC in various companies forming part of the NDTV group companies. This was a contravention of the FEMA Regulations. This is one of the violations/contraventions that NDTV has sought to compound vide its Compounding Application dated 19th August 2016.

x) It is suspected that the aforesaid payment of US$ 40 million by Astro to NLHL was also part of illegal gratification paid by Maxis in relation to the acquisition of the shares of Aircel by Maxis. The Enforcement

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Directorate is at present investigating this aspect under PMLA.

xi) Another contravention committed by NDTV Limited was in respect of the investment of US$ 163.78 million by NNPLC in 5 Indian group companies of NDTV Limited. It is suspected that the funds raised by NNPLC may be linked to overseas entities involved in the Aircel-Maxis Case. Accordingly further enquiries under PMLA are being carried out for which NDTV Limited has sought compounding.

xi) It was in these circumstances that, in response to the letter of RBI dated 05.12.2016 the Enforcement Directorate issued the letter dated 6th March, 2017 to RBI advising the RBI not to compound the contraventions referred to in the Compounding Applications of NDTV, the Petitioner."

28. Thereafter, it was stated that from the Airce Maxis case,

the CBI has registered another FIR on 2nd June, 2017 against the

petitioner, its promoters and unknown officials of ICICI Bank

Limited and other unknown persons in respect of the offences

punishable under section 120B read with section 420 of the

Indian Penal Code, 1860 and section 13(2) read with section

13(1)(d) of the Prevention of Corruption Act, 1988. Based on this

FIR, the Enforcement Directorate recorded a case under the

PMLA against the accused in the aforesaid FIR dated 7 th August,

2017. Then, the facts as alleged by the Enforcement Directorate

against the accused are set out in para 7 (sub paras of the

additional counter affidavit). Then, as far as the contraventions

against some companies, which are Mauritius based, are set out

and it is stated that the order of discharge of the learned CBI

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Judge is also under challenge. The further steps have been set

out in the subsequent paragraphs of this additional counter

affidavit and it is reiterated that there is no obligation to hold the

adjudication proceedings in abeyance. All the more, in the light of

the subsequent amendments to the Compounding Rules. For

these reasons, the submission is that the petition be dismissed.

29. The petitioner filed, on 22nd September, 2017, an additional

affidavit-in-rejoinder to the counter affidavit of the second

respondent. In both these affidavits, the petitioner prayed that no

pending case can interfere with the petitioner's right to seek

compounding of the offences and for these reasons, the petition be

allowed.

30. With these materials, though the petitioner was heard on

subsequent dates by this court, what we have seen is that the

petition was listed on 6th November, 2017, but was adjourned to

13th November, 2017. On 13th November, 2017, after hearing both

sides, this court passed the following order:-

" On the earlier date, we had called upon the learned counsel appearing for the Union of India to produce the file of the decision which is communicated vide communication dated 6th March 2017 addressed by the Special Director of Enforcement Directorate to the Chief General Manager, Foreign Exchange Department, OID, Reserve Bank of India, Mumbai. The learned counsel appearing for the second and third respondents, on instruction from Mr.Kamal Singh, Deputy Director, states that the Enforcement Directorate will withdraw the

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decision communicated by the aforesaid letter dated 6th March 2017. He further states that this statement will not preclude the Enforcement Directorate from applying its mind as regards exercise of power under proviso to sub- rule (2) of Rule 8 of the Foreign Exchange (Compounding Proceedings) Rules, 2000. We accept the statement made. In view of the said statement, challenge to the communication dated 6th March 2017 does not survive.

2. The learned counsel appearing for the Reserve Bank of India seeks time on the ground that the counsel briefed in the matter is not available. By consent, fix the petition for admission on 4th December 2017, high upon board.

3. The learned counsel appearing for the second and third respondents, on instruction, states that the adjudicating proceedings will be adjourned to a date after 4th December 2017."

31. The writ petition was then placed on 4th December, 2017 and

22nd December, 2017. After these dates, on 12 th January, 2018

onwards, it has been listed before us. From the record, it appears

that another Chamber Summons (ST) No. 64 of 2018 for

amendment was moved. That was moved after inspecting the

records by the petitioner. On that chamber summons, a detailed

order was passed on 8th February, 2018. That order reads as

under:-

"1. We have heard Mr. Dwarkadas appearing in support of the chamber summons and Mr. Venegaonkar for the contesting respondent, particularly the second respondent.

2. Mr. Venegaonkar would submit that this chamber summons should not be granted for leave to amend is sought to insert the pleas inconsistent with the case of the petitioner as initially or originally pleaded. Therefore, the structure of the petition undergoes a drastic change and equally the cause of action.

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3. Mr. Dwarkadas would submit to the contrary. He would submit that as pointed out in the affidavit in support, the petitioner was required to move this chamber summons. The petitioner was required to move this chamber summons only on account of the stand of the Directorate of Enforcement.

4. The facts are relevant and the events transpiring subsequent to the filing of the petition are now required to be incorporated. Further, the events require the petitioner to challenge the constitutional validity of a notification of 2017.

5. In these circumstances, Mr. Dwarkadas would submit that the petitioner be permitted to amend the petition.

6. After hearing both sides on this limited point, it is evident that by our order on the chamber summons, we are not expressing any opinion on the rival contentions and particularly the merits of the amended pleas. Therefore, the merits have to be gone into at a subsequent stage. All contentions and pleas of the Directorate of Enforcement with regard to the merits of these added paragraphs are, therefore, expressly kept open. Without prejudice to the contentions of all parties on merits, the chamber summons is made absolute. The amendment is allowed. The writ petition stands amended in terms of the Schedule to the chamber summons. There would be no order as to costs.

7. It is also argued by the RBI that any allegations made by the petitioner against it are not admitted. Once the reply filed to the chamber summons is exhaustive and dealing with merits of the amended pleas, they are not filing any additional affidavit. Therefore, the court can proceed on the available material.

8. Let the amendment be formally carried out within a period of one week from today, but we would proceed on the footing that the petition stands amended.

9. List the writ petition on 12th February, 2018 at 3.00 p.m."

32. In pursuance of that order, Mr. Venegaonkar learned

advocate appearing for the second respondent produced a sealed

envelop which was opened and re-sealed and kept in the custody

of this court. On 23rd February, 2018, during the course of

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hearing, Mr. Venegaonkar produced a copy of the communication

dated 9th February, 2018 of the Government of India, Ministry of

Finance, Department of Revenue, addressed to the Director of

Enforcement, New Delhi, annexing therewith the opinion of the

Ministry of Law and Justice, Department of Legal Affairs, which

opinion was sought by the Department of Revenue. That was

taken on record and marked as 'X' for identification. That was

with regard to a legal argument canvased before us.

33. Before we refer to all the arguments, we must make a

reference to an affidavit of the petitioner dated 2nd December,

2017 filed in this petition seeking to place on record the outcome

of the inspection of the documents taken by the petitioner. The

writ petition raises the issue of a compounding application being

not considered by the RBI, though the Rules enable it to do so, but

the RBI maintains that it was equally bound to consider the

contents of a letter from the Enforcement Directorate. It is in

these circumstances and when the RBI relied upon the

amendment to the Compounding Rules that the petitioner filed an

affidavit seeking to raise certain legal issues. Prior to that, it

sought to place on record the further developments/events and

further correspondence exchanged with the RBI. That is how this

affidavit of 2nd December, 2017 was filed.

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34. The petitioner, as stated above, filed a chamber summons

for amendment of the petition, which was allowed and the

contents of that amendment are equally material for this petition.

It is based on those contents that the issue of legality and validity

of the Rules would arise for determination of this court, according

to the petitioner.

35. Mr. Dwarkadas learned senior counsel appearing on behalf

of the petitioner submitted that the writ petition raises certain

important issues and according to him, it would be necessary for

this court to consider the scheme of compounding as envisaged by

the FEMA. He submitted that the scheme of compounding under

the FEMA postulates that contravention of FEMA is treated as a

civil offence. It is amenable to penalty under the FEMA.

Mr.Dwarkadas would contend that the Compounding Rules, vide

Rule 3, envisage two compounding authorities, namely, the RBI

and the Enforcement Directorate, such that the RBI, as statutory

regulator and repository of foreign exchange dealings, is vested

with powers to compound all contraventions under the FEMA,

save and except for contraventions under section 3(a) of the

FEMA (vide Rule 4 of the Compounding Rules) and the

Enforcement Directorate is the sole repository of powers to

compound contraventions under section 3(a) of the FEMA (vide

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Rule 5 of the Compounding rules. The procedure for

compounding is set forth in Rule 8 of the Compounding Rules. It

confers power upon the Compounding Authority to call for any

information, record or other documents relevant to the

compounding proceedings, and stipulates that the compounding

authority shall pass an order of compounding after affording an

opportunity of hearing, as expeditiously as possible and not later

than 180 days from the date of application.

36. Mr. Dwarkadas would submit that the proviso to Rule 8(2)

of the Compounding Rules was introduced vide the impugned

notification dated 20th February, 2018. A reading of the proviso

would mean that before the Directorate of Enforcement can form

a view, it must be satisfied that the proceeding initiated under

Rule 4 of the Compounding Rules must relate to a serious

contravention suspected of money laundering. In other words,

the proceedings for compounding must be a direct or indirect

attempt either to indulge or knowingly assist or knowingly be a

party to or actual involvement in any process or activity

connected with proceeds of crime (see section 3 of the PMLA). In

other words, the compounding proceedings must relate to an

offence of money laundering i.e. foreign exchange or foreign

security derived or obtained directly or indirectly as a

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consequence of a criminal activity relating to a scheduled offence

under the PMLA. The view which to be formed must, therefore,

be based upon existence of circumstances, from which, a

reasonable, bonafide and honest opinion/inference can be drawn

to the aforesaid effect and in particular that the compounding

proceedings, therefore, relates to a serious contravention

suspected of money laundering.

37. Mr. Dwarkadas would submit that the delegated legislation

fails to conform to parent legislation. In that, the impugned

notification seeks to deprive RBI of its vast powers as statutory

custodian of foreign exchange, to exercise powers to compound

offences under section 15 of the FEMA read with Rule 4 of the

Compounding Rules and purports to clothe the Enforcement

Directorate with powers to denude RBI of exercise of statutory

powers and authority without stipulating any minimum

safeguards of objectivity.

38. Mr. Dwarkadas submits that wide and untrammeled powers

are conferred upon the Enforcement Directorate under the

impugned notification, whereby, if the Enforcement Directorate

were merely of the "view", that a serious contravention suspected

of money laundering or terror financing or affecting the

sovereignty and integrity of the nation, the compounding

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authority shall become liable to remit the matter to the

appropriate adjudicating authority for adjudicating the

contravention under section 13 of the FEMA, exposes such power

to the vice of arbitrariness.

39. Mr. Dwarkadas submits that the statutory powers vested in

the RBI are incapable of being lightly interfered with and/or

undermined by the executive. Accordingly, mere suspicion

cannot take the place of relevant circumstances that must exist

in order to justify inference, which must demonstrably be the sine

qua non for action.

40. Mr. Dwarkadas would submit that it is insufficient in law for

the Enforcement Directorate to interdict RBI's compounding

powers on mere suspicion as to the commission of one or more out

of the category of offences stipulated within the impugned

notification vis-a-vis a person seeking to exercise the right of

compounding conferred under section 15 of the FEMA.

41. Mr. Dwarkadas would submit that through the impugned

notification, civil consequences under the FEMA are at risk of

undermining and powers to compound a civil wrong are

interfered with through introducing a tenuous link with potential

criminal proceedings. Thus, two similarly situated persons,

namely, both of whom otherwise have a vested statutory right

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under section 15 of the FEMA to seek compounding, are exposed

to arbitrary and discriminatory treatment. Illustratively, where

a person instituting an application under section 15 of the FEMA

for compounding were purportedly suspected by the Enforcement

Directorate, either prior to or after institution of such

compounding application of an offence of money laundering, then,

(a) the mere commencement of investigation by the Enforcement

Directorate absent the mandatory pre-requisite of a predicate

registered offence under sections 2(u), 2(y) and 3 read with the

Schedule to the PMLA (notably, in the case of the present

petitioner, no registered offence under the Schedule to the PMLA

exists); and/or (b) despite potential closure of such purported

investigation, without charges being eventually brought; and/or

(c) where any such purported investigations culminate in

proceedings, which are dismissed by final conclusive

unappealable order/judgment, unequal and discriminatory

treatment lacking intelligible differentia ensures, in effect

violation of Article 14 of the Constitution of India. In effect, the

mere fact of pendency of investigation against two similarly

situated persons cannot deprive either the statutory right to

secure compounding under the FEMA, whether through the RBI

or the Enforcement Directorate and where such compounding of a

civil offence were granted by the RBI or the Enforcement

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Directorate, cannot hinder the Enforcement Directorate from

instituting criminal proceedings. In the case of Sociedade De

Fomento Industrial Pvt. Ltd., despite the pendency of proceedings

before the adjudicating authority, the RBI proceeded ahead with

compounding.

42. Mr. Dwarkadas further submits that the PMLA is a

complete Code in itself, providing inter alia for imprisonment,

attachment, confiscation of proceeds of crime and civil

compounding under the FEMA cannot in any manner affect the

maintainability of the PMLA proceedings. While the PMLA

proceedings arise out of offences which are criminal in nature,

since the FEMA contraventions are civil in nature, these are

completely independent of the PMLA proceedings. Thus, even if

the FEMA contraventions by the petitioner were compounded,

such compounding can have no bearing on any contravention of

the PMLA, since any such proceedings are capable of being

proceeded with independently in law, despite the FEMA

contraventions being compounded. Compounding of the FEMA

contraventions, which are civil in nature, do not in any manner

affect any ongoing or future PMLA proceedings.

43. Mr. Dwarkadas submits that the actions of the Enforcement

Directorate, in notifying the RBI that a serious contravention

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involving money laundering is suspected, may, in any event, be

questioned on grounds that no circumstances leading to inference

of the kind contemplated i.e. where no serious contravention

suspected of money laundering exists, the action might be

exposed to interference through judicial review, unless the

existence of circumstances is made out and in such a case, the

onus of proof must lie on the Enforcement Directorate to establish

that the facts justify such an inference. The Enforcement

Directorate's actions are amenable to judicial review, since it is

available to the petitioner to show that either such circumstances

do not exist or that they are such that it is impossible for anyone

to form an opinion therefrom suggestive of the aforesaid and to

challenge any such conclusion/opinion on grounds of (a) non-

application of mind or (b) perversity or (c) that it was formed on

collateral grounds and was beyond the scope of the statute.

Formation of opinion is a subjective process, which must be

founded on the objective test of existence of circumstances

suggesting that the inference is made out. While such an opinion

is not subject to a challenge on the grounds of propriety,

reasonableness or sufficiency, the honest formation of an opinion

that an investigation is necessary. It is not reasonable to say that

such opinion has been formed on circumstances which it thinks

exist. The existence of circumstances, if questioned, has to be

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proved at least prima facie. It is not sufficient to assert

circumstances exist and give no clue to what they are, because

the circumstances must be such as to lead to conclusions of

certain definiteness. If the circumstances are such that no

inference of the enumerated kind to justify an investigation can at

all be drawn, the action would be ultra vires the statute and void.

It is hard to contemplate that the legislature could have left to

subjective process both the formation of opinion and also the

existence of circumstances on which it is to be founded,

abandoning safeguard of requiring the opinion to be founded on

existent circumstances which suggest the things for which an

investigation can be ordered. If it is shown that the

circumstances do not exist or that they are such that it is

impossible for anyone to form an opinion therefrom suggestive of

the things necessary, the opinion is challengeable on grounds of

non-application of mind, or perversity or on the ground that it

was formed on collateral grounds and was beyond the scope of the

statute.

44. Mr.Dwarkadas would submit that the impugned notification

is contrary to and exceeds the scope and amplitude of section 15

of the FEMA, which gives a right to every person to make a

compounding application and empowers the RBI and the

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Enforcement Directorate to compound offences in the manner

prescribed. Section 46(1) of the FEMA empowers the Central

Government to make rules to carry out the provisions of this Act.

Section 46(2) provides that the Central Government may make

rules to provide for the manner in which the contravention may

be compounded under sub-section (1) of section 15. However, the

impugned notification, on the contrary, provides that a

compounding application will be rejected without any

consideration if the Enforcement Directorate is of the view that

the applicant is suspected of offences mentioned in the impugned

notification. Thus, the impugned notification travels beyond the

power conferred under section 46 and is contrary to section 15

and hence violative of Article 14 of the constitution of India.

45. Mr. Dwarkadas further submits that the impugned

notification becomes a weapon of unbridled harassment, whereby,

its misuse by the executive acting through the Enforcement

Directorate cannot be ruled out. In the case of Rameshwar

Prasad vs. Union of India1 it is held that if the satisfaction is mala

fide or is based on wholly extraneous or irrelevant grounds, the

court would have the jurisdiction to examine, because in that case

there would be no satisfaction in regard to matters on which the

concerned authority was required to be satisfied. Exercise of 1 (2006) 2 SCC 1 Page 34 of 122 J.V.Salunke,PA

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power is subject to judicial review, at least to the extent of

examining whether the conditions precedent have been satisfied

or not. This examination will necessarily involve the scrutiny as

to whether there existed material for the satisfaction that the

situation had arisen. When considering the question of material it

is not the personal whim, wish, view or opinion or the ipse dixit

de hors material placed which is relevant for the purpose. The

authority has to be convinced of, or has to have sufficient proof of

information with regard to or has to be free from doubt or

uncertainty about the state of things indicating the situation.

Although the sufficiency or otherwise of the material cannot be

questioned, the legitimacy of the inference drawn from the

material is certainly open to judicial review. The burden of proof

would, when there is a challenge brought in judicial review, be on

the authority to satisfy that the material exists, since the

material is within the exclusive knowledge of the authority (see

paras 124, 125 and 126 of the Majority judgment of Y. K.

Sabharwal, B. N. Agrawal and Ashok Bhan, JJ). Sometimes,

power is coupled with a duty. Thus a limited judicial review

against administrative action is always available to the courts. A

person entrusted with discretion must direct himself properly in

law. He must call his attention to matters which he is bound to

consider. He must exclude from consideration matters which are

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irrelevant. If he does not obey those rules, he may truly be said to

be acting unreasonably. Similarly, there may be something so

absurd that no sensible person could ever dream that it lay within

the powers of the authority. It is an unwritten rule of law,

constitutional and administrative, that whenever a decision

making function is entrusted to the subjective satisfaction of a

statutory functionary, there is an implicit obligation to apply his

mind to pertinent and proximate matters only, eschewing the

irrelevant and the remote (Shalini Soni vs. Union of India2). A

decision will be said to be unreasonable in the wednesbury sense

when it is (a) based on wholly irrelevant material or irrelevant

considerations; (b) it has ignored a very relevant material which

it should have taken into consideration; or (c) it is so absurd that

no sensible person could ever have reached it. As Lord Diplock

observed in the CCSU case, a decision will be said to suffer from

wednesbury unreasonableness, if it is so outrageous in its

defiance of logic or of accepted moral standards that no sensible

person who had applied his mind to the question to be decided

could have arrived at it. Interference is called for when there is

an abuse of power or what is sometimes called fraud on power

(see paras 239 to 243 and 249: Minority dissenting judgment of

A. Passayat, J. concurs on this issue).

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46. Mr.Dwarkadas further submits that the compounding

applications were filed by the petitioner with RBI on 19th August,

2016 and 24th October, 2016, but returned to the petitioner on 20 th

January, 2017 for guidance by Overseas Investment Division and

Foreign Investment Division (both divisions of the RBI), but not

rejected. During the pendency of such 'guidance', the amendment

notification was issued on 20th February, 2017 and the letter of 6th

March, 2017 followed thereafter. Therefore, the impugned

notification cannot have any retrospective effect vis-a-vis the

compounding applications and is not applicable to the petitioner.

47. Mr. Dwarkadas further submits that the impugned

notification was not laid in the manner required in law forthwith

after 20th February, 2017 and the explanation of the Enforcement

Directorate that it has been tabled in Rajya Sabha on 6 th March,

2018 (during the financial year of the writ petition) after the

lapse of a mere 61 days (across four parliamentary sessions)

renders the notification to the interdict of the salutary principle

of administrative law. In the case of Babu Verghese vs. Bar

Council of Kerala3, it is held that if the statute prescribes a

particular procedure to do an act in a particular way, that act

must be done in that manner, otherwise, it is not at all done. A

principle cited with approval in AICTE, wherein, it was held that 3 (1999) 3 SCC 422 Page 37 of 122 J.V.Salunke,PA

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non-placing on the floor of the Houses of Parliament, in the

manner required under the relevant statute vitiated those

regulations. The AICTE judgment was held by this Court in the

case of Anil versus Maharashtra Academy of Engineering and

Education Research4, to be per incuriam and principles laid down

in Atlas Cycles vs. State of Haryana5 i.e. requirements are

'directory' not 'mandatory', have been held to be good law. The

petitioner has also placed reliance on the judgments in the case of

Quarry Owners Assn vs. State of Bihar6, Prohibition and Excise

Superintendent, A. P. vs. Toddy Tappers Co.op. Society,

Narredpally7 and K. T. Plantation Private Limited vs. State of

Karnataka8.

48. Mr.Dwarkadas further submits that the impugned

notification seeks to take away the right of compounding and thus

transgresses principles of natural justice. While Rule 8(2) of the

Compounding Rules provides for the right of a personal hearing

before passing orders on a compounding application, the

impugned notification does not provide for the right of a personal

hearing before rejecting the compounding application.

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49. Mr.Dwarkadas then submits that the impugned notification

is in any event meaningless and/or contrary to law: (a) it

contemplates serious contravention failing to carry minimum

safeguards quintessential to distinguishing a serious

transgression of law from one otherwise than serious. All

contraventions of law are bound to be treated as serious and

therefore, no effective meaning can be given to the use of the word

'serious' within the purported proviso to sub-rule (2) of Rule 8 of

the Compounding Rules, absent requisite minimum objective

safeguards; (b) alternately, 'serious' must be attributed the

meaning of something more than routine contravention,

assuming without admitting that the FEMA contraventions were

at all capable of such a distinction being drawn, in which event,

again, no rational criterion has been devised in the impugned

notification to distinguish what type of contravention will fulfill

the scope of 'serious'; (c) in stipulating that the Enforcement

Directorate must have formed a view although the Enforcement

Directorate has attempted to distinguish the use of 'view' against

the requirements of 'opinion, the petitioner has nullified such

contention through relying on the dictionary meaning of 'view', to

be synonymous with that of 'opinion'. The impugned notification

lacks criterion to be employed by the Enforcement Directorate in

reaching such a view, thus endangering misuse by the

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Enforcement Directorate through manifest arbitrariness/

unreasonableness, without any accountability whatsoever, as

apparent in the present case. Significantly, when the

Enforcement Directorate issued its letter of 6 th March, 2017 to the

RBI purporting to interdict the petitioner's right to seek

compounding, no notice or writing whatsoever had been received

by the petitioner in relation to any purported investigation

ongoing by the Enforcement Directorate. Again, therefore, absent

requisite minimum objective safeguards, there can be no

subjective satisfaction capable of being recorded; (c) finally, the

impugned notification fails to define the contours of suspicion and

confers unfettered powers upon the executive without guidance

as to degree of suspicion, which must fulfill the minimum

requirement of grave suspicion and necessarily be founded upon

the existence of circumstances such that were supported by

compelling material evidence, justifying tentative conclusions of

certain definiteness and in the case of money laundering fulfill the

minimum criterion of a registered predicate offence under the

Schedule to the PMLA. As held by the Hon'ble Supreme Court in

the case of Barium Chemicals Limited vs. Company Law Board 9,

the requirement must postulate the absence of a general

discretion to go on a fishing expedition to find evidence. Absent

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such minimum objective safeguards, every application to the RBI

for compounding would be put to risk of being pre-empted by the

Enforcement Directorate.

50. Mr. Dwarkadas further submits that the Enforcement

Directorate appears to be operating entirely under a

misconception that under the impugned notification, it is

sufficient to have a mere suspicion to justify purported

investigation, which, in turn, must form and is treated as the view

required under the impugned notification. If that alone were the

requirement, the impugned notification would have to provide

that wherever any investigation under the PMLA is undertaken,

compounding applications shall be liable to stand rejected.

However, that is not the language of the impugned notification

and such a meaning, which would run contrary to the parent

legislation, would, in any event, be ultra vires the FEMA.

51. Mr.Dwarkadas then submits that the facts of the petitioner's

case would reveal that the actions of the Enforcement Directorate

in purporting to interdict RBI display non application of mind and

perversity. The Enforcement Directorate's view is founded on

collateral grounds beyond the scope of the statute and the

impugned notification.

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52. Mr. Dwarkadas submits that the applications for

compounding, which have been returned by the RBI arise from

the show cause notices of the Enforcement Directorate and do not

concern any matters, which are alleged to be subject of a

purported PMLA investigation by the Enforcement Directorate.

To the extent this Directorate purports to rely upon the PMLA

investigations allegedly commenced against the petitioner so as to

interdict the compounding proceedings, the Enforcement

Directorate is acting contrary to the provisions of law. They are

virtually dictating the RBI in matters of compounding, which are

within the exclusive jurisdiction and power of the RBI. The RBI

has not to concern itself with the investigations allegedly

commenced and pending by virtue of the proviso to Sub-rule (2)

of Rule 8 of the Compounding Rules. The RBI is being directed by

the Enforcement Directorate not to proceed with the

compounding applications of the petitioner. This act of the

Enforcement Directorate is contrary to the FEMA. Assuming

without admitting that the Enforcement Directorate can

communicate its views to the RBI within the meaning of the

proviso to Sub-rule (2) of Rule 8, still, the RBI cannot be directed

to abide by that view if that view of the Enforcement Directorate

is not in accordance with the proviso. In other words, so long as

the view taken and recorded by the Enforcement Directorate does

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not indicate that it is relating to a serious contravention

suspected of money laundering, terror financing or affecting

sovereignty and integrity of the nation, the Compounding

Authority is not obliged to abide or respect that view. It is then

not obliged to remand the case to the appropriate adjudicating

authority for adjudication under section 13 of the FEMA.

53. Even otherwise, Mr. Dwarkadas would submit that since

this court has granted an opportunity to take inspection of the

Enforcement Directorate's files, after taking inspection, the

petitioner has informed this court that no material is found in the

files justifying the Enforcement Directorate's action. Further, it is

apparent that the Enforcement Directorate has unequivocally and

unconditionally withdrawn its earlier letter dated 6th March,

2017. Onces it has so withdrawn its letter, then, it is apparent

that the Enforcement Directorate has no material in its

possession, based on which, it can communicate a view to the RBI

as envisaged by the proviso. Mr.Dwarkadas then submits that the

further communication from the Enforcement Directorate dated

1st December, 2017 is inadequate to justify the interference with

the power of compounding vesting with the RBI. The letter is

clear, inasmuch as that power is also exclusive in nature and

vesting solely in the RBI. Therefore, today there is no material,

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based on which, any view can be recorded by the Enforcement

Directorate.

54. Mr. Dwarkadas then submitted that the Enforcement

Directorate has since attempted to supplement its position vide

affidavit in reply dated 8th February, 2018 filed by the

Enforcement Directorate to Chamber Summons (L) No. 64 of

2018 contending (a) the petitioner is accused in FIR

No.2172017A009 dated 2nd June, 2017; (b) the petitioner is

accused in a case registered by the Enforcement Directorate vide

ECIR/09/HIU/2017 dated 7th August, 2017; and (c) the petitioner

is under investigation in PMLA Case No. ECIR/05/DZ/2012

(Aircel-Maxis case), wherein overseas investigation is pending.

55. Mr. Dwarkadas further submits that it is not available in law

to the Enforcement Directorate to supplement/amplify/add to the

lack of credible basis apparent from the Enforcement

Directorate's letter of 1st December, 2017 which forms the premise

for purporting to interdict the RBI's right to proceed with its

statutory power to consider the petitioner's compounding

application, through the means of the Enforcement Directorate's

affidavit of 8th February, 2018, which offers reasons which are not

to be found in the letter of 1st December, 2017 and thereby causing

grave injustice to the petitioner.

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56. Mr.Dwarkadas further submits that assuming whilst

maintaining its position that the Enforcement Directorate's

affidavit of 8th February, 2018 cannot supplement reasons or

rather the lack of them in the letter of 1 st December, 2017,

significantly, no fair-minded person can form a view against the

petitioner based on the allegations made in the Enforcement

Directorate's affidavit of 8th February, 2018: (i) as regards the

first of the matters cited in the Enforcement Directorate's

affidavit of 8th February, 2018 i.e. the FIR dated 2nd June, 2017, it

mainly relates to an interest waiver/reduction that was granted

by the ICICI Bank to the promoters and/or a holding company of

the petitioner which does not directly concern the petitioner. In

any event, the FIR was registered only on 2nd June, 2017 i.e. well

subsequent to the Enforcement Directorate's letter dated 6th

March, 2017 to the RBI. A writ petition being Writ Petition

No.1863 of 2017 was instituted and is currently pending in the

Hon'ble Delhi High Court against the FIR. In the writ petition, it

was specifically averred by the petitioner that there is no

allegation of any offence committed by the petitioner. Pertinently,

in response thereto, the Enforcement Directorate in para 26E at

page 4 stated that "no comments are offered for want of

knowledge". In effect, this averment is tantamount to an

admission that there is no offence by the petitioner, which is the

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subject-matter of the purported FIR; (ii) as regards the second of

the matters cited in the Enforcement Directorate's affidavit of 8 th

February, 2018 i.e. the ECIR of 7 th August, 2017, the petitioner has

no record of having received any intimation in relation thereto;

(iii) as regards the last of the matters cited in the Enforcement

Directorate's affidavit of 8th February, 2018 i.e. the Aircel-Maxis

case, the petitioner was merely summoned as a witness and not

as an accused. Further more, since the Aircel-Maxis case was

relied upon in the Enforcement Directorate's letter dated 6 th

March, 2017, which has been unequivocally withdrawn with the

permission of this court, there is no scope to resurrect reference

to such case once again, through the back-door method of the

affidavit in reply to the petitioner's chamber summons. In any

event, in the Aircel-Maxis case, the Special Judge/Trial Court has

discharged/acquitted the accused persons, vide order dated 2nd

February, 2017.

57. Mr.Dwarkadas, therefore, submits that this court should

allow the petition and direct the RBI to take a decision on the

compounding applications preferred by the petitioner. This court

should also direct that the Enforcement Directorate now cannot

adjudicate on the alleged contravention of the provisions of the

FEMA by passing an adjudication order and the Enforcement

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passing an appropriate order and issuing a writ in regard thereto.

Mr.Dwarkadas also supported his oral arguments by the written

note handed in on 12th March, 2018. To be fair, Mr. Dwarkadas

also argued that the proviso below Sub-rule (2) of Rule 8 cannot

be relied upon for the Rules have to be amended and the

amendment has to take effect strictly in accordance with law. The

position today is that the law has not been abided by and in that

regard, strong reliance is placed by Mr.Dwarkadas on the

provisions contained in section 48 of the FEMA. He would submit

that once the Rule has not been laid before the Parliament, then,

it cannot take effect. If the amendment to the Rule also requires

that the same should be laid before the Parliament and in terms of

section 48, then, unless the respondents demonstrate compliance

with this provision, they are not empowered to rely on the

proviso. To the extent they are relying upon it and as noted

above, that reliance should not be permitted at all as the law is

contravened totally.

58. In support of the above contentions, Mr. Dwarkadas placed

reliance on the following judgments:-

(i) Association of Management of Private Colleges vs. All India Council for Technical Education and Ors., (2013) 8 SCC 271.

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(ii) Barium Chemicals Ltd. and Anr. vs. Company Law Board and Ors., AIR 1967 SC 295 (V. 54 C 59).

(iii) Rameshwar Prasad and Ors. (VI) vs. Union of India and Anr., (2006) 2 SCC 1.

(iv) State of T. N. and Anr. vs. P. Krishnamurthy and Ors., (2006) 4 SCC 517.

(v) P. Vijayan vs. State of Kerala and Anr., (2010) 2 SCC

398.

(vi) Kishan Singh (Dead) through Lrs. vs. Gurpal Singh and Ors., (2010) 8 SCC 775.

59. In answer to Mr. Dwarkadas's arguments, all that Mr.Dhond

learned senior counsel appearing on behalf of respondent no. 1-

RBI would submit is that the issue now raised is of a wider nature.

The issue concerns invocation and application of the proviso

below Sub-rule (2) of Rule 8 of the Compounding Rules. This

court would have to rule upon that aspect of the matter and which

is squarely arising between the petitioner and the Enforcement

Directorate. So far as the RBI is concerned, it will abide by the

order and directions of this court in this petition and act

accordingly. The writ petition, therefore, is mainly contested by

the Enforcement Directorate and the Union of India.

60. Mr. Venegaonkar learned advocate appearing for

respondent nos. 2 and 3 would submit that the writ petition has

no merit and should be dismissed. He would submit that there is Page 48 of 122 J.V.Salunke,PA

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complete compliance with the provisions of section 48 of the

FEMA. The notification inserting proviso dated 20 th February,

2017 has been forwarded to the Parliament on 26th February,

2018. The notification has been tabled in the Rajya Sabha on 6 th

March, 2018. In these circumstances, there is compliance with

the provisions of law. Mr.Venegaonkar also supplied to us the

details of the days when the House was in session. He would

submit that once the Rules have been laid before the Parliament,

then, there is complete compliance with law. In any event, the

position is very clear and that is that the provision, which

requires laying of rules and regulations before the Parliament, is

not mandatory, but directory. Section 48 of the FEMA entails

laying of rules before the Parliament simplicitor. That does not

mean that the rules have to wait to take effect until both Houses

agree in making the modification in terms of the proviso or until

both Houses agree with the rule, amendment should not be made.

In any event, that requirement can be still complied with. Once

the rules have been tabled before the Rajya Sabha, then, there are

further sittings of both Houses, during which, the amendment can

be considered. Therefore, the invocation of the notification and

its application at the instance of the Enforcement Directorate is

not illegal.

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61. Mr. Venegaonkar placed strong reliance upon the judgment

of the Hon'ble Supreme Court in the case of Atlas Cycles (supra). Our attention was also invited to a Division Bench judgment of

this court rendered by the Bench at Aurangabad in the case of

Anil vs. Maharashtra Academy of Engineering and Education

Research10. A copy thereof was produced very fairly for our

perusal by Mr. Dwarkadas. Mr. Venegaonkar, therefore, submits

that in view of this judgment of this Court, the issue regarding the

rules becoming operative, effective and capable of being invoked

and applied is concluded.

62. Mr. Venegaonkar submits that the whole petition is founded

on erroneous legal basis that compounding of an offence is a right

vesting in the petitioner. Rather, according to Mr. Venegaonkar,

the position is otherwise in law. None can claim unfettered,

unrestricted and absolute right of compounding an offence. It is

not for an offender to dictate terms and he cannot decide whether

he deserves to be tried for an offence or that the offence should be

compounded. The power to take all such decisions vests

exclusively in the State or the authority. Therefore, a person like

the petitioner, who has contravened the provisions of the Act

cannot choose for itself whether to be tried for such contravention

and penalised or whether that contravention should be

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compounded. Precisely, this is what the petitioner has taken

upon itself to decide and determine. If that cannot be determined

by the petitioner, then, the whole petition must be dismissed

solely on this reasoning and conclusion. More so, when the

Compounding Authority/RBI does not complain of any undue or

uncalled for much less illegal interference with its power under

section 15 of the FEMA.

63. Alternatively and without prejudice to the above argument

and in the event this court holds that there is a statutory

mechanism, which enables the RBI to compound the offence, then,

even that power vesting in the RBI is not absolute. It is coupled

with a duty. The RBI is not bound to compound every

contravention unmindful of the consequences of such act on its

part. The RBI ought to take into account several matters,

including whether larger public interest is going to be subserved

by such compounding. Therefore, the power to compound

contravention conferred by section 15 should be exercised

cautiously, carefully and to subserve larger public interest. If that

is not interpreted as above, then, by the exercise of power

contemplated by section 15, the object and purpose of the FEMA

would be defeated. Thus, Mr. Venegaonkar submits that the

power to compound, which has been conferred in the RBI should

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Rules and that procedure should be strictly followed. Even

without the amendment and intervention of the proviso below

Sub-rule (2) of Rule 8, that power of compounding was not

absolute or uncontrolled. Once the compounding has to be done

by the authority only after passing an order and before that order,

opportunity of being heard has to be granted to all concerned,

then, it is evident from the scheme of the Act that such power, as

is vesting in the RBI, has to be exercised more or less on par with

similar power, which is conferred in the Enforcement Directorate.

Our attention in that behalf is invited to Rules 4 and 5 of the

Compounding Rules by Mr.Venegaonkar. On the aspect of the

constitutional validity of the proviso recently introduced by the

amendment to the rules, Mr.Venegaonkar contended that in the

affidavit in reply/counter affidavits of the Enforcement

Directorate, sufficient and adequate light is thrown on this aspect

and it is elaborately pointed out as to how this proviso is not

unconstitutional, much less ultra vires the FEMA or the RBI Act.

If matters, which are extremely relevant for the purpose of

decision on the compounding applications, are implicit in the

scheme of law, then, that law or provision cannot be declared as

unconstitutional or ultra vires. Mr. Venegaonkar submits that the

mandate of Articles 14 and 21 is not violated at all and that

argument has no merit. The Act and the Rules have all to be read

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and construed together and harmoniously. So read, it would be

evident that there is parallel mechanism of compounding the

contravention and power in that behalf is conferred equally in the

Enforcement Directorate. The Enforcement Directorate cannot

exercise that power unmindful of the contravention or suspected

involvement of the applicant in offences punishable under the

PMLA. Equally, the RBI cannot ignore the mandate of the PMLA.

A money launderer cannot escape the clutches of law by seeking

recourse to the power of compounding the contravention of

FEMA. The result would be that he would rely upon such

proceedings and outcome or decision thereof to defeat the object

of PMLA/FEMA and escape the consequences in law. It is well

settled that the power conferred in a statutory authority under

an Act cannot be exercised in such a manner so as to defeat and

frustrate the object and purpose of a pari materia enactment or

an another stringent law. Precisely, that is sought to be achieved

in the instant case and therefore, neither the law is

unconstitutional nor is the communication of the Enforcement

Directorate vague or illegal by any means. Hence, the writ

petition has no merit.

64. Mr. Venegaonkar then addressed us on merits and

submitted that all that the proviso envisages is a formation of an

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opinion. That is not synonymous with the formation of a view.

This formation of a view and formation of an opinion are not parts

of the same coin. The material that is required to be referred is

different at both stages. As far as formation of view is concerned,

it is only an initial stage exercise, whereas when a definite opinion

is sought to be reached, then, that exercise will have different and

distinct consequences and there could be an element of finality

attached to it. Apart therefrom and if both concepts are

synonymous to each other, still, at any initial stage, the material

required should be enough to raise a suspicion. That is adequate

and sufficient. No elaborate or detailed exercise is contemplated

as the process is entirely subjective. No objective analysis is

contemplated at that stage. It is only to set in motion or initiate a

process in law that some material is to be provided to the

authority. Thus, adequacy and sufficiency of that material cannot

be probed by this court in its writ jurisdiction. So long as there

was some material to form a view or an opinion and communicate

it to the Compounding Authority, then, that test is satisfied in the

instant case. There is enough material, which would raise

suspicion about the involvement of the petitioner in

contravention of PMLA. Therefore, on merits as well, the

requirement of the proviso is satisfied and the writ petition must

be dismissed.

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65. Mr. Venegaonkar relies upon the following decisions in

support of his aforereferred rival contentions:-

(i) Narayan Govind Gavate and Ors. vs. State of Maharashtra and Ors., (1977) 1 SCC 133.

(ii) Rochester Telephone Corporation vs. United States, (1939) No. 481, decided on 17th April, 1939.

(iii) New Delhi Television Limited vs. Deputy Commissioner of Income Tax, Circle-18(1), New Delhi and Anr., WP © No. 9120 of 2015 and connected matter, decided on 10th August, 2017.

(iv) M/s. Atlas Cycle Industries Ltd. and Ors. vs. The State of Maharashtra, (1979) 2 SCC 196.

(v) Prohibition and Excise Supde., A. P. and Ors. vs. Toddy Tappers Coop. Society, Marredpally and Ors., (2003) 12 SCC 738.

(vi) K. T. Plantation Private Limited and Anr. vs. State of Karnataka, (2011) 9 SCC 1.

(vii) M/s. Brentfield Travels Co. Pvt. Ltd. vs. The Reserve Bank of India and Anr., Writ Petition No. 1777 of 2011, decided on 23rd September, 2011.

66. For properly appreciating the rival contentions, we would

refer to the FEMA. The FEMA is an Act to consolidate and amend

the law relating to foreign exchange with the objective of

facilitating external trade and payments and for promoting the

orderly development and maintenance of foreign exchange

market in India. It is a successor legislation to the Foreign

Exchange Regulation Act, 1973 (FERA). In the statement of

objects and reasons leading to FEMA, it was stated that the FERA

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was reviewed in 1993 and several amendments were enacted as

part of the on going process of economic liberalisation relating to

foreign investments and foreign trade for closer interaction with

the world economy. At that stage, the Central Government

decided that a further review of the FERA would be undertaken in

the light of subsequent developments and experience in relation

to foreign trade and investment. It was subsequently felt that a

better course would be to repeal the existing FERA and enact a

new legislation. The RBI was accordingly asked to undertake a

fresh exercise and suggest a new legislation. A task force

constituted for this purpose submitted its report in 1994

recommending substantial changes in the existing Act. However,

after considering this report and significant developments, a

decision was taken to repeal and replace the FERA with a new law

and with the above objective. The FEMA, therefore, contains

provisions which would enable achievement of the above objective

and purpose. The Act is divided into several chapters. Chapter II

is titled as "Regulation and Management of Foreign Exchange".

Chapter III is titled as "Authorised Person" and Chapter IV is

titled as "Contravention and Penalties". The comprehensive

Chapter, namely, Chapter V, titled as "Adjudication and Appeal", is

inserted in this enactment. A separate chapter, Chapter VI

contains provisions of setting up of Directorate of Enforcement

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and several powers conferred in the authorities under the FEMA.

The last Chapter, Chapter VII is titled as "Miscellaneous".

67. Section 2 contains definitions and the term "Adjudicating

Authority" is defined in section 2(a) to mean an officer authorised

under sub-section (1) of section 16. The person authorised to deal

in foreign exchange or foreign securities is an "Authorised

Person" and that definition is to be found in section 2(c). Since

section 37-A refers to an "Authorised Officer", even that term is

defined under section 2(cc). The word "Competent Authority" is

defined in section 2(gg). The term "Director of Enforcement"

means the Director of Enforcement appointed under sub-section

(1) of section 36. The term "foreign exchange" is defined under

section 2(n). The term "prescribed" is defined under section 2(x)

to mean prescribed by Rules made under the Act. Finally, the

term "Reserve Bank" means the Reserve Bank of India

constituted under sub-section (1) of section 3 of the Reserve Bank

of India Act, 1934. No person can deal in foreign exchange, save

as otherwise provided under the Act, Rules or requirements made

thereunder or with the general or special permission of the RBI.

The holding of foreign exchange by a person resident in India is

also governed by the Act.

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68. The various sections, which would enable the RBI to be

approached for dealing in foreign exchange or in foreign security

are then to be found in the subsequent sections of the Act and

particularly sections 10 and 11. There is a power of the RBI to

inspect authorised person. Chapter IV is titled as "Contravention

and Penalties". Section 13 falling therein reads as under:-

"13. Penalties. - (1) If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.

(1-A) If any person is found to have acquired any foreign exchange, foreign security or immovable property, situated outside India, of the aggregate value exceeding the threshold prescribed under the proviso to sub-section (1) of section 37-A, he shall be liable to a penalty up to three times the sum involved in such contravention and confiscation of the value equivalent, situated in India, the the Foreign exchange, foreign security or immovable property.

(1-B) If the Adjudicating Authority, in a proceeding under sub-section (1-A) deems fits, he may, after recording the reasons in writing, recommend for the initiation of prosecution and if the Director of Enforcement is satisfied, he may, after recording the reasons in writing, may direct prosecution by filing a Criminal Complaint against the guilty person by an officer not below the rank of Assistant Director.

(1-C) If any person is found to have acquired any foreign exchange, foreign security or immovable property, situated outside India, of the aggregate value exceeding the threshold prescribed under the proviso to sub-section (1) of section 37-A, he shall be, in addition to the penalty imposed under sub-section (1-A), punishable with

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imprisonment for a term which may extend to five years and with fine.

(1-D) No Court shall take cognizance of an offence under sub-section (1-C) of section 13 except as on complaint in writing by an officer not below the rank of Assistant Director referred to in sub-section (1-B).

(2) Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government and further direct that the foreign exchange holdings, if any, of the persons committing the contravention or any part thereof, shall be brought back into India or shall be retained outside India in accordance with the directions made in this behalf.

Explanation. - For the purpose of this sub-section, "property" in respect of which contravention has taken place, shall include -

(a) deposits in a bank, where the said property is converted into such deposits;

(b) Indian currency, where the said property is converted into that currency; and

(c) any other property which has resulted out of the conversion of that property."

69. A perusal of this section would reveal as to how a

contravention of the provisions of the Act has to be dealt with and

what are the penalties for the same. If the penalties have to be

adjudicated, then, the adjudicating authority, as contemplated by

law, must adjudicate the contravention and decide upon the

penalty. By section 14, the orders of the adjudicating authority

can be enforced. By section 14-A power to recover arrears of

penalty are conferred and this section was inserted by Act 28 of

2016. Section 15 is relevant for our purpose and it reads as

under:-

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"15. Power to compound contravention. - (1) Any contravention under section 13 may, on an application made by the person committing such contravention, be compounded within one hundred and eighty days from the date of receipt of application by the Director of Enforcement or such other officer of the Directorate of Enforcement and officers of the Reserve Bank as may be authorised in this behalf by the Central Government in such manner as may be prescribed.

(2) Where a contravention has been compounded under sub-section (1), no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing such contravention under that section, in respect of the contravention so compounded."

70. A perusal of section 15, therefore, would reveal as to how

any contravention made under section 13 would be compoundable

on an application made by such person committing such

contravention. He can make an application and then the

contravention can be compounded. It can be compounded within

180 days from the date of receipt of application and the power to

compound is either to be exercised by the Director of

Enforcement or such other officer of the Directorate of

Enforcement or the officer of the RBI as may be authorised in this

behalf by the Central Government in such manner as may be

prescribed. The consequences of compounding of the

contraventions are then set out in sub-section (2).

71. Chapter V deals with adjudication and appeals and section

16 provides for appointment of adjudicating authority. It reads as

under:-

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"16. Appointment of Adjudicating Authority. - (1) For the purpose of adjudication under section 13, the Central Government may, by an order published in the Official Gazette, appoint as many officers of the Central Government as it may think fit, as the Adjudicating Authorities for holding an inquiry in the manner prescribed after giving the person alleged to have committed contravention under section 13, against whom a complaint has been made under sub-section (3) (hereinafter in this section referred to as the said person) a reasonable opportunity of being heard for the purpose of imposing any penalty:

Provided that where the Adjudicating Authority is of opinion that the said person is likely to abscond or is likely to evade in any manner, the payment of penalty, if levied, it may direct the said person to furnish a bond or guarantee for such amount and subject to such conditions as it may deem fit.

(2) The Central Government shall, while appointing the Adjudicating Authorities under sub-section (1), also specify in the order published in the Official Gazette, their respective jurisdictions.

(3) No Adjudicating Authority shall hold an enquiry under sub-section (1) except upon a complaint in writing made by any officer authorised by a general or special order by the Central Government.

(4) The said person may appear either in person or take the assistance of a legal practitioner or a chartered accountant of his choice for presenting his case before the Adjudicating Authority.

(5) Every Adjudicating Authority shall have the same powers of a Civil Court which are conferred on the Appellate Tribunal under sub-section (2) of section 28 and-

(a) all proceedings before it shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860);

(b) shall be deemed to be a Civil Court for the purposes of sections 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974).

(6) Every Adjudicating Authority shall deal with the complaint under sub-section (2) as expeditiously as Page 61 of 122 J.V.Salunke,PA

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possible and endeavour shall be made to dispose of the complaint finally within one year from the date of receipt of the complaint:

Provided that where the complaint cannot be disposed of within the said period, the Adjudicating Authority shall record periodically the reasons in writing for not disposing of the complaint within the said period."

72. A perusal of sub-section (1) of section 16 would reveal as to

how the Central Government can, for the purpose of adjudication

under section 13, appoint as many officers of the Central

Government as it may think fit, as the adjudicating authorities for

holding an inquiry in the manner prescribed after giving the

person alleged to have committed contravention under section 13,

against whom a complaint has been made under sub-section (3), a

reasonable opportunity of being heard for the purpose of imposing

any penalty. How the adjudication has to be held and in what

manner is then provided by the further sub-sections of section 15

and by section 17, there is an appeal provided to Special Director

(Appeals) and there is a further appeal to the appellate tribunal.

73. We need not then set out or refer to further provisions of the

law, save and except to emphasise them. When the adjudication is

a process which results in imposition of penalty, then, adherence

to the procedural matters is expected. The law expects the

provisions to be followed scrupulously. The law also allows a legal

practitioner or a chartered accountant of the choice of the person

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proceeded against to be appointed. We feel that particular

emphasis has to be laid on section 34 for that completely takes

away the jurisdiction of a civil court in matters of adjudication

and appeals. Therefore, the law gives further power to appeal to

this court and that appeal is provided by section 35. As observed

above, Chapter VI deals with the Directorate of Enforcement and

such a Directorate with a Director and such other officers or class

of officers, as deemed fit by the Central Government, have to be

appointed. By section 37, there is a power of search and seizure

conferred in the Director of Enforcement and we would also refer

to sub-section (2) of section 37, where the power of investigation

of contravention referred to in section 13 can be exercised by an

officer of the RBI to be appointed by the Government of India.

There are several provisions relating to estates held outside India

in contravention of section 4 and there is also a provision in

section 38, which empowers other officers to discharge such of the

duties of the Director of Enforcement or any other officer of the

Enforcement, as may be stated in the order. Since great emphasis

has been laid on Chapter VII containing miscellaneous provisions

and particularly section 46 thereof, we deem it fit to refer to sub-

section (2) of section 46. Section 46 gives power to the Central

Government to make Rules to carry out the provisions of the Act

and without prejudice to the generality of this power, the Central

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Government may make Rules providing for the manner in which

the contraventions can be compounded under sub-section (1) of

section 15. By section 47, there is a power to make Regulations.

Section 48 is necessary to be referred for another aspect of the

matter and that section is reproduced hereinbelow:-

"48. Rules and regulations to be laid before Parliament. - Every rule and regulation made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation, or both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or regulation."

74. We would come to the consequences flowing from the

language of section 48 a little later. For the time being, we only

hold that such a comprehensive law has been made and enacted

for the purpose of fulfilling the objectives particularly referred

above. An interpretation, which would enable fulfillment of the

objects and purpose, for which the law has been made, would,

therefore, have to be placed on the provisions of this Act. An

interpretation, which would defeat and frustrate this object and

purpose must be avoided at all cost. Since the Act provides for

exercise of power of compounding, both, by the Director of

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Enforcement or by the RBI, an interpretation, which would enable

exercise of the powers of compounding by both should be placed

on the provisions. However, if the RBI were to exercise all powers

to compound, as is the factual position in the present case, then,

the question before us is whether the Director of Enforcement can

control the exercise of that power by the RBI or interfere, much

less interdict it and for that purpose, we would have to refer to the

Rules, styled as the Foreign Exchange (Compounding

Proceedings) Rules, 2000. These Rules were made vide G.S.R.

383(E) dated 3rd March, 2000, published in the Gazette of India,

Extension, Part II section 3(2) dated 4th May, 2000. It is known

as Government Standing Order. These rules are made in exercise

of powers conferred by section 46 read with sub-section (1) of

section 15 of the FEMA.

75. Rule 2 contains definitions and the definition of the term

"applicant" is relevant. The expression "Compounding Authority"

is defined in Rule 3 and in the case of a RBI officer, an officer of

the RBI not below the rank of the Assistant General Manager can

be entrusted with the exercise of powers under section 15(1) of

the FEMA. Rule 4 reads as under:-

"4. Power of Reserve Bank to compound contravention.

- (1) If any person contravenes any provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) except clause (a) of section 3 of that Act -

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(a) in case where the sum involved in such contravention is ten lakhs rupees or below, by the Assistant General manager of the Reserve Bank of India;

(b) in case where the sum involved in such contravention is more than rupees ten lakhs but less than rupees forty lakhs, by the Deputy General Manager of Reserve Bank of India;

(c) in case where the sum involved in the contravention is rupees forty lakhs or more but less than rupees one hundred lakhs by the General Manager of Reserve Bank of India;

(d) in case the sum involved in such contravention is rupees one hundred lakhs or more, by the chief General Manager of the Reserve Bank of India;

Provided further that no contravention shall be compounded unless the amount involved in such contravention is quantifiable.

(2) Nothing contained in sub-section (1) shall apply to a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under these rules.

Explanation. - For the purposes of this rule, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention.

(3) Every officer specified under sub-rule (1) of rule 4 of the Reserve Bank of India shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Governor of the Reserve Bank of India.

(4) Every application for compounding any contravention under this rule shall be made in Form to the Reserve Bank of India, Exchange Control Department, Central Office, Mumbai along with a fee of Rs.5,000 by Demand Draft in favour of compounding authority."

76. A perusal of Rule 4, therefore, leaves us in no manner of

doubt that the applicant cannot seek compounding of the

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contravention as of right, but the law permits him to make an

application to the Compounding Authority and the Compounding

Authority has to exercise the power of compounding subject to

the directions, control and supervision of the Governor of the RBI.

The power to compound is not unbridled, unchecked, much less

unregulated. It has to be exercised in accordance with the Act

and the Rules and subject to the directions, control and the

supervision of the Governor of RBI. The law eschews every

possibility of unguided exercise of this power. As far as the power

of the Enforcement Directorate to compound contravention is

concerned, that is to be found in Rule 5. In that case as well, the

Director of Enforcement has to direct, control and supervise the

exercise of power to compound contravention. Rule 6 is

important and it says that where any contravention is

compounded before the adjudication of any contravention under

section 16, no inquiry shall be held for adjudication of such

contravention in relation to such contravention against the

person in relation to whom the contravention is so compounded.

However, Rule 7 says that where the compounding of any

contravention is made after making of a complaint under sub-

section (3) of section 16, such compounding shall be brought by

the authority specified in rule 4 or rule 5 in writing, to the notice

of the Adjudicating Authority and on such notice of the

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compounding of the contravention being given, the person in

relation to whom the contravention is so compounded shall be

discharged. Rule 8, after its amendment reads as under:-

"8. Procedure for compounding. - (1) The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings.

(2) The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerned as expeditiously as possible and not later than 180 days from the date of application.

Provided that with respect to any proceeding initiated under rule 4, if the Enforcement Directorate is of the view that the said proceeding relates to a serious contravention suspected of money laundering, terror financing or affecting sovereignty and integrity of the nation, the Compounding Authority shall not proceed with the matter and shall remit the case to the appropriate Adjudicating Authority for adjudicating contravention under section

13."

77. A bare perusal of Rule 8, therefore, would indicate that

procedure of compounding is that the Compounding Authority

has a discretion to call for any information, record or any other

documents relating to the compounding proceedings and there is

an outer limit to pass an order of compounding a contravention

and that order has to be passed not later than 180 days from the

date of the application.

78. It is not, therefore, right to urge that the Compounding

Authority has to proceed only on the materials brought by the

person seeking contravention, but the authority is free to call for

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compounding proceedings. That information or record or any

other document so long as it is relevant to the compounding

proceedings, the Compounding Authority has a discretion to call

for it and that may include anything in relation to adjudication as

well. Therefore, absent the proviso, does not mean that the

Compounding Authority cannot call for the relevant information,

but in its discretion, it is free to call for it. Secondly, there being

an outer limit for the exercise of the power that the authority is

expected to adhere to that time limit.

79. All that the proviso does is to enable the Enforcement

Directorate to communicate its view with regard to a serious

contravention suspected of money laundering, terror financing or

affecting sovereignty and integrity of the nation. Once that view

is recorded and communicated, it is the bounden duty of the

Compounding Authority and namely the RBI in this case not to

proceed with the matter, but to remit the matter to the

adjudicating authority for adjudication of the contravention.

Therefore, no compounding is then permissible. In any event, if

the compounding results in making payment, but that payment is

not made, then, no compounding can come into effect. No

contravention can be compounded if an appeal stands filed under

sections 17 and 19 of the Act.

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80. It is in these circumstances, that we are of the opinion that

there is much substance in the argument of Mr.Venegaonkar that

there is no absolute right to seek compounding of contravention.

At the same time, Mr.Dwarkadas can justifiably argue that an

application for compounding, if made to the RBI, the power to

compound vesting in the RBI cannot be taken away nor that

exercise can be nullified except in the eventualities set out in the

statute. Whether the same are found in the statute and whether

there is any flaw in the view communicated resulting in a

prohibition against compounding by the RBI is the moot question

before us.

81. Before we address that issue/question, we would also like to

refer to the PMLA. That Act has been enacted so as to prevent

money laundering and to provide for confiscation of property

derived from, or involved in, money laundering and for matters

connected therewith or incidental thereto. In the light of the

resolution adopted by the General Assembly of the United Nations

and the political declaration adopted by the Special Session of the

United Nations General Assembly, details of which are referred in

the preamble to the law, it was imperative for the countries world

over to take steps so as to prevent money laundering. It is in

these circumstances and when international community was

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geared up and took the steps, in view of a urgent need of an

enactment or comprehensive legislation, inter alia, for preventing

money laundering of proceeds of drug crimes and other

connected activities and confiscation of proceeds derived from

such offence, setting up of agencies and mechanisms for co-

ordinating measures for combating money laundering etc., the

PMLA Bill 1998 was introduced in the Lok Sabha on 4 th August,

1998. Thereafter, it was referred to the Standing Committee on

Finance, which presented its report to the Lok Sabha. Thereupon,

the Central Government took the steps and the law was enacted.

It has been amended by the Amendment Act 20 of 2005, the

Amendment Act 21 of 2009 and the Amendment Act 2 of 2013.

The Statement of Objects and Reasons leading to the Amendment

Act 2 of 2013 states that the problem of money laundering is no

longer restricted to the geo political boundaries of any country. It

is a global menace that cannot be contained by any nation alone.

In view of this, India has become a member of the Financial

Action Task Force and Asia Pacific Group on money-laundering,

which are committed to the effective implementation and

enforcement of internationally accepted standards against money

laundering and the financing of terrorism. Consequent to the

submission of an action plan to the Financial Action Task Force to

bring anti money laundering legislation of India at par with the

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international standards and to obviate some of the deficiencies in

the Act that have been experienced by the implementing

agencies, the need to amend the Prevention of Money-Laundering

Act, 2002 has become necessary.

82. The Act must, therefore, receive such interpretation as

would further this object and purpose. Towards that end, the Act

has been enacted by dividing it into several chapters. The

preliminary provisions are contained in Chapter I. Section 2

falling in that Chapter contains definitions and the definition of

the term "money-laundering" is to be found in section 2(p). The

word "money-laundering" is defined by stating that the word

carries the meaning assigned to it in section 3 of the PMLA. The

word "investigation" is defined in section 2(na), which is inserted

by the Act 20 of 2005 to include all the proceedings under the

PMLA conducted by the Director or by an authority authorised by

the Central Government under the PMLA for collection of

evidence. The word "Director" or "Additional Director" or "Joint

Director" means a Director or Additional Director or Joint

Director, as the case may be, appointed under sub-section (1) of

section 49. That section falls in Chapter VIII titled as

"Authorities". Thus, these and the other words, including the

definition of the term "financial institution" as appearing in

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section 2(l), the expression "offence of cross border implications"

as defined in section 2(ra) together with the definition of the word

"proceeds of crime" and prior thereto the word "prescribed", the

expression "Schedule" and "scheduled offence" as appearing in

section 2(x) and (y) would enable us to understand as to what is

money laundering. Section 3 is titled as offence of money

laundering. That is the heading of the Chapter also. Section 3

reads as under:-

"3. Offence of money-laundering. - Whosoever directly or indirectly attempts to indulge or knowingly assist or knowingly is a party or is actually involved in any process or activity connected with the [proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming] it as untainted property shall be guilty of offence of money laundering."

83. Thus, the offence of money laundering has several

components. Firstly, directly or indirectly attempting to indulge,

secondly, knowingly assisting or knowingly becoming a party or

knowingly being a party and thirdly, actually involving in any

process or activity connected with the proceeds of crime. That

part of the provision and which is bracketed has been substituted

by the Act 2 of 2013. Thus, direct or indirect attempt to indulge,

knowingly assist or knowingly become a party to, actual

involvement in any process or activity connected with the

proceeds of crime, including its concealment, possession,

acquisition or use and projecting or claiming it as untainted

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property is an offence and whosoever is guilty of the same is said

to be committing an offence of money laundering. Section 4

provides for its punishment. Then, Chapter III titled as

"Attachment, Adjudication and Confiscation" contains provisions

so as to attach properties involved in money laundering and its

adjudication and vesting in the Central Government and

thereafter its management and all this is to be found in sections 5

to 11. In Chapter IV, there are provisions setting out obligations

of banking companies, financial institutions and intermediaries.

Chapter V contains provisions in relation to summons searches

and seizure etc. and there are three sections, namely, sections 22,

23 and 24. The first is "presumption as to records or property in

certain cases", second is "presumption in inter-connected

transactions" and the third is "burden of proof", which entirely

rests on the person charged with the offence of money laundering.

The authority or court shall, unless the contrary is proved,

presume that such proceeds of crime are involved in money

laundering. The rest of the provisions are for setting up of

appellate tribunal (Chapter VI), Special Courts (Chapter VII) and

authorities (Chapter VIII). Since the offence has serious and far

reaching implications across even national boundaries that

Chapter IX contains provisions regarding reciprocal arrangement

for assistance in certain matters and procedure for attachment

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and confiscation of property. Chapter X contains miscellaneous

provisions, prominent amongst which is section 71, which has

given the Act an overriding effect. Thus, when the FEMA in the

FEMA Rules relating to compounding refers to the view of the

Enforcement Directorate that the compounding proceedings

relate to a serious contravention suspected of money laundering,

terror financing or affecting sovereignty and integrity of the

nation so as to compel the Compounding Authority to remit the

case to the adjudicating authority for adjudication of the

contravention under section 13, then, that view of the

Enforcement Directorate has to be based on materials pointing

towards firstly, the relation of the compounding proceedings and

secondly to a serious contravention suspected of money

laundering, terror financing or affecting sovereignty and integrity

of the nation.

84. Since the matter before us involves the "view" relating to

serious contravention suspected of money laundering, then, even

if there is an element of suspicion enabling the view to be formed,

still, the compounding proceedings must relate to it. These words

in the proviso are crucial and cannot be ignored. It is well settled

rule of interpretation that no words in the statute or any

statutory provision are to be construed as wastage or surplusage.

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The legislature is presumed to employ or use words carrying a

definite meaning. It does not insert a word or expression without

intending to ascribe or attach a meaning to it. Therefore, the

words and expressions inserted with definite intention ought to

receive the meaning carrying forward the same and not

frustrating or defeating it. In the Principles of Statutory

Interpretation by Justice G. P. Singh, revised by Justice A. K.

Patnaik former Judge of Supreme Court of India, the principles

have been summarised as under:-

"Avoiding rejection of words.

As on the one hand, it is not permissible to add words or to fill in a gap or lacuna, on the other hand effort should be made to give meaning to each and every word used by the Legislature. "It is not a sound principle of construction", said PATANJALI SHASTRY, C.J.I., "to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute"

[Aswinin Kumar Ghose v. Arabinda Bose, AIR 1952 SC 369 p. 377 : 1953 SCR 1; see further Union of India v. Hansoli Devi, AIR 2002 SC 3240, p. 3246 : (2002) 7 SCC 273; State of Orissa vs. Joginder Patjoshi, AIR 2004 SC 1039, p. 1142 : (2004) 9 SCC 278.] And as pointed out by JAGANNATHDAS, J., "It is incumbent on the court to avoid a construction, if reasonably permissible on the language, which would render a part of the statute devoid of any meaning or application" [Rao Shiv Bahadur Singh v. State of U. P., AIR 1953 SC 394]. "In the interpretation of statutes", observed DAS GUPTA, J., "the courts always presume that the Legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect" [ J. K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U. P., AIR 1961 SC 1170, p. 1174 : (1962) 1 SCJ 417 : (1961) 1 LLJ 540; Shri Mohammad Alikhan v. Commissioner of Wealth Tax, AIR 1997 SC 1165, p. 1167 : (1997) 3 SCC 511; Dilawar balu Kurane v. State of Maharashtra, AIR 2002 SC 564, p. 566 : (2002) 2 SCC 135; Ramphal Kundu v. Kamal

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Sharma, AIR 2004 SC 1039, p. 1042 : (2004) 9 SCC 279 ]. The Legislature is deemed not to waste its words or to say anything in vain and [Wuebec Railway, Light, heat & Power Co. V. Vandry, AIR 1920 PC 181, p. 186 : 1920 AC 662; see further Union of India v. Hansoli Devi, supra ] a construction which attributes redundancy to the Legislature will not be accepted except for compelling reasons [Ghanshyamdas v. Regional Asstt. Commr., Sales Tax, AIR 1964 SC 766, p. 772 ; CIT v. Kanpur Coal Syndicate, AIR 1965 SC 325; State of Rajasthan v. Leela Jain, AIR 1965 SC 1296, p. 1299; Bhanu Pratap Singh (Raja) v. Asstt. Custodian, E. P., Bahraich, AIR 1966 SC 245, p. 247; CIT v. Moon Mills, AIR 1966 SC 870, p. 873, D. R. Jerry v. Union of India, AIR 1974 SC 130, p. 133; Shri Balaganeshan Metals v. Shanmugham Chetty, (1987) 2 SCC 707, p. 713; State of Uttar Pradesh v. Radhey Shyam, AIR 1989 SC 682, pp. 689, 690; State of Maharashtra v. Santosh Shankar Acharya, (2007) 7 SCC 463, p. 469; Borosil Glass Works Ltd. Employees Union v. D. D. Bambode, AIR 2001 SC 378, p. 380; Union of India v. Hansoli Devi, AIR 2002 SC 3240, p. 3246; Nathi Devi v. Radha Devi, (2005) 2 SCC 271, p. 277; Promoters & Builders Ass. Of Pune v. Pune Municipal Corpn., (2007) 6 SCC 143 (para 11); Visitor AMU v. K. S. Misra, (2007) 8 SCC 593, para 13 (9th Edition of this book is referred) ]. ....."Though a parliamentary enactment (like parliamentary eloquence) is capable of saying the same thing twice over without adding anything to what has already been said once, this repetition in the case of any Act of Parliament is not to be assumed. When the Legislature enacts a particular phrase in a statute the presumption is that it is saying something which has not been said immediately before. The rule that a meaning should, if possible, be given to every word in the statute implies that, unless there is good reason to the contrary, the words add something which would not be there if the words were left out" [Hill v. Williams Hhill (Park Lane) Ltd. supra, p. 461; referred to in Umed v. Raj Singh, AIR 1975 SC 43, p. 63 : (1975) 1 SCC 76]."

85. Therefore, we must start with a presumption that the

legislature employs and uses every word as in this proviso with a

purpose. That purpose is that the Compounding Authority should

not compound contravention of the provision of the FEMA if the

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compounding proceedings have a relation to a serious

contravention suspected of money laundering, terror financing

etc. for that would totally defeat the object of enacting a stringent

law like the PMLA. That is obviously a later law and the FEMA

precedes it. One who is guilty of contravention of the provisions

of the FEMA should not derive any advantage by getting that

contravention compounded and with the aid of that compounding

proceedings, seek to escape from the clutches of the PMLA. If

that is how the proviso is brought in by an amendment to Rule 8,

then, that purpose would have to be achieved. A meaning which

would help achieving that purpose must be given to the

expressions highlighted before us.

86. Mr. Dwarkadas, on being confronted with the returning of

the compounding applications and as pointed out later on account

of the view expressed by the Enforcement Directorate, argued

that if the interpretation as is placed by the respondents on the

wording of the proviso is accepted, then, that would be travelling

much beyond the parent Act. It would then make it impossible for

the RBI to exercise the power vesting in it under the statute.

Mr.Dwarkadas argued that it is not any other authority, but the

apex bank in whom the power is invested as is apparent from a

reading of section 15 of the FEMA read with the Compounding

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Rules. The RBI will not surrender its authority and power in

favour of the applicant seeking the compounding of the

contravention. It will not, in each and every case, compound the

contravention even though the applicant may pray for it. The RBI

will bear in mind the object and purpose of the FEMA, its role in

the scheme of the said Act, the gravity and seriousness of the

contravention and may, in a given case, by assigning reasons,

refuse to compound it. Thus, the RBI is expected to exercise this

power cautiously, carefully and reasonably. Once enormous

powers are vesting in the RBI insofar as dealings in foreign

exchange are concerned and it is entrusted with the management

of foreign exchange, then, the RBI is bound to take into

consideration all the relevant facts of a matter before exercising

its discretionary power in terms of sub-section (1) of section 15.

Mr. Dwarkadas submits that a bald or vague communication from

the Enforcement Directorate should not interdict this power

conferred in the RBI and take away the opportunity given by the

statute to the applicant to seek compounding of the

contravention. Else, we would have to declare the proviso to be

unconstitutional and ultra vires the parent Act as that fails to

conform to the parent legislation. With all this, Mr. Dwarkadas

does not argue that the proviso be declared unconstitutional

straight away, but should be read and interpreted in such a way

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so as to not to interfere or unduly control the independent

exercise of powers by the RBI. Thus, a balance will have to be

struck so as to save the proviso from the vice of

unconstitutionality.

87. Mr. Venegaonkar's arguments have already been noted by

us and to be fair, he also did not suggest that in the absence of

cogent and satisfactory material, a mere letter or communication

from the Enforcement Directorate recording its view in terms of

the proviso would suffice or that is beyond judicial review. He

agreed that in the event the view taken by the Enforcement

Directorate is questioned before a writ court exercising powers of

judicial review, then, but for the adequacy or sufficiency of the

material, the court is not prohibited from probing and finding out

whether there was any material at all to arrive at that view. All

that Mr. Venegaonkar would argue is that there is a difference

between recording a view and forming an opinion. More so, when

even suspicion would suffice.

88. We are mindful of these positions taken by the counsel, but

we are in agreement with the petitioner that if the Enforcement

Directorate is of the view that the compounding proceedings

relate to a serious contravention suspected of money laundering

as in this case, then, this court is not prevented from seeking

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appropriate clarifications from the Enforcement Directorate with

regard to presence or availability of material in its possession

before it forms the view. In our opinion, the use of the word 'view'

hardly makes any difference. Eventually, whether a view can be

equated with an opinion or not in the light of the far reaching

consequences, the Enforcement Directorate would have to satisfy

this court that there is some material available with it, based on

which, it communicated to the RBI its view as in this case of

serious contravention suspected of money laundering. Thus,

there is a broad agreement that this court, in exercise of its

powers of judicial review, can seek such answers and

clarifications from the Enforcement Directorate. That would

ensure that the RBI is not unnecessarily and unjustifiably

prevented from exercising its discretionary powers to compound

a particular contravention inviting penalty under section 13 of

the FEMA. To enable the RBI to exercise that power in

accordance with law, it must be allowed to proceed with the

compounding proceedings. They can be interdicted only when the

Enforcement Directorate is of the view as above. However, if the

Enforcement Directorate's view is challenged or questioned, then,

a writ court is not prevented from seeking appropriate and

necessary answers and clarifications. We propose to place such

interpretation on this proviso so as not to make it impossible for

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the RBI to exercise its statutory power of compounding

contravention. The RBI's authority or power will be undermined

in the event a mere communication conveying a view of the

Enforcement Directorate is received by it but there being no

backup material at all to hold that there is serious contravention

suspected of money laundering. It may not be possible for the RBI

to go behind the Enforcement Directorate's communication in

every case, but in the event an application for compounding the

contravention under the FEMA is made to the RBI and the RBI is

dealing with such application, but during its pendency, a

communication from the Enforcement Directorate to the above

effect prevents it from proceeding further, then, that course

adopted by the RBI and its remittance of the proceedings straight

away to the adjudicating authority can be questioned by the

applicant seeking compounding of the contravention under the

FEMA, by making an application to the RBI. Thus, the applicant

invoking the RBI's power of compounding can then approach a

court of law and challenge both, the refusal or reluctance on the

part of RBI to proceed further as also the Enforcement

Directorate's communication or view to the aforesaid effect. If

that is the constitutional safeguard and protection ensured to

every aggrieved applicant, then, it is not necessary to declare the

proviso unconstitutional.

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89. We agree with Mr. Dwarkadas that no interpretation which

totally takes away the power to compound contravention vesting

in the RBI be placed on the proviso. We must, on a harmonious

and complete reading of the statutory scheme, together with the

rules, hold as above and that would ensure that the contravention

can be compounded by resort to section 15 and the requisite rules

by the RBI. It is only when a situation of the above nature is

faced, then, the applicant seeking compounding of the

contravention may invoke the powers of judicial review to strike

down the actions of the statutory authorities. We will have to

presume that the statutory authorities act within the four

corners of the statute and their actions are reasonable, just and

fair. Unless proven to be arbitrary, unreasonable and malafide,

this presumption would operate as the power is not conferred in

any authority, but high functionaries such as the Enforcement

Directorate. The Directorate of Enforcement Directorate is

expected to exercise its powers bonafide and reasonably. It is

only in the event of a wholly uncalled for interdiction or

interference with the powers of compounding vesting in the RBI

that the question of challenging the RBI's inaction and the

Enforcement Directorate's opinion or view will arise.

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90. We also agree with Mr. Dwarkadas that the RBI's powers to

compound the contravention should not be lightly and casually

interfered with or interdicted frequently, but we cannot agree

with him that it is open for the RBI to question the view of the

Enforcement Directorate or to seek from that Directorate

necessary clarifications every time when the RBI is confronted

with a situation of a 'view' of the Enforcement Directorate

communicated to it and to the aforesaid effect. If the RBI is

allowed to go on questioning every communication and seek

clarification about the presence of necessary material before the

Enforcement Directorate, then, the RBI would be acting as either

an appellate authority or a superior, which is not envisaged by

law. The law invests both, the RBI and the Enforcement

Directorate with the power to compound an offence and expects

both high functionaries to trust and respect each other so also

abide by the mandate of the statute. Once the power is parallel

and vested in both, then, allowing the RBI to question the

communication or the view of the Enforcement Directorate

recorded therein would mean that the Enforcement Directorate

would be prevented from exericising the powers of adjudication of

the contravention in terms of the powers conferred in it by the

FEMA and in a given case, it may also be prevented from

investigating the matter further in order to find out whether the

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PMLA can be invoked. That would only benefit the wrongdoer or

the person contravening the laws and he may as well avoid the

consequences that the law visits him/her in the event he/she

contravenes it. Then, the adjudication proceedings under the

FEMA would also not commence and would be unnecessarily and

unjustifiably delayed and equally when the Enforcement

Directorate's views are questioned in order to find out whether

there is a serious contravention suspected of money laundering

etc., then, offences having cross border repercussions and effect

cannot be investigated and probed further. That surely is not the

intent of the law makers. In these circumstances, it would not be

proper to contend that the RBI has an authority to question the

view of the Enforcement Directorate and that, in every case, it

can seek a clarification from the Enforcement Directorate on

receipt of its view as above. In a given case, of course, it would be

open for the RBI to seek the details, but we expect from the RBI

that it will not assist a wrongdoer or a law breaker to such an

extent that he avoids the compliance and possibly consequences

of the breach and of both, FEMA and a statute like the PMLA.

Therefore, this will not be a rule, but an exception and for which,

the RBI would definitely have to record reasons. However, when

it seeks the details, it cannot refuse to hold the compounding

proceedings in abeyance, which, in any event, it would have to .

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Secondly, after the details are known, it would have to makeover

the papers to the adjudicating authority as required by the

proviso for that authority to proceed and adjudicate the

contravention. In no case, the RBI can probe or question the

sufficiency or adequacy of the materials regarding the view of the

Enforcement Directorate, but must leave the matter to the

applicant seeking compounding to workout his/her remedies.

That is how we can ensure that the proviso does not become a

weapon or tool of unbridled harassment nor will it allow the

misuse of the power conferred in the Enforcement Directorate. It

is precisely to rule out such exercise of power that we have

allowed the view of the Enforcement Directorate to be tested in

exercise of our powers of judicial review.

91. We are spared of a detailed or elaborate exercise by the fact

that it is agreed that none can claim a absolute right of

compounding an offence. That right is not unconditional or

unfettered. If it is conferred by a statute, then, its exercise is

controlled and regulated by the statute. If the law gives a right to

seek compounding of an offence by making an application, then,

that right to make an application cannot be placed at such a

pedestal or height that the authority is left with no choice, but to

pass an order compounding the offence. It is a right at best to

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make an application seeking compounding of the contravention,

but beyond that, the applicant cannot insist on an order of

compounding contravention, as prayed by him, to be passed. The

matter is left to the Compounding Authority's discretion and if

that discretion is not exercised reasonably, the applicant has a

legal remedy available to him/her to approach a court of

competent jurisdiction questioning that action of the RBI. Hence,

if the exercise of the right to seek compounding of the

contravention is controlled and regulated by the statute, then, we

cannot agree with Mr. Dwarkadas that the intervention as

envisaged by the proviso is unconstitutional or ultra vires the

parent Act.

92. Mr. Dwarkadas would submit that the words and

expressions in the proviso are capable of being conveniently

interpreted and unless a firm and clear meaning is assigned to

them, there is a possibility that a mere communication of a view

without any material to support it would be enough to stall the

compounding proceedings. He would submit that this court

should not allow the Enforcement Directorate to play with words

and even if there is no material supporting before the

communication or regarding the view, as in this case, later on, the

Enforcement Directorate will fish out something so as to try and

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convince the court particularly when its action or that of the RBI,

as in this case, is challenged. That is how he would submit that we

must apply the test laid down in several decisions of the Hon'ble

Supreme Court right from Barium Chemicals (supra) and holding

that there should be definite material and nothing should be in

the realm of speculation and guesswork. That would negate the

purpose of the proviso. Though Mr.Dwarkadas has relied upon

several decisions in this behalf, we are of the clear view that the

judgment of the Hon'ble Supreme Court in the case of Bhikhubhai

Vithlabhai Patel and Ors. vs. State of Gujarat and Anr. 11 would

guide all concerned. In the judgment before the Hon'ble Supreme

Court, the proviso opening with the words "where the State

Government is of opinion that substantial modifications in the

draft development plan and regulations are necessary" fell for

interpretation and the Hon'ble Supreme Court held as under:-

20. The State Government is entitled to publish the modifications provided it is of opinion that substantial modifications in the draft development plan are necessary.

The expression "is of opinion" that substantial modifications in the draft development plan are necessary is of crucial importance. Is there any material available on record which enabled the State Government to form its opinion that substantial modifications in the draft development plan were necessary? The State Government's jurisdiction to make substantial modifications in the draft development plan is inter-twined with the formation of its opinion that such substantial modifications are necessary in the draft development plan. The State Government without forming any such opinion cannot publish the modifications considered necessary

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along with notice inviting suggestions or objections. We have already noticed that as on the day when the Minister concerned took the decision proposing to designate the land for educational use the material available on record were :

(a) the opinion of the Chief Town Planner;

(b) Note dated 23rd April, 2004 prepared on the basis of the record providing the entire background of the previous litigation together with the suggestion that the land should no more be reserved for the purpose of South Gujarat University and after releasing the lands from reservation, the same should be placed under the residential zone.

21. It is true that the State Government is not bound by such opinion and entitled to take its own decision in the matter provided there is material available on record to form opinion that substantial modifications in the draft development plan were necessary. Formation of opinion is a condition precedent for setting the law in motion proposing substantial modifications in the draft development plan.

22. Any opinion of the Government to be formed is not subject to objective test. The language leaves no room for the relevance of a judicial examination as to the sufficiency of the grounds on which the Government acted in forming its opinion. But there must be material based on which alone the State Government could form its opinion that it has become necessary to make substantial modification in the draft development plan.

23. The power conferred by Section 17(1)(a)(ii) read with proviso is a conditional power. It is not an absolute power to be exercised in the discretion of the State Government. The condition is formation of opinion subjective, no doubt that it had become necessary to make substantial modifications in the draft development plan. This opinion may be formed on the basis of material sent along with the draft development plan or on the basis of relevant information that may be available with the State Government. The existence of relevant material is a pre- condition to the formation of opinion. The use of word "may" indicates not only a discretion but an obligation to consider that a necessity has arisen to make substantial modifications in the draft development plan. It also involves an obligation to consider which are of the several steps specified in sub-clauses (i), (ii) and (iii) should be taken.

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24. Proviso opens with the words "where the State Government is of opinion that substantial modifications in the draft development plan and regulations are necessary .....". These words are indicative of the satisfaction being subjective one but there must exist circumstances stated in the proviso which are conditions precedent for the formation of the opinion. Opinion to be formed by the State Government cannot be on imaginary grounds, wishful thinking, however, laudable that may be. Such a course is impermissible in law. The formation of the opinion, though subjective, must be based on the material disclosing that a necessity had arisen to make substantial modifications in the draft development plan.

25. The formation of the opinion by the State Government is with reference to the necessity that may have had arisen to make substantial modifications in the draft development plan. The expression: "as considered necessary" is again of crucial importance. The term "consider" means to think over; it connotes that there should be active application of the mind. In other words the term "consider" postulates consideration of all the relevant aspects of the matter. A plain reading of the relevant provision suggests that the State Government may publish the modifications only after consideration that such modifications have become necessary. The word "necessary" means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word "necessary" must be construed in the connection in which it is used. (See-Advanced Law Lexicon, 3rd Edition, 2005; P. Ramanatha Aiyar)

26. The formation of the opinion by the State Government should reflect intense application of mind with reference to the material available on record that it had become necessary to propose substantial modifications to the draft development plan.

27. In J. Jayalalitha v. Union of India [(1999) 5 SCC 138] this Court while construing the expression "as may be necessary" employed in Section 3(1) of the Prevention of Corruption Act, 1988 which conferred the discretion upon the State Government to appoint as many Special Judges as may be necessary for such area or areas or for such case or group of cases to try the offences punishable under the Act, observed: (SCC pp. 154-155, para 14)

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"14. ..... The legislature had to leave it to the discretion of the Government as it would be in a better position to know the requirement. Further, the discretion conferred upon the Government is not absolute. It is in the nature of a statutory obligation or duty. It is the requirement which would necessitate exercise of power by the Government. When a necessity would arise and of what type being uncertain the legislature could not have laid down any other guideline except the guidance of necessity. It is really for that reason that the legislature while conferring discretion upon the Government has provided that the Government shall appoint as many Special Judges as may be necessary. The words "as may be necessary" in our opinion is the guideline according to which the Government has to exercise its discretion to achieve the object of speedy trial. The term necessary means what is indispensable, needful or essential."

28. In the case in hand, was there any material before the State Government for its consideration that it had become necessary to make substantial modifications to the draft development plan? The emphatic answer is, none. The record does not reveal that there has been any consideration by the State Government that necessity had arisen to make substantial modifications to the draft development plan. We are of the view that there has been no formation of the opinion by the State Government which is a condition precedent for exercising the power under the proviso to Section 17(1) (a) (ii) of the Act.

29. In Barium Chemicals Ltd. v. Company Law Board [AIR 1967 SC 295] this Court pointed out, on consideration of several English and Indian authorities that the expressions "is satisfied", "is of the opinion" and "has reason to believe" are indicative of subjective satisfaction, though it is true that the nature of the power has to be determined on a totality of consideration of all the relevant provisions. This Court while construing Section 237 of the Companies Act, 1956 held: (AIR p. 325, para 64)

"64. The object of Section 237 is to safeguard the interests of those dealing with a company by providing for an investigation where the management is so conducted as to jeopardize those interests or where a company is floated for a fraudulent or an unlawful object. Clause (a) does not create any difficulty as investigation is instituted either at the wishes of the company itself expressed through a

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special resolution or through an order of the court where a judicial process intervenes. Clause (b), on the other hand, leaves directing an investigation to the subjective opinion of the Government or the Board. Since the legislature enacted Section 637(i)(a) it knew that Government would entrust to the Board its power under Section 237(b). Could the legislature have left without any restraints or limitations the entire power of ordering an investigation to the subjective decision of the Government or the Board? There is no doubt that the formation of opinion by the Central Government is a purely subjective process. There can also be no doubt that since the legislature has provided for the opinion of the Government and not of the court such an opinion is not subject to a challenge on the ground of propriety, reasonableness or sufficiency. But the Authority is required to arrive at such an opinion from circumstances suggesting what is set out in sub-clauses (i),

(ii) or (iii). If these circumstances were not to exist, can the Government still say that in its opinion they exist or can the Government say the same thing where the circumstances relevant to the clause do not exist? The legislature no doubt has used the expression "circumstances suggesting". But that expression means that the circumstances need not be such as would conclusively establish an intent to defraud or a fraudulent or illegal purpose. The proof of such an intent or purpose is still to be adduced through an investigation. But the expression "circumstances suggesting" cannot support the construction that even the existence of circumstances is a matter of subjective opinion. That expression points out that there must exist circumstances from which the Authority forms an opinion that they are suggestive of the crucial matters set out in the three sub-clauses. It is hard to contemplate that the legislature could have left to the subjective process both the formation of opinion and also the existence of circumstances on which it is to be founded. It is also not reasonable to say that the clause permitted the Authority to say that it has formed the opinion on circumstances which in its opinion exist and which in its opinion suggest an intent to defraud or a fraudulent or unlawful purpose. It is equally unreasonable to think that the legislature could have abandoned even the small safeguard of requiring the opinion to be founded on existent circumstances which suggest the things for which an investigation can be ordered and left the opinion and even the existence of circumstances from which it is to be formed to a subjective process. These analysis finds support in Gower's Modern Company Law (2nd Ed.) p. 547 where the learned author, while dealing with Section

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165(b) of the English Act observes that "the Board of Trade will always exercise its discretionary power in the light of specified grounds for an appointment on their own motion"

and that "they may be trusted not to appoint unless the circumstances warrant it but they will test the need on the basis of public and commercial morality." There must therefore exist circumstances which in the opinion of the Authority suggest what has been set out in sub- clauses (i),

(ii) or (iii). If it is shown that the circumstances do not exist or that they are such that it is impossible for any one to form an opinion therefrom suggestive of the aforesaid things, the opinion is challengeable on the ground of non-

application of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute.

30. This Court while expressly referring to the expressions such as "reason to believe", "in the opinion of" observed:

(AIR p. 324, para 63)

"63. ..... Therefore, the words, "reason to believe" or "in the opinion of" do not always lead to the construction that the process of entertaining "reason to believe" or the "opinion" is an altogether subjective to process not lending itself even to a limited scrutiny by the court that such a "reason to believe" or "opinion" was not formed on relevant facts or within the limits or as Lord Radcliffe and Lord Reid called the restraints of the statute as an alternative safeguard to rules of natural justice where the function is administrative."

31. In the Income-tax Officer, Calcutta & Ors. Vs. Lakhmani Mewal Das [(1967) 3 SCC 757] this court construed the expressions "reason to believe" employed in Section 147 of the Income-tax Act, 1961 and observed: the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully or truly all material facts. It is not any or every material, howsoever vague and indefinite or distant which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The reason for the formation of the belief must be held in good faith and should not be a mere pretence.

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32. We are of the view that the construction placed on the expression reason to believe will equally be applicable to the expression "is of opinion" employed in the proviso to Section 17(1)(a) (ii) of the Act. The expression "is of opinion", that substantial modifications in the draft development plan and regulations, "are necessary", in our considered opinion, does not confer any unlimited discretion on the Government. The discretion, if any, conferred upon the State Government to make substantial modifications in the draft development plan is not unfettered. There is nothing like absolute or unfettered discretion and at any rate in the case of statutory powers. The basic principles in this regard are clearly expressed and explained by Prof. Sir William Wade in Administrative Law (9th Edn.) in the chapter entitled "Abuse of discretion"

and under the general heading "the principle of reasonableness" which read as under:

"The common theme of all the authorities so far mentioned is that the notion of absolute or unfettered discretion is rejected. Statutory power conferred for public purposes is conferred as it were upon trust, not absolutely that is to say, it can validly be used only in the right and proper way which Parliament when conferring it is presumed to have intended. Although the Crown's lawyers have argued in numerous cases that unrestricted permissive language confers unfettered discretion, the truth is that, in a system based on the rule of law, unfettered governmental discretion is a contradiction in terms. The real question is whether the discretion is wide or narrow, and where the legal line is to be drawn. For this purpose everything depends upon the true intent and meaning of the empowering Act.

The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights of his dependents, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercise of his power. In the same way a private person has an absolute power to allow whom he likes to use his land, to release a debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things it acts reasonably and in good faith and upon lawful and relevant grounds of public interest. The whole conception of unfettered discretion is

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inappropriate to a public authority, which possesses powers solely in order that it may use them for the public good. There is nothing paradoxical in the imposition of such legal limits. It would indeed be paradoxical if they were not imposed."

93. Thus, the Hon'ble Supreme Court has reiterated the settled

principles and it is not now open to contend that the RBI should

be inhibited in compounding the offences merely because the

Enforcement Directorate is holding some view. If the

Enforcement Directorate's and consequently the RBI's actions in

not proceeding with the compounding proceedings, but dropping

them or returning the compounding applications, are challenged,

then, it is futile to urge that the right to compound the

contravention conferred by the statute is not absolute or mere

insertion of a provision like section 15 would not enable the

parties like the petitioner as of right to seek compounding a

contravention. Here, we are dealing with a case where no

extreme proposition, as is sought to be met by Mr.Venegaonkar, is

canvassed, but what is pointed out is that once a compounding

application is made and is being sincerely and bonafide pursued

by the petitioner, they were advised to approach different cells

and departments within the RBI and to seek their guidance, then,

suddenly the compounding applications are returned and while

returning them, the initial reason assigned is that the petitioner

should seek proper guidance from the above referred

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cells/departments. Thereafter, the Enforcement Directorate

interdicted the proceedings and did not allow the RBI to proceed

by communicating its view. That initial communication also was

withdrawn when this court desired to know the material which

enabled the Enforcement Directorate to communicate its view.

Thereafter, another communication has been forwarded dated 1st

December, 2017, which is also not backed by any material

satisfying the tests laid down in the above judgment of the Hon'ble

Supreme Court, but later on an affidavit was filed to the amended

petition seeking to place the material, which was in possession of

the Enforcement Directorate, based on which it communicated

the view. These allegations are being levelled in the pleadings

before us by the petitioner and the Enforcement Directorate has

to meet the same. Hence, it is futile to urge that the petitioner has

no right to seek compounding of the contravention and mere filing

of the application does not mean the RBI is obliged to compound

the contravention at the instance of the applicant. We are aware

of the position that there is nothing like an duty to compound the

contravention, but it is obligatory to deal with the application

once it is made and in terms of the statutory scheme and if it is

not taken to its logical end, then, of-course, a party like the

petitioner can complain by urging that the RBI dropped the

proceedings or has sat over it deliberately or illegally refused to

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compound the contravention. Though it is empowered to do so,

merely it was pressurised or has acted at the behest of the

Enforcement Directorate. A mere forwarding letter is being relied

upon not to proceed with the compounding proceedings and that

is untenable in law. We are of the opinion that such a foundation

can be laid in the pleadings and once that is laid, then, none, much

less the Enforcement Directorate can escape the consequences in

law.

94. By Exhibit 'DD' to the petition, the petitioner is pointing out

that in response to the petitioner's e-mail dated 2 nd December,

2017, the subject of reporting of transactions undertaken by the

petitioner and group companies under the Foreign Exchange

Management (Transfer or Issue of any Foreign Security)

Regulations, 2004, as amended from time to time, appears to

have been taken up. An advise was given by the RBI by its letter

dated 18th December, 2017 to the petitioner and in this letter, that

advise is mentioned. At the same time, in para 3 of this letter, the

RBI is inviting the attention of the petitioner to a letter dated 1 st

December, 2017 received from the Directorate of Enforcement of

Government of India. That letter is annexed at page 127.525

(Exhibit 'EE' to the petition). That letter reads as under:-

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"GOVT. OF INDIA DIRECTORATE OF Enforcement 6 th Floor, Lok Nayak Bhawan, Khan Market, New Delhi-110 003 (Tel. No. 011-24629633, Fax No. 24631847, 24640760)

F. No. T-4/2-D/2015 (Part) Dated: 01.12.2017

To

The Chief General Manager, Foreign Exchange Department, Reserve Bank of India, Central Office Building, Shahid Bhagt Singh Road, Fort, Mumbai-400 001.

Subject - M/s. NDTV Ltd. and others - reg. (Your ref: EF.CO.CEFA/15678/ 15.20.67/2016-17 dated 05.12.2016)

Please refer to Show Cause Notice No. T-4/2-D/2015 dated 13.11.2015 in respect of NDTV Ltd. and others which is pending adjudication before Adjudicating Authority.

2. In this regard, it is stated that the contraventions invoked against the noticees under Foreign Exchange Management Act, 1999 (FEMA) which are subject matter of compounding proceedings before RBI also part and parcel of offence of money laundering being investigated by the Directorate of Enforcement under the Prevention of Money Laundering Act, 2002 (PMLA).

3. Kind attention is also invited to the newly inserted proviso to sub-rule (2) of Rule 8 in the Foreign Exchange (Compounding Proceedings) Rules, 2000 which have been notified w.e.f. 20.02.2017. The said proviso stipulates that, in case of certain contingencies as mentioned therein, the RBI should not entertain any compounding application.

The impugned contraventions under FEMA which are subject matter of compounding applications filed by the aforesaid noticees squarely falls within the provisions of proviso to Sub-rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000.

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4. In view of the above, Enforcement Directorate is of the view that the impugned contraventions of the aforesaid Show Cause Notice are serious contraventions suspected of money laundering and are being investigated under PMLA by the Enforcement Directorate. Accordingly it is requested that the compounding applications filed by the subject entities may not be proceeded with by RBI and that the case be remitted to the Adjudicating Authority for adjudicating the contraventions under Section 13 of FEMA.

Yours faithfully,

sd/-

(D. K. Gupta) Special Director)"

95. In relation to this communication/letter of the Enforcement

Directorate, the pleading in the petition is as under:-

"X. Without prejudice, the Respondent No. 2 once again failed to consider that the 2017 Notification can become applicable only if Respondent No. 2 is of the 'view' that 'proceedings' relate to a serious contravention 'suspected' to be money laundering, and any such 'view' of Respondent No. 2 is bound to have been based on cogent material, which is significant by its absence.

Y. Barring the bald allegation in the letter dated 1 December 2017 issued by Respondent No. 2 to Respondent No. 1 that the impugned contraventions of suspected of money laundering and are being investigated under PMLA, there is no allegation of a predicate offence triggering PMLA, in the absence of which the 2017 Notification can have no application to the Petitioner. Mere allegation of an investigation under PMLA is insufficient to trigger the applicability of the 2017 Notification.

Z. The Respondent No. 1 acting under the influence of the Respondent No. 2 and in complete dereliction of its statutory duty is trying to drag its feet from considering the compounding applications. The aforesaid is clear from the fact that whereas before the Respondent No. 2 issued the 6 March 2017 letter, the Respondent No. 1 informed the Petitioner that its departments will give guidance on the matter of compounding but after the 6 March 2017

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letter and finally after 1 December 2017 letter of Respondent No. 2 it has completely changed its stand. Despite the Petitioner complying with the directions/ guidance of the Respondent No. 1 communicated to the Petitioner during the personal meeting and confirming the same vide its letter dated 2 December 2017, the Respondent No. 1 instead of guiding the Petitioner for filing of the compounding application has now vide its letter dated 15 December 2017 directed the Petitioner to approach the AD Bank. It is submitted that the Respondent No. 1 is undertaking an exercise without which also the contraventions the compounding as has been sought can be compounded. As already mentioned above, substantially the Contraventions for which the compounding has been sought are the specific contraventions which are the subject matter of the SCN of Respondent No. 2. Accordingly, the Respondent No. 1 ought to have considered the compounding applications without diverting itself to other transactions because even if the Respondent No. 1 compounds any contravention(s) it will not affect any other contravention, if any, which the Respondent No. 1 and/or Respondent No. 2 can take up even after the compounding. Having said that, it is submitted that it is not the case of the Petitioner that the Respondent No. 1 should not examine any transaction but the Petitioner submits that the Respondent No. 1 should not link other transactions with the transactions in respect of which the compounding has been sought as the compounding has been sought only for specific transactions and the order of compounding will not affect other contraventions, if any. The Petitioner is stuck in a precarious situation in which the Respondent No. 2 is pressing for continuation of adjudication proceedings whereas the Respondent No. 1 is not deciding the compounding applications due to which the right of the Petitioner to approach for compounding is being defeated in this very precarious manner which is arbitrary and discriminatory because in other cases the Respondent No.1 has been compounding similar contraventions on standalone basis even where the Respondent No.2's investigation under PMLA are still going on."

96. In reply to these specific grounds and the contents of the

letter referred above, there is an affidavit, which has been filed,

but it is evident that in the earliest affidavit, a reference is made

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to the letter dated 6th March, 2017, but the Enforcement

Directorate itself gave up its reliance on this letter of 6 th March,

2017 addressed by it to RBI, as recorded in this court's earlier

order and reproduced above. In relation to the amended

pleadings, what we find is that the Enforcement Directorate filed

its response/reply, in which, it stated that the view of the

Directorate was formed on the basis of material against the

petitioner relating to suspected money laundering, which is under

investigation in the Directorate. The petitioner has also invited

our attention to the reply to the chamber summons dated 8 th

February, 2018/affidavit of the Enforcement Directorate filed to

the proposed amendments to the petition, in which as well, the

only statement made is that the letter dated 1 st December, 2017

has been issued by the Directorate to the RBI after the

withdrawal of the letter dated 6th March, 2017 pursuance to the

directions of this court dated 13th November, 2017. It is stated

that there is a wrong claim made by the petitioner that the letter

dated 1st December, 2017 was to cure the lacuna in the letter

dated 6th March, 2017 and constitutes unlawful interference on

the right of the petitioner to seek compounding. The statutory

duty of the RBI is to compound only those cases which are not

covered by the notification dated 20th February, 2017. Meaning

thereby, the amended proviso. The case before the RBI is the

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subject matter of ongoing investigation under the PMLA, of

which, the investigation file was shown to this court to find out

application of mind to the issuance of the letter dated 1 st

December, 2017.

97. Then, it is stated that the allegation that the mandate of

Articles 14, 19 and 21 is violated, is bald, without any merit and

basis. That is how the Enforcement Directorate deals purportedly

with the amended paragraphs reproduced above. It is stated that

the petitioner is one of the accused in FIR No. 217-2017A009

dated 2nd June, 2017 registered by CBI and suspected accused in

the case registered by the Directorate vide ECIR/09/HIU/2017

dated 7th August, 2017. The petitioner is under investigation in

another PMLA Case No. ECIR/05/DZ/2012 (for short known as

"Aircel Maxis case"), in which overseas investigation is pending.

Hence, the letter dated 1st December, 2017 was not issued on mere

allegation of investigation under the PMLA to trigger the

notification/amended provision in any manner. It is asserted that

the view of the Directorate is based on the material facts being

investigated under the PMLA against the petitioner. Then, it is

stated that the Directorate has communicated its view to the RBI.

The Enforcement Directorate denies that the RBI is acting at its

behest and is merely holding up the compounding applications on

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98. It is clear from what we have narrated above that the

petitioner has already taken inspection of certain documents and

therefore, filed additional affidavits. Apart from that, in the writ

petition itself, the petitioner has clearly averred that the entire

assertion of the Enforcement Directorate as above is false to its

knowledge for it is not in respect of any investigation against the

petitioner. It is pointed out in the petition itself as to how the

petitioner is not at all under investigation or suspected of any

money laundering. In that regard, we have already referred to

the requisite assertions. The petitioner has also relied upon the

judicial orders passed by the Special Judge-CBI, New Delhi in

what is styled as the 2G Spectrum Case. The petitioner has also

annexed documents pointing out as to how the petitioner has not

been summoned as an accused, but as a witness. The petitioner's

stand is that even in its writ petition filed before the High Court of

Delhi, New Delhi, it has pointed out as to how no offence is

disclosed in the FIR, which is subject matter of Writ Petition (Cri.)

No. 1863 of 2017. Thus, the petitioner cannot be said to be

suspected of involved in money laundering operations.

99. In the written notes of arguments, the details are set out

with reference to the FIRs and the case numbers taken from the

Enforcement Directorate's affidavit. It is pointed out as to how

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the FIR dated 2nd June, 2017, which mainly relates to interest

waiver/reduction granted by the ICICI Bank to the Promoters or

holding companies of the petitioner, directly does not concern the

petitioner. The FIR was registered only on 2 nd June, 2017, which

is subsequent to the Enforcement Directorate's letter dated 6 th

March, 2017. As far as the second of the matters, namely, ECIR of

7th August, 2017, the petitioner has no record of having received

intimation in relation thereto. In the Aircel Maxis case, the

petitioner was summoned as a witness and not an accused. The

petitioner has also relied upon the order of discharge of the

accused persons dated 2nd February, 2017.

100. Thus, the petitioner's categoric assertion is that what is

subject matter of their earlier letter of 6th March, 2017, which is

expressly withdrawn and given up, cannot be now reintroduced

either by filing an additional affidavit or by supplementing the

reasons.

101. In order to test the correctness of these assertions by the

parties, we called upon Mr. Venegaonkar to produce before us the

relevant record. He was fair enough to handover a sealed cover in

this court and that sealed cover contains, according to

Mr.Venegaonkar, the requisite material, based on which, the

Enforcement Directorate's view has been communicated.

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Mr.Venegaonkar was further fair enough to state that this

material can be perused by the court, but the same may not be

allowed to be perused by the petitioner.

102. A perusal of this original record leaves us in no manner of

doubt that the communication dated 1st December, 2017 is only

based on some investigations resulting in a FIR, but that also not

against the petitioner, but its holding company. In the record,

there is a letter address by one K. P. S. Gill-IPS (Retired) on 26 th

January, 2015 received on 29th January, 2015, which letter is

addressed to the Minister of Finance, Government of India. This

complaint/letter states that there are efforts made by two serving

IRS officers in the disguise of litigation in public interest to

suppress inquiries and investigations by agencies such as the CBI,

Central Board of Direct Tax, ED, SFIO, RBI, SEBI etc. over money

laundering/tax evasion/corruption/receipt of bribe and illegal

gratification/embezzlement of Government money/theft of secret

records etc. by Shri. P. Chidambaram, M/s. NDTV Ltd., complicit

IRS officers and culpable relatives, not necessarily in that order.

Then, there is a reference made to a receipt of bribe and illegal

gratification of Rs.5000 crores by Shri. P. Chidambaram in the 2G

scam as reported by the CBDT secret records and another

Rs.1,200 crores paid to Shri. P. Chidambaram by M/s. GE

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Corporation of USA in the Rs. 24,000 crores Dabhol Enron Scam,

where he stands already indicted. It is alleged that

Shri.Chidambaram received these payments through the conduit

of M/s. NDTV Ltd. and its subsidiaries, such as M/s.NDTV

Network Plc, U. K., M/s. NDTV Network BV, Holland, M/s. NDTV

Lifestyle Holdings Pvt. Ltd. etc. and then there are names of some

complicit IRS officers. It is stated that Shri.Chidambaram exerted

pressure on one IRS officer Shri. Srivastava, who traced US $ 427

million laundered by M/s. NDTV Ltd. and which has been held to

be correct in statutory proceedings under the Income Tax Act,

1961. However, two serving officers have filed PIL before the

Hon'ble Supreme Court and reference is made to these Hon'ble

Supreme Court proceedings. The letter then proceeds to allege

that the mischievous litigation under public interest before the

Hon'ble Supreme Court by two serving IRS officers, who are

beneficiary parties to the money laundering, tax evasion and

corruption and are exerting efforts to suppress the investigation

and the rights of Shri. S. K. Srivastava and are also attempting to

influence the inalienable jurisdiction of the High Courts under

Article 226 and 227 of the Constitution of India. Thus, this is an

attempt to cover up the misdeeds as alleged above and there is a

conspiracy allegedly engineered by M/s. NDTV Ltd. and Shri.

P.Chidambaram to incapacitate an honest officer in his pursuit of

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the cases of the loot and plunder of public money. The allegations

then proceed to set out particulars received of the bribes received

by Shri. P. Chidambaram in the 2G scam. Thus, this is a complaint

which narrates essentially the alleged misdeeds of Shri. P.

Chidambaram and he was assisted, according to this complaint, in

these misdeeds, by certain officers of the Indian Revenue Service

and the petitioner and its holding companies. A copy of this

complaint was forwarded to the Prime Minister of India, Central

Vigilance Commissioner. After a copy of this complaint, what the

record contains, is the details of ECIR, which we have referred

above dated 7th August, 2017. In that, full particulars have been

set out. That includes a reference to Dr.Prannoy Roy, Ms.Radhika

Roy and M/s. NDTV Ltd. The complaint is being investigated by

CBI. The FIR is based on this complaint/material received by the

CBI, New Delhi and in which, it is stated that the complaint refers

to movable property and particularly funds of Rs.403.85 crores

obtained from M/s.Vishvapradhan Commercial Pvt. Ltd. by RRPR

Holdings Pvt. Ltd. It includes proceeds to the tune of Rs.48 crores

approximately with RRPR Holdings Pvt. Ltd. and Rs.53.85 crores

with Dr. Prannoy Roy. The allegation is that these are bribes to

create interest in favour of benami person and to gain covert

control of NDTV Ltd.

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103. We have already noted in the foregoing paragraphs as to

how this is the same material the affidavit of the Enforcement

Directorate makes a reference to. This is the same material

which is stated to be the subject matter of a pending writ petition

before the High Court of Delhi, New Delhi. On a perusal of the

same, it is evident that it is the promoter of NDTV Limited against

whom the allegations have been made. From the same, it is

difficult even prima facie to establish any nexus or connection of

the petitioner with the alleged payments. How the above entities

obtained the monies and whether they are proceeds of any crime

and hence the investigation is being carried out about the process

or activity connected therewith and hence this is a case of a

serious contravention suspected of money laundering is not spelt

out at all.

104. Then, what the record contains is a chart and the chart of

the alleged violations of FEMA in relation to which, a show cause

notice has already been issued. Based on all this, there is a note

prepared of 8 pages by the Deputy Director of Enforcement, New

Delhi and a perusal of that note would indicate that the petitioner

was not named as an accused in the charge-sheet in 2G spectrum

case and particularly Aircel Maxis case. This note refers to the

same allegations and says that certain entities stated to be

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companies connected with Shri. Dayanidhi Maran were benefited

and that investigation under the PMLA from a company called

South Asia FL revealed that a group company of NDTV Ltd. called

NDTV News Ltd. purchased the primary equity shares of SAFL for

an amount of Rs.5.1 crores. These shares were subsequently

acquired by another entity called AHMPL from NDTV News for

the same amount and passed on to the Mauritius based subsidiary

of Astro. It shows the axis between NDTV Ltd. and with Astro in

receiving funds from Mauritius based subsidiary of Astro.

105. We need not refer to all these details simply because the

petitioner has not been made an accused in the 2G scam case. The

investigations in that case are over long time back. Those who

had to be tried as accused have been put to trial already. The trial

has already ended, as is very widely reported. It is in these

circumstances and when the petitioner was not an accused at all

in a case which was investigated, tried and concluded, it is futile

now to point out, based on the allegations in the same, that the

Enforcement Directorate can take a view that the petitioner's

compounding proceedings should not be proceeded further

because the compounding proceedings relate to serious

contravention suspected of money laundering. Therefore, this

note and the material referred therein is of absolutely no

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assistance in forming a view and communicating it to the RBI. It

is clear from the plain language of the proviso that it comes into

play when with respect to any proceeding initiated under Rule 4

of the Compounding Rules, if the Enforcement Directorate is of

the view that the said proceeding relates to a serious

contravention suspected of money laundering, then, the

Compounding Authority shall not proceed in the matter and shall

remit the case to the appropriate adjudicating authority for

adjudicating contravention under section 13 of the FEMA. It is,

therefore, the relation with the compounding proceedings and the

applicant initiating the compounding proceedings, which is the

most vital and crucial factor. Absent the relation of the

compounding proceedings as also of the applicant therein with a

serious contravention suspected of money laundering, it would

not be permissible for the Enforcement Directorate to take any

view and communicate the same to the RBI by invoking this

proviso. If such a interpretation is not placed on the priviso,

there is a likelihood of the RBI being informed by a vague and

general communication as in the present case not to go ahead and

compound the contravention. If such communication is upheld,

that would put an end to the compounding proceedings, though

the view of the Enforcement Directorate is general in nature and

based on no material or on such material which has no relation

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with the compounding proceedings. The compounding

proceedings pertain to a contravention of the provisions of the

FEMA. It is the FEMA which permits a compounding application

to be considered by the RBI and confers specific power in that

behalf in the RBI by section 15. If the RBI is not allowed to

proceed and exercise its statutory power, which is also is

discretionary, only because the Enforcement Directorate has

communicated a view in general and vague terms, then, as is

rightly urged before us, the Enforcement Directorate would on

every occasion intervene and interfere with the RBI's powers and

take it over. It would then be possible for the Enforcement

Directorate to control the exercise of the power vesting in the RBI

and this would totally defeat the object and purpose of the FEMA.

Secondly, the RBI being the apex bank, its authority and position

in terms of the FEMA and the RBI Act, 1934 will be undermined

completely. Bearing in mind its position as an apex bank and the

trust and confidence reposed in it by the public and the

Parliament, as is apparent from at-least two parliamentary

statutes, diluting its statutory authority or undermining its

position would not be conducive and proper management of

foreign exchange. We cannot presume that the RBI, unmindful of

its role and the trust and confidence reposed in it under the two

parliamentary statutes, will compound every contravention of the

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FEMA very lightly and casually. It would definitely exercise its

discretionary power bearing in mind the expectations of the

general public, particularly as a guardian of the foreign exchange.

It will appropriately advise the applicants seeking contravention

and if compounding of contravention is not in larger public

interest, then, definitely the RBI will refuse to grant the

compounding application. Thus, on such a vague and general

materials, as are contained in the original record, we do not find

that we should allow the Enforcement Directorate to interdict the

compounding proceedings in the present case. Most of the

materials in the record pertain to the Aircel Maxis case, the

result of which, as observed above, known to all.

106. As a result of the above discussion, we hold that the view

communicated by the impugned communication/letter dated 1 st

December, 2017 could not brought any compounding proceedings

an end. The RBI was not bound to act in accordance with such

general and vague communication. The proviso could not have

been invoked by the Enforcement Directorate in the facts and

circumstances of the case. However, we must at once clarify that

we are not in agreement with Mr.Dwarkadas when he urges that

for the proviso to be invoked and applied, there must be a

predicate offence. In the sense, before the view is taken, the

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Enforcement Directorate would have to demonstrate and prove

that a FIR or crime is registered and investigations under the

Code (Cr. P. C.) for booking a case under the PMLA have

commenced by the Enforcement Directorate. It is not correct to

urge that all this is a pre-requisite or pre-condition to invoke the

proviso to Rule 8(2) of the Compounding Rules. It all depends

upon the facts and circumstances in each case. All that is

required is to possess reliable cogent and satisfactory material for

the suspicion to be raised. The nature of the same again depends

on the facts and circumstances in each case and no general rule

can be laid down.

107. In these circumstances, while upholding the constitutional

validity and legality of the proviso, particularly by reading it in

the manner noted above, we are in agreement with Mr.Dwarkadas

that in the facts of this case, the RBI was not bound to put an end

to the compounding proceedings. We are of the opinion that the

compounding proceedings initiated vide the compounding

applications of the petitioner and pending before the RBI should

proceed, but strictly in accordance with law.

108. In the view which we have taken, it is not necessary to

decide as to whether the amendment brought to the Compounding

Rules by insertion of the proviso by the notification dated 20 th

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February, 2017 has come into force or not. Mr.Dwarkadas fairly

argued that it has not come into force because of non-compliance

with section 48 of the FEMA, whereas, Mr. Venegaonkar, relying

upon the judgment of the Division Bench of this court, rendered at

Aurangabad and urging that the provisions of section 48 are

directory, urged further that this court should proceed on the

footing that the proviso has come into force and could have been

invoked. Mr. Venegaonkar fairly stated that even if this court

proceeds on the footing that there is compliance with section 48

or that the provisions are directory, it can still consider whether

in the facts and circumstances of the present case, the proviso

could have been invoked by the Enforcement Directorate at all.

Once we have rendered our findings on these lines, then, the

argument on the point as to whether compliance with section 48

is mandatory or directory need not be considered and rather is

not required to be considered in this case. The arguments of both

sides on this point are left open. We clarify that we have not

rendered any opinion insofar as this aspect is concerned.

109. Thus, the above discussion concludes this judgment. Rule is

made absolute by quashing and setting aside the communication

dated 1st December, 2017 and further directing the RBI to

consider the compounding applications in accordance with law

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uninfluenced by the communication of the Enforcement

Directorate dated 1st December, 2017 or any prior

letters/communications, which are quashed and set aside by this

judgment. There would be no order as to costs.

110. The original record produced by Mr. Venegaonkar shall be

returned to him after he replaces it with a certified true copy of

the same.

111. We also proceed to direct the RBI to render the necessary

guidance to the petitioner in the matter of compounding of the

contraventions under the FEMA. Since it was clearly stated

before us by the RBI that it is presently inhibited in considering

the compounding applications or proceeding to decide the same in

view of the communication/letter of the Enforcement Directorate,

then, as a result of quashing of the same, the RBI is free to

proceed and decide the same. However, our order does not oblige

the RBI to compound the contravention and all aspects and

matters, save and except the one decided above, can be taken into

consideration by the RBI in deciding the compounding

applications, if otherwise permitted by law.

112. In the view which we have taken, it is not necessary to deal

with the judgments, which Mr. Venegaonkar brought to our notice

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especially on the point of compliance with the requirements of

laying of Rules. Secondly, his reliance on the judgment in the case

of Narayan Govind Gavate (supra) is misplaced because there, the

Hon'ble Supreme Court was concerned with the question,

particularly that although the notification under section 4(1) of

the Land Acquisition Act is valid, yet, the Government of

Maharashtra has not discharged its burden of showing facts

constituting the urgency, which impelled it to give declarations-

cum-directions under section 17(4) of that Act dispensing with

the inquiries under section 5A of the Land Acquisition Act, 1894.

The High Court took a view that the declarations under section

17(4) are invalid and liable to be quashed and set aside. They

were accordingly quashed. It was that view which was assailed in

the Hon'ble Supreme Court. The observations in para 10 of this

judgment, far from assisting Mr. Venegaonkar, would militate

against his arguments. The formation of an opinion may be a

subjective matter, nevertheless that opinion has to be based on

some relevant material in order to pass the test, which courts do

impose. Para 10 of this decision reads as under:-

"10. It is true that, in such cases, the formation of an opinion is a subjective matter, as held by this Court repeatedly with regard to situations in which administrative authorities have to form certain opinions before taking actions they are empowered to take. They are expected to know better the difference between a right or wrong opinion than courts could ordinarily on such matters. Nevertheless, that opinion has to be based upon Page 116 of 122 J.V.Salunke,PA

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some relevant materials in order to pass the test which courts do impose. That test basically is: Was the authority concerned acting within the scope of its powers or in the sphere where its opinion and discretion must be permitted to have full play? Once the court comes to the conclusion that the authority concerned was acting within the scope of its powers and had some material, however meagre, on which it could reasonably base its opinion, the courts should not and will not interfere. There might, however be cases in which the power is exercised in such an obviously arbitrary or perverse fashion, without regard to the actual and undeniable facts, or, in other words, so unreasonably as to leave no doubt whatsoever in the mind of a court that there has been an excess of power. There may also be cases where the mind of the authority concerned has not been applied at all, due to misunderstanding of the law or some other reason, to what was legally imperative for it to consider."

113. To our mind, we have not departed from this test in coming

to the above conclusion.

114. Then, his reliance upon a decision of the United States

Supreme Court is also misplaced for in that decision as well, the

said Court does not hold that a view taken is immune from

judicial review. When the exercise of such nature even though

subjective, if the relevant materials are lacking or the opinion has

no basis, if it is found that the opinion is not based on any

material at all and the exercise in that behalf is wholly arbitrary,

then, we do not see how this decision can be said to be assisting

Mr. Venegaonkar.

115. Mr. Venegaonkar heavily relied upon the order passed by

the High Court of Delhi, New Delhi in the two writ petitions, which

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are filed by the petitioner (New Delhi Television Ltd. vs. The

Deputy Commissioner of Income Tax and Anr.). These petitions

were challenging a notice proposing reassessment proceedings by

the Commissioner of Income Tax under sections 147-148 of the

Income Tax Act and the order of provisional attachment of the

petitioners' assets.

116. Now, it is apparent that sections 147 and 148 confer in the

Income Tax Authority a power to reassess the income and the

question posed before the High Court at Delhi was whether the

invocation of this power is valid or not. The petitioner argued

that the complete details regarding the issuance of the step up

coupon bonds by NNPLC and guaranteed by NDTV were

submitted during the original assessment proceedings under

section 143 of the Act. The Department stressed that there had

been suppression and to the extent permitted by law, they can

reassess the income if that is found to have escaped the tax.

Thus, this was not a case of mere change of opinion. It is in that

context that all the observations have been made by the Division

Bench. We do not see how de-hors the factual background and the

context in which the issue under the provisions of a distinct law,

that these observations are relevant for our purpose. The ambit

and scope of the powers to reassess the income was in issue and

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whether the facts justify the same or otherwise. Hence, this

judgment is of no assistance.

117. In conclusion, we will be failing in our duty if we do not note

other arguments of Mr.Dwarkadas learned senior counsel

appearing for the petitioner. He submitted that the statutory

position and status of the authorities and high functionaries like

the RBI, Enforcement Directorate and the CBI is being

undermined and compromised. These institutions, according to

him, ought to be allowed to function with full autonomy,

independence and impartiality. Their strength lies in such

functioning and whenever that is disrupted or disturbed so also

interfered with, invariably, the public interest suffers. In their

prestige, reputation and dignity lies that of the nation. Mr.

Dwarkadas submits that the Hon'ble Supreme Court has

emphasised time and again the institutional integrity and that is

paramount. If such high functionaries surrender their authority,

power and jurisdiction and act as per the dictates of the political

bosses, then, the rule of law is a casualty. Mr. Dwarkadas submits

that we must not forget and overlook the fact that the petitioner is

a company engaged in the business of electronic media. It is

running a news channel and is a prominent player on the national

television network, particularly in the field of dissemination of

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news. If an attempt is made to embarrass and harass it with such

proceedings, then, we will have to pay a heavy price as the

freedom of press and electronic media will be in jeopardy.

118. Though we are not in agreement with Mr. Dwarkadas and

the material on record does not lead to this inference leave alone

conclusion, it is extremely distressing to note that parties like the

petitioner doubt the independence and impartiality of the above

institutions. None should entertain this belief or voice it before a

court of law for if that is noted in the proceedings, the very

credibility and efficacy of such institutions/authorities is than

questioned. It is extremely unfortunate that we have to take note

of such submissions of the learned senior counsel. We feel that

beyond noting these arguments, we should not express any

opinion thereon. However, we hope that all concerned

understand our pain and anguish. We are concerned in this

petition with the actions of the RBI and the Enforcement

Directorate, both of whom refer to the criminal proceedings

launched by the CBI. Those in-charge of their affairs and those in

power giving them directions ought to realise that nothing would

be achieved if foundations and base of these institutions is shaken

and if they allegedly obey every command of the political masters.

The political parties and outfits in power, in opposition ought to

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know that just as Defence Forces, Police and the Judiciary, it is

important that these institutions do not betray public trust and

confidence. By its very name, it is the Directorate of Enforcement

and it enforces stringent laws like the FEMA and the PMLA. Such

institutions are the custodians of our foreign exchange resources,

they safeguard and protect them by properly managing and

administering them. They ensure that there is balance, much less

in payment. If they are looked upon as guardians of citizens'

rights, then, it is time that those in power and opposition realise

that they should not act in a manner which gives the public at

large an impression that these vital institutions are but puppets

in the hands of politicians.

119. These institutions protect our constitutional framework.

Every law, which is made and the authority therefrom is but a

product of our constitution and the entries in the fields of

legislation (Schedule 7 Lists I, II and III) have given us the CBI,

the RBI and the Enforcement Directorate together with an

independent and impartial judiciary, free-press. The agencies like

RBI etc. are also pillars of our democracy. The earlier we realise

that in their meaningful existence lies our safety and of our legal

rights the better it would be. We pray that hereinafter we do not

have to observe anything like this and everybody will leave out

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these institutions from unnecessary attacks, uncalled for

criticism and do not try to overpower or overreach them.

(SMT. BHARATI H. DANGRE, J.) (S.C.DHARMADHIKARI, J.)

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