REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5188 OF 2008
(Arising out of SLP (C.) No. 1830 of 2007)
Monotosh Saha ..Appellant
Versus
Special Director, Enforcement Directorate
And Anr. ..Respondents
JUDGMENT
Dr. ARIJIT PASAYAT, J.
1. Leave granted.
2. Challenge in this appeal is to the order passed by a
Division Bench of the Calcutta High Court dismissing the
appeal filed by the appellant under Section 35 of Foreign
Exchange Management Act, 1999 (in short the `Act’).
3. Background facts in a nutshell are as follows:
Memorandum was issued by the Enforcement
Directorate, Ministry of Finance. On the basis of certain
statements recorded it was indicated therein that M/s
Godsons (India) and its proprietor, the present appellant
had acquired foreign exchange contravening the provisions of
Section 8(1) of the Foreign Exchange Regulation Act, 1973 (in
short the `Foreign Exchange Act’) thereby rendering him liable
to be proceeded under Section 50 of the Foreign Exchange
Act. The memorandum was issued under Rule 3 of the
Adjudication Proceedings and Appeal Rules, 1974 (in short
`Adjudication Rules’). The reply to the show cause notice was
filed by the appellant. The Special Director, of Foreign
Exchange Act passed an order on 13th May, 2005 imposing
penalty of Rs.25 lakhs on the appellant. The appellant
preferred an appeal before the Appellate Tribunal (Foreign
Exchange) (in short the `Tribunal’) and filed an application for
dispensing with the requirement of pre-deposit. By order
dated 7.3.2006 the Tribunal passed an order directing deposit
of 60% of the penalty amount for the purpose of entertaining
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the appeal. An appeal was filed under Section 35 of the Act
which came to be dismissed by the High Court holding that no
case for hardship was made out either before the Tribunal or
before it and, therefore, there was no scope of interference
with the order of the Tribunal. However, time permitting the
deposit was extended.
4. In support of the appeal, learned counsel for the
appellant submitted that a case for dispensing with pre-
deposit was made out. In any event, in compliance with this
Court’s interim order dated 5.2.2007 the amount of
Rs.10,00,000/- has been deposited with the concerned
Directorate.
5. Learned counsel for the respondents on the other hand
submitted that the appellant did not make out a case for
dispensing with pre-deposit and, therefore, the order of the
Tribunal as affirmed by the High Court does not suffer from
any infirmity.
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6. Principles relating to grant of stay pending disposal of
the matters before the concerned forums have been
considered in several cases. It is to be noted that in such
matters though discretion is available, the same has to be
exercised judicially.
7. The applicable principles have been set out succinctly in
Silliguri Municipality and Ors. v. Amalendu Das and Ors. (AIR
1984 SC 653) and M/s Samarias Trading Co. Pvt. Ltd. v. S.
Samuel and Ors. (AIR 1985 SC 61) and Assistant Collector of
Central Excise v. Dunlop India Ltd. (AIR 1985 SC 330).
8. It is true that on merely establishing a prima facie case,
interim order of protection should not be passed. But if on a
cursory glance it appears that the demand raised has no leg to
stand, it would be undesirable to require the assessee to pay
full or substantive part of the demand. Petitions for stay
should not be disposed of in a routine matter unmindful of the
consequences flowing from the order requiring the assessee to
deposit full or part of the demand. There can be no rule of
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universal application in such matters and the order has to be
passed keeping in view the factual scenario involved. Merely
because this Court has indicated the principles that does not
give a license to the forum/authority to pass an order which
cannot be sustained on the touchstone of fairness, legality
and public interest. Where denial of interim relief may lead to
public mischief, grave irreparable private injury or shake
citizens’ faith in the impartiality of public administration,
interim relief can be given.
9. It has become an unfortunate trend to casually dispose
of stay applications by referring to decisions in Siliguri
Municipality and Dunlop India cases (supra) without
analysing factual scenario involved in a particular case.
10. Section 19 of the Act reads as follows:
“19(1). Save as provided in sub-section (2), the
Central Government or any person aggrieved
by an order made by an Adjudicating
Authority, other than those referred to in sub-
section (1) of section 17, or the Special
Director (Appeals), may prefer an appeal to the
Appellate Tribunal :
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Provided that any person appealing against
the order of the Adjudicating Authority or the
Special Director (Appeals) levying any penalty,
shall while filing the appeal, deposit the
amount of such penalty with such authority as
may be notified by the Central Government:
Provided further that where in any particular
case, the Appellate Tribunal is of the opinion
that the deposit of such penalty would cause
undue hardship to such person, the Appellate
Tribunal may dispense with such deposit
subject to such conditions as it may deem fit
to impose so as to safeguard the realisation of
penalty.”
11. Two significant expressions used in the provisions are
“undue hardship to such person” and “safeguard the
realization of penalty”. Therefore, while dealing with the
application twin requirements of considerations i.e.
consideration of undue hardship aspect and imposition of
conditions to safeguard the realization of penalty have to be
kept in view.
12. As noted above there are two important expressions in
Section 19(1). One is undue hardship. This is a matter within
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the special knowledge of the applicant for waiver and has to be
established by him. A mere assertion about undue hardship
would not be sufficient. It was noted by this Court in S.
Vasudeva v. State of Karnataka and Ors. (AIR 1994 SC 923)
that under Indian conditions expression “Undue hardship” is
normally related to economic hardship. “Undue” which means
something which is not merited by the conduct of the
claimant, or is very much disproportionate to it. Undue
hardship is caused when the hardship is not warranted by the
circumstances.
13. For a hardship to be `undue’ it must be shown that the
particular burden to have to observe or perform the
requirement is out of proportion to the nature of the
requirement itself, and the benefit which the applicant would
derive from compliance with it.
14. The word “undue” adds something more than just
hardship. It means an excessive hardship or a hardship
greater than the circumstances warrant.
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15. The other aspect relates to imposition of condition to
safeguard the realization of penalty. This is an aspect which
the Tribunal has to bring into focus. It is for the Tribunal to
impose such conditions as are deemed proper to safeguard the
realization of penalty. Therefore, the Tribunal while dealing
with the application has to consider materials to be placed by
the assessee relating to undue hardship and also to stipulate
condition as required to safeguard the realization of penalty.
16. The above position was highlighted in Benara Valves Ltd.
and Ors. v. Commissioner of Central Excise and Anr. (2006
(13) SCC 347). The decision was rendered in relation to
Section 35F of the Central Excise Act, 1944 where also
identical stipulations exist.
17. In the instant case Tribunal has rightly observed that the
rival stands have to be examined in detail with reference to
material on record.
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18. The only other question that needs to be examined is
whether any reduction of the amounts to be deposited as
directed by the Tribunal is called for.
19. Undisputedly the appellant had deposited the amount
which was directed to be deposited. However, for the balance
amount demanded with a view to safeguard the realization of
penalty the appellant shall furnish such security as may be
stipulated by the Tribunal. On that being done, the appeal
shall be heard without requiring further deposit if the appeal
is otherwise free from defect.
20. The appeal is disposed of accordingly.
……………………………………J.
(Dr. ARIJIT PASAYAT)
…………………………………….J.
(Dr. MUKUNDAKAM SHARMA)
New Delhi,
August 21, 2008
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