Case: Shanti Prasad Jain And Another Vs. Director Of Enforcement, Foreign Exchange Regulation A

2. Appellant No. 1 went to Europe and the United States of America in connection with business, and his wife, appellant No. 2. accompanied him. The first appellant is the Chairman of Sahu Jain Limited. They left India on June 30, 1958 and visited several countries in Europe including West Germany. Eventually they reached the United States of America on August 5, 1958. They left the United States on September 22, and arrived at Delhi on October 1, 1958. The first appellant had been allowed foreign exchange amounting to? 337 (equal to Rs. 4500/-) and 1410 U. S. dollars (equal to Rs. 6,750/-). Further, Messrs Sahu Jain Limited had been informed that the exchange was sanctioned on condition that the visit was limited to a period of two months. The second appellant was not allowed any foreign exchange but her visit was sanctioned on the representation that a certain company in the United States would bear all the expenses of her trip to that country3. When the appellants returned to Delhi on the 1st of October the Customs authorities found travellers cheques of the total value of 2590 U. S. dollars on the person of the first appellant. They were detained and the travelers cheques were handed over to the Enforcement Directorate under the orders of a magistrate. Thereafter the appellants were required to furnish certain information about their trip abroad including particulars about how they came to be in possession of these cheques. It will be noticed that the amount of these cheques was more than the total dollar exchange sanctioned to the first appellant. The explanation given by the appellant was that travellers cheques worth 1500 U. S. dollars were received as gift from Messrs Maschinenbau Schoiz and Company, West Germany, and traverlers cheques worth 1,000 U. S. dollars were received from Messr. Chemiobau, Dr. A. Zieren, West Germany, and a sum of 1,000 U. S. dollars was Received from Messrs. Hans Tobeason, Inc., New York. It was further explained that travellers cheques worth 1990 U. S. dollars, out of the total amount seized on October 1st represented the unspent balance from the two gifts received in West Germany and the remaining travellers cheques worth 600 U. S. dollars formed the unspent balance of the foreign exchange sanctioned when the appellant had left India. It was also stated that the entire amount of 1,000 U. S. dollars received in New York was spent in the United StatesOn receipt of this explanation, the Director of Enforcement issued notices to the appellants to show cause why adjudication should not be commenced against them for contravention of the provisions of S. 9 of the Foreign Exchange Regulation Act, No. VII of 1947, (hereinafter referred to as the Act) read with Notification dated March 25, 1947, issued thereunder. The notices said that the appellants had failed to sell the foreign exchange amounting to 3500 U. S. dollars referred to above acquired by them abroad within one month of their becoming owners thereof as required by S. 9 of the Act read with the said notification. The appellants showed cause which was more or less the same as the explanation they had already given earlier. The Director of Enforcement then held adjudication proceedings and came to the conclusion that the sum of 3500 U. S. dollars was received by the appellants as gift and they were owners of it, and as they had not offered to sell this foreign exchange as required by S. 9 and the notification made thereunder, they were liable to penalties for contravening S. 9. The Director ordered the forfeiture of the travellers cheques to the extent of 1990 U. S. dollars found with the appellants. He also imposed a penalty of Rs. 18,000/- on the first appellant under S. 23 of the Act; no penalty was imposed on the second appellant4. The appellant then went in appeal to the Appellate Board, and the contention that was raised there was that they were not the owners of this foreign exchange which had been given to them merely to defray their expenses in the United States and that instead of the various foreign companies spending the money on them directly, they gave the money to the appellants to be spent by them. It was also urged before the Appellate Board that the notification was ultra vires S. 9 of the Act, inasmuch as it dealt not only with the foreign exchange owned or held by persons at the time the notification was issued but also foreign exchange which might thereafter come into the ownership of any person. Certain other contentions were also raised before the Appellate Board, but these contentions have not been raised before us in view of the Judgment of this Court in Shanti Prasad Jain v. The Director of Enforcement, Civil Appeal Nos. 319 and 320 of 1961, D/- 19-4-1962 : (AIR 1962 SC 1764 ). The two points therefore that arise for consideration are whether the appellants were owners of this foreign exchange and whether the notification is ultra vires S. 9 of the Act. Both these points were decided against the appellants by the Appellate Board, which confirmed the order of the Director of Enforcement. Thereupon the appellants obtained special leave from this Court and that is how the matter has come up before us.

Court's reasoning:
5. The question whether the appellants were owners of this foreign exchange is in our opinion concluded by the concurrent finding of fact of the Director of Enforcement and the Appellate Board. The Appellate Board has pointed out that the contention that the appellants were not the owners of this foreign exchange was ingenious but unacceptable. The appellants wanted to make out that though they had actually received the money, they were really spending it on themselves on behalf of their foreign companies, which gave them the money for the expenses in the United States. The Appellate Board has rightly pointed out that this foreign exchange given to the appellants was nothing but a gift received by them and that the appellants themselves in the beginning had admitted that they had received these amounts as gift. It was only later that the ingenious argument was put forward on their behalf that though they had received the money, they were merely agents of the three companies which gave them the money for the purpose of spending it on themselves. We have no doubt that this is an absurd explanation and the fact is that the appellants received this foreign exchange as gift, even though the intention might have been to spend the amount on their trip in the United States of America. Further, as the Appellate Board has rightly pointed out, it is obvious that the money was given to the appellants outright, as otherwise the appellants would not have offered the amount found on them on October 1, 1958, for sale through the Reserve Bank as they did on October 25, 1958. There can therefore be no doubt that the appellants became owners of this foreign exchangeWe are of opinion that there is no force in this contention. The section lays down that every person who owns or holds such foreign exchange as may be specified in the notification has to offer it for sale as provided thereunder. The reason why the section provides for a notification is that it was left to the discretion of the Central Government to decide on a consideration of the foreign exchange situation at a particular time as to which kind of foreign exchange would have to be offered for sale as directed by S. 9. For example, the notification may direct that U. S. dollars must be offered for sale but may not direct that English pounds should be so offered for sale. The section as it stands is clearly applicable to foreign exchange owned or held at the date the Act came into force as well as to foreign exchange which a person may acquire after the Act came into forceWe are unable to accept this construction of S. 9. The Act is permanent statute and S. 9 clearly provides that every person holding or owning such foreign exchange as may be specified in the notification contemplated thereunder has to offer it for sale as provided therein. The words of the section are not confined only to foreign exchange owned or held by persons on the date the Act was passed; they apply also to foreign exchange which may be owned or held by persons even after the Act came into force and such foreign exchange had to be offered for sale if there is a notification in that behalf. It is true that words corresponding to "who may hereafter become the owner of any foreign exchange" do not appear in the section. But the words of the section in our opinion are clear and it is implicit in them that they apply not only to those persons who owned or held foreign exchange on the date the Act came into force but to those also who own or hold foreign exchange after that date, and the notification is mainly for the purpose of specifying the kind of foreign exchange which has to be offered for sale. The notification in the present case by using the words "or who may hereafter become the owner of any foreign exchange" merely makes explicit what was already implicit in the section. In fact, even if the impugned clause had not been included in the notification, it would have made no difference to the meaning. Like the main section, the remaining part would have covered cases of owning and holding foreign exchange in the past as well as in the future. The clause has been added only to clarify the position, and that is all8. Further, if we were to accept the argument raised on behalf of the appellants we would reach the startling result that a notification will have to be issued be every day in order that the purpose of S. 9 which is to control foreign exchange which any person might own or hold on the date the Act came into force as well as foreign exchange which any person might come to own or hold after the enactment of the Act, might be carried out. An interpretation which leads to such a starting result cannot possibly be accepted. Besides, as we have already said, the words of S. 9 are clear and they apply not only to foreign exchange owned or held at the date of the Act but to foreign exchange which might be held or owned at any time thereafter and the notification is mainly required to indicate the kind of foreign exchange which may have to be offered for sale under S. 9. We are therefore of opinion that the notification is completely intra vires S. 9. If that is so, it is not disputed by the appellants that S. 9 read with the notification was contravened in this case in view of the finding of fact that the foreign exchange to the extent of 3500 U. S. dollars was gifted to the appellants and was owned by themThis contention has no force for the notification requires that the offer should be made within one month of a person becoming the owner of foreign exchange. There is no warrant for reading in the notification that the offer has to be made within a month of the return of the person to India in case the foreign exchange is acquired while the person is abroad. The notification clearly requires an offer to sell within one month of a person becoming the owner of the foreign exchange. It has not been disputed that there was no impediment in the way of the appellants making such an offer within one month of their acquiring the foreign exchange. As they undoubtedly failed to do so, they have clearly contravened the notification read with S. 9 of the Act10. Lastly, it is urged that the penalty imposed in this case is too heavy. This matter has been considered by the Appellate Board and we see no reason to differ from the Board on this question. We may only add that the first appellant who is the Chairman of the Sahu Jain Limited is a person of responsibility and position, and it is not expected that such a person would contravene the provisions of the Act.