Supreme Court Quashes 1992 FERA Proceedings Against Standard Chartered Bank Over NRE Transactions

The Supreme Court on Tuesday quashed criminal proceedings initiated against Standard Chartered Bank under the Foreign Exchange Regulation Act, 1973 (FERA). The case stemmed from allegations that the bank facilitated foreign exchange transactions in 1992 by allowing foreign currency deposits and remittances through Non-Resident External (NRE) accounts without the approvals mandated under the Act.

A bench of Justices J.B. Pardiwala and Manoj Misra allowed the bank's appeal against the Bombay High Court's judgment dated March 22, 2012 which had refused to quash the prosecution despite observing that the delay in the case was "deplorable."

Pronouncing the operative directions, the Bench said:

"We accordingly hold that Complaint Bearing Criminal Case Nos. ... of 2002 and the summoning order dated 20th May 2002 issued therein are liable to be quashed as against the appellants herein. We accordingly pass the order."

A detailed copy of the judgment is yet to be uploaded.

Background

The dispute arose from allegations by the Enforcement Directorate (ED) that Standard Chartered Bank had facilitated foreign exchange transactions in 1992 in violation of the Foreign Exchange Regulation Act, 1973. The ED alleged that the bank had permitted foreign currency deposits and remittances in Non-Resident External accounts without the approvals mandated under FERA.

Although the alleged transactions took place in 1992, criminal complaints were filed only on 30 May 2002 just before the expiry of the two year 'sunset period' preserved under Section 49(3) of the Foreign Exchange Management Act, 1999 (FEMA).

The bank contended that the decade-long delay had seriously prejudiced its defence, particularly because banking records were required to be preserved only for eight years under the applicable record retention rules, and further alleged that the Magistrate had mechanically issued process without recording reasons.

The bank approached the Bombay High Court seeking quashing of the criminal proceedings under Section 482 CrPC, arguing that the prosecution amounted to an abuse of process, violated its right to a speedy investigation and trial, and suffered from non application of mind.

The High Court declined to quash the proceedings. While observing that the delay in the case was 'deplorable', it held that the prosecution need not be terminated at the threshold and instead directed the trial court to conclude the proceedings expeditiously within one month.

For Appellant: Ateev Kumar Mathur, Advocate, Sanjay Gupta, Advocate & Ananta Prasad Mishra , AoR