The ruling comes in the wake of petitions filed by two foreign banks, ANZ Grindlays and Standard Chartered objecting to the notices sent to their officials by the Directorate of Enforcement in connection with some FERA violations. The petitioner banks had objected to the prosecution on the ground that it robbed their officials of their ``right to reputation and dignity.'' The notices sent to the officials presumed their involvement in the wrongdoing, the banksclaimed, adding that ``ultimate acquittal can be no solace to such officials as they have to suffer humiliation in an expensive and long-drawn trial.'' However, the court held that no person could ``maintain dignity and cherish honour by avoiding due process of law. And the provisions of FERA do not abrogate the prestige of an official merely because he/she has to face prosecution.''

The banks had also argued that such provisions gave a free hand to the Enforcement Directorate to subject any official to prosecution without the obligation of proving his/her involvement in the alleged misdeed. To this the court said that FERA provisions do not allow any arbitrary action by the directorate. The directorate has to identify the officials who could have been involved in the contravention and therefore `every person who is in-charge and responsible to the conduct of business in the company' has a definite connotation. Moreover, the judges said, the FERA provisions were in keeping with the main intent of the Actwhich was to detect the technical methodology by which the country was robbed of its national exchange. Since the FERA violations could not be compared with other criminal offences, they need a different and non-traditional means of detection, the court ruled.

Counsels for the petitioner banks K K Venugopal and Aspi Chinoy argued that the directorate should only hold a single person (the main boss) as responsible for the contravention. However, the court observed that business in corporate bodies and foreign banks was no longer ``plain and simple.'' Therefore, any act of omission or commission involved a group of people and chain of transactions. Thus, any one person could not be held solely responsible.

The petitioner banks complained to the court that since FERA was a penal statute, proceedings under it were of quasi-criminal nature. Such proceedings presume that the officer had ``criminal intention'' while committing the contravention. ``It saddles the person with vicarious penal liability forinnocuous acts.''. However, the court ruled that an act of contravention could not be ``innocuous,'' just as a FERA violation could not be claimed to be committed ``unknowingly.'' Therefore, the court said, mental culpability to commit the contravention had been rightly presumed in the FERA provisions.

Lastly, the petitioners argued that the prosecution should not be initiated against the accused officials, unless the process of adjudication was complete. However, the court observed, the new Foreign Exchange Regulation Act of 1973 (unlike the old one) allowed for parallel process of adjudication and prosecution.