TMI Blog1982 (10) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... Cr. Leelawati 18,50,000 Motia Rani 16,00,000 Dr. L. D. Bhatia 62,000 Ram Lal Bhatia 2,75,510." These four persons are residents of India and carry on business under the name of Bhatia Brothers at Delhi. Now, at the airport, Bhatia was questioned. He made no satisfactory answer. The Additional Director of Enforcement held him guilty of contravention of section 4(1) of the Foreign Exchange Regulation Act, 1947 (the Act). He also held Leelawati, Motia Rani Bhatia and Ram Lal Bhatia guilty of contravention of section 4(1). He imposed the following penalties on them: (1) A penalty of Rs. 4,000 on Sh. L. D. Bhatia. (2) A penalty of Rs. 1 lakh on Smt. Motia Rani. (3) A penalty of Rs. 1,15,000 on Smt. Leelawati and (4) A penalty of Rs. 18,000 on Sh. Ram Lal Bhatia. From the order of the Additional Director of Enforcement, all the four appellants appealed to the Appellate Board under section 23EE of the Act. The Board dismissed their appeals. The point for decision in these appeals is whether the appellants contravened section 4(1) of the Act. Two questions will arise. Firstly, can page 25 of the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of enforcement is authorised to seize the documents. If the seizure of the document is under section. 19A, or section 19C or section 19D from the custody and control of a person, only then the presumption can be drawn under section 24A. In this case, it is clear from the order of the Additional Director dated 20-9-77 that the documents were seized by the customs authorities at Palam. The customs authorities forwarded the documents to the Enforcement Directorate on January 9, 1974, along with a report. First, Bhatia was examined by the customs officer to explain the document. Later on, he was again examined by the Enforcement Directorate on 21-8-74. It cannot, therefore, be said that the documents were seized by an officer of enforcement from the person of L. D. Bhatia. Therefore, the presumption under section 24(A) will not arise. There is no presumption in this case regarding the truth of the contents of page 25 which contains the entries in question. If this is so, as I hold it to be, the prosecution cannot tender the document, namely, page 25, in evidence against any of the four appellants including L. D. Bhatia. Counsel for the Union of India referred me to a notification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the truth of the contents of such documents. . . . . . . . . . . . . . . . . . . " This shows that the presumption is raised only against that person from whom it is seized. The Board raised a presumption against all the four appellants. They fell into the same error as the additional director. Under section 72 of the Act of 1973, the scope of the presumption has been greatly widened. The new section has made three important changes, Firstly, it refers to seizure under any other law, which would include customs law also. Secondly, it makes an unstamped document also admissible. Thirdly, the document can be tendered in evidence against the person from whom it is seized or "against him and any other person who is proceeded against jointly with him". But we are not concerned with section 72 of the Act of 1973. That section does not apply as was rightly held by the Appellate Board. But it is surprising that having held thus the Appellate Board raised the presumption against all the four appellants of the truth of the contents of the document and held them guilty on the basis of presumption. On the first question, my conclusions are these : ( i )There was no seizure by the enf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66] 36 Comp. Cas. 49 (SC), the Supreme Court held that the concept of debt is more comprehensive than that of loan. All that this balance-sheet shows is that Ram Lal Bhatia and L.D. Bhatia are in debt. But it does not show that they have taken any loan of foreign exchange. As the Supreme Court observes (p. 51): " 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 well known that at the relevant time the Government had allowed what is called barter trade between India and Afghanistan. From Afghanistan, king (asafoetida) and dry and fresh fruits of all kinds could be imported. Certain specified goods like machinery, confectionery, etc ., of equal value could be exported from India. The Gazette notification dated June 30, 1972, in annexure II, Schedule A, sets out the commodities for export from Afghanistan to India. Schedule B( ii ) names the commodities for export from India to Afghanistan. That there was barter trade between India and Afghanistan at the relevant time is an undisputed fact. A barter trade can result in Motia Rani and Leelawati bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supply of goods and services abroad was held not to be a sale and so did not fall within the words "sell foreign exchange" within the meaning of section 4(1). (See Mercury Travels Ltd. v. Director of Enforcement [1975] DLT 172). The word "borrow" must be given its natural meaning connoting the existence of a legal lender-borrower relationship. Therefore, it does not apply where A alleges a loan of money to B when in fact the money was paid by A at B's request to third parties and never reached B at all. (H.P.C. Productions Ltd., In re [1962] 1 All. ER 37 (Ch D). Similarly, the term "lend" has to be given a natural meaning. It is a contract whereby one delivers money to another who agrees to return an equivalent sum. A sum of money is confided to another. It is a debt arising from borrowing money. The Appellate Board holds that L. D. Bhatia and Ram Lal Bhatia were debtors in respect of the two accounts and that they were guilty of borrowing in contravention of the provisions of section 4(1) of the Act. They say : "incurring indebtedness of whatever amount would amount to borrowing." "This is a startling proposition. On this they found their decision." I cannot assent to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan depends upon the terms of the contract where under the deposit is made.' It is to be regretted that the attention of the Appellate Board was not drawn to these rulings. They clearly lay down that what is essential to prove in a case of borrowing and lending is delivery by one party and receipt by another party of money on agreement, express or implied, to repay money with or without interest. There must be an advance of money with an absolute promise to repay. There must be a transaction wherein one party transfers to the other a sum of foreign exchange. In other words, the borrower's promise to repay has to be proved. It is true that identical money is not to be returned where money is borrowed. But money must be returned in specie. It must be payable in foreign exchange. The word "loan" is the co-relative of "borrow". "Borrow" has been held the reciprocal action with "to lend". Therefore, here both in the case of the two women as in the case of the two men, the Enforcement had to prove that there was an agreement to repay. This is the gist of the offence. Without proving the terms of the contract where-under indebtedness had been created, it would be idle to say that there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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