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1973 Supreme(Cal) 101
HIGH COURT OF CALCUTTA
SANKAR PRASAD MITRA, SABYASACHI MUKHERJI, JANAH AND SHARMA
JAY ENGINEERING WORKS LTD. - Appellant
Versus
M. G. WAGH - Respondent
Appeal 108 Of 1971
Decided On : MARCH 28, 1973
SUBRATA ROY CHAUDHURI
Section 12(2) of the Foreign Exchange Regulation Act, 1947, does not apply to completed sales, but only to sales that are yet to take place.
Headnote:
FOREIGN EXCHANGE REGULATION ACT, 1947 - SECTION 12(2) - APPLICABILITY - COMPLETED SALES - NOTICE - VALIDITY - MENS REA.
Fact of the Case:
The appellant exported electric fans and sewing machines to Mombasa, East Africa, between March 31, 1962, and April 7, 1962. The appellant wrote to the Reserve Bank of India on November 23, 1962, requesting permission to adjust the outstanding bills against India Machinery Importers (E. A.) Ltd. with the outstanding claims of M/s. Jay Engineering Works Ltd. and for permission to repatriate the balance due to them amounting to Sh. 4940. On December 9, 1968, the Enforcement Directorate issued a notice to the appellant alleging contravention of Section 12(2) of the Foreign Exchange Regulation Act, 1947, for failure to realize the export value of the goods within six months from the date of shipment. The appellant challenged the validity of the notice.
Finding of the Court:
The Court held that Section 12(2) of the Foreign Exchange Regulation Act, 1947, does not apply to completed sales, but only to sales that are yet to take place. The Court also held that the period of six months specified in the notice was contrary to the provisions of Section 12(2) and that the notice did not specify the ingredients of mens rea required for an offense under the subsection.
Issues: 1. Whether Section 12(2) of the Foreign Exchange Regulation Act, 1947, applies to completed sales. 2. Whether the period of six months specified in the notice was contrary to the provisions of Section 12(2). 3. Whether the notice specified the ingredients of mens rea required for an offense under Section 12(2).
Ratio Decidendi: 1. The Court interpreted the expression "no person entitled to sell" in Section 12(2) to mean "no person qualified to sell" and held that this expression, when read together with the expression "procure the sale of," refers to future sales and not past sales. 2. The Court held that the period of six months specified in the notice was contrary to the provisions of Section 12(2) because the subsection does not provide for a specific or definite period for all types of cases. 3. The Court held that the notice did not specify the ingredients of mens rea required for an offense under Section 12(2) because it did not state that the appellant did anything with intent to secure any of the results envisaged by the subsection.
Final Decision: The Court allowed the appeal, quashed and set aside the notice dated December 9, 1968, and restrained the respondents from taking proceedings under the said notice.
( 1 ) THIS is an appeal from a judgment of Mr. Justice K. L. Roy delivered on November 20, 1970. By this judgment the validity of a notice under Section 12 (2) of the Foreign Exchange Regulation Act, 1947 was upheld. There was another notice under Section 5 (1) of the said Act with which we are not concerned in this appeal. In the writ application before Mr. Justice Roy the notice under Section 12 (2) dated the 9th December, 1968 was challenged and appropriate writs were prayed for.
( 2 ) THE appeal first came up for hearing before my learned brother Mr. Justice Sabyasachi Mukharji and myself. It was urged on behalf of the respondents that in view of certain observations of the Supreme Court we would be invited to differ from a division bench judgment of this Court on the point involved in the appeal. It was urged further that there were also other strong reasons why the division bench of our Court should not be followed. For avoiding all controversies I constituted this bench of three Judges in order that the contentions on behalf of the respondents may be fully urged.
( 3 ) THE facts are that between March 31, 1962 and April 7, 1962 Messrs. Jay Engineering Works Ltd. exported electric fans and sewing machines to Mombasa in South East Africa by five several consignments of divers invoice values. It is alleged that M/s. Jay Engineering Works Ltd. had an agency agreement in East Africa with M/s. India Machinery Importers Ltd. In June, 1962, this agreement was terminated. And in November 1962, M/s. India Machinery Importers' business was completely closed down.
( 4 ) ON November 23, 1962 the appellant wrote to the Reserve Bank of India asking for permission to adjust the outstanding bills against India Machinery Importers (E. A.) Ltd. with the outstanding claims of M/s. Jay Engineering Works Ltd. and for permission to repatriate the balance due to them amounting to Sh. 4940.
( 5 ) ON the 1st April 1965 certain amendments to Section 12 (2) of the Foreign Exchange Regulation Act were made, But we are not concerned with these amendments because the goods which are the subject matter of this appeal were exported long before these amendments came into force.
( 6 ) ON the 25th May, 1965, The Export Credit and Guarantee Corporation Ltd. , a Government of India undertaking wrote to the appellant dealing with the claims against India Machinery Importers Ltd. and offering to admit a claim to the extent of Sh. 1190-76.
( 7 ) THE appellant by a letter dated November 4, 1965 requested the Export Credit and Guarantee Corporation Ltd. to accept a claim of Sh. 5660-36.
( 8 ) ON November 30, 1965, the appellant wrote to the Reserve Bank of India, inter alia, enclosing a list of the outstanding bills against India Machinery Importers and referring to the offer of Export Credit and Guarantee Corporation Ltd. The appellant requested the Reserve Bank of India to allow the petitioner to accept the offer of Sh. 1150.
( 9 ) ON the 7th July, 1962 the Enforcement Directorate of the Government of India passed an order under Section 19 (2) of the Foreign Exchange Regulation Act, 1947 asking for information as to whether the full value of the aforesaid exported goods had been realised.
( 10 ) THE appellant gave its reply to the Assistant Director of Enforcement on the 17/20th December, 1966. In this letter all the facts already stated have more or less been set out.
( 11 ) ON the 9th December, 1968, the impugned notice was issued by the Enforcement Directorate. We propose to set out the notice in full. It is as follows:"whereas it appears that during the year 1962 M/s. Jay Engineering Works Ltd. , Calcutta effected shipments of electric fans and sewing machines of the value of 705-4-0 (as per details in the annexure) to Mombasa, East Africa. And whereas it further appears that the full export value of these shipments amounting to 005-4-0 has not so far been received in India by the said M/s. Jay Engineering Works Ltd. , in
