Why SC Quashed 35-Year-Old FERA Case Against Standard Chartered Bank: Explained

A criminal case against Standard Chartered Bank that had dragged on for more than two decades came to an end on Tuesday, after the Supreme Court quashed the proceedings against the bank and one of its officers. The case is related to alleged foreign exchange violations from 1991-1992.

A Bench of Justice J.B. Pardiwala and Justice Manoj Misra held that the Enforcement Directorate (ED) had missed a mandatory legal step before launching the prosecution, as per media reports. The court also flagged how little the case had progressed over the years.

The Bench set aside the criminal complaints along with a 2002 summoning order passed by a Mumbai magistrate, and directed its Registry to share the judgment with all High Courts.

How The Case Started

The dispute traced back to foreign remittance transactions carried out through Standard Chartered Bank in 1991 and 1992, at a time when the Foreign Exchange Regulation Act (FERA) governed India's forex rules. The ED alleged that these transactions were carried out without the required permissions, amounting to offences under Sections 56 and 57 of FERA.

The ED, however, filed its criminal complaints only in May 2002, well after FERA had been replaced by the Foreign Exchange Management Act (FEMA) in June 2000. Cases involving alleged violations committed while FERA was still in force could continue to be prosecuted under the older law.

Once the complaints were filed, a magistrate took cognisance and issued summons. The case then remained stuck at that stage for more than 23 years, with the matter eventually making its way to the Supreme Court after proceedings before the Bombay High Court.

Why The Court Stepped In

The court's ruling rested on a procedural requirement under the proviso to Section 61(2) of FERA. This provision required the ED to give the accused a chance to show that the transaction in question had valid permission, before any prosecution could begin.

The Bench held that this requirement was not optional. "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," the court reportedly said. It added that such an opportunity "must be meaningful and adequate, and not a mere technical or notional compliance."

According to the judgment, the ED had only claimed in its complaint that a notice had been served. It did not produce a copy of the notice, mention the date it was issued, or provide any proof of service, whether before the magistrate, the Bombay High Court or the Supreme Court.

On this basis, the Bench concluded that the mandatory requirement had not been fulfilled, and that the magistrate's order taking cognisance of the case could not be allowed to stand.

A Case Stuck For Decades

The judgment also took note of the long delay in the proceedings. It observed that the ED failed to collect summons for service for nearly two years after they were issued, remained absent from several hearings, and did not comply with time-bound directions given by the Bombay High Court to conclude the case.

"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 court said.

The Bench ruled that this prolonged delay violated the accused's right to a speedy trial under Article 21 of the Constitution. "To permit the respondent-complainant to continue in such circumstances would be to allow the appellants... in a state of suspended animation indefinitely," it said.

Beyond the specifics of the case, the judgment also settled a broader legal question. The Supreme Court held that a High Court can use its inherent powers under Section 482 of the erstwhile Code of Criminal Procedure to quash a criminal case, even when a revision petition is also available as an alternative option.

This provision allows High Courts to step in and prevent misuse of the legal process where necessary.

With this ruling, the Supreme Court has made clear that even in prosecutions carried out under the now repealed FERA, investigating agencies are bound to follow the legal safeguards laid down by law and must pursue such cases without unnecessary delay.