IMPORTANT POINT
"Mens rea" is not an essential ingredient to establish contravention of Section 10(1) of FERA 1947 punishable under Section 23 of said Act.

Headnote:(i) Foreign Exhange Regulation Act, 1947-Sections 10 r/w 23(1)(a) -Penalty imposed for violation under -Non-repatriation of foreign exchange from Kuala Lumpur to India on two occasions-Set aside by High Court in appeal-Whether existence of "mens rea" is necessary ingredient for establishing contravention of Section 10 punishable under Section 23 FERA 1947 ? (No) (Para 9)
Held : We, therefore, hold that mens-rea (as is understood in criminal law) is not an essential ingredient for holding a delinquent liable to pay penalty under Section 23(1)(a) of FERA 1947 for contravention of the provisions of Section 10 of FERA, 1947 and that penalty is attracted under Section 23(1)(a) as soon as contravention of the statutory obligation contemplated by Section 10(1)(a) is established. The High Court apparently fell in error in treating the "blameworthy conduct" under the Act as equivalent to the commission of a "criminal offence", overlooking the position that the "blameworthy conduct" in the adjudicatory proceedings is established by proof only of the breach of a civil obligation under the Act, for which the defaulter is obliged to make amends by payment of the penalty imposed under Section 23(1)(a) of the Act irrespective of the fact whether he committed the breach with or without any guilty intention. Our answer to the first question formulated by us above is, therefore in the negative. (Para 14)
(ii) Foreign Exhange Regulation Act, 1947-Penalty under Section 10 r/w. 23(1)(a)-Whether Section 10(1) of FERA, 1947 is not an independent provision making its contravention by itself punishable under Section 23(1)(a) of FERA, 1947 or whether its contravention can arise only if there is breach of some directions issued by RBI under Section 10(2) of FERA, 1947 ?
Held : We are, therefore, of the opinion that contravention of sub-section (1) of Section 10 would invite penalty under Section 23(1)(a) and penalty shall also be leviable for contravention of any of the directions which may be issued by the Reserve Bank of India to such a person under sub-section (2) of Section 10 after his failure to comply with sub-section (1) of Section 10, notwithstanding the imposition of penalty for contravention of Section 10(1)(a) of FERA upon that person. The High Court was in error, if we may say so with respect, to construe that the contravention under sub-section (1) of Section 10 is not complete unless there is also a violation of the directions issued by the Reserve Bank of India under sub-section (2) of Section 10 of FERA, 1947. (Para 17)
Held further : In view of our answer to both the questions above the judgment of the High Court, impugned in this appeal, cannot be sustained and we accordingly set it aside. However, penalty imposed on Directors set aside but that on company maintained. (Paras 18 & 19)

JUDGMENT

Dr. A.S. Anand. J.-Leave granted.

2. The respondents, a private limited company and its Directors were proceeded against departmentally for having contravened the provisions of Section 10(1)(a) of the Foreign Exchange Regulation Act, 1947 (hereinafter referred to as ; the FERA, 1947 ). The gravamen of the departmental case against the respondents was that they had failed to repatriate the foreign exchange lying in Malaysia, which they had a right to receive in India and had thereby failed to take or refrained from taking action which had the effect of not securing the receipt of the foreign exchange in this country. In the charge-sheet, the respondents were alleged to have committed two contraventions of the provisions of FERA, 1947 by the Directorate of Enforcement. The first charge related to their failure to repatriate foreign exchange of Malaysian t 62186.42 being the sale proceeds of Nataraja Rubber Estate and Malaysian t 1,25,000. being the Social Welfare Prize money won by the Company in 1960 while the second charge related to their failure to repatriate Malaysian t 3,56,222.44 being the profit earned by the Company from the business carried on by the branch of the respondent Company at Kuala Lumpur as per the statement of profit and loss of the Company ending on 31.12.1972, All the amounts admittedly belonged to the Company and had been disclosed by the Company in its balance- sheet as well as in the return of income-tex for the relevant years. Admittedly, the respondents had not obtained any special or general permission from the Reserve Bank of India authorising them to hold the aforesaid foreign exchange lying with their branch at Kuala Lumpur in Malaysia without repatriating the same to India. The Directorate of Enforcement in the departmental proceedings, taken against the respondents guilty of committing both the contraventions mentioned in the article of charges and in respect of the first charge imposed a penalty of Rs. 4,000/- each on its Directors and of Rs. 40,000/- on the respondent company, while in respect of the second charge imposed a penalty of Rs. 20.000/- on each of the Directors and a penalty of Rs. 2,00,000/- on the respondent company, under Section 23(1)(a) of FERA, 1947. Against the order dated 19.9.1977 the respondents filed five separate appeals before the Appellate Board. The Board took the view that since it was not a case where foreign exchange had been surreptitiously held abroad with any mala fide motive though it was retained in Kuala Lumpur deliberately and intentionally, the contravention of the provisions was of a technical nature and therefore reduced the penalty to Rs. 2,000/- on each of the Directors and to Rs. 20,000/- on the company in respect of the first charge and to Rs. 5000/- each in the case of the Directors in respect of the second charge, while retaining the penalty on the company. The Board rejected the plea of the Company and its Directors that since to time limit had been specified for repatriation of the foreign exchange under Section 10 of the Act, the respondents could not be held guilty of either of the charges and opined that since no period had been specifically prescribed for repatriation of the foreign exchange, it was implied that foreign exchange had to be repatriated within a reasonable time from the date when the right to receive the same accrued and having regard to the long time taken by the Company, it followed that the Company had failed to repatriate the foreign exchange within a reasonable period. (Foreign Exchange had not been repatriated even after the expiry of more than 15 years from the date the right to receive it in India accrued). Dissatisfied, the respondents (the company and its Directors) filed five separate appeals before the High Court at Madras under Section 54 of FERA, 1973. Vide judgment and order dated 9th March, 1988, a Division Bench of the High Court, allowed all the appeals and set aside the penalty as imposed by the Directo

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1996 Supreme(SC) 65

IMPORTANT POINT"Mens rea" is not an essential ingredient to establish contravention of Section 10(1) of FERA 1947 punishable under Section 23 of said Act.

Cases Referred (1)

IMPORTANT POINT
"Mens rea" is not an essential ingredient to establish contravention of Section 10(1) of FERA 1947 punishable under Section 23 of said Act.