Law On Bail, Anticipatory Bail, Discharge And Quashing Of Proceedings Under Direct Taxes

Advocate Aditya R. Ajgaonkar has pointed out that the aggressive approach of the CBDT with regard to launching prosecution for offenses under the Direct Tax Laws means that all taxpayers and professionals have to be abreast with the provisions in the Code of Criminal Procedure relating to Anticipatory Bail, Bail, Discharge and Quashing of Proceedings, etc. He has explained the entire law on the subject with admirable clarity

Introduction

1. The Wanchoo Committee Report was unequivocal when it opined that the fear of civil liabilities and penalties have proven ineffective in as much as they do not adequately deter the assessees that decide to tread upon the fine line that differentiates between the grey area of adventurous tax planning and the dark area of tax evasion. The report stressed upon the need to dole out exemplary punishment in the form of prosecutions to instill fear in the mind of the assessees seeking to traverse that grey area. “… The provisions for imposition of penalty fail to instil adequate fear in the minds of tax evaders. Prospect of landing in jail on the other hand, is a far more dreaded consequence – to operate in terorem upon the erring taxpayers. Besides, a conviction in court of law is attended with several legal and social disqualifications as well. In order, therefore to make enforcement of tax laws really effective, we consider it necessary for the Department to evolve a vigorous prosecution policy and to pursue it unsparingly.

2. The prosecution policy of the Government in the case of economic offences has seen a varied degree of success over the years. However, it is safe to say that the Wanchoo report failed to inspire the Government of those days to take adequate steps to prosecute offenders. Times change and with the increased percolation of the internet and news, economic offences are being seen as a rising menace in todays society. The current Government with a dual motive of increasing tax collections as well as projecting itself as a hardliner on economic offences has taken the bold step of stepping up the action on errant assessees. Public perception however has traditionally been to hold economics to a lower standard than the traditional criminal offences. Lack of prosecutions in the past has also emboldened the public to skip its fundamental duty of paying their taxes on time. It may therefore be a common perception that the Courts may be softer on taxation cases than they are on traditional offences such as theft etc. This could not be further from the truth.

3. The strict approach of courts to economic offence can be summed up in a Judgment of the Hon’ble Supreme Court as far back as 1987 in the case of State of Gujrat v. Mohanlal Jitmalji Porwal & Ors. (1987) 2 SCC 364 “The entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest”.

The Hon’ble Supreme Court in Ram Narain Popli v. CBI (2003) 3 SCC 641 reiterated its observations in Gujrat v. Mohanlal Jitmalji Porwal & Ors. further observing that “the cause of the community deserves better treatment at the hands of the Court in the discharge of its judicial functions. The Community or the State is not a persona non grata whose cause may be treated with disdain.. ..Unfortunately in the last few years, the country has seen an alarming rise in white-collar crimes which has affected the fibre of the country’s economic structure. These cases are nothing but private gain at the cost of public, and lead to economic disaster.” The approach of the Courts in treating economic offences as grave offenses against the public at large has a necessary effect widespread ramifications in as much as securing bail and in discharge / quashing proceedings. Compounding of offences therefore seems to be the simplest way out for those assessees against who prosecution proceedings are purported to be initiated.

Bail

1. The word bail refers to process of procuring the release of an accused by ensuring his attendance. The Hon’ble Supreme Court in Gudikanti Narasimhulu & Ors. v. P.P. (1978) 1 SCC 240 has made several observations that are fundamental to Jurisprudence regarding bail. The Hon’ble Justice Krishna Iyer made an erudite attempt to balance the rights enshrined in Article 21 as against the dangers posed to the society observed “"Bail or jail?"– at the pre-trial or post-conviction stage-belongs to the blurred area of the criminal justice system and largely binges on the hunch of the Bench, otherwise called judicial discretion. The Code is cryptic on this topic and the Court prefers to be tacit, be the order custodial or not. And yet, the issue is one of liberty, justice, public safety and burden of the public treasury, all of which insist that a developed jurisprudence of bail is integral to a socially sensitised judicial process. Personal liberty, deprived when bail is refused, is too precious a value of our Constitutional system recognised under Article 21 that the curial power to negate it is a great trust exercisable, not casually but judicially, with lively concern for the cost to the individual and the community. To glamorise impressionistic orders as discretionary may, on occasions, make a litigative gamble decisive of a fundamental right. After all, personal liberty of an accused or convict is fundamental, suffering lawful eclipse only in terms of ‘procedure established by law’. The last four words of Article 21 are the life of that human right. The doctrine of Police Power, Constitutionally validates punitive processes for the maintenance of public order, security of the State, national integrity and the interest of the public generally. Even so, having regard to the solemn issue involved, deprivation of personal freedom, ephemeral or enduring, must be founded on the most serious considerations relevant to the welfare objectives of society, specified in the Constitution. The essential distillation of the observations made by the Supreme Court can be summarised in the phrase :- “Bail is the rule, Jail is the exception.”

2. When it comes to bail, offences fall broadly into Two different categories, either bailable or Non Bailable. Bailable offences are those in which bail is granted as a matter of right. In case an offence is bailable, then upon arrest bail is automatically granted subject to the conditions imposable. The arresting officer is to complete the formalities of arrest and then grant him bail in order to secure his presence in Court. Section 496 of the Criminal Procedure Code provides that "when a person charged with the commission of a bailable offence is arrested or detained without warrant by an officer in charge of a police station or is brought before a Court and is prepared at any time, while in the custody of such officer or at any stage of the proceedings before such court, to give bail, such person shall be released on bail." The Hon’ble Supreme Court in the case of Talab Haji Hussain v. Madhurkar Purshottam Mondkar & Ors. 1958 AIR 376 held that “There is no doubt that under Section 496 a person accused of a bailable offence is entitled to be released on bail pending his trial. As soon as it appears that the accused person is prepared to give bail, the police officer or the Court, before whom he offers to give bail, is bound to release him on such terms as to bail as may appear to the officer or the Court to be reasonable. It would even be open to the officer or the Court to discharge such person on executing his bond as provided in the section instead of taking bail from him.” Therefore, in case of a bailable offence, the bail is granted to the accused as a matter of entitlement either on the furnishing of a bail bond or even on his personal recognizance (without any security). It is to be noted that a large number of offences under the Income-tax Act are bailable and hence bail can be obtained in them as a matter of entitlement by conveying to the police officer upon arrest that the accused is willing to fulfil the conditions of bail. However, merely because bail is a matter of entitlement in a bailable offences would not mean that the said bail that has been secured cannot be cancelled. In Sukar Narayan Bakhiya v. Rajnikant R. Shah 1982 GLH 778 the Hon’ble Gujarat High Court held that the Court can refuse bail even if offense is bailable if conditions imposed while granting bails are violated.

3. Contrary to the name, Non-Bailable offences are not those in which bail cannot be obtained. Non-Bailable offenses are those offenses in which bail is not a matter of right. Therefore, getting bail when accused of a non bailable offence is not automatic but is the exercise of the discretion of the Courts. Bail can certainly be granted, however an application before the Court having the jurisdiction must be made and the Court should be satisfied that the case is a fit case for granting bail.

4. At the time of granting bail the Court shall only look at the prima facie material and should not go into merits of the case by appreciating evidence. In granting or not granting of bail in a non-bailable offence, the primary consideration is the nature and gravity of the offence. The Hon’ble Supreme Court in the case of DCP (Special Branch Delhi) v. Jaspal Singh Gill (1984) 3 SCC 555 held that “at the time of granting bail in cases involving non-bailable offences particularly where the trial has not yet commenced, the Court should take into consideration various matters such as the nature and seriousness of the offence, the character of the evidence, circumstances which are peculiar to the accused, a reasonable possibility of the presence of the accused not being secured at the trial, reasonable apprehension of witnesses being tampered with, the larger interests of the public or the State and similar other considerations.” Therefore the Trail Courts wide Discretion in granting or refusing bail is well established. There is however, no straight jacket formulae and the consideration for each and every bail application must be upon the merits of the matter brought before the Courts. The possibility of the accused being actually convicted of the offence keeping in mind the quality of the evidence can also often weigh in on the Court’s mind before granting bail. However, one of the most important yardstick is the flight risk that the accused presents. The entire purpose of enlarging an accused on bail is to strike a balance between the interest of the public and the fundamental right of liberty guaranteed to the citizens of India by the Constitution. It is therefore not unusual to see restrictions on travel being put in place by the court, usually involving either the deposit of the passport with the Court or to explicitly seek the permission of the court before travelling overseas. Needless to say, the accused needs to present himself / herself before the Court on every occasion as mandated failing which a bailable / non-bailable warrant may be issued against the accused to compel appearance. The terms of bail need to be strictly adhered to in both letter and spirit so as to prevent the cancellation of bail.

5. Bail also called ‘regular bail’ by its very nature can be availed of only after arrest. Therefore, being arrested is an essential precondition for seeking bail. In the case of a non-bailable offence, this would essentially mean that the accused invariably spends a little while in custody. Section 438 of the Criminal Procedure Code provides for the granting of ‘Anticipatory bail’ by an appropriate Court in order to safeguard an accused from being unnecessarily taken into custody. The general scheme of anticipatory bail is as follows :- “Where any person has any reason to believe that he may be arrested on accusation of having committed a non-bailable offence, he may apply to the High Court or the Court of Session for a direction under this section that in the event of such arrest he shall be released on bail. The Court may, after taking into consideration, inter alia the following factors, namely:- (i) the nature and gravity of the accusation ; (ii) the antecedents of the applicant … (iii) the possibility of the applicant to flee from justice (iv) where the accusation has been made with the object of injuring or humiliating the applicant by having him so arrested; either reject the application forthwith or issue an interim order for grant of anticipatory bail.” It is to be noted that there are various state wise amendments that need to be considered while applying for anticipatory bail. Needless to say, anticipatory bail is not required to be taken where the offence itself is bailable and therefore bail is available as a matter of right.

6. An anticipatory bail application can also act as a dual edged sword as upon making an application for anticipatory bail, it is crucial that interim protection from being arrested should be taken from the Court failing which the concerned officer may arrest the applicant on basis of accusation apprehended in such application. It is also of note that the person must have ‘a reason to believe’ that he may get arrested on the accusation of having committed a non-bailable offence. The person needs to make out a prima facie case that he has an apprehension that he may be arrested. This reason to believe needs to be established in the Court that is moved for the grant of anticipatory bail failing which anticipatory bail shall not be granted. The discretion given to the court in the grant of anticipatory bail is even wider than what is afforded to it for regular bail, but the yardsticks are clearly defined by the statute. Interim protection often restricts the police from placing the applicant under arrest, however the accused is often directed to assist the investigating authority in the conduct of the investigation and by filing regular appearances before the investigating authority. Anticipatory bail as well as interim protection often comes with stringent conditions and a strict adherence to the conditions is a sin qua non for availing of the protection. Anticipatory bail does not mean that the accused cannot be arrested at all, it simply means that in the event of arrest, the accused shall be released on bail as per the conditions of the anticipatory bail. The distinction between an ordinary order of bail and an order of anticipatory bail is that whereas the former is granted after arrest and therefore means release from the custody of the police, the latter is granted in anticipation of arrest and is therefore effective at the very moment of arrest as observed by the Hon’ble Supreme Court in the case of Shri Gurbaksh Singh Sibbia and Ors (1980) 2 SCC 565 where the Hon’ble Supreme Court observed that “the applicant must show that he has "reason to believe" that he may be arrested for a non-bailable offence. The use of the expression "reason to believe" shows that the belief that the applicant may be so arrested must be founded on reasonable grounds. Mere ‘fear’ is not ‘belief’, for which reason it is not enough for the applicant to show that he has some sort of a vague apprehension that some one is going to make an accusation against him, in pursuance of which he may be arrested. The grounds on which the belief of the applicant is based that he may be arrested for a non-bailable offence, must be capable of being examined by the Court objectively, because it is then alone that the Court can determine whether the applicant has reason to believe that he may be so arrested. Section 438(1), therefore, cannot be invoked on the basis of vague and general allegations, as if to arm oneself in perpetuity against a possible arrest. Otherwise, the number of applications for anticipatory bail will be as large as, at any rate, the adult populace. Anticipatory bail is a device to secure the individual’s liberty; it is neither a passport to the commission of crimes nor a shield against any and all kinds of accusations, likely or unlikely.”

7. Even though the statute provides for anticipatory bail application being filed either before the Court of Session or the Jurisdictional High Court, convention dictates that only in exceptional cases shall an ‘ABA’ application be moved directly before the High Court before first approaching the Court of Session. The Gujarat High Court in the case of Rameshchandra Kashiram Vora & etc. v. State of Gujarat & Ors. 1988 Cri LJ 210 (Guj.) held that “It would be a sound exercise of judicial discretion not to entertain each and every application for anticipatory bail directly bypassing the Court of Session. Ordinarily, the Sessions Court is nearer to the accused and easily accessible and remedy of anticipatory bail is same and under same section and there is no reason to believe that Sessions Court will not act according to law and pass appropriate orders. In a given case, if any accused is grieved, his further remedy to approach the High Court is not barred and he may prefer a substantive application for anticipatory bail under Section 438 or revision application under Section 397 of the Cr. P. C. to the High Court and the High Court would have the benefit of the reasons given by the Sessions Court. It would be only in exceptional cases or special circumstances that the High Court may entertain such an application directly and these exceptional and "special circumstances must really be exceptional and should have valid and cogent reasons for by passing the Sessions Court and approaching the High Court.” This clearly establishes that though the High Court can be directly moved for grant of anticipatory bail, ordinarily the Court of Session needs to be moved first, unless special reasons can be culled out for not doing the same. Also, a revision application can be made from an order granting / refusing anticipatory bail.

8. There are two views on the aspect if the Court of Session rejects an anticipatory bail application, whether the same one can be made in the High Court. The above Judgment of the Gujarat High Court seems to suggest as such, however there are various judgments of various Courts on either side The High Court of Kerala in Gopinath v. State of Kerala 1986 CriLJ 1742 (Ker) has held that “The Section says "may apply to the High Court or the Court of Session". The conjunction ‘or’ appearing in between ‘High Court’ and ‘the Court of Session’ was held in that decision to have been used in an alternative or exclusive sense in contradiction with the term used in Sections 397 and 439 in non-alternative sense as equivalent to ‘and’. With due respect to the learned Judges who decided that case I beg to disagree, I do not think that the section was intended to give a restricted forum in the sense that when one forum is chosen the jurisdiction of the other is excluded. There cannot be any dispute that an accused is having the freedom to approach the Court of Session or the High Court under Section 438. But the question is only whether an accused who approached the Court of Session and got defeated is precluded from moving the High Court for the same relief. I am of the view that he is not precluded. The fact that the concerned person is given the freedom of applying to the High Court or the Court of Session need not necessarily mean that when the Court of Session is moved the option has become final and the approach to the High Court is thereafter barred. By the use of the word ‘or’ in sub-section (1) the legislature has invested the Court of Session and the High Court with concurrent jurisdiction. If the accused makes an application to the Sessions Judge and the same is rejected, nothing in the Code prevents him from making a subsequent application to the High Court. That jurisdiction of the High Court is original and not revisional.” On the other hand the Division Bench of the Calcutta High Court in Amiya Kumar Sen v. State of West Bengal 1979 CriLJ 288 (Cal-DB) has held that “we have no doubt to hold that the said section gives the petitioner for anticipatory bail a choice as to the forum where he is to apply. Two Courts are empowered to grant bail under Section 438, namely, the High Court and the Court of Session, but the petitioner may choose one of the two Courts and apply to the Court of his choice. We cannot hold that if the petitioner approaches the Court of Session for the relief under Section 438 and if his prayer is rejected, he will be again entitled to approach the High Court for the same relief on the same ground under that section.” Even so, there is no bar in the High Court exercising its revisionary jurisdiction upon the order passed by the Sessions Court granting or refusing anticipatory bail and hence invoking the revisionary jurisdiction of the High Court is a better option in case anticipatory bail is denied by the Court of Session.

9. The fact that the Apex Court has held that economic offences are a grave crime and need to be dealt with firmly has already been established above. The Hon’ble Supreme Court in the case of Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439 held that “economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations.” The said Judgment was rendered while discussing the bail plea of an accused under the Prevention of Corruption Act, however the ‘obiter dicta’ of the Court can be said to be applicable to all economic offences and is in harmony with the practice of the Supreme Court treating economic offences as a different class of offenses being grave in nature.

10. In a departure from the principle ‘Bail is the rule, jail is the exception’ the Hon’ble High Court of Rajasthan in the case of ITO v. Gopal Dhamani [1988] 172 ITR 462 (Raj.) while dealing with a case of Section 276C of the Income-tax Act held that “in such cases where tax evasion is prima facie of very high valuation, the question of bail should be considered seriously and it should not be granted as a matter of course. Tax evasion of high value certainly jeopardises the entire economy of the country, and is an economic crime of serious magnitude. Leaving apart ‘anticipatory bail’ which should normally be out of question, even I would have considered the original application for bail after arrest, the rejection, other things remaining same, would have had edge; over acceptance at ‘jail’ and not bail should be the rule in such serious cases.”

11. In the light of the above Judgment, the prosecution in economic offences had started contending that bail should not be granted in the case of economic offences. However, the Rajasthan High Court had occasions to revisit and clarify the above Judgment in order that it may not be abused indiscriminately. In J.P. Singh v. IACIT [1990] 185 ITR 659 (Rajasthan) the Hon’ble Court held that “There is no force in the contention of learned counsel for the Department that anticipatory bail cannot be granted in cases involving economic offences.” In Rajvir Singh v. State of Rajasthan [1990] 186 ITR 144 (Rajasthan) the Hon’ble Court held that “a general principle cannot be laid down that in all cases involving commission of economic offences anticipatory bail is to be refused. What is to be seen is whether in the facts and circumstances of the case, anticipatory bail should be granted or not. Filing of a return late is an economic offence and it can be said that economic offences are on the increase every day, but in my opinion a general principle cannot be laid down that in all cases involving commission of economic offences anticipatory bail is to be refused. As seen above, what is to be seen is whether in the facts and circumstances of the case, anticipatory bail should be granted or not. At the same time, it may also be considered whether the court should grant anticipatory bail or convert the non-bailable warrants issued by the learned Chief Judicial Magistrate into bailable warrants. The relevant factors for deciding the bail application in cases of this type would be the deposit or non-deposit of tax as assessed, whether returns before and after submission of the delayed return were submitted within time, what is the extent of the amount due, the likelihood of the petitioners absconding and other similar matters.”

Discharge of the accused

1. The Sec. 227 of the Criminal Procedure Code deals with the discharge of an accused “If upon consideration of the record of the case and the documents submitted therewith, and after hearing the submissions of the accused and the prosecution in this behalf, the judge considers that there is not sufficient ground for proceeding against the accused, he shall discharge the accused and record his reasons for doing so”. The Magistrate after issuing process has the power to either ‘discharge’ the accused if an application is so filed or to ‘frame charges’ against the accused based upon the material available on record. It is important to note that a discharge application is to be filed in the court in which the charges are purported to be tried before the charges are framed. A discharge application must be filed before the charges are framed. At this stage, discharge shall be allowed only if there is insufficient evidence on record to show that the accused must be put on trial. Otherwise, the law put a duty on the magistrate to frame charges and appreciate evidence before discharging the accused or acquitting him.

2. Only prima facie case is to be seen, whether case is beyond reasonable doubt is not to be seen at this stage. Sections 228 and 240 of the Code deal with framing of charge. The Hon’ble High Court of Orissa in State Bank of India, Balangir Branch v. Satyanarayan Sarangi and Anr. 1992 CrLJ 2635 (Ori.) held that “While Section 228 relates to framing of charge in respect of offences triable by Court of Session, Section 240 deals with framing of charge in respect of offences triable by Magistrate in warrant cases. The opening words of Sub-section (1) in both Sections 228 and 240 ‘that there is ground for presuming that the accused has committed an offence’ make it clear that framing of charge is not a mere formality, but a judicial act, to be performed after applying judicial mind to the consideration whether there is any ground for presuming the commission of the offence of the accused. The concerned Court cannot blindly accept opinion of the prosecution that the accused be asked to face a trial. Before forming opinion as to the presumption referred to in Section 228(1) or Section 240(1), the Judge or the Magistrate, as the case may be, is required to consider the records of the case, i.e., all the materials collected by the prosecution and also hear the submissions of the prosecution and the accused on the relevant aspects. Before framing a charge, he should be satisfied that there are materials on record on the basis of which it can reasonably be concluded that the accused is in any manner connected with the incident leading to the prosecution. In State of Bihar v. Ramesh Singh it was observed by the Apex Court that if the evidence which the prosecutor proposes to adduce to prove the guilt of the accused even if fully accepted before it is challenged in cross-examination or rebutted by the defence evidence, if any, cannot show that the accused committed the offence, then there will be no sufficient ground for proceeding with the trial. For the purpose of determining whether there is sufficient ground for proceeding against an accused, the Court possesses comparatively wider discretion in the exercise of which it can determine the question whether the material on record, if unrebutted, is such on the basis of which it can reasonably be said that the accused had some link with the alleged offence. It has, however, to be remembered that at the stage of framing charge the prosecution has not yet commenced. The truth, veracity and effect of the evidence which the investigating Police Officer has gathered and which the prosecutor proposes to adduce are not to be meticulously judged. The standard of test, proof and judgment which is to be applied finally before finding the accused guilty or otherwise, is not exactly to be applied at the stage of Section 227 or 228 and Section 239 or 240 of the Code. At that stage, even a very strong suspicion founded upon materials before the Magistrate, which leads him to form a presumptive opinion as to the existence of the factual ingredients constituting the offence alleged may justify the framing of charge. If on consideration of the materials it can be said that the accused has been reasonably connected with the offence, and on the basis of said materials there is a reasonable probability or chance of the accused being found guilty of the offence alleged, then framing of charge cannot be interdicted.. ..The purpose of a Sections 227 and 228 of the Code is to ensure that the Court should be satisfied that the accusation made against the accused is not frivolous and that there is some material for proceeding against him. The evidence has yet to be taken and the aspects which accused terms vulnerable can very well be clarified by evidence when the prosecution has its opportunity of placing the case through witnesses in Court. It would be hazardous to act on the discrepancies unless they are so fatal and glaring as to affect the credibility of the prosecution case without affording reasonable opportunity to prosecution to substantiate the allegations. Similar view has been taken by the Punjab and Haryana High Court in the case of Amrik Singh & Ors. v. State of Punjab 1996 CriLJ 1610 (P&H). The Hon’ble Apex Court in the case of Stree Atyachar Virodhi Parishad v. Dilip Nathumal Chordia and Anr. (1989) 1 SCC 715 held that “Section 227 itself contains enough guidelines as to the scope of enquiry for the purpose of discharging an accused. It provides that the Judge shall discharge when he considers that there is no sufficient ground for proceeding against the accused". The ‘ground in the context is not a ground for conviction, but a ground for putting the accused on trial. It is in the trial, the guilt or the innocence of the accused will be determined and not at the time of framing of change. The Court, therefore, need not undertake an elaborate enquiry in sifting and weighing the material. Nor it is necessary to delve deep into various aspects. All that the Court has to consider is whether the evidentiary material on record if generally accepted, would reasonably connect the accused with the crime. No more need be enquired into.”

Revision of orders

Section 397 of the Criminal Procedure Code provides that “The High Court or any Sessions Judge may call for and examine the record of any proceeding before any inferior Criminal Court situate within its or his local jurisdiction for the purpose of satisfying itself or himself as to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior Court, and may, when calling for such record, direct that the execution of any sentence or order be suspended, and if the accused is in confinement, that he be released on bail or on his own bond pending the examination of the record.” “All Magistrates whether Executive or Judicial, and whether exercising original or appellate jurisdiction, shall be deemed to be inferior to the Sessions Judge for the purposes of this sub-section and of section 398”. “If an application under this section has been made by any person either to the High Court or to the Sessions Judge, no further application by the same person shall be entertained by the other of them.” This lays the foundation for the revisionary power of a superior court over that of the lower court within its jurisdiction. Powers of revision are exercised in case of orders against which no appeal lies.

3. The revisional jurisdiction of either the Sessions Court or the High Court can be used to challenge the issue of process against an accused. The revisional Jurisdiction in the said challenge usually includes a prayer to quash the proceedings citing correctness, legality or propriety of any finding. The revisional Jurisdiction can also be invoked in an order denying anticipatory bail/regular bail or any other order against which an appeal does not lie. The Hon’ble Apex Court has held that the revisional jurisdiction of High Court can be moved directly in Central Bureau of Investigation v. State of Gujarat (2007) 6 SCC 156. This is because the statute given the aggrieved party an option of whether to approach the Court of Sessions or the High Court. The High Court of Rajasthan in Natwar Lal and Ors. v. State and Ors. 2008 CriLJ 3579 observed as follows “it is clear that there is of-course no bar for filing revision directly to the High Court under Section 397 of the Code against the order of the Magistrate but when concurrent jurisdiction is given specially under such circumstances when both are superior courts one to the Magistrate and another to the Sessions, then the propriety demands that elder superior court in hierarchy must be first approached. This is the customary common law as the first elders are always respected.” The order was passed affirming the order of the Hon’ble Bombay High Court in Shri Padmanabh Keshav Kamat v. Shri Anup R. Kantak & Ors. 1999 CRiLJ 122 (Bombay) where it was held that “In the case of Madhavlal v. Chandrashekhar (supra) there were special and exceptional circumstances which in a way justified filing of the revision application directly to the High Court. However, in the instant case no special circumstances which required the petitioner to bypass the forum of the Sessions Judge and rush directly to the High Court, are pointed out. The petitioner could have very well filed his application even before the Sessions Judge, Panaji.. ..Exercise of revisional powers is not a matter of course but it is a matter of rare and sparing use.. ..Hence, as pointed out above when two fora are available to the petitioner for getting redressal of the alleged wrong, then it will certainly be more appropriate for him to first approach the lower forum. It is certainly within the discretion of the higher forum, that is, this Court to consider whether it should entertain or not of such a revision application which can lie before the Sessions Judge.” It is therefore amply clear that though the High Court or the Court of sessions may both be approached in their revisionary jurisdiction to challenge an order of the trial court, it is preferred that the Sessions Court be approached first.

Quashing of proceedings

1. The Criminal Procedure Code does not specifically give any power to the Court to quash proceedings as strictly construed in legal parlance. This power is derived from the inherent powers contemplated under Section 482 of the Code. This was held by the Full Bench of the Hon’ble Bombay High Court in the case of Abasaheb Yadav Honmane and Ashwini Abasaheb Honmane v. The State of Maharashtra 2008 (2) MhLJ 856 (Bom-FB).

2. Sec. 482 of the CRPC provides for saving of Inherent powers of the High Court “to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice”. The said Section which provides the High Courts virtually unbridled power in order to make any orders necessary to prevent abuse of process of any court or to secure ends of justice is so expansive that it is used both with strict judicial restraint as well as very sparingly. The Hon’ble Supreme Court in the case of Minu Kumari and Anr. v. The State of Bihar and Ors. 2006 (4) SCC 359 held that “The Section does not confer any new power on the High Court. It only saves the inherent power which the Court possessed before the enactment of the Code. It envisages three circumstances under which the inherent jurisdiction may be exercised, namely, (i) to give effect to an order under the Code, (ii) to prevent abuse of the process of court, and (iii) to otherwise secure the ends of justice. It is neither possible nor desirable to lay down any inflexible rule which would govern the exercise of inherent jurisdiction. No legislative enactment dealing with procedure can provide for all cases that may possibly arise. Courts, therefore, have inherent powers apart from express provisions of law which are necessary for proper discharge of functions and duties imposed upon them by law. That is the doctrine which finds expression in the section which merely recognises and preserves inherent powers of the High Courts. All courts, whether civil or criminal possess, in the absence of any express provision, as inherent in their constitution, all such powers as are necessary to do the right and to undo a wrong in course of administration of justice on the principle "quando lex a liquid alicui concedit, conceder videtur et id sine quo res peas esse non protest" (when the law gives a person anything it gives him that without which it cannot exist). While exercising powers under the section, the court does not function as a court of appeal or revision. Inherent jurisdiction under the section though wide has to be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specifically laid down in the section itself. It is to be exercised ex debito justitiae to do real and substantial justice for the administration of which alone courts exist. Authority of the court exists for advancement of justice and if any attempt is made to abuse that authority so as to produce injustice, the court has power to prevent abuse. It would be an abuse of process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of the powers court would be justified to quash any proceeding if it finds that initiation/continuance of it amounts to abuse of the process of court or quashing of these proceedings would otherwise serve the ends of justice. As noted above, the powers possessed by the High Court under Section 482 of the Code are very wide and the very plenitude of the power requires great caution in its exercise. Court must be careful to see that its decision in exercise of this power is based on sound principles. The inherent power should not be exercised to stifle a legitimate prosecution. The High Court being the highest court of a State should normally refrain from giving a prima facie decision in a case where the entire facts are incomplete and hazy, more so when the evidence has not been collected and produced before the Court and the issues involved, whether factual or legal, are of magnitude and cannot be seen in their true perspective without sufficient material. Of course, no hard-and-fast rule can be laid down in regard to cases in which the High Court will exercise its extraordinary jurisdiction of quashing the proceeding at any stage.

3. Quashing of the charge then is not a power excercised lightly by the High Court. As quashing of the charge means that the accused shall not stand trial at all and no evidence will be lead, it is required to show right at the outset that the provisions of Section 482 of the Criminal Procedure Code are directly applicable and the said proceedings shall tantamount to abuse of process of the court. The said power is exteremly wide in its scope but narrow in its implementation. The Hon’ble Supreme Court in State of Punjab v. Kasturi Lal and Ors. (2004) 12 SCC 195 has held that quashing of charge is an exception and not the rule. It observed “Exercise of power under Section 482 of the Code in a case of this nature is the exception and not the rule. The section does not confer any new powers on the High Court. It only saves the inherent power which the Court possessed before the enactment of the Code. It envisages three circumstances under which the inherent jurisdiction may be exercised, namely, (i) to give effect to an order under the Code, (ii) to prevent abuse of the process of court, and (iii) to otherwise secure the ends of justice. It is neither possible nor desirable to lay down any inflexible rule which would govern the exercise of inherent jurisdiction. No legislative enactment dealing with procedure can provide for all cases that may possibly arise. Courts, therefore, have inherent powers apart from express provisions of law which are necessary for proper discharge of functions and duties imposed upon them by law. That is the doctrine which finds expression in the Section which merely recognises and preserves inherent powers of the High Courts. All courts, whether civil or criminal possess, in the absence of any express provision, as inherent in their constitution, all such powers as are necessary to do the right and to undo a wrong in course of administration of justice. While exercising powers under the Section, the Court does not function as a court of appeal or revision. Inherent jurisdiction under the Section though wide has to be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specifically laid down in the Section itself. It is to be exercised ex debito justitiae to do real and substantial justice for the administration of which alone, courts exist. Authority of the court exists for advancement of justice and if any attempt is made to abuse that authority so as to produce injustice, the court has power to prevent such abuse. It would be an abuse of process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of the powers court would be justified to quash any proceeding if it finds that initiation/continuance of it amounts to abuse of the process of court or quashing of these proceedings would otherwise serve the ends of justice. When no offence is disclosed by the complainant, the court may examine the question of fact. When a complaint is sought to be quashed, it is permissible to look into the materials to assess what the complainant has alleged and whether any offence is made out even if the allegations are accepted in toto.” Given the very nature of the power, the inherent powers of the High Court are meant to see substantive justice done and cannot be used invoked when there is another remedy made available by the statute as held by the Hon’ble High Court of Gujarat in Sankalchand Varchhaji v. Khengaram Varadhji & Ors. 1969 CriLJ 1501.

Conclusions

1. In summation, it can be seen that the courts have time and again held economic offences as grave crimes that cannot be treated leniently. In fact there have been cases where economic offenses have been treated as a greater offence than crimes involving harm to body or property. There are views that different standards of onus shall rest on the accused for anticipatory bail, regular bail, discharge as well as quashing of charge. In the given scenario, given that courts are loath to quash charges and deprive the prosecution for an opportunity to prove the charges sought to be brought about against the accused, compounding of charge emerges as a ‘win – win’ situation for both the revenue authorities and the assessees. A criminal trial is a long, hard, gruelling process and at the end of the process, it is possible that there are no clear winners. Unless the proceedings taken out against the Assessee are patently unjust and wrong in law, professionals may take it upon themselves to safeguard the interest of the Assessees and to compound the charges so as to spare all the parties concerned from the rigours of a long and gruelling trial.

Reproduced with permission from the AIFTP Journal
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One comment on “Law On Bail, Anticipatory Bail, Discharge And Quashing Of Proceedings Under Direct Taxes
  1. Vaibhav Rathi says:

    in a situation where penalty u/s 271(1)(c) dropped by the ITAT on law point and assessee has not challenged the quantum ?

    What will be fat of prosecution launched against the assessee

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