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PETITIONER: SHANTI PRASAD JAIN AND ANOTHER

       Vs.

RESPONDENT: DIRECTOR  OF  ENFORCEMENT, FOREIGN EXCHANGE  REGULATION  AND

DATE OF JUDGMENT: 04/10/1962

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR, P.B. GUPTA, K.C. DAS SHAH, J.C.

CITATION:  1964 AIR 1023            1963 SCR  Supl. (1) 514

ACT: Foreign Exchange-Acquisition by Central Government-Offer for sale  by  owner-If must cover acquisition  both  before  and after   Notification-When  must  be  made-Foreign   Exchange Regulation  Act,  1947 (7 of  1947),  ss.  9,23-Notification dated March 25, 1947.

HEADNOTE: The  first  appellant accompanied by his  wife,  the  second appellant,  visited foreign countries on business.   He  was allowed  foreign  exchange amounting to 337 and 1410  U.  S. dollars, the visit being limited to two months.  The  second appellant  ’was  not allowed any foreign  exchange  and  was allowed  to go on the representation that a foreign  company will  bear all her expenses for the trip.  When after  three months  the  appellants  returned  to  Delhi,  the   Customs authorities  found  on  the person of  the  first  appellant travelers  cheques of the value of 2590 U.S.  dollars.   The Director of Enforcement took the appellant’s explanation and on adjudication found that the appellants had received a sum of  3500  U.  S.  dollars as gift, were  owners  of  it  and contravened  s.  9 of the Foreign Exchange  Regulation  Act, 1947, read with Notification dated March 25, 1947, issued 515 thereunder,  for failing the offer the foreign exchange  for sale as required thereunder within a month of their becoming owners  thereof.   He, therefore, forfeited  the  travellers cheques to the extent of 1990 U. S. dollars found with  them and  imposed a penalty of Rs. 18000 on the  first  appellant under  s.  23 of the Act.  The appellants  appealed  to  the Appellate Board which confirmed the order of the Director. Held,  that s. 9 of the Foreign Regulation Act  applied  not merely to foreign exchange owned or held at the date the Act came into force but also to foreign exchange acquired  after that date.  The words "or who may hereafter become the owner of  any  foreign exchange" in the  Notification,  therefore, were  not  ultra vires the section.  It must  be  held  that those words were implied in the section and the main purpose of  the  Notification was to specify what  kind  of  foreign

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exchange was to be offered for sale thereunder. The Notification was clear that the offer of sale was to  be made  within  a  month of acquisition of  ownership  of  the foreign exchange and not within a month of arrival in India.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 617 of 1961. Appeal  by  special leave from the order dated  October  27, 1960,  of the Foreign Exchange Regulation  Appellate  Board, New Delhi in Appeal No. 61 of 1960. Sachin  Choudhri, N. Bajoria and B. P. Maheshwari,  for  the appellants. Bishan  Narain,  F.  D. Mahajan and P.  D.  Menon,  for  the respondents. 1962. October 4. The judgment of the Court was delivered by WANCHOO, J.-This is an appeal from the order of the  Foreign Exchange  Regulation  Appellate  Board  and  arises  in  the following circumstances 516 Appellant  No.1  went  to Europe and the  United  States  of America in connection with business, and his wife, appellant No. 2, accompanied him.  The first appellant is the Chairman of Sahu Jain Limited.  They left India on June 30, 1958  and visited several countries in Europe including West  Germany. Eventually  they  reached the United States  of  America  on August  5, 1958.  They left the United States  on  September 22,  and  arrived at Delhi on October 1,  1958.   The  first appellant  had  been allowed foreign exchange  amounting  to POUND  337  (equal  to Rs. 4500/-) and 1410  U.  S.  Dollars (equal  Rs. 6,750/-).  Further, Messrs.  Sahu  Jain  Limited had  been  informed  that the  exchange  was  sanctioned  on condition  that  the visit was limited to a  period  of  two months.   The second appellant was not allowed  any  foreign exchange, but her visit was sanctioned on the representation that  a certain company in the United States would bear  all the expenses of her trip to that country. When the appellants returned to Delhi on the 1st of October, the  Customs  authorities found travellers  cheques  of  the total value of 2590 U. S. dollars on the person of the first appellant.   They were detained and the  travellers  cheques were  handed over to the Enforcement Directorate  under  the orders  of  a magistrate.  Thereafter  the  appellants  were required  to  furnish certain information about  their  trip abroad  including particulars about how they came to  be  in possession  of these cheques.  It will be noticed  that  the amount  of  these  cheques was more than  the  total  dollar exchange sanctioned to the first appellant.  The explanation given  by  the appellant was that travellers  cheques  worth 1500  U.  S  dollars  were received  as  gift  from  Messrs. Maschinenbau   Schoiz   and  Company,  West   Germany,   and travellers  cheques worth 1,000 U. S. dollars were  received from Messrs.  Chemiobau, Dr. A. Zieren, West Germany, and  a sum  of 1,000 U.S. dollars was received from  Messrs.   Hans Tobeason,  517 Inc.,  New York.  It was further explained  that  travellers cheques  worth 1990 U. S. dollars, out of the  total  amount seized on October 1st, represented the unspent balance  from the  two  gifts received in West Germany and  the  remaining travellers  cheques  worth  600 U.  S.  dollars  formed  the unspent balance of the foreign exchange sanctioned when  the appellant  had  left  India.  It was also  stated  that  the entire  amount of 1,000 U. S. dollars received in  New  York

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was  spent  in  the  United  States.   On  receipt  of  this explanation,  the Director of Enforcement issued notices  to the appellants to show cause why adjudication should not  be commenced  against them for contravention of the  provisions of  s. 9 of the Foreign Exchange Regulation Act, No. VII  of 1947,  (hereinafter  referred  to  as  the  Act)  read  with Notification  dated March 25, 1947, issued thereunder.   The notices  said  that the appellants had failed  to  sell  the foreign exchange amounting to 3500 U. S. dollars referred to above  acquire,_] by them abroad within one month  of  their becoming owners thereof as required by s. 9 of the Act  read with  the  said notification.  The appellants  showed  cause which was more or less the same as the explanation they  had already  given  earlier.  The Director of  Enforcement  then held  adjudication  proceedings and came to  the  conclusion that  the  sum  of 3500 U. S. dollars was  received  by  the appellants  as gift and they were owners of it, and as  they had not offered to sell this foreign exchange as required by s. 9 and the notification made thereunder, they were  liable to penalties for contravening s. 9. The Director ordered the forfeiture  of the travellers cheques to the extent of  1990 U. S. dollars found with the appellants.  He also imposed  a penalty of Rs. 18,000/on the first appellant under s. 23  of the Act; no penalty was imposed on the second appellant. The  appellants then went in appeal to the Appellate  Board, and the contention that was raised there was that they  were not the owners of this foreign 518 exchange which had been given to them merely to defray their expenses  in  the  United States and  that  instead  of  the various  foreign  companies  spending  the  money  on   them directly, they gave the money to the appellants to be  spent by them.  It was also urged before the Appellate Board  that the  notification was ultra vires s. 9 of the Act,  inasmuch as it dealt not only with the foreign exchange owned or held by per sons at the time the notification was issued but also foreign  exchange  which  might  thereafter  come  into  the ownership  of  any person.  Certain other  contentions  were also   raised   before  the  Appellate  Board,   but   these contentions  have not been raised before us in view  of  the judgment of this Court in Shanti Prasad Jain v. The Director of Enforcement(1).  The two points therefore that arise  for consideration are whether the appellants were owners of this foreign exchange and whether the notification is ultra vires s.9 of the Act.  Both these points were decided against the appellants by the Appellate Board, which confirmed the order of  the Director of Enforcement.  Thereupon  the  appellants obtained  special leave from this Court and that is how  the matter has come up before US. The  question  whether the appellants were  owners  of  this foreign  exchange  is  in  our  opinion  concluded  by   the concurrent  finding of fact of the Director  of  Enforcement and  the Appellate Board.  The Appellate Board  has  pointed out  that  the contention that the appellants were  not  the owners   of   this  foreign  exchange  was   ingenious   but unacceptable.  The appellants wanted to make out that though they  had  actually  received the money,  they  were  really spending  it  on themselves on behalf of the  foreign  corn- panies, which gave them the money for their expenses in  the United States.  The Appellate Board has rightly pointed  out that  this  foreign  exchange given to  the  appellants  was nothing but a gift received by them and that the  appellants themselves in the (1)  [1963] 2 S. C. R. 297.                             519

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beginning had admitted that they had received these  amounts as gift.  ’It was only later that the ingenious argument was put  forward on their behalf that though they  had  received the  money, they were merely agents of the  three  companies which gave them the money for the purpose of spending it  on themselves.   We  have  no  doubt that  this  is  an  absurd explanation  and  the fact is that the  appellants  received this  foreign  exchange as gift, even though  the  intention might  have  been to spend the amount on their trip  in  the United  States of America.  Further, as the Appellate  Board has  rightly pointed out, it is obvious that the  money  was given   to  the  appellants  outright,  as   otherwise   the appellants  would not have offered the amount found on  them on  October  1, 1958, for sale through the Reserve  Bank  as they  did  on October 25,1958.  There can  therefore  be  no doubt  that  the appellants became owners  of  this  foreign exchange. This  brings us to the main point that was urged  before  us that the notification is beyond the terms of s. 9. Section 9 (omitting  the portion not relevant for the purpose of  this appeal)  is in these terms:-               "9.   Acquisition  by  Central  Government  of               Foreign exchange.-The Central Government  may,               by notification in the Official Gazette, order               every person in, or resident in, India---               (a)   who owns or holds such foreign  exchange               as  may be specified in the  notification,  to               offer  it, or cause it to be offered for  sale               to  the Reserve Bank on behalf of the  Central               Government  or to such person, as the  Reserve               Bank  may authorise for the purpose,  at  such               price as the Central Government may fix, being               a price which is in the opinion of the Central               Government  not less than the market  rate  of               the  foreign exchange when it is  offered  for               sale; (b)               520               Provided  that the Central Government  by  the               said notification or another order exempt  any               persons or class of persons from the operation               of such order.               Provided...... The  notification which was issued on March 25, 1947, is  in these terms:-               "In  exercise  of  the  powers  conferred   by               section  9 of the Foreign Exchange  Regulation               Act,   1947   (VII  of  1947),   the   Central               Government  is  pleased to direct  that  every               person  resident in India who owns or who  may               hereafter  become  the owner  of  any  foreign               exchange  whether  held  in  India  or  abroad               expressed  in the currency of any  country  or               territory specified in the schedule annexed to               this  Order, shall before the  expiration  of               one  month from the date of this Order, or  in               the  case of a person hereafter becoming  such               owner, within one month of the date of his  so               becoming, offer such foreign exchange or cause               it  to  be offered for sale to  an  authorised               dealer  being  a  person  authorised  by   the               Reserve Bank for the purpose, "against payment               in  rupees  at  the rate for  the  time  being               authorised by the Reserve Bank in pursuance of               sub-section  (2) of section 4 of the said  Act               for the conversion into Indian currency of the

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             foreign   currency  in  which   such   foreign               exchange is expressed.               "Provided  that this order shall not apply  to               foreign  exchange held by  authorised  dealers               within  the  scope of their  authority  or  to               persons authorised by the Reserve Bank to hold               foreign   exchange  for  business   or   other               purposes, or to persons not being citizens  of               India, who have obtained the permission of the               Reserve Bank in behalf                521                                  Schedule               "United   States   of   America,    Philippine               Island.". The contention on behalf of the appellants is that what s. 9 contemplates  is that any person who owns or  holds  foreign exchange on the date of the notification has to offer it for sale as provided therein but it does not contemplate that  a person  who comes to be owner of foreign exchange after  the date  of the notification has also to offer it for sale.  We are  of opinion that there is no force in  this  contention. The  section lays down that every person who owns  or  holds such   foreign   exchange  as  may  be  specified   in   the notification   has  to  offer  it  for  sale   as   provided thereunder.   The  reason  why the section  provides  for  a notification  is that it was left to the discretion  of  the Central  Government  to  decide on a  consideration  of  the foreign exchange situation at a particular time as to  which kind  of foreign exchange would have to be offered for  sale as  directed  by  s. 9. For example,  the  notification  may direct  that U. S. dollars must be offered for sale but  may not  direct  that, English pounds should be so  offered  for sale.   The  section as it stands is clearly  applicable  to foreign exchange owned or held at the date the Act came into force  as  well as to foreign exchange. which a  person  may acquire after the Act came into force.  Learned counsel  for the appellants conceded that s. 9 was not confined only  to- foreign exchange held or, owned by persons in.. or  resident in, India on the date the Act came into force but would also apply  to any foreign exchange subsequently owned or’  held; but  his contention is that though the section  applies  not only  to foreign exchange owned or held on the date the  Act came  into force but also on any subsequent date so long  as the  Act continues in force, the notification could only  be issued  with reference to foreign exchange owned or held  on the  date  of the notification.  It is  therefore  contended that  the words "or  who may hereafter become  the  owner of any 522 foreign  exchange" appearing in the notification  go  beyond the power conferred by s. 9 of the Act and the  notification could only apply to foreign exchange owned or held up to the date  of  the notification.  We are unable  to  accept  this construction of s. 9. The Act is a permanent statute and  s. 9 clearly provides that every person holding or owning  such foreign  exchange  as may be specified in  the  notification contemplated thereunder has to offer it for sale as provided therein.  The words of the section are not confined only  to foreign  exchange owned or held by persons on the  date  the Act  was passed., the apply also to foreign  exchange  which may  be owned or held by successors even after the Act  came into  force and such foreign exchange had to be offered  for sale if there is a notification in that behalf.  It is  true that  words corresponding to "who may hereafter  become  the owner of any foreign exchange" do not appear in the section.

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But the words of the section in our opinion are clear and it is  implicit  in  them that they apply  not  only  to  those persons  who owned or held foreign exchange on the date  the Act  came  into  force but to those also  who  own  or  hold foreign  exchange after that date, and the  notification  is mainly  for the  purpose of specifying the kind  of  foreign exchange which has to be offered for sale.  The notification in  the  present case by using the words "or  who  may  here after become the owner of any foreign exchange" merely makes explicit what was already implicit in the section.  In fact, even  if  the impugned clause had not been included  in  the notification,  it  would  have made  no  difference  to  the meaning.   Like’ the main section, the remaining part  would have covered cases of owning and holding foreign exchange in the  past  as well as in the future.  The  clause  has  been added only to clarify the position, and that is all. Further, if we were to accept the argument raised on  behalf of the appellants we, would reach the startling result  that a notification will have to be issued  523 every  day  in order that the purpose of s. 9  which  is  to control foreign exchange which any person might own or  hold on  the  date the Act came into force as  well  as  foreign. exchange which any person might come to owner hold after the enactment   of   the  Act,  might  be   carried   out.    An interpretation  which  leads  to such  a,  startling  result cannot  possibly be accepted.  Besides, as we  have  already said, the words of s. 9 are clear and they apply not only to foreign exchange owned or held at the date of the Act but to foreign  exchange which might be held or owned at  any  time thereafter  and  the  notification  is  mainly  required  to indicate  the kind of foreign exchange which may have to  be offered  for  sale under s. 9. We are therefore  of  opinion that  the  notification is completely ultra vires s.  9.  If that is so, it is not disputed by the, appellants that s.  9 read  with the notification was contravened in this case  in view of the finding of fact that the foreign exchange to the extent  of 3500 U. S. dollars was gifted to  the  appellants and was owned by them. It was also urged on behalf of the appellants that all  that the  notification  required was that they should  offer  the foreign exchange with in one month of their return to  India and that the appellants complied with that.  This contention has  no force for the notification requires that  the  offer should  be  made within one month of a person  becoming  the owner of foreign exchange.  There is no warrant for  reading in  the notification that the offer has to be made within  a month  of  the return of the person to India  in  case  ’the foreign  exchange  is acquired while the person  is  abroad. The  notification clearly requires an offer to  sell  within one  month  of a per-son becoming the owner of  the  foreign exchange.   It  has  not been disputed that  there  was  not impediments  in  the way of the appellants  making  such  an offer  within  one  month of  their  acquiring  the  foreign exchange.   As they undoubtedly failed to do so,  they  have clearly  contravened the notification read with s. 9 of  the Act. 524 Lastly, it is urged that the penalty imposed in this case is too heavy.  This matter has been considered by the Appellate Board and we see no reason to differ from the Board on  this question.   We may only add that the first appellant who  is the  Chairman  of  the  Sahu Jain Limited  is  a  person  of responsibility  and  position, and it is not  expected  that such  a per-son would contravene the provisions of the  Act.

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The appeal is hereby dismissed with costs. Appeal dismissed