TMI Blog1984 (11) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... ment gave notice to the appellant company for contravention of the provisions of section 5(1)(a) of the Foreign Exchange Regulation Act, 1947. In other words, he conducted enquiries under the provisions of section 19(2) of the Act. During the enquiry, he found that the appellant company made 209 payments totalling a sum of Rs. 1,23,240 to persons resident outside India in contravention of the provisions of section 5(1)(a) of the Act and issued a notice dated February 24, 1971, asking the appellant to show cause why adjudication proceedings should not w held against them as provided under section 23D of the Act. To this show-cause notice, the appellant-firm gave a reply explaining the circumstances under which they paid those amounts. They stated that it was an international trade practice to pay to the captains of the ships what is called "hat money" and the said payments do not attract the provisions of the Act. The Director of Enforcement held this payment as contravening section 5(1)(a) of the Act and imposed a fine of Rs. 25,000 under section 23(l)(a) of the Act. Against these orders, the appellant preferred an appeal to the Foreign Exchange Regulation Appellate Board and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of this Act, termed as persons resident outside India. If Indian citizens during their visits to India having their permanent homes outside India are treated as residents outside India for purposes of this Act, it is beyond doubt that foreign citizens, if they were to come to India for a short sojourn for whatever purpose it may be, must be treated as persons, resident outside India. The captains of foreign vessels, who are admittedly foreign citizens, simply because they berth their ships for a few day or months in a particular port in India, cannot be treated as persons resident in India. Under the Foreign Exchange Regulation Act, 1973, we have the definition of "person resident in India". Section 2(p)(i) of the Act reads as follows: "person resident in India" means ( i )a citizen of India, who has, at any time after the 25th day of March, 1947, been staying in India, but does not include a citizen of India who has gone out of, or stays outside, India, in either case ( a ) for or on taking up employment outside India, or ( b )for carrying on outside India a business or vocation outside India, or ( c )for any other purpose, in such circumstances as would indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Indian citizens, they could as well keep the exchange of their own nations with them and can easily borrow moneys from their friend in India and spend the same then India will lose the foreign exchange to the extent of their spending in India. If we permit foreign persons taking Indian money as loan or credits for their spending in India, it is obvious that we are losing that much of foreign exchange. When the purpose of the Foreign Exchange Regulation Act is to conserve foreign exchange, this restriction on foreigners to take moneys in Indian currency from their friends in India and restriction on Indian citizens to pay foreigners in Indian currency, is absolutely necessary. Therefore, foreigners, whenever they visit India and simply because they are on the Indian soil if they were to become residents in India, for the purpose of this Act, then the very purpose of the Act would be defeated. Therefore, this argument of learned counsel for the appellant is rejected as not acceptable. It is then argued by learned counsel for the appellant that this payment of "hat money" is normal and is an accepted international trade practice in the shipping business and, therefore, it canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person resident in India or for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period. If a non-citizen becomes a resident of India for the simple reason that he happened to be there in India at the time of payment, there would have been no need for Parliament to incorporate section 2(p)(iii) in the statute. Therefore, apart from the Foreign Exchange Control Manual, we have to hold that these captains of foreign ships are persons resident outside India during the period of berthing their ships in an Indian port. It is then argued that these payments are trivial and, therefore, the same is liable to be ignored. Trivial acts relating to offences under the Indian Penal Code can be ignored. When we are dealing with the Foreign Exchange Regulation Act, there is no question of trivial payments. When the purpose of the Act is to conserve foreign exchange, unless we take care of trivials, conservation is not possible. Moreover, we do not know the exact amount paid on each occasion. All that we know from the record is that the payments are as many as 209 and the total came to Rs. 1,23,240 and the total is not trivial. It is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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