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CASE NO.:

Appeal (crl.) 1100 of 2006

PETITIONER:

State, CBI

RESPONDENT:

Sashi Balasubramanian & Anr.

DATE OF JUDGMENT: 31/10/2006

BENCH:

S.B. Sinha & Dalveer Bhandari

JUDGMENT:

J U D G M E N T

[Arising out of SLP (Crl..) No.996 of 2006]

S.B. SINHA, J.

Delay condoned.

Leave granted.

Interpretation and/or application of the \021Kar Vivad

Samadhan Scheme 1998\022 framed under the Finance (No.2) Act,

1998 is in question in this appeal which arises out of a

judgment and order dated 20.01.2005 passed by the High

Court of Madras in Crl.OP Nos.31422 and 36254 of 2004.

Shorn of all unnecessary details, the fact of the

matter is as under :

One M/s Best Fabrics (for short, \021the Company\022) had

applied for an advance licence on 29.01.1993 from the

Office of the Joint Director General of Foreign Trade,

Chennai for import of cotton fabrics showing the export

order for 47136 sets of \021cotton mens ensemble\022 under the

\021Duty Exemption Entitlement Certificate\022 (for short, \021the

Scheme\022). Upon scrutiny the application, a recommendation,

however, was made to allow the said company to import

\021cotton fabrics of 44 inch widths\022. As the item was not

figuring in the standard input and output norms book, the

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file was placed before Respondent No. 1, Smt. Sashi

Balasubramanian, by Sri V. Rajpriyan, Respondent No. 2

herein, for placing before the Zonal Advance Licensing

Committee for recommendations as regards quantity and

description of the goods to be allowed for import.

Approval for advance licence was granted by Smt. Sashi

Balasubramanian. On allegations in regard to the grant of

the said licence, a First Information Report was lodged on

02.03.1995 for commission of offences under Sections 120-B,

420 and 471 of the Indian Penal Code, Section 13(2) read

with Section 13(1)(d) of the Prevention of Corruption Act,

1988 and Section 136 of the Customs Act, 1962.

The Company and its Directors, however, in the

meanwhile filed an application in terms of the Scheme.

Declarations were filed on 31.12.1998. The charge-sheet in

the criminal case was filed on 12.04.1999.

Originally, there were seven accused; three out of them

were the private parties, namely, M/s Best Fabrics, Shri S.

Vaidyanathan and Shri Bharath Bhushan Goyal. Smt. Sashi

Balasubramanian, Respondent No.1 herein, was the Deputy

Director General of Foreign Trade and Shri V. Rajpriyan ,

Respondent No.2 herein, was the Controller of Exports and

Imports. Apart from Respondents herein, two other

officials were also arrayed as accused persons in the charge-

sheet, namely, Shri S. Ramanathan, Assistant Collector and

Shri A. Sivaram Kumar, Apprising Officer.

Accused Nos. 1 to 4 filed an application for quashing

the criminal proceedings as against them before the High

Court of Madras, which was registered as CC No. 34 of 1999.

It is stated that by an order dated 29.04.2004, the said

application has been allowed. No appeal is said to have

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preferred therefrom.

Respondents thereafter filed an application before the

High Court with the self-same prayer, which by reason of the

impugned judgment has been allowed.

Appellant is, thus, before us.

Mr. Vikas Singh, the learned Additional Solicitor

General appearing on behalf Appellant urged :

(i) Having regard to the nature of the Scheme, the High

Court committed a manifest error in opining that as the

private parties became entitled to immunity from

prosecution, the official respondents would also be

covered thereby.

(ii) The High Court misconstrued and misinterpreted the

provisions of Section 95 (iii) of the Act.

(iii) Public Servants were not entitled to any relief

under the said Scheme and far less immunity from

prosecution.

Dr. Manish Singhvi and Mr. T. Raja, the learned

counsel appearing on behalf of Respondents, on the other

hand submitted :

(i) The High Court cannot be said to have acted illegally

and without jurisdiction, as Respondents herein were

also entitled to the benefit of immunity scheme.

(ii) The doctrine of parity is applicable in the instant

case, and, thus, as other accused similarly situated

had been held to be entitled to the benefit of

declaration dated 31.12.1998 made under the Scheme,

there is no reason as to why Respondents would not be

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entitled thereto.

(iii) Section 95 of the Act cannot be invoked for the

said offence and in that view of the matter, it is

impermissible in law to split up the offences between

private parties and the public servants, particularly

when charges had been framed under Section 120-B of the

Indian Penal Code.

(iv) As the charges formed part of the same transaction,

either all the persons involved therein may be

proceeded against or none at all.

(v) Section 95(iii) of the Act, as the High Court has

rightly opined, must be held to be inapplicable in the

facts and circumstances of the case.

(vi) In any event, even if the allegations made against

Respondents are taken to be correct and accepted in

its entirety, the same does not constitute any offence

as alleged or at all.

An additional submission was made by Mr. T. Raja that

his client having worked under the orders of Smt. Sashi

Balasubramanian, cannot be said to have committed any

offence at all.

The Parliament enacted the Finance Act, 1998. It came

into force with effect from 29.03.1998. Chapter IV of the

said Act provides for the \021Kar Vivad Samadhan Scheme, 1998\022.

It came into force with effect from the 1st day of

September, 1998.

\021Declarant\022 has been defined in Section 87(a) to mean a

person making a declaration under Section 88. \021Disputed

tax\022 has been defined in Section 87(f) to mean the total tax

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determined and payable, in respect of an assessment year

under any direct tax enactment but which remains unpaid as

on the date of making the declaration under Section 88.

\021Indirect tax enactment\022 has been defined in Section 87(j)

in the following terms :

\023(j) \023indirect tax enactment\024 means the

Customs Act, 1962 (52 of 1962) or the Central

Excise Act, 1944 (1 of 1944) or the Customs

Tariff Act, 1975 (51 of 1975) or the Central

Excise Tariff Act, 1985 (5 of 1986) or the

relevant Act and includes the rules or

regulations made under such enactment;\024

Section 87(k) of the Act defines the \021person\022 to mean :

\023(k) \023person\024 includes \026

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm

(v) an association of persons or a body of individuals,

whether incorporated or not,

(vi) a local authority,

(vii) every artificial juridical person, not falling

within any of the preceding sub-clauses;

(viii) assessee, as defined in rule 2 of the Central

Excise Rules, 1944;

(ix) exporter as defined in clause (20) of section 2 of

the Customs Act, 1962 (52 of 1962);

(x) importer as defined in clause (26) of section 2 of

the Customs Act, 1962 (52) of 1962);

(xi) any person against whom proceedings have been

initiated and are pending under any direct tax enactment

or indirect tax enactment.\024

Section 88, inter alia, provides :

\02388. Subject to the provisions of this

Scheme, where any person makes, on or after

the 1st day of September, 1998 but on or

before the 31st day of December, 19998, a

declaration to the designated authority in

accordance with the provisions of section 89

in respect of tax arrear, then,

notwithstanding anything contained in any

direct tax enactment or indirect tax

enactment or any other provision of any law

for the time being in force, the amount

payable under this Scheme by the declarant

shall be determined at the rates specified

hereunder, namely :-

\005 \005 \005

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(f) where the tax arrears is payable under the indirect

tax enactment -

(i) in a case where the tax arrear

comprises fine, penalty or interest

but does not include duties

(including drawback of duty, credit

of duty or any amount representing

duty) or cesses, at the rate of

fifty per cent, of the amount of

such fine, penalty or interest, due

or interest, due or payable as on

the date of making a declaration

under section 88,

(ii) in any other case, at the rate of

fifty per cent, of the amount of

duties (including drawback of duty,

credit of duty or any amount

representing duty) or cess due or

payable on the date of making a

declaration under section 88.\024

A declaration is required to be filed in the form

prescribed therefor. Time and manner of payment of tax

arrears is provided for in Section 90. Section 91 provides

for immunity from prosecution and imposition of penalty in

certain cases. Section 95 provides for exceptions as

regards the applicability of the Scheme, Clause (iii)

whereof, which is relevant for our purpose, reads as under :

\02395. The provisions of this Section shall not

apply \026

\005 \005 \005

(iii) to any person in respect of whom

prosecution for any offence punishable

under Chapter IX or Chapter XVII of the

Indian Penal Code (45 of 1860), the

Foreign Exchange Regulation Act, 1973

(46 of 1973), the Narcotic Drugs and

Psychotropic Substances Act, 1985 (61 of

1985), the Terrorists and Disruptive

Activities (Prevention) Act, 1987 (28 of

1987), the Prevention of Corruption Act,

1988 (49 of 1988), or for the purpose of

enforcement of any civil liability has

been instituted on or before the filing

of the declaration or such person has

been convicted of any such offence

punishable under any such enactment.\024

The principal questions which arise for consideration

are \026

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(i) Whether the Scheme is applicable in relation to a

public servant ?

(ii) When does a prosecution start ?;

(iii) Whether the offences enumerated under Section

95(iii) are excluded from immunity in terms of Section 91

of the Act ?

The Scheme provides for an exception to the general

law. It provides for the mode and manner in which the

arrears of tax was to be collected. It dealt with direct

and indirect taxes only. Ex facie \021public servants\022 would

not come within the purview of the Act.

Counsel for Respondents, however, suggest that public

servants would also come within the purview of the Act as

against them also proceedings had been initiated.

Section 2(k)(xi), while defining a person undoubtedly

embraces within its fold those against whom proceedings

have been initiated, but the same relate to direct or

indirect tax enactments. Proceedings contemplated under the

Act must have a nexus with arrears of tax. Public servants

who can never file a declaration would not, in our

considered view, come within the purview thereof.

Of course, there exists a distinction between a

\021person\022 and a \021declarant\022. However, declaration is to be

filed by a person who would come within the purview of the

said term, as has been stated in the interpretation clause

contained in Section 2(k) of the Act. Section 88 provides

for a declaration to be made by a person and, \021declarant\022

means a person making a declaration. The applicability of

the provisions of the Act must be judged in the aforesaid

context.

The definition of \021person\022 must be read having regard

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to term \021declarant\022 i.e. who files a declaration.

A public servant is enjoined with a duty to enforce

tax enactments. A declaration in terms of Section 88 can be

filed by a declarant for determination of the tax arrear

under the Scheme at the rates specified thereunder. Public

servants, therefore, cannot not take the benefit of the

scheme. Section 90 provides for the time and manner of

payment of tax arrear. The amount of arrear of tax is

required to be determined within a period of sixty days from

the date of receipt of the declaration under Section 91,

whereupon a certificate is to be granted in such form as may

be prescribed. The certificate is granted only to the

declarant, which would contain the particulars of tax

arrears and the sum payable after such determination towards

full and final settlement of tax arrears.

The immunity under the scheme is an not absolute one.

The designated authority may impose certain conditions while

making an inquiry contained in Section 90.

The immunity granted is subject to the conditions

provided in Section 90. The immunity is in relation to

institution of any proceeding for prosecution for any

offence. Such offence may be either under the direct tax

enactment or indirect enactment. Immunity is also granted

from imposition of penalty under such enactments. However,

immunity also extends to matters covered under the

declaration under Section 88. Section 95 provides for an

exception to the Scheme. Once the provisions of Section 95

are attracted, the Scheme shall not apply. A determination

might have been made although the Scheme was not applied,

but the same may not per se confer a right of obtaining any

immunity in terms of Section 91 of the Act. Clause (iii)

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of Section 95 while laying down the exceptions, enumerates

offences under Chapter IX or Chapter XVII of the IPC and

certain other statutes. It also makes an exception, if a

proceeding for enforcement of any civil liability has been

instituted. Clause (iii) of Section 95 would be attracted

if, inter alia, any prosecution for any offence enumerated

thereunder has been instituted on or before the filing of

the declaration.

The First Information Report in regard to the offences

committed, as indicated hereinbefore, was lodged on

02.03.1995. The investigation started immediately

thereafter. The investigation was being carried on by the

Central Bureau of Investigation (Economic Offences Wing).

Only at a much later stage, namely, more than three years

thereafter, i.e. on 31.12.1998, declarations were filed.

Charge-sheet in the criminal case was filed on 12.04.1999.

It is in the aforementioned context, interpretation of

the word \021prosecution\022 assumes significance. The term

\021prosecution\022 would include institution or commencement of

a criminal proceeding. It may include also an inquiry or

investigation. The terms \021prosecution\022 and \021cognizance\022 are

not interchangeable. They carry different meanings.

Different statutes provide for grant of sanction at

different stages.

\021In initio\022 means in the beginning. The dictionary

meaning of \021initiation\022 is cause to begin. Whereas some

statutes provide for grant of sanction before a prosecution

is initiated, some others postulate grant of sanction

before a cognizance is taken by Court. However, meaning

of the word may vary from case to case. In its wider sense,

the prosecution means a proceeding by way of indictment or

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information, and is not necessarily confined to prosecution

for an offence.

The term \021prosecution has been instituted\022 would not

mean when charge-sheet has been filed and cognizance has

been taken. It must be given its ordinary meaning.

The Legislature with a definite purpose thought of

granting an exemption from the operation of the Act, if no

prosecution is initiated under the provisions of the statute

specified thereunder. Chapter IX of the Penal Code deals

with public servants. Chapter XVII thereof deals with

offences relating to property. Offences under other

enactments are of serious nature. Thus, presumably

commission of offences under the other Acts enumerated

therein were considered to be serious enough by the

Parliament, so as to exclude the application of the Scheme,

which includes Prevention of Corruption Act.

In any view of the matter, an immunity is granted only

in respect of offences purported to have been committed

under direct tax enactment or indirect tax enactment, but by

no stretch of imagination, the same would be granted in

respect of offences under the Prevention of Corruption

Act. A person may commit several offences under different

Acts; immunity granted in relation to one Act would not

mean that immunity granted would automatically extend to

others. By way of example , we may notice that a person may

be prosecuted for commission of an offence in relation to

property under the Indian Penal Code as also under another

Act, say for example, the Prevention of Corruption Act.

Whereas charges under the Prevention of Corruption Act may

fail, no sanction having been accorded therefor, the charges

under the Penal Code would not.

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The High Court has not held that the offences alleged

against Respondents are so inextricably connected that it

cannot be separated so much so that in the event if it be

held that private parties cannot be proceeded with at all,

the case against public servants, would invariably fail.

We, thus, as at present advised, do not intend to delve deep

into the said question. However, to be fair to learned

counsel, we may notice the decisions cited at the bar.

Reliance placed by Mr. Singhvi on Devarapalli

Lakshminarayana Reddy and Others v. V. Narayana Reddy and

Others [(1976) 3 SCC 252] has no application to the facts

and circumstances of the present case. The question which

arose for consideration therein was required to be

determined in the context of the provisions of Sections 200

and 202 of the 1898 Code vis-`-vis Sections 200 and 202 of

the 1973 Code. The question was as to whether cognizance is

taken before issuance of process or not. It in that

context, it was stated :

\02314. This raises the incidental

question: What is meant by \023taking cognizance

of an offence\024 by a Magistrate within the

contemplation of Section 190? This expression

has not been defined in the Code. But from

the scheme of the Code, the content and

marginal heading of Section 190 and the

caption of Chapter XIV under which Sections

190 to 199 occur, it is clear that a case can

be said to be instituted in a court only when

the court takes cognizance of the offence

alleged therein. The ways in which such

cognizance can be taken are set out in

clauses (a), (b) and (c) of Section 190(1).

Whether the Magistrate has or has not taken

cognizance of the offence will depend on the

circumstances of the particular case

including the mode in which the case is

sought to be instituted, and the nature of

the preliminary action, if any, taken by the

Magistrate. Broadly speaking, when on

receiving a complaint, the Magistrate applies

his mind for the purposes of proceeding under

Section 200 and the succeeding sections in

Chapter XV to the Code of 1973, he is said to

have taken cognizance of the offence within

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the meaning to Section 190(l)(a). It, instead

of proceeding under Chapter XV, he has, in

the judicial exercise of his discretion,

taken action of some other kind, such as

issuing a search warrant for the purpose of

investigation, or ordering investigation by

the police under Section 156(3), he cannot be

said to have taken cognizance of any

offence.\024

Institution of a prosecution and institution of a

complaint case in a criminal court stand on different

footings. Whereas summons to an accused in a complaint case

can be issued only upon taking cognizance of the offence,

the same would not mean in a case where first information

report has been lodged resulting in initiation of

investigation or where it has been referred to police or

other authorities for enquiry; even then a prosecution may

not be held to have been initiated at that stage.

What transpires from the said decision is that whereas

before cognizance is taken, application of mind on the part

of the court is imperative, taking action of some other kind

would not mean that cognizance has been taken. In some

cases, even after lodging of the F.I.R., a preliminary

enquiry which may not be an investigation into the crime,

may be initiated.

Strong reliance has also been placed on Basir-ul-Haq

and Others v. State of West Bengal [(1953) SCR 836]. The

question which arose for consideration therein was whether

having regard to the nature of the offence allegedly

committed by the accused named therein, it was capable to be

split up. In the aforementioned context, it was held that

if the offences are inseparable or incapable of being split

up, the Court will have no other option but to pass a

judgment of acquittal, stating :

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\02314. Though, in our judgment, Section 195

does not bar the trial of an accused person

for a distinct offence disclosed by the same

facts and which is not included within the

ambit of that section, it has also to be

borne in mind that the provisions of that

section cannot be evaded by resorting to

devices or camouflages. The test whether

there is evasion of the section or not is

whether the facts disclose primarily and

essentially an offence for which a complaint

of the court or of the public servant is

required. In other words, the provisions of

the section cannot be evaded by the device of

charging a person with an offence to which

that section does not apply and then

convicting him of an offence to which it

does, upon the ground that such latter

offence is a minor offence of the same

character, or by describing the offence as

being one punishable under some other section

of the Indian Penal Code, though in truth and

substance the offence falls in the category

of sections mentioned in Section 195 of the

Criminal Procedure Code\005.\024

[Emphasis supplied]

The observations in the said judgment must be held to

have been made in the factual matrix obtaining therein and

not de\022hors the same.

In the instant case, resorting to any device or

camouflage has not been alleged. It is also not a case

that the provisions of the Indian Penal Code or the

Prevention of Corruption Act cannot be said to have any

application, although linked with an offence under Section

136 of the Customs Act.

An ultimate purpose of commission of an offence may be

to commit one offence under one statute, but indisputably in

the process thereof offences under other statutes may also

be committed.

In Hira Lal Hari Lal Bhagwati v. CBI, New Delhi

[(2003) 5 SCC 257] this Court indisputably proceeded to

hold that the immunity was qua offence but Appellants

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therein before this Court were the assessees. The

prosecution was also launched therein after a declaration

was made.

We may also notice that Brijesh Kumar, J. in his

concurring but separate judgment took into consideration the

fact situation obtaining therein, namely, initiation of a

criminal proceeding after issuance of a declaration and

after withdrawal of the case, in the High Court in the

following terms :

\023\005On the one hand final settlement was made

after determining the tax liability on the

premise that the appellants were neither

convicted nor criminal proceedings were

pending, relating to any offence under

Chapter IX or XVII IPC, yet the criminal

proceedings are being prosecuted which is

apparently against the very spirit of the

Scheme promulgated under the Finance (No. 2)

Act of 1998. If a person against whom

criminal proceedings were pending, relating

to offence under Chapter IX or XVII IPC or

who stood convicted under any of the

provisions of those chapters, he would not

have been eligible to seek benefit under the

Scheme and after accepting that position and

the due settlement, there was no occasion to

initiate and continue the criminal

proceedings, which could bring about the

conviction of the same persons, in case

prosecution ended successfully in favour of

the State and against the appellants. If such

a condition is provided that on a particular

date a criminal proceeding should not be

pending against a person nor should he have

been convicted of an offence, as a condition

precedent for a settlement, and on that basis

a settlement is brought about, it does not

mean that later on, one could turn around and

get the declarant convicted for a criminal

offence too, after settlement of the

liability. More so, when in view of Section

90 sub-section (4) of the Scheme the

declarant is obliged to withdraw an appeal or

proceedings regarding tax liability pending

before the High Court or the Supreme Court,

which had also been done in the case in hand.

That is to say that on one hand the declarant

is not permitted to pursue the remedy,

regarding tax liability, which is already

pending before the courts of law, as they are

either deemed to be withdrawn by operation of

law or they have to be withdrawn by a

positive act of the party and yet prosecute

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such persons for their conviction as well.

The declarant could not be dragged and chased

in criminal proceedings after closing the

other opening making it a dead end. It is

highly unreasonable and arbitrary to do so

and initiation and continuance of such

proceedings lack bona fides.\024

An accused may be discharged from a criminal case under

Section 245 of the Code, if his civil liability has been

determined in his favour; but the same must have a direct

nexus with his criminal liability. He would not acquire

any immunity only because civil and criminal liabilities

have some connection, however, remote the same may be.

The connection between the two types of liabilities must

be direct and proximate. If in incurring the civil

liability, he has committed offences wherewith

determination thereof has no nexus, the immunity would

not extend thereto.

We will give a simple example. A person while

obtaining undue favour from an authority under the indirect

tax enactment, offers a bribe. Obtaining of an undue favour

resulting in prosecution under the indirect tax enactment

may be a separate offence , but involvement of the public

servant qua offences under the Prevention of Corruption Act

would be a separate and distinct one.

It is one thing to say that an Act constitutes both

civil and criminal wrong and in the self same fact, when

compounding of offence is effected in relation to the civil

dispute, the High Court may be justified in quashing a

complaint under the criminal case as was done in Central

Bureau of Investigation, SPE, SIU (X), New Delhi v. Duncans

Agro Industries Ltd., Calcutta [(1996) 5 SCC 591], but it

is another thing to say that prosecution under other statute

would also fail. It is in that view of the matter, this

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Court stated the law in the following terms :

\02326. After giving our careful

consideration to the facts and circumstances

of the case and the submissions made by the

respective counsel for the parties, it

appears to us that for the purpose of

quashing the complaint, it is necessary to

consider whether the allegations in the

complaint prima facie make out an offence or

not. It is not necessary to scrutinise the

allegations for the purpose of deciding

whether such allegations are likely to be

upheld in the trial. Any action by way of

quashing the complaint is an action to be

taken at the threshold before evidences are

led in support of the complaint. For quashing

the complaint by way of action at the

threshold, it is, therefore, necessary to

consider whether on the face of the

allegations, a criminal offence is

constituted or not.\024

Reliance has also been placed on K.C. Builders and

Another v. Assistant Commissioner of Income Tax [(2004) 2

SCC 731]. The question which arose for consideration

therein was as to whether mens rea is an essential

ingredient for imposition of penalty under Section 271(1)(c)

of the Income Tax Act. In that case, finding of

concealment and subsequent levy of penalties had been struck

down by the Tribunal. The assessment year was directed to

be corrected in terms of Section 154 of the Act. It was in

that fact situation, this Court opined that if the Tribunal

has set aside the order of imposing a penalty for

concealment, there would be no concealment in the eyes of

the law and, therefore, the prosecution should be proceeded

against the accused and, thus, further proceedings would be

illegal and without jurisdiction, stating :

\023\005When the Tribunal has set aside the levy of

penalty, the criminal proceedings against the

appellants cannot survive for further

consideration\005\024

In the fact of that case, it was held that the charge

of conspiracy had not been proved and no case had also been

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made out for establishing the offence of cheating. The gist

of the prosecution case therein was that the accused had

filed false returns of income before the Department which

led concealment of income to evade tax. The question,

therefore, was as to whether there had been any concealment

of income at all. The said decision, therefore, cannot have

any application whatsoever.

Reliance has also been placed on Central Bureau of

Investigation v. Akhilesh Singh [(2005) 1 SCC 478]. In that

case, out of the three accused, two were discharged and in

that view of the matter it was held that the basis of

alleged conspiracy by the respondent therein with Dr. Sanjay

Singh lost its substratum. It was in the factual matrix of

the case exercise of jurisdiction by the High Court under

Section 482 of the Code of Criminal Procedure was held to

be not to be suffering from any illegality or infirmity.

We may, however, notice that in R.K. Garg etc. v. Union

of India and Others [(1981) 4 SCC 675], it was held that

only because exemption had been granted in relation to

purchase of bearer bonds, the same would not mean that the

offender shall stand immuned from other offences also.

Bhagwati, J. speaking for the majority opined :

\023\005It will be seen that the immunities granted

under Section 3, sub-section (1) are very

limited in scope. They do not protect the

holder of Special Bearer Bonds from any

inquiry or investigation into concealed

income which could have been made if he had

not subscribed to or acquired Special Bearer

Bonds. There is no immunity from taxation

given to the black money which may be

invested in Special Bearer Bonds. That money

remains subject to tax with all consequential

penalties, if it can be discovered

independently of the fact of subscription to

or acquisition of Special Bearer Bonds. The

only protection given by Section 3, sub-

section (1) is that the fact of subscription

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to or acquisition of Special Bearer Bonds

shall be ignored altogether and shall not be

relied upon as evidence showing possession of

undisclosed money. This provision relegates

the Revenue to the position as if Special

Bearer Bonds had not been purchased at all.

If without taking into account the fact of

subscription to or acquisition of Special

Bearer Bonds and totally ignoring it as if it

were non-existent, any inquiry or

investigation into concealed income could be

carried out and such income detected and

unearthed, it would be open to the Revenue to

do so and it would be no answer for the

assessee to say that this money has been

invested by him in Special Bearer Bonds and

it is therefore exempt from tax or that he is

on that account not liable to prosecution and

penalty for concealment of such income. This

is the main difference between the impugned

Act and the Taxation Laws (Amendment and

Miscellaneous Provisions) Act, 1965. Under

the latter Act, where gold is acquired by a

person out of his undisclosed income, which

is the same thing as black money, and such

gold is tendered by him as subscription for

the National Defence Gold Bonds, 1980, the

income invested in such gold is exempted from

tax, but where Special Bearer Bonds are

purchased out of undisclosed income under the

impugned Act, the income invested in the

Special Bearer Bonds is not exempt from tax

and if independently of the fact of purchase

of the Special Bearer Bonds and ignoring them

altogether, such income can be detected, it

would be subject to tax. The entire machinery

of the taxation laws for inquiry and

investigation into concealed income is thus

left untouched and no protection is granted

to a person in respect of his concealed

income merely because he has invested such

income in Special Bearer Bonds. It is

therefore incorrect to say that as soon as

any person purchases Special Bearer Bonds, he

is immunised against the processes of

taxation laws. Here there is no amnesty

granted in respect of any part of the

concealed income even though it be invested

in Special Bearer Bonds. The whole object of

the impugned Act is to induce those having

black money to convert it into white money by

making it available to the State for

productive purposes, without granting in

return any immunity in respect of such black

money, if it could be detected through the

ordinary processes of taxation laws without

taking into account the fact of purchase of

Special Bearer Bonds\005.\024

We may at this stage deal with another contention viz.

that if in the connected matter where other public servants

were parties, , no appeal having been filed from the

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judgment of the High Court by the C.B.I., this appeal would

be maintainable. This aspect of the matter has been

considered by a three-Judge Bench of this Court in

Government of West Bengal v. Tarun K. Roy and Others [(2004)

1 SCC 347], wherein it was categorically stated :

\023\005Non-filing of an appeal, in any event,

would not be a ground for refusing to

consider a matter on its own merits. (See

State of Maharashtra v. Digambar10.)

29. In State of Bihar v. Ramdeo Yadav11

wherein this Court noticed Debdas Kumar1 by

holding: (SCC p. 494, para 4)

\0234. Shri B.B. Singh, the learned counsel

for the appellants, contended that though an

appeal against the earlier order of the High

Court has not been filed, since larger public

interest is involved in the interpretation

given by the High Court following its earlier

judgment, the matter requires consideration

by this Court. We find force in this

contention. In the similar circumstances,

this Court in State of Maharashtra v.

Digambar10 and in State of W.B. v. Debdas

Kumar1 had held that though an appeal was not

filed against an earlier order, when public

interest is involved in interpretation of

law, the Court is entitled to go into the

question.\024

[See also Union of India v. Pramod Gupta (Dead) by Lrs. and

Others \026 (2005) 12 SCC 1]

In this case also public interest is involved as

interpretation of the provisions of the Act were in

question. Yet again there cannot be any equality in

illegality.

[See Secretary, State of Karnataka and Others v. Umadevi

(3) and Others [(2006) 4 SCC 1]

We, therefore, are of the opinion that the impugned

judgment cannot be sustained. It is set aside accordingly.

The High Court, however, did not go into the merit of

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the matter. It proceeded on the basis that the continuation

of the prosecution as against Respondents was

unsustainable in law. Although prosecution as against

Respondents herein may be held to be not maintainable, in

our opinion, they are entitled to contend that even if the

materials brought on records are given face value and taken

to be correct in their entirety, no case has been made out

as against them.

The appeal is allowed, the impugned judgment is set

aside with the aforementioned observations. No costs.