TMI Blog1996 (1) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 10(1)( a ) of the Foreign Exchange Regulation Act, 19.47 (herein after referred to as "the FERA 1947") The gravamen of the departmental case against the respondents was that they had failed to repatriate the foreign exchange lying in Malaysia, which they had a right to receive in India and had thereby failed to take or refrained from taking action which had the effect of not securing the receipt of the foreign exchange in this country. In the charge-sheet, the respondents was alleged to have committed two contraventions to the provisions of the FERA, 1947, by the Directorate of Enforcement. The first charge related to their failure to repatriate foreign exchange of Malaysian 62,186.42 being the sale proceeds of Nataraja Rubber Estate and Malaysian 1,25,000, being the social welfare prize money won by the company in 1960 whether second charge related to -their failure to repatriate Malaysian 3,56,223-44 being the profit earned by the company from the business carried job by the branch of the respondent company at Kuala Lumpur as per the statement of profit and loss to the company ending on December 51, 1872. Ail the amounts admittedly belonged to the company and had been dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crued). Dissatisfied, the respondents (the company and its directors) filed five separate appeals before the High Court at Madras under section 54 of the Foreign Exchange Regulation Act, 1973."Vide judgment and order dated March 9, 1988, a Division Bench of the High Courts allowed all the appeals and set aside the penalty as imposed by the Directorate of Enforcement and modified by the Appellate Board. The High Court; inter alia , held that section 10(1) of the FERA, 1947 is not the independent section and unless some direction given under section 10(2) by the Reserve Bank of India was contravened, no penalty could be imposed for breach of section 10(1)( a ) under section 23(1)( a ) of, the FERA, 1947. The High Court also held that a finding regarding existence of " mens rea or criminal intent" for failure to repatriate foreign exchange was necessary before the respondents could be penalised for contravention of the provisions of section 10(1)( a ) of the FERA, 1947, and since in the instant case, the existence of mens rea had not been found by the Directorate or the Appellate Board, the award of punishment by way, of levy of penalty under section 23(1)( a ) of the FERA, 1947, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in the manner hereinafter provided, or. . . 23F. If any person fails to pay the penalty imposed by the Director of Enforcement or the Appellate Board, or fails to comply with any of their directions or orders, he shall, on conviction before a court, be punishable with imprisonment for a term which may extend to two years, or with fine, or with both." The preamble to the FERA, 1947, provides a key to the general purpose of the Act. That purpose is to regulate certain payments and dealings in foreign exchange, etc., for the conservation of foreign exchange resources of the country and for proper utilisation thereof. The Act is designed to safeguard and conserve foreign exchange, which is essential for the economic life of a developing country like India. Conservation of foreign exchange resources of the country being the inoperative need, it follows that any action, positive or negative, which disables this country from utilising the foreign exchange to which it has a right, to sub-serve the common good, would be volatile of the relevant provisions of the FERA, 1947, punishable under section 23(1)( a ) of the FERA, 1947, which provision lays down one of the modes of punishme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of wide significance. Sometimes, it means recovery of an amount as a penal measure even in civil proceedings. An exaction which is not compensatory in character is also termed as a "penalty". When penalty is imposed by an adjudicating officer it is done so in "adjudicatory proceedings" and not by way of fine as a result of "prosecution" of an "accused" for commission of an "offence" in a criminal court. Therefore, merely because a "penalty" clause exists in section 23(1)( a ), the nature of the proceedings under that section is not changed from "adjudicatory" to "criminal" prosecution. An order made by an adjudicating authority under the Act is not that of conviction but of determination of the breach of the civil obligation by the offender. It is thus the breach of a "civil obligation" which attracts "penalty" under section 23(1)(a) of the FERA, 1947, and a finding that the delinquent has contravened the provisions bf section 10 of the FERA, 1947, would immediately attract the levy of "penalty" under section 23, irrespective of the fact whether the contravention was made by the, defaulter with any "guilty intention" or not. Therefore, unlike in a criminal case, where it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of Bombay under article 226 of the Constitution seeking quashing of the complaint by contending that his prosecution in the court of the Chief Presidency Magistrate was in violation of his fundamental right' guaranteed under article 20(2) of the Constitution. It was the case of the appellant before, the High Court that since the complaint before the Chief Presidency Magistrate also proceeded on the footing that the appellant had committed an' offence in so far as he brought gold into India without any permit from the Reserve Bank of India on which allegations alone, the gold stood already confiscated by the authorities under the Sea Customs Act during the confiscation proceedings, he was being punished twice for the some offence which was not permissible in law in view of article 20(2) of the Constitution. The High Court was of the opinion that the appellant could claim the protection of article 20(2) only if he was the owner of the gold which had been confiscated. The Chief Presidency Magistrate was, therefore, directed to first determine that question of fact. After recording some "evidence, the Chief Presidency Magistrate returned a finding that the appellant was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f authorities, relevant provisions of the Sea Customs Act, 1878, and the nature of the adjudicatory proceedings as contained in that Act, opined that an adjudicatory authority functioning under the Act was merely an administrative machinery for the purpose of adjudging confiscation, determination, of duty or the increased rate of duty and for imposition of penalty as prescribed under ; the Act and hot a judicial tribunal. The court opined (at page 330): "We are of the opinion that the sea customs authorities are not a judicial tribunal and the adjudging of confiscation, increased rate of duty or penalty under the provisions of the Sea Customs Act do not constitute a judgment or order of a court or judicial tribunal necessary for the purpose of supporting a plea of double jeopardy. It, therefore, follows that when the customs authorities confiscated the gold in question neither the proceedings taken before the sea customs authorities constituted a prosecution of the appellant nor did the order of confiscation constitute a punishment inflicted by a court or judicial tribunal on the appellant. The appellant could not be said by reason of these proceedings before the sea customs a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act irrespective of the, fact whether he committed the breach with or without any guilty intention. Our answer to the first question formulated by us above is, therefore, in the negative; Coming now to the second question : In the instant case, on the facts there is no dispute that for more than 15 years, the foreign exchange owned by the respondents had been lying in Malaysia-and the respondents had taken no action or steps whatsoever to repatriate that foreign exchange which they had the right to receive in India and had thereby failed to secure the receipt of the foreign exchange in India. Did the respondents thereby contravene the provisions of section 10(1)( a ) of the FERA, 1947, or could it be said that unless the respondents had violated a direction given under section 10(2), the "offence" under section 10(1)( a ) could not be said to have been committed, attracting the levy of penalty under section 23(1)( a ) of the FERA, 1947? This precisely is the core of the second question framed by us above. The scheme of clause (1) of section 10 in, our opinion, unambiguously indicates that any person who has a right to* receive in foreign exchange or its payment in rupee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of section 10. Sub-sections (1) and (2) of section (10) take care of two distinct) situations. There is, therefore, no warrant to hold that the contravention under section 10(1) is not possible unless there has been violation of the directions issued under section 10(2). Both sub-sections operate in different spheres and. the issuance of direction's under subjection (2) and the breach of those directions is not the sine qua non for establishing the contravention contemplated by sub-section (1) of section 10 whereas failure to comply with the requirements of sub-section (1) of section10 is necessary to enable the Reserve Bank of India to issue specific or general directions under sub-section (2) of section 10. The obligation to repatriate the foreign exchange, receivable in India, is a statutory; obligation and is not dependent upon any specific direction to be issued-by the Reserve Bank of India in that behalf under sub-section (2) of section 10. The object of enactment of clause (2) of section 10 appears to be that the defaulter, may after having been penalised for' contravention of section 10(1) be still directed to repatriate the foreign exchange, in whole or in part, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statutory-obligation to repatriate the foreign exchange receivable in India as non-statutory, dependant upon issuance of specific or general directions by the Reserve Bank of India. Our answer to the second question, formulated in the earlier part of this judgment, therefore is in the affirmative and we hold that for establishing contravention of sub-section (1). of section 10 it is not necessary to establish that the defaulter has disobeyed any directions issued by the Reserve Bank of India under section 10(2) with regard to the repatriation of the foreign exchange receivable by him in, India. The contrary view taken by the High Court is not sustainable. In view of our answer to both the questions above the judgment of the High Court, impugned in this appeal, cannot be sustained and we, accordingly, set it aside. So far as the amount of penalty is concerned, the Appellate Board, as already noticed, has modified the amount of penalty as imposed by the Directorate of Enforcement. The learned Additional Solicitor General, Mr. Tulsi, submitted that the appellant has no objection to the waiving of the entire amount of penalty in so far as each one of the directors is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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