Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | 1947 Foreign Exchange Regulation Act |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Case Disposed Off |
Headnote | Foreign Exchange—Foreign firm depositing money in account of India in foreign bank.—Money to be used only for purchases from foreign firm—If contravenes prohibition to lend foreign exchange—Relationship between Bank and India-—Whether of debtor ant creditor —Contingent debt—Power to adjudge contravention given, to Director of Enforcement— Director empowered to send case to Court if penalty imposeable by him not adequate—If discriminatory—Foreign Exchange Regulation Act, 1947 (7 of 1947), Ss. 4(1), 23, 28D—Constitution of India, Art. 14.The appellant had claims, for compensation against certain German firms in respect of machineries supplied by them to the appellant’s concerns. The appellant went to Germany and arrived at settlements with the firms, under which the firms deposited certain sums of money with the Deutsche Bank in the account of the appellant with the stipulation that the money was only to be used by the appellant for purchases of new machineries from the same firms after obtaining import licenses from the Government of India. The appellant had not obtained permission, general or special, of the Reserve Bank for opening this account. Section 4,(1) of the Foreign Exchange Regulation Act, 1947, prohibits a ‘person resident in India’, inter alia, from lending to any person outside India foreign exchange without the permission of the Reserve Bank. Section 23 lays down the penalties for contravention of s.4(1) on adjudication by the Director of Enforcement and on conviction by a Court. Section 23D confers upon the Director the power to adjudicate whether any person has contravened s. 4 (1) and empowers him, if he is of the opinion that the penalty which he is empowered by impose would not be adequate in the circumstances of any particular case, to make a complaint in writing to the Court. The Director inquired into the appellant’s Deutsche Bank account, held that the appellant had contravened s, 4(1) and imposed a penalty of Rs. 55 lakhs. On appeal the Foreign Exchange Appellate Tribunal held that the deposits amounted in law to loans by the appellant to the Bank and consequently s. 4(1) was contravened but it reduced the penalty to Rs. 5 lakhs. The appellant contended (i) that s. 23(1) of the Act offended Art. 14 of the Constitution as two parallel procedures were provided for the same offence and it was left to the discretion of the executive to choose which was to be applied in a particular case, and (ii) that there was no loan by the appellant to the Bank and therefore there was no contravention of s. 4(1). Held, that the power conferred upon the Director under s. 23D to transfer cases to a court is not unguided or arbitrary and, does not offend Art. 14 and s. 23(1) cannot be assailed as unconstitutional. A serious offence should not go with-out being adequately punished; and in such cases the accused should have the benefit of trial by a Superior Court. Under s. 23D the transfer is to a Court and that only when the Director considers that a more severe punishment than what he is authorised to impose should be awarded. Held, further, that the appellant had not lent money to the Deutsche Bank and had not contravened the provisions of s. 4(1) of the Act. Though normally when moneys are deposited in a Bank, the relationship that is constituted between the Banker and the customer is one of debtor and creditor, there may he special arrangement under which the relationship may be different. The right of the appellant to the amounts in deposit was contingent on the happening of certain events some of which were beyond his control and until then there was no debt due to him. A contingent debt is no debt until the contingency happens, and as the right of the appellant to the amounts in deposit in his name in the Deutsche Bank arises only on the happening of the contingencies, i.e. granting of the import licenses by the Government of India, there was no debt due to him in present and there was no loan the of within s. 4(1) of the Act. The fact that money has been put in a Bank does not necessarily import that it is a deposit in the ordinary course of banking. The purpose of the deposits and the conditions attached to it indicated that the Deutsche Bank held the money under a special arrangement which constituted it not a debtor, but a sort of a stakeholder. The words “a person resident in India” in s. 4(1) has been used in the sense of “resident of India’, and it was not necessary that at the time of the contravention of s. 4(1) should be actually in India. |
Judge | Hon'ble Mr. Justice T.L Venkatarama Aiyyar |
Neutral Citation | 1962 INSC 157 |
Petitioner | Shanti Prasad Jain |
Respondent | The Director Of Enforcement |
SCR | [1963] 2 S.C.R. 297 |
Judgement Date | 1962-04-19 |
Case Number | 319 |
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