Judgment

SIKRI, C.J.I. :- The same point of law arises in both the writ petitions and it will suffice if facts in writ petition No. 164 of 1972 are set out. The petitioner, Ramanlal Bhogilal Shah, was the General Manager of United Commercial Bank Ltd. till January 17, 1968, when he became the Chairman and wholetime Director of the said bank. Upon nationalisation of the bank, the petitioner was appointed Custodian thereof and he continued as Custodian till September 1, 1971.

2. On June 4, 1966 the United Commercial Bank had booked a forward exchange contract for Hindustan Motors for £ 9,32,617 at the rate of ls. 5 29/32d per rupee. On June 6, 1966, the rupee was devalued. On May 24, 1971 the petitioner was served with summons under S. 19-F of the Foreign Exchange Regulation Act, 1947 - hereinafter referred to as the Exchange Act - to give evidence in the enquiry which Shri D. K. Guha, Deputy Director, Enforcement Directorate, was making into certain offences under the Exchange Act. The petitioner was examined on June 3, 1971, June 16, 1971 and June 17, 1971.

3. According to the petitioner, the entire examination on the said dates related to the booking by the United Commercial Bank of the aforesaid forward exchange contract dates June 4, 1966. On August 31, 1971, the petitioner was arrested under S. 19B of the Exchange Act. Sub-section (1) of S. 19B provides that "if any officer of Enforcement.........has reason to believe that any person in India or within the Indian customs waters has been guilty of an offence punishable under the Exchange Act, he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest." Sub-section (2) provides the "every person arrest under sub-section (1) shall, without unnecessary delay, be taken to a Magistrate." Sub-s. (3) empowered an officer of Enforcement arresting any person to release such person on bail or otherwise. In this connection he has the same powers and is subject to the same provisions as the officer-in-charge of a police station.

4. The grounds of arrest served on the petitioner are elaborate. These give detailed reasons why the enforcement officer had reasons to believe that the petitioner had been guilty of an offence under S. 4 (2) and under S. 22 of the Exchange Act punishable under S. 23 thereof. We may reproduce paras 31 to 40 of the grounds of arrest.

"31. AND WHEREAS by such criminal acts the Bank converted pound sterling not at the rate prescribed by the Foreign Exchange Dealers Association of India effective from 8-6-66 as aforesaid but at the rate of sh. 1-5 29/32d - Re. 1/- during the period of 8-7-66 to 3-3-67 on the total amount of £ 9,32,617-0-d.

32. AND WHEREAS the aforesaid amount of £ 9,32,617-0-0d has been converted into Indian currency at rates other than the rates authorised by the Reserve Bank of India;

33. AND WHEREAS such unauthorised conversion has been made without fulfilling the condition prescribed in Section XXVIII of the Exchange Control Manual published by the Reserve Bank of India as aforesaid.

34. AND WHEREAS such conversion of pound sterling into Indian currencies has been made in contravention of Section 4 (2) of the said Act;

35. AND WHEREAS false information has been furnished to the Reserve Bank of India thereby contravening the provisions of Section 22 of the said Act;

36. AND WHEREAS the aforesaid contraventions have been committed by the said Bank or have taken place with the consent of the said R. B. Shah;

37. AND WHEREAS at the time the aforesaid contraventions were committed, the said R. B. Shah was in charge of, or was responsible to the United Commercial Bank Limited for the conduct of the business of the said Bank;

38. AND WHEREAS the said R. B. Shah failed to prove in course of his statements made under Section 19F of the said Act before Shri D. K. Guha, Deputy Director of Enforcement that the contravention took place without his knowledge or that he exercised all due diligence to prevent the aforesaid contravent