Judgment Intelligence
Petition DismissedM/s. Seema Silk & Sarees & Anr. v. Directorate of Enforcement & Ors.
Criminal Appeal No. 860 of 2008 (arising out of SLP (Crl.) No. 6812 of 2007); cited as 2008 (7) SCALE 624
- Court
- Supreme Court of India
- Date of Decision
- 12 May 2008
- Bench
- Justices S.B. Sinha and Lokeshwar Singh Panta
- Relevant Acts & Sections
- Foreign Exchange Regulation Act, 1973 — Sections 18(1), 18(2), 18(3), 56; Constitution of India — Articles 14, 31B, Ninth Schedule
Final Outcome
The appeal was dismissed with no order as to costs; all contentions on whether the appellants committed any offence were left open (para 22).
Key holdings
- Sections 18(2) and 18(3) of FERA, presuming failure to take reasonable steps where export proceeds are not realised in time, were upheld (paras 12, 14, 15).
- A provision does not become unconstitutional only because it places a reverse burden; the presumption is rebuttable and follows proof of foundational facts (paras 16-17).
- A challenge under Article 14 must rest on pleaded foundational facts; hardship or commercial expediency is not enough (paras 12-14, 18).
- An order refusing discharge stands where there is strong suspicion and the statutory burden lies on the accused; defences remain open at trial (paras 19-20, 22).
Brief Facts
A partnership firm exporting garments could not repatriate export proceeds of about Rs. 16.5 crores for exports made in 1997-98 (paras 3-4). The Enforcement Directorate issued notice under Sections 18(2) and 18(3) of the Foreign Exchange Regulation Act and imposed penalties on the firm and its partners; the Appellate Tribunal set them aside, and the Directorate's appeal was pending in the High Court (paras 4-5). In the parallel prosecution under Section 56, the Magistrate dismissed their discharge application (para 6). Their writ petition challenging Sections 18(2) and 18(3) and the Constitution 39th Amendment Act was dismissed by the Bombay High Court (para 7). They contended that the reverse burden was draconian and discriminated against exporters (para 8).
Court's Findings
The Act is in the Ninth Schedule and protected by Article 31B; even otherwise, a classification answering the test of intelligible differentia does not offend Article 14, and "Hardship, by itself, may not be a ground for holding the said provision to be unconstitutional" (paras 11-12). No factual foundation for the challenge had been pleaded; the appellants had not even annexed the writ petition (paras 13-14). A domestic trader and an exporter stand on different footings: the provisions were enacted during a foreign exchange crunch to prevent fraud, and the Reserve Bank can grant exemption (para 15). The burden of proof is procedural, and the presumption is rebuttable, arising only after the prosecution establishes foundational facts, as under the Negotiable Instruments Act, the Prevention of Corruption Act and TADA (paras 16-17). Commercial expediency or the accounting treatment of bad debts cannot invalidate a parliamentary Act (para 18). At the discharge stage strong suspicion suffices, and since the burden lay on the appellants to show that they took all permissible steps, discharge could not be ordered (paras 19-20). They had obtained no Reserve Bank permission for non-realisation beyond six months (para 21).
Legal Principle
A statutory reverse burden or presumption does not by itself make a law unconstitutional; the burden of proof is procedural, and a rebuttable presumption that arises only after the prosecution proves foundational facts is valid. An Article 14 challenge needs a pleaded factual foundation (paras 13-14, 16-17).
Precedents Relied Upon
- Ajoy Kumar Banerjee v. Union of India (1984) 3 SCC 127
Differentiation is not always discriminatory; a rational nexus with the object sought to be achieved satisfies Article 14.
- Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector & ETIO (2007) 5 SCC 447
A ground under Article 14 must be based on a pleaded factual foundation, which cannot be raised for the first time in the Supreme Court.
- Hiten P. Dalal v. Bratindranath Banerjee (2001) 6 SCC 16
A provision does not become unconstitutional because it provides for a reverse burden; the burden of proof is procedural.
View all precedents (4)
- M.S. Narayana Menon v. State of Kerala (2006) 6 SCC 39
A provision does not become unconstitutional because it provides for a reverse burden; the burden of proof is procedural.
