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PETITIONER: UNION OF INDIA AND ANOTHER

       Vs.

RESPONDENT: VIJAY CHAND JAIN

DATE OF JUDGMENT09/02/1977

BENCH: GUPTA, A.C. BENCH: GUPTA, A.C. KRISHNAIYER, V.R.

CITATION:  1977 AIR 1302            1977 SCR  (2) 952  1977 SCC  (2) 405

ACT:             Foreign  Exchange Regulation Act  1947--s.  23(1B)--For-         eign  Currency--Sale proceeds in Indian currency seized  and         confiscated-- Government, if competent to confiscate.

HEADNOTE:         Words and Phrases--"in respect of"--Meaning of.             Under  s- 2(d) of the Foreign Exchange Regulation  Act,’         1947 foreign exchange means foreign currency.   Section 4(1)         prohibits  the  sale or purchase of foreign  exchange  by  a         person  other  than  an authorised dealer  except  with  the         permission of the Reserve Bank. Section 23(1)(a)  prescribes         a  penalty for contravention of s. 4.  Section  23(1B)  pro-         vides that, in addition to the penalty which may be  imposed         for such  contravention, a court may direct that any curren-         cy  or any other money or property in respect of  which  the         contravention  has taken place shall be confiscated  to  the         Central  Government.   The explanation to  this  sub-section         provides that for the purpose of the sub-section property in         respect of which contravention has taken place shall include         deposits in a bank where the said property is converted into         such deposits.             A  large sum of Indian currency which was the sale  pro-         ceeds  of foreign currencY, was recovered from the  respond-         ent.   In addition to imposing  a penalty. the  Director  of         Enforcement confiscated the Indian currency seized from  the         respondent.   In a petition under art. 226 of the  Constitu-         tion,  the High Court held that the Director of  Enforcement         had no competence to order confiscation of Indian.  currency         because the contravention had taken place in respect of some         foreign  currency and not in respect of the Indian  currency         seized.         Allowing the appeal,         HELD:  The currency in respect of which there has been  con-         travention  covers  the sale proceeds of  foreign  currency,         sale of which is prohibited under s. 4(1). [954H]             The High Court was wrong in quashing the order of confis-         cation.  The intention of the legislature is clear from  the         Explanation  to  s. 23(1B).  If, for  this  sub-section  any         property in respect of which a contravention has taken place         includes  deposits into which the property may be  converted         and  can be reached, even where the deposits are in a  bank,

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       it  is  not  reasonable to hold that the  sale  proceeds  in         Indian  currency  of foreign exchange would be  outside  the         scope  of s. 23(1B) and, therefore not liable to be  confis-         cated. [955 A]              The words "in respect of" admit of a wide  connotation.         In the context  of s . 23 (1b) "in respect of" has been used         in the  sense of  being" connected  with". [954 G]             Cuperd’s  Trustees v. Inland Revenue  Commissioners  174         L.T. Rep. 133 and S.S. Light Railway Co. Ltd. v. Upper  Doab         Sugar Mills Ltd. & Anr. [1960) 2 S.C.R. 926 referred to.

JUDGMENT:         CIVIL APPELLATE JURISDICTION Civil Appeal No. 2081 of 1968.            Appeal from the Judgment and Order dated the 30-3-1967 of         the Delhi High Court in Civil Appl. No. 112 of 1966.         G.L. Sanghi and Girish Chandra for the Appellant.          Y.S. Chitley and Ashok Grover for Respondent.         953         The Judgment of the Court was delivered by              GUPTA, J.--This appeal on certificate of fitness  turns         on  the  meaning of the words "in respect of"  occurring  in         section  23(1B)  of  the Foreign  Exchange  Regulation  Act,         1947.   For  a proper appreciation of the  question,  it  is         necessary to refer to two other sections of the Act, section         4(1)  and  section  23(1)(a), before we  turn   to   section         23(1B).                       Section 4(1) lays down:                              "Except  with the previous  general  or                       special  permission  of the Reserve  Bank,  no                       person other than an  authorised dealer  shall                       in  India  and  no person  resident  in  India                       other than an authorised dealer shall  outside                       India,  buy  or otherwise  acquire  or  borrow                       from,  or sell or otherwise transfer  or  lend                       to, or exchange with, any person not being  an                       authorised dealer, any foreign exchange."                       Section 23(1)(a) provides:                              "If  any person contravenes the  provi-                       sions  of   section 4, section 5,  section  9,                       section  10,  sub-section (2) of  section  12,                       section 17, section 18A or section 18B or  any                       rule,  direction or order made thereunder,  he                       shall-                              (a)  be  liable  to  such  penalty  not                       exceeding  three  times the value of the  for-                       eign exchange in respect of  which the contra-                       vention  has taken place, or   five   thousand                       rupees, whichever is more, as may be  adjudged                       by  the Director of Enforcement in the  manner                       hereinafter provided, or                       (b)      x     x     x"                       The  part of section 23(1B) material  for  the                       present purpose reads:                             "Any Court trying a contravention  under                       sub-section  (1)  or sub-sction (IA)  and  the                       authority  adjudging any  contravention  under                       clause  (a)  of  sub-section (1)  may,  if  it                       thinks fit, and in addition to any sentence or                       penalty  which it may impose for such  contra-                       vention, direct that  any  currency, security,                       gold or silver, or goods or any other money or                       property,  in respect of which the  contraven-                       tion has taken place, shall be confiscated  to

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                     the Central Government  ....  "                           There  is an explanation to this  sub-sec-                       tion which says:                           "Explanation.--For  the purposes  of  this                       sub-section,    property in respect  of  which                       contravention  has taken place  shall  include                       deposits  in a bank, where the said   property                       is   converted into such deposits."             These are the facts on which the question of’  construc-         tion  of "section 23(1B) arises.  On the morning of  January         28, 1966 the  respondent who resides and carries on business         in Delhi arrived at Palam Airport by I.A.C..Flight No.  181.         A customs officer recover-         954         ed  from his possession Indian currency amounting   to   Rs.         78,481/which  sum,  the respondent admitted,  was  the  sale         proceeds  of  the foreign currency entrusted to him for sale         by someone else.  On February 14, 1966 the second appellant,         Director,  Enforcement  Directorate,  Ministry  of  Finance,         asked the respondent to show cause  why the Indian  currency         recovered from his possession, which admittedly was the sale         proceeds of foreign currency, should not be confiscated. The         second  appellant  was  the   authority   adjudging    under         section 23(1) (a) an alleged contravention of the provisions         of   section 4. . On October 14, 1966 the  second  appellant         held  on  the evidence before him that  the  respondent  was         guilty  of contravening the provisions  of section 4(1)  and         imposed  a  penalty of  Rs. 50,000/-  under   section  23(1)         (a).   He further directed the sum of 78,481/-  seized  from         the respondent to be confiscated under section 23(1B).   The         respondent  moved the High Court of Delhi under Article  226         of  the Constitution  seeking an appropriate  writ  quashing         the order of confiscation.  The High Court viewed the matter         as follows:                              "What  has  happened  is  that  foreign                       currency  had  been sold for Indian  currency.                       In other words, a  contravention under section                       23(1)(a)  had taken place in respect  of  some                       foreign  currency  and not in respect  of  the                       Indian currency seized."             Accordingly,  the High Court held that the  Director  of         Enforcement "had no competence to order the confiscation  of         the  Indian currency in question" and quashed  the  impugned         order.             The  contravention  alleged is of section   4(1)   which         prohibits,  inter alia, sale of any foreign exchange.   For-         eign  exchange  as  defined in section  2(d)  means  foreign         currency.  Under section 23(1B) any currency, security, gold         or  silver,  or goods or any other  money  or  property  "in         respect  of  which"  the contravention has  taken  place  is         liable  to  be confiscated to the  Central  Government.  The         currency confiscated in this case was Indian currency.   The         question  is whether the Indian currency   constituting  the         sale proceeds  of foreign exchange seized from the  respond-         ent  was currency in respect of which the contravention  had         taken  place.   The words "in respect of" admit  of  a  wide         connotation; Lord Greene M.R. in Cuperd’s Trustees v. Inland         Revenue Commissioner, C) calls them colourless words.   This         Court  in S.S. Light Railway  Co. Ltd. v. Upper  Doab  Sugar         Mills  Ltd. & Anr. (2), construction these words in  section         3(14)  of the Indian Railways Act, 1890 has held  that  they         are  very  wide.   It seems to. us that in  the  context  of         section  23(1B) in respect of has been used in the sense  of         being "connected with’ and we have no difficulty in  holding         that the currency in respect of which there has been contra-

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       vention  covers the sale proceeds of foreign currency,  sale         of which is prohibited under section 4(1).  The intention of         the legislature is dear from the explanation to  sub-section         (1B) of section 23 which provides that for         (1) 174 L.T. Rep. 133.         (2) [1960] 2 S.C.R. 926.         956         the purposes of the sub-section property in respect of which         contravention  has taken place shall include deposits  in  a         bank  where such property is converted into such  deposits."         If  for this sub-section any Property in respect of which  a         contravention has taken place includes deposits into  ’which         the property may be converted and can reached even where the         deposits  are in a bank, it is not reasonable to think  that         the sale proceeds in Indian currency of any foreign exchange         would  be outside the scope of section 23(1B) and  therefore         not liable to be confiscated.  In our opinion the High Court         was  wrong  in quashing the order of confiscation  which  we         consider valid and lawful.         The appeal is accordingly allowed with costs.         P.B.R.                               Appeal allowed..         956