Case: Union of India and Anr Vs. Vijay Chand Jain

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).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 recovered 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 Rs. 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. Foreign 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.

Court's reasoning:
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 contravention covers the sale proceeds of foreign currency, sale of which is prohibited under section 4(1). The intention of the legislature is clear from the Explanation to sub-section (1B) of section 23 which provides that " for 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 be 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.