SHANTI PRASAD JAIN THE DIRECTOR OF ENFORCEMENT FOREIGN EXCHANGE REGULATION ACT SHANTI PRASAD JAIN Vs. UNION OF INDIA
LAWS(SC)-1962-4-24
SUPREME COURT OF INDIA
Decided on
April 19,1962
SHANTI PRASAD JAIN,DIRECTOR OF ENFORCEMENT FOREIGN EXCHANGE REGULATION ACT,SHANTI PRASAD JAIN
Appellant
VERSUS
UNION OF INDIA
Respondents
JUDGEMENT
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(1.) The appellant in Civil Appeal No. 319 of 1961, Shri S. P. Jain is the Chairman of the Board of Directors of a Company called Sahu Jain Ltd., which holds the managing agency of two companies, the Rohtas Industries Ltd. or more shortly the Rohtas, and the New Central Jute Mills Ltd. The Rohtas carry on business in the manufacture and sale of paper, and own a paper Mill at Dalmanagar in the state of Bihar. Shri Jain is the Chairman of the Board of Directors of that Company also. The New Central Jute Mills Ltd. carry on business in the manufacture and sale of jute, and own a Jute Mill at Calcutta. They also do business in the manufacture and sale of chemicals and fertilisers at Varanasi. On June .30, 1958, Shri S. P. Jain left India on a tour to the continent of Europe and on his return to this country he was searched at the Palam Airport on October 1, 1958, and the following document was found in his leather attach case :-
"Deutsche Bank
Aktiengesellschalft.
Page 2 to our letter of 25th Sept, 1958, to Mr. S. P. Jain, Hotel Breidenbacher Hof. Dusseldorf.
The DM-account with limited convertibility No. 50180 of Mr. S. P. Jain has been credited in 1958, upto now, with the following amounts from German sources;
20th March, 1958 DM 210.l18,66 from M/s. J. M. Voith G. m. b. H. Maschinenfabrik, Heidenheim marked 'DM 210,081,31 less DM. 262,65 banking charges'(the said charge was made by the remitter's bank which is not a branch of ours);
11th July 1958 DM. 205000 from Messrs. Escher Wyss G. m. b. H. marked 'as per letter of 7th July, 1958,'in translation.
9th August 1958 DM 201.424,81 from Messrs. J. M. Voith G. m. b. H. Maschinenfabrik,' Heidenheim marked 'DM. 201.676,59 less banking charges'.
15th August, 1959 DM. 472.886,03 from Messrs. Friedr. Udhe G. m. b. H., Dertmund, marked-in translation-'derived expenses DM. 465.633,63 interest payment DM. 7.2.52,40'.
24th September, 1958 DM. 350.000, from Messrs. Pintsch-Bamag A.G., Butzbach marked-in translation-'payment of excess price'.
25th September 1958 DM. 250.000 from Messrs Pintsch-Bamag A. G., Butsbach marked-in translation-'in respect of excess price'."
(2.) Now S. 4(1) of the Foreign Exchange Regulations Act (VII of 1947) hereinafter referred to as 'the Act' provides that "Except with the previous general or special permission of the Reserve Bank, no person resident in India other than an authorised dealer shall outside India buy or borrow from, or sell or lend to, or exchange with, any person not being an authorised dealer, any foreign exchange." The expression 'foreign exchange' as defined in S. 2(d) means "foreign currency and includes all deposits, credits and balances payable in any foreign currency and any drafts, travellers cheques, letters of credit and bills of exchange expressed or drawn in Indian currency but payable in any foreign currency".
(3.) As Shri Jain had admittedly not obtained the permission general or special of the Reserve Bank, for opening the account aforesaid, the Director of Enforcement started proceedings against him under S. 4(1) of the Act. The explanation of Shri Jain was that the amounts in question had been deposited into the Bank by four German firms in settlement of claims which two Indian Companies the Rohtas and the New Central Jute Mills Ltd. had against them nor delayed and defective supplies of machinery and equipments under previous contracts, that the deposits in question had been made subject to the condition that they should be utilised only for making initial payments towards price of new machineries to be purchased from the German firms and that in consequence there was no loan by the appellant within S. 4(1) of the Act. The Director rejected this explanation and held that S. 4(1) had been contravened and imposed a fine of Rs. 55/- lakhs on Shri Jain under S. 23(1)(a) of the Act. Against this order there was an appeal to the Foreign Exchange Appellate Board who, examining the question in the light of fresh materials which were made available to them accepted the version of Shri Jain, and held that the deposits had been made by the German firms under the circumstances and on the conditions stated by him. They however held that even so the deposits in question would in law be loans by Shri Jain to the Bank, and that in consequence, S. 4(1) of the Act had been infringed, as no permission had been obtained as required by it. In this view they confirmed the order of the Director but reduced the fine to Rs. 5 lakhs. Against this order both Shri S. P. Jain and the Union of India have preferred the above appeals with the leave of this Court under Art. 136 of the Constitution. In this Judgment Shri S. P. Jain will be referred to as the appellant and the Union of India as respondents.;
(2.) Now S. 4(1) of the Foreign Exchange Regulations Act (VII of 1947) hereinafter referred to as 'the Act' provides that "Except with the previous general or special permission of the Reserve Bank, no person resident in India other than an authorised dealer shall outside India buy or borrow from, or sell or lend to, or exchange with, any person not being an authorised dealer, any foreign exchange." The expression 'foreign exchange' as defined in S. 2(d) means "foreign currency and includes all deposits, credits and balances payable in any foreign currency and any drafts, travellers cheques, letters of credit and bills of exchange expressed or drawn in Indian currency but payable in any foreign currency".
(3.) As Shri Jain had admittedly not obtained the permission general or special of the Reserve Bank, for opening the account aforesaid, the Director of Enforcement started proceedings against him under S. 4(1) of the Act. The explanation of Shri Jain was that the amounts in question had been deposited into the Bank by four German firms in settlement of claims which two Indian Companies the Rohtas and the New Central Jute Mills Ltd. had against them nor delayed and defective supplies of machinery and equipments under previous contracts, that the deposits in question had been made subject to the condition that they should be utilised only for making initial payments towards price of new machineries to be purchased from the German firms and that in consequence there was no loan by the appellant within S. 4(1) of the Act. The Director rejected this explanation and held that S. 4(1) had been contravened and imposed a fine of Rs. 55/- lakhs on Shri Jain under S. 23(1)(a) of the Act. Against this order there was an appeal to the Foreign Exchange Appellate Board who, examining the question in the light of fresh materials which were made available to them accepted the version of Shri Jain, and held that the deposits had been made by the German firms under the circumstances and on the conditions stated by him. They however held that even so the deposits in question would in law be loans by Shri Jain to the Bank, and that in consequence, S. 4(1) of the Act had been infringed, as no permission had been obtained as required by it. In this view they confirmed the order of the Director but reduced the fine to Rs. 5 lakhs. Against this order both Shri S. P. Jain and the Union of India have preferred the above appeals with the leave of this Court under Art. 136 of the Constitution. In this Judgment Shri S. P. Jain will be referred to as the appellant and the Union of India as respondents.;
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