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CASE NO.:

Appeal (crl.) 35 of 2004

PETITIONER:

The Special Director and Anr.

RESPONDENT:

Mohd. Ghulam Ghouse and Anr.

DATE OF JUDGMENT: 09/01/2004

BENCH:

DORAISWAMY RAJU & ARIJIT PASAYAT

JUDGMENT:

J U D G M E N T

(Arising out of SLP(Crl.)No. 2914 of 2003)

ARIJIT PASAYAT,J

Leave granted.

The interim order passed by a Division Bench of the

Bombay High Court is under challenge by the Union of India

and the Special Director, Enforcement Directorate, Ministry

of Finance, Govt. of India. Respondent No.1 filed a writ

petition before the Bombay High Court questioning legality

of the show cause notice no.T-4/144/SDE/(AKB)/B/2002 dated

31st May, 2002 issued by the appellant No.1 and prayed

that the same may be quashed and set aside, for allegedly

being illegal, null and void. A prayer for interim relief

was made to the effect that pending hearing and final

disposal of the writ petition, the Court be pleased to pass

an order of injunction restraining the respondents i.e.

present appellants before this Court and the State of

Maharashtra (respondent No.3 in the present appeal) and/or

his subordinates or any other officer acting on his behalf

from initiating any proceeding pursuant to the show cause

notice referred to above, as issued by the present

appellants. The High Court passed the following order on

11.9.2002:

"Rule. Status quo".

According to the appellants the writ petition is

thoroughly misconceived as it challenges a show cause notice

and in any event the final relief as sought for by

respondent No.1-writ petitioner in relation to the show

cause notice should not have been granted by an interim

order of the nature passed by withholding any further action

in this regard . It was pointed out that respondent No.1 is

responsible for financial irregularities involving nearly

Rupees 270 crores and documents have been forged, accounts

have been manipulated; and in any event respondent No.1 was

free to canvass all the points that were taken in the writ

petition before the authority issuing the notice. Instead of

doing that he rushed to the High Court and unfortunately the

High Court not only entertained the writ application but

also granted interim relief which was in effect allowing the

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writ petition even before it was heard on merits. The final

relief sought for itself, in substance, was granted by the

interim order. There was clear violation of the provisions

of Foreign Exchange Regulation Act, 1973 (in short the

'FERA') and Foreign Exchange Management Act, 1999 (in short

the 'FEMA'). The Enforcement Directorate has clearly

indicated in the notice the various infractions which led to

such large scale illegal transactions of more than Rupees

270 crores. Respondent No.1 (writ petitioner) was clearly

guilty of various provisions of FERA and FEMA. The High

Court should have thrown out the writ petition at the

threshold.

Per contra, learned counsel for respondent No.1

submitted that the show cause notice is clearly unfounded in

law, cannot stand the test of legal scrutiny and the High

Court was justified not only in entertaining writ petition

but also in granting the interim protection.

This Court in a large number of cases has deprecated

the practice of the High Courts entertaining writ petitions

questioning legality of the show cause notices stalling

enquiries as proposed and retarding investigative process to

find actual facts with the participation and in the presence

of the parties. Unless, the High Court is satisfied that the

show cause notice was totally non est in the eye of law for

absolute want of jurisdiction of the authority to even

investigate into facts, writ petitions should not be

entertained for the mere asking and as a matter of routine,

and the writ petitioner should invariably be directed to

respond to the show cause notice and take all stands

highlighted in the writ petition. Whether the show cause

notice was founded on any legal premises is a jurisdictional

issue which can even be urged by the recipient of the notice

and such issues also can be adjudicated by the authority

issuing the very notice initially, before the aggrieved

could approach the Court. Further, when the Court passes an

interim order it should be careful to see that the statutory

functionaries specially and specifically constituted for the

purpose are not denuded of powers and authority to initially

decide the matter and ensure that ultimate relief which may

or may not be finally granted in the writ petition is

accorded to the writ petitioner even at the threshold by the

interim protection, granted.

In the instant case, the High Court has not indicated

any reason while giving interim protection. Though, while

passing interim orders, it is not necessary to elaborately

deal with the merits, it is certainly desirable and proper

for the High Court to indicate the reasons which has weighed

with it in granting such an extra ordinary relief in the

form of an interim protection. This admittedly has not been

done in the case at hand.

While issuing notice on 7.7.2003, this Court had

granted interim stay of the impugned interim order. The

respondent had entered appearance and we have heard the

learned senior counsel on either side. In the fitness of

things, taking into account the above circumstances, we

dispose of the appeal with a direction that the proceedings

emanating from the show cause notice shall be continued, but

the final order passed pursuant thereto shall not be

communicated to the respondent No.1 (writ petitioner)

without leave or further orders of the High Court. The writ

petition shall be disposed of on merits in accordance with

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law. Any observation made in this appeal shall not be

construed to be expression of any opinion on the merits of

the matter pending before the High Court. Since the

controversy is of a very limited as well as serious nature,

the High Court may explore the possibility of early disposal

of the writ petition. The appeal is allowed to the extent

indicated with no order as to costs.