- (1.)These are the two appeals under clause 15 of the Letters Patent directed against the judgment and order dated February 18, 1977, passed by a learned single judge of this court. By the judgment and order under appeal the learned judge dismissed the two writ petitions and discharged two Rules issued thereon. Those two writ petitions which were heard together were preferred by the present appellants challenging therein two adjudication proceedings initiated by the Special Director, Enforcement Directorate, respectively under section 23D of the Foreign Exchange Regulation Act, 1947 and section 51 of the Foreign Exchange Regulation Act, 1973, based on more or less identical allegations. Fact which led to the initiation of such proceedings may shortly be set out as hereunder.
(2.)United Commercial Bank Limited (hereinafter referred to as the said bank) appellant in one of these appeals is a company incorporated under the Companies Act, and at the material time in the year 1966 was carrying on banking business as one of the scheduled banks of India until it was nationalized on June 19, 1969. The said bank was also an authorized dealer within the meaning of the Foreign Exchange Regulation Act, 1947 (hereinafter referred to as the said Act) duly authorized by the Reserve Bank to deal in foreign exchange. The said bank had extensive foreign exchange business and in course of such business it had dealings with a large number of constituents. Hindustan Motors Limited (hereinafter referred to as Hindustan Motors) appellant in the other appeal was one of such constituents of the said bank at the material time. Hindustan Motors was manufacturing commercial vehicles, namely, Bedford Trucks in collaboration with Messrs. Vauxhall Motors Limited, London. For its manufacturing process, the said Hindustan Motors used to import components, parts and machineries from their collaborator and also raw materials like steel etc, from an agent at London, namely, East India Produce Company Limited (hereinafter referred to as EIP) against valid import licence for importation of varied goods issued by the Government. The agency in favour of EIP had the sanction of the Reserve Bank of India. Bills against such importation for the price of the goods so imported were being cleared through the said bank.
(3.)In course of such transaction, Hindustan Motors approached the said bank in the last week of May 1966 with a request to book a forward exchange contract for sale of sterling for imports to be made in course of the next 6 months against valid import licence. According to the said bank, the relevant papers and documents being placed before them by Hindustan Motors, they were satisfied that Hindustan Motors was asking for a forward exchange contract for sale of sterling to cover imports to be made against a valid import licence and that the importer had already placed firm orders with their collaborators and EIP which had been accepted by them. In such circumstances they entered into a foreign exchange contract No. 130/66 for sale of sterling to the extent of Rs.1.25 crores equivalent to (pound) 9,32,617 within next six months from the date of the contract, viz., June 4, 1968. In that contract the rate for the conversion that was agreed to was the rate authorized by the Reserve Bank for such forward contracts, viz., Shilling 1.5-29/32=Re. 1/-. In order to cover the said contract, the said bank on that very day, entered into a contract with the Reserve Bank of India for forward purchase of (pound) 7,00,000 to be delivered within 6 months from that date, and the said bank further made ready purchase of (pound) 1,32,000 from other banks.