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1975 Supreme(Mad) 516
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE RAMANUJAM
Mohamed Ayisha Nachiyar - Appellant
Versus
Deputy Director, Enforcement Directorate, and Others - Respondent
Case No : Writ Petition No. 484 of 1974
Decided On : 10 October 1975
The RBI has the power to issue directions to banks under section 20(3) of FERA for the purpose of securing compliance with the provisions of the Act.
Headnote:
FOREIGN EXCHANGE REGULATION ACT - SECTION 20(3) - SCOPE AND VALIDITY - DIRECTIONS TO BANKS TO SECURE COMPLIANCE WITH THE ACT - POWER OF RESERVE BANK - CONSTITUTIONALITY - WRIT PETITION - DISMISSAL.
Fact of the Case:
The petitioner's bank accounts were blocked by the Enforcement Directorate and the Reserve Bank of India (RBI) under the Foreign Exchange Regulation Act, 1947 (FERA). The petitioner challenged the blocking of her accounts, arguing that the RBI did not have the power to issue such directions and that section 20(3) of FERA was unconstitutional.
Finding of the Court:
The court held that the RBI had the power to issue directions to banks under section 20(3) of FERA for the purpose of securing compliance with the provisions of the Act. The court also held that section 20(3) was not unconstitutional.
Issues: 1. Whether the RBI had the power to issue directions to banks under section 20(3) of FERA for the purpose of securing compliance with the provisions of the Act. 2. Whether section 20(3) of FERA was unconstitutional.
Ratio Decidendi: 1. The court held that the expression "persons who are authorised by the Reserve Bank to do anything in pursuance of this Act in the course of their business" used in section 20(3) of FERA qualified only travel agents, stock brokers and other persons and not the word "bankers" and "authorised dealers" occurring earlier in the section. Therefore, the court held that so far as bankers are concerned section 20(3) automatically applies. 2. The court held that section 20(3) of FERA was not unconstitutional as it did not violate articles 14 and 19(1)(f) and (g) of the Constitution.
Final Decision: The court dismissed the writ petition.
RAMANUJAM J.
The petitioner's premises was searched by the officers of the Enforcement Directorate on June 24, 1973, under section 19D of the Foreign Exchange Regulation Act, 1947, hereinafter referred to as the Exchange Regulation Act, and some documents including savings bank account and fixed deposit receipts for Rs. 50, 000 had been seized. The petitioner issued a cheque on the third respondent bank on June 26, 1973, for a sum of Rs. 2, 000 but the third respondent refused to honour it on the ground that her accounts were blocked under the Regulation Act by the second respondent on July 6, 1973. In this writ petition the petitioner questions the validity of the said blocking of the petitioner's bank accounts by the first and second respondents on the following grounds: (1) That either of the respondents Nos. 1 or 2 had no power under the provisions of the said Act to block the bank accounts.
(2) Section 20(3) of the Exchange Regulation Act under which the second respondent has purported to act does not apply to the facts of this case and that, in any event, the said section does not empower the second respondent to block the accounts of the petitioner who is an independent citizen resident in India.
(3) The second respondent is an authority separate and distinct from the directorate of enforcement and, therefore, it cannot merely block the petitioner's bank account on the instructions of the first respondent without applying its own mind.
(4) Section 20(3) of the Regulation Act violates articles 14 and 19(1)(f) and (g) of the Constitution of India.
According to the petitioner the sum of Rs. 50, 000 and odd which was lying in deposit in the petitioner savings bank account has been fully accounted for with reference to the Indian income and that if a notice had been given prior to the said blocking of the petitioner's bank account, she could have easily satisfied the second respondent that the amounts deposited with the third respondent bank has nothing to do with the Exchange Regulation Act.The first respondent in his counter has stated that on the basis of reliable information the premises of the petitioner was searched on June 24, 1973, and the search resulted in the seizure of incriminating documents in the form of bank passbook, account book, foreign aerogramme, etc., containing details of money transactions made by the petitioner's husband, Shri Hayum, that on interrogation with reference to the seized documents the petitioner had admitted that her husband used to receive and make payments unauthorisedly as per the instructions of one Ibrahim of Penang, that her husband used to deposit the monies received through illicit channels in the savings bank account No. 812 standing in the joint names of herself and her husband with the third respondent, that the balance left over in the said savings bank account was Rs. 52, 072.03 out of which a sum of Rs. 50, 000 was withdrawn through cheques on February 16, 1973, and deposited as fixed deposit in the names of herself and her brother and that on the basis of the said statement the amount of Rs. 52, 082.09 was blocked by the second respondent on the instructions of the first respondent. It is also stated that investigation has been completed and a show-cause notice as to why she should not be proceeded against for the contravention of the provisions of section 5(1)(c) read with section 23B of the Exchange Regulation Act has already been issued on June 5, 1974, and that another show-cause notice dated August 12, 1974, under section 5(1)(aa) has also been issued to the petitioner asking her to show cause as to why the sum of Rs. 50, 000 lying in fixed deposit and a sum of Rs. 2, 072.09 lying in the joint savings bank account No. 812 should not be confiscated and for her having received payments amounting to Rs. 75, 000 by order of a person residing outside India. It is further contended that in view of the pendency of the proceedings for contravention of the provisions of
