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PETITIONER: RAM RATTAN GUPTA

       Vs.

RESPONDENT: DIRECTOR OF ENFORCEMENT, FOREIGN EXCHANGEREGULATION, AND ANO

DATE OF JUDGMENT: 30/08/1965

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. MUDHOLKAR, J.R. BACHAWAT, R.S.

CITATION:  1966 AIR  495            1966 SCR  (1) 651

ACT: Foreign  Exchange  Regulation Act (7 of 1947), s.  4(1)  and (3)--Scope of.

HEADNOTE: The appellant visited Far Eastern countries during the years 1951  to 1956 after-obtaining from the Government  of  India the  necessary foreign exchange for the purpose  of  meeting his  expenditure during his tour.  He deposited the  unspent part  of the foreign exchange in different branches  of  the Chartered   Bank   in  those   countries.    The   Director, Enforcement  Directorate, Foreign Exchange  Regulation  Act, took proceedings under s.     19(2) of the Act and found him guilty  of  contravening  s. 4(1) and  (3).  The  order  was confirmed  on  appeal  by the  Foreign  Exchange  Regulation Appellate Board. In the appeal to this Court. HELD  :  (i)  The  appellant  could  not  be  held  to  have contravened the provisions of s. 4(1). [654 F] To  attract s. 4(1), the appellant should have lent  foreign exchange to a person who was not an authorised dealer.   The Bank,  no doubt, was not an authorised dealer, but,  when  a person  deposits free currency in the current account  of  a bank in order to draw it whenever necessary for the  purpose for  which it was given, it is not possible to hold that  he enters  into  a contract of loan with the bank,  within  the meaning  of s. 4((1).  Ordinarily a deposit of an amount  in the  current account of a bank creates -a debt, but it  need not  necessarily involve a contract of loan. [653 E; 654  C. D-E] Shanti  Prasad  Jain v. Director of  Enforcement,  [1963]  2 S.C.R. 294, followed. (ii) The tribunals were right in holding that the  appellant had contravened s. 4(3). [655 A] Under  this sub-section, the appellant should have sold  the unspent  foreign  exchange to an authorised  dealer  without delay.  Since he had kept the amount in the current  account of  various branches of the Bank for a number of  years,  he was guilty of contravening the provision. [654 H; 655 A]

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JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 890 of 1964. Appeal  by special leave from the order dated  February  19, 1963 of the Foreign Exchange Regulation Appellate Board, New Delhi, in Appeal No. 52 of 1959. A. V. Viswanatha Sastri and J. P. Goyal, for the appellant. Bishan Narain, R. N. Sachthey and B. R. G. K. Achar, for the respondents. 652 The Judgment of the Court was delivered by Subba Rao, J. This appeal by special leave raises the  short question whether the appellant contravened the provisions of subss.  (1)  and  (3)  of  S.  4  of  the  Foreign  Exchange Regulation  Act, 1947 (VII of 1947), hereinafter called  the Act. During  the  years 1951 to 1956 the  appellant,  Ram  Rattan Gupta, visited the Far Eastern countries after obtaining the necessary  foreign  exchange from the Government  of  India. During  that  period the appellant opened  current  accounts with  the Chartered Bank of India, Australia and  China,  at Singapur, Hong Kong, Osaka and Tokyo, without the general or the special permission of the Reserve Bank of India.  In the different branches of the said Bank he deposited the unspent part  of the foreign exchange given to him.  The balance  of the  said deposits made at the various branches of the  Bank was  pound 40 (sterling).  The appellant  received  payments from  those accounts even after he returned to  India.   The Director,   Enforcement   Directorate,   Foreign    Exchange Regulation Act, took proceedings against the appellant under S.  19(2)  of  the  Act  and,  after  making  the  necessary enquiries,  found him guilty of contravening the  provisions of sub-ss. (1) and (3) of s. 4 of the Act and imposed on him a penalty of Rs. 2,500/- under S. 23 (1) (a) of the Act.  On appeal,  the  Foreign Exchange  Regulation  Appellate  Board agreed   -with  the  view  expressed  by  the  Director   of Enforcement   that  the  appellant  contravened   the   said provisions  of  the  Act  and  dismissed  the  appeal.   The appellant  has  preferred  the present  appeal,  by  special leave, against the judgment of the said Board. Mr.  A.  V.  Viswanatha  Sastri,  learned  counsel  for  the appellant,  contended that the total of the amounts kept  by the  appellant  in  the  branches of the  said  Bank  was  a negligible  balance  of the free quota of  foreign  exchange given to him, that there was no relationship of creditor and debtor  between the appellant and the Bank in regard to  the said  amounts, that the free quota of foreign  exchange  was given to him without any condition imposed thereon, and that on the said facts there was no scope to invoke either sub-s. (1) or sub-s. (3) of S. 4 of the Act. We will read the relevant provisions of the Act in order  to appreciate the said contentions. Section 4. Restrictions on dealing in foreign exchange               (1)   Except  with  the  previous  general  or               special  permission of the Reserve  Bank-,  no               person  other than an authorised dealer  shall               in India and no                653               person   resident  in  India  other  than   an               authorised dealer shall outside India, buy  or               borrow  from, or sell or lend to, or  exchange               with,  any  person  not  being  an  authorised               dealer, any foreign exchange.                           (2)............................                (3)  Where  any foreign exchange is  acquired

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             by any person other than an authorised  dealer               for  any  particular  purpose,  or  where  any               person  has  been permitted  conditionally  to               acquire  foreign  exchange,  the  said  person               shall not use the foreign      exchange     so               acquired  otherwise than for that purpose  or,               as  the case may be, fail to comply  with  any               condition  to which the permission granted  to               him is subject, and where any foreign exchange               so acquired cannot be so used or, as the  case               may  be,  the conditions cannot  be   complied               with, the said person shall without delay sell               the foreign exchange to an authorised dealer. Section 4(1) of the Act was amended in the year 1964, but we are  concerned  only with the said sub-section as  it  stood before  the  amendment.  To attract s. 4(1), a  resident  in India other than an authorised dealer shall have lent to any person,   not  being  an  authorised  dealer,  any   foreign exchange.  It is not disputed that the said Bank was not  an "authorised  dealer"  within the meaning of  the  said  sub- section.  If so, the only question is whether the appellant, in  depositing the said amounts in the current account’,  of the various branches of the said Bank, lent the said amounts to the   Bank. What  is the meaning of the expression "lend" ? It means  in the ordinary parlance to deliver to another a thing for  use on  condition that the thing lent shall be returned with  or without compensation for the use made of it by the person to whom it was   lent.  The subject-matter of lending may  also be  money.  Though a loan contracted creates a  debt,  there may  be a debt created without contracting a loan; in  other words,  the concept of debt is more comprehensive than  that of loan.  It is settled law ’that tie relationship between a banker  and a customer qua moneys deposited in the  bank  is that  of debtor and creditor.  This Court in  Shanti  Prasad fain v. Director of Enforcement(1) restated the principle in the following words: (1)  [1963] 2 S.C.R. 297, 324. 6 54 .lm15 "Now the law is well settled that when moneys are  deposited in a Bank, the relationship that is constituted between  the banker  lad the customer is one of debtor and  creditor  and not trustee and beneficiary.  The banker is entitled to  use the  monies  without being called upon to account  for  such user,  his  only  liability being to return  the  amount  in accordance  with the terms agreed upon between him  and  the customer." But  this  Court qualified that general statement  with  the remark that "there might be special arrangement under  which a Banker might be constituted a trustee, but apart from such an arrangement, his position qua Banker is that of a debtor, and  not trustee".  It follows that ordinarily a deposit  of an  amount in the current account of a bank creates a  debt; but  it  need not necessarily involve a  contract  of  loan. Whether  a deposit amounts to a loan depends upon the  terms of  the  contract whereunder the deposit is  made.   In  the context  of  s.  4(1) of the Act, can it be  said  that  the depositor in the present case lent money to the Bank ?  When a person deposits free currency in the current account of  a bank in order to draw it whenever necessary for the _purpose for  which it was given, it is not possible to hold that  he enter%  into  a contract of loan with the  bank  within  the meaning  of s. 4(1) of the Act.  He only deposits the  money for   the  said  purpose.   Should  we  hold  that  such   a

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transaction  is  a  loan, many an honest  man  who  deposits foreign exchange in a bank in a foreign country where he  is staying  for  a short time to draw it for  his  requirements will be committing an offence.  That could not have been the intention  of the Legislature.  If such a deposit is  not  a loan,  it follows that the appellant cannot be held to  have contravened the provisions of s. 4(1) of the Act. The  next  question is whether the appellant was  guilty  of contravening  the  provisions of sub-s. (3) of s. 4  of  the Act.  Under the relevant part of that sub-section, where any foreign exchange was acquired by a person for any particular purpose and where the foreign exchange so acquired cannot be used,  the said person shall without delay sell the  foreign exchange  to an authorised dealer.  Admittedly  the  foreign exchange  was acquired by the appellant for the  purpose  of meeting  his  expenditure during his tour of  the  Far  East countries;  but he had not used the entire foreign  exchange for  the said purpose.  If so, under the express  provisions of  sub-s.  (3) of s. 4 of the Act, he should  have  without delay  sold  the same to an authorised dealer.   Instead  he kept the  655 said  amount in the current account of the various  branches of  the  Bank for a number of years.   The  tribunals  were, therefore, right in holding    that   the   appellant    had contravened the said provision. No other point arises for consideration in this appeal. As  we  find the appellant guilty of an offence  only  under sub- s.   (3)  of  s.  4 of the Act, we think  the  ends  of justice will be met if   a fine of Rs. 1,000 only is imposed on  him.   We,  therefore, reduce the fine  of  Rs.  2,500/- imposed on the appellant to Rs. 1,000/-.  In the result, the order of the Foreign Exchange Regulation Appellate Board  is modified  accordingly.   The  parties will  bear  their  own costs. Order modified. 6 56