35 years on, SC quashes FERA case against Standard Chartered Bank

The apex court held that the Enforcement Directorate failed to comply with the mandatory requirement of issuing an opportunity notice before initiating prosecution under FERA

The Supreme Court on Tuesday quashed criminal proceedings against Standard Chartered Bank and one of its officers in a case dating back to 1991-92 under the erstwhile Foreign Exchange Regulation Act (FERA). The criminal proceedings in the case had remained pending for more than 23 years.

 

The court was sharply critical of the extraordinary delay in the prosecution, while legal experts said the ruling is significant for India’s investment climate because it reinforces that enforcement agencies cannot keep businesses entangled in criminal proceedings indefinitely.

 

Reinforcing procedural safeguards in criminal prosecutions, the apex court held that the Enforcement Directorate (ED) failed to comply with the mandatory requirement of issuing an opportunity notice before launching prosecution under the now-repealed FERA, which was later replaced by the Foreign Exchange Management Act (FEMA).

   

The case arose from alleged FERA violations involving remittances routed through Standard Chartered Bank.

 

A Bench of Justice J B Pardiwala and Justice Manoj Misra also clarified that the availability of a revision petition under the now-replaced Code of Criminal Procedure (CrPC) did not bar a High Court from exercising its inherent powers under Section 482 to quash criminal proceedings. Section 482 of the CrPC empowered High Courts to prevent abuse of the legal process and secure the ends of justice.

 

Criminal complaints were filed in May 2002, shortly before FERA was replaced by FEMA. However, the prosecution remained stalled at the stage of service of summons for more than two decades.

 

The court held that the prosecution had failed to establish compliance with the proviso to Section 61(2) of FERA, which required authorities to first give the proposed accused an opportunity to show that the transaction had the requisite permission before filing a criminal complaint.

 

“The service of an opportunity notice under the proviso to Section 61(2) of FERA is a mandatory requirement, without compliance of which no complaint under Section 56 or 57 of FERA... can validly be instituted, and no Magistrate can validly take cognizance of the offence alleged therein,” the Bench said.

 

It added that the opportunity “must be meaningful and adequate, and not a mere technical or notional compliance.”

 

Examining the record, the court noted that the ED had merely asserted in its complaint that such a notice had been served, but neither disclosed its date nor produced a copy before the Magistrate, the High Court or the Supreme Court. It also failed to place any proof of service on record.

 

“In such circumstances... the mandatory requirement of the proviso to Section 61(2) of FERA has not been complied with... and therefore, the order of the Magistrate taking cognizance... cannot be sustained in law,” the judgment said.

 

The Bench observed that while the alleged transactions dated back more than three decades, the complaint itself had remained pending for 23 years without the trial progressing beyond the service of summons. According to the court, “the question... who is responsible for the delay, admits of only one answer- at every stage... it was virtually the prosecution that failed to act with even ordinary diligence.”

 

The judgment records that the ED failed to collect summons for service for nearly two years after they were issued, remained absent on several occasions, and even ignored time-bound directions issued by the Bombay High Court to conclude the trial.

 

Holding that the prolonged prosecution violated the appellants’ right to a speedy trial under Article 21 of the Constitution, the Bench observed: “To permit the respondent-complainant to continue in such circumstances would be to allow the appellants... in a state of suspended animation indefinitely.”

 

The court consequently quashed the criminal complaints and the 2002 summoning order against Standard Chartered Bank and its officer, while also directing the Registry to circulate the judgment to all High Courts.

 

Apoorva Pandey, an advocate at the Delhi High Court, said the judgment “sends a clear message that regulatory powers cannot be exercised without regard to time”, and strengthens legal certainty by protecting businesses from having to defend decades-old allegations.

 

Tushar Agarwal, founder and managing partner of C.L.A.P. Juris, said prolonged prosecutions undermine commercial confidence. “Ease of doing business is ultimately a function of legal certainty. Investors are prepared to face regulation, investigation and even prosecution where warranted, but they cannot reasonably price the risk of litigation that has no foreseeable end,” he said, adding that the ruling reinforces the State’s obligation to prosecute cases diligently rather than allow proceedings to linger for decades.

 

“A criminal prosecution that survives for twenty-three years ceases to be merely a legal proceeding; it becomes a form of punishment in itself,” he added.