1. Possession of foreign exchange acquired abroad — failure to offer for sale — contravention of Section 9, Foreign Exchange Regulation Act and associated notification. (Para 2 , 3 )
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1962 Supreme(SC) 317
SUPREME COURT OF INDIA
4th October, 1962
B.P. SINHA, C.J.I., P.B. GAJENDRAGADKAR, K.N. WANCHOO, K.C. DAS GUPTA AND J.C. SHAH, JJ.
Shanti Prasad Jain and another, Appellants
Versus
Director of Enforcement, Foreign Exchange Regulation and another, Respondents.
Civil Appeal No. 617 of 1961.
Advocates appeared
Mr. Sachin Choudhury, Senior Advocate (M/s. N. Bajoria and B. P. Maheshwari, Advocates with him), for Appellants; Mr. Bishan Narain, Senior Advocate (Dr. V. D. Mahajan and P. D. Menon, Advocates with him), for Respondents.
Advocates:
B.P.MAHESHVARI, BISHAN NARAIN, N.Bajoria, P.D.MENON, Sachin Chandra Chawdhury, V.D.Mahajan
B.P.MAHESHVARI, BISHAN NARAIN, N.Bajoria, P.D.MENON, Sachin Chandra Chawdhury, V.D.Mahajan
Section 9 of the Foreign Exchange Regulation Act, 1947, applies to foreign exchange owned or held both at the time of enactment and subsequently. Notifications issued under this section to include future owners are valid and not ultra vires the Act.
Headnote:(A) Foreign Exchange Regulation Act, 1947 - Section 9 - Notification dated March 25, 1947 - Acquisition of foreign exchange - Requirement to offer for sale - Validity of notification - Whether a notification requiring persons who may hereafter become owners of foreign exchange to offer it for sale is ultra vires Section 9 - Section 9 is a permanent statute and applies to foreign exchange owned or held both at the time the Act came into force and subsequently - The notification merely makes explicit what is implicit in the section - An interpretation requiring a new notification every day to cover future acquisitions would lead to an absurd result - Notification is intra vires Section 9. (Paras 6, 7, 8)
(B) Foreign Exchange Regulation Act, 1947 - Section 9 - Timing of offer for sale - Notification requires the offer to be made within one month of a person becoming the owner of foreign exchange - No justification for reading the notification as requiring the offer within one month of return to the country if the exchange was acquired abroad. (Para 9)
(C) Finding of Fact - Concurrent findings of the adjudicating authority and the appellate board regarding the ownership of foreign exchange are binding - Argument that money received as a gift to defray expenses was held as an agent of foreign companies is unacceptable and absurd. (Para 5)
Facts of the case:
Appellants traveled abroad and returned with traveler's cheques exceeding the sanctioned limit. They claimed the excess amount was received as gifts from foreign companies to cover expenses. The authorities initiated proceedings for contravention of Section 9 of the Act and a corresponding notification, as the appellants failed to offer the foreign exchange for sale within one month of acquisition. The appellants challenged the ownership of the funds and the validity of the notification, arguing it could not apply to those becoming owners after the notification's date.
Findings of Court:
The court upheld the concurrent findings that the appellants were the owners of the foreign exchange. It ruled that the notification was intra vires Section 9, as the Act is a permanent statute intended to regulate foreign exchange held at any time. The court also found that the appellants failed to comply with the timeline for offering the exchange for sale, which begins from the date of becoming the owner.
Issues: Whether the appellants were owners of the foreign exchange; whether the notification extending the requirement to offer for sale to future owners was ultra vires Section 9 of the Act; and whether the one-month period for offering the exchange for sale commenced upon return to the country or upon becoming the owner.
Ratio Decidendi: Section 9 of the Act applies to foreign exchange owned or held both at the date of enactment and subsequently. A notification specifying that future owners must offer such exchange for sale is merely clarificatory and valid. The statutory obligation to offer foreign exchange for sale must be fulfilled within one month of becoming the owner, regardless of the date of return to the country.
Result: Appeal dismissed.
Legal Category Hierarchy
Table of Contents
2. Ownership of foreign exchange — validity of notification extending to future ownership — timing of the requirement to offer foreign exchange for sale. (Para 4 )
3. Rejection of agency theory for gifts — interpretation of Section 9 as applying to future acquisitions — notification as a clarifying instrument. (Para 5 , 7 , 8 , 9 )
4. Section 9 of the Foreign Exchange Regulation Act applies to foreign exchange owned or held both at the time of enactment and subsequently acquired. (Para 7 , 8 )
5. Appeal dismissed with costs. (Para 10 )
6. Does Section 9 of the Foreign Exchange Regulation Act apply to foreign exchange acquired after the date of the Act or its notifications?
Yes. The court held that Section 9 applies to foreign exchange owned or held at the date the Act came into force as well as to foreign exchange acquired thereafter. The notification merely makes explicit this implicit power. (Para 7 , 8 )
7. When must foreign exchange acquired abroad be offered for sale under the 1947 notification?
The offer must be made within one month from the date the person becomes the owner of the foreign exchange, not within one month of their return to India. (Para 9 )
8. Does receiving money from a foreign company to spend on one's own travel expenses constitute ownership of that foreign exchange?
Yes. If the money is given outright as a gift, the recipient becomes the owner, even if the intended purpose was to defray travel expenses. (Para 5 )
Judgment
WANCHOO, J. : This is appeal from the order of the Foreign Exchange Regulation Appellate Board and arise in the following circumstances :
2. Appellant No. 1 went to Europe and the United States of America in connection with business, and his wife, appellant No. 2. accompanied him. The first appellant is the Chairman of Sahu Jain Limited. They left India on June 30, 1958 and visited several countries in Europe including West Germany. Eventually they reached the United States of America on August 5, 1958. They left the United States on September 22, and arrived at Delhi on October 1, 1958. The first appellant had been allowed foreign exchange amounting to £337 (equal to Rs. 4500/-) and 1410 U. S. dollars (equal to Rs. 6,750/-). Further, Messrs Sahu Jain Limited had been informed that the exchange was sanctioned on condition that the visit was limited to a period of two months. The second appellant was not allowed any foreign exchange but her visit was sanctioned on the representation that a certain company in the United States would bear all the expenses of her trip to that country.
3. When the appellants returned to Delhi on the 1st of October the Customs authorities found traveller s cheques of the total value of 2590 U. S. dollars on the person of the first appellant. They were detained and the traveler s cheques were handed over to the Enforcement Directorate under the orders of a magistrate. Thereafter the appellants were required to furnish certain information about their trip abroad including particulars about how they came to be in possession of these cheques. It will be noticed that the amount of these cheques was more than the total dollar exchange sanctioned to the first appellant. The explanation given by the appellant was that traveller s cheques worth 1500 U. S. dollars were received as gift from Messrs Maschinenbau Schoiz and Company, West Germany, and traverler s cheques worth 1,000 U. S. dollars were received from Messr. Chemiobau, Dr. A. Zieren, West Germany, and a sum of 1,000 U. S. dollars was Received from Messrs. Hans Tobeason, Inc., New York. It was further explained that traveller s cheques worth 1990 U. S. dollars, out of the total amount seized on October 1st represented the unspent balance from the two gifts received in West Germany and the remaining traveller s cheques worth 600 U. S. dollars formed the unspent balance of the foreign exchange sanctioned when the appellant had left India. It was also stated that the entire amount of 1,000 U. S. dollars received in New York was spent in the United States. On receipt of this explanation, the Director of Enforcement issued notices to the appellants to show cause why adjudication should not be commenced against them for contravention of the provisions of S. 9 of the Foreign Exchange Regulation Act, No. VII of 1947, (hereinafter referred to as the Act) read with Notification dated March 25, 1947, issued thereunder. The notices said that the appellants had failed to sell the foreign exchange amounting to 3500 U. S. dollars referred to above acquired by them abroad within one month of their becoming owners thereof as required by S. 9 of the Act read with the said notification. The appellants showed cause which was more or less the same as the explanation they had already given earlier. The Director of Enforcement then held adjudication proceedings and came to the conclusion that the sum of 3500 U. S. dollars was received by the appellants as gift and they were owners of it, and as they had not offered to sell this foreign exchange as required by S. 9 and the notification made thereunder, they were liable to penalties for contravening S. 9. The Director ordered the forfeiture of the traveller s cheques to the extent of 1990 U. S. dollars found with the appellants. He also imposed a penalty of Rs. 18,000/- on the first appellant under S. 23 of the Act; no penalty was imposed on the second appellant.
4. The appellant then went in appeal to the Appellate Boa
