Dr. A. S. Anand, J. - (1.) Leave granted.
(2.) The respondents, a private limited company and its Directorate 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 S.62186.42 being the sale proceeds of Nataraja Rubber Estate and Malaysian $ 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 $3,56,222.44 being the profit earned by the Company from the business carried on by the breach 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-tax 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, by its order dated 19-9-1977 held 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 Rupees 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 respondent 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.5,000/- 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 no time limit had been specified for repatriation of the foreign exchange under Section 10 of the Act, the respondent 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 Directorate of Enforcement and modified by the Appellate Board. The High Court inter alia held that Section 10(1) of FERA, 1947 is not an independent section and unless some direction given under Section 10(2) by the Reserve Bank of India was contravened, no penalty could be imposed for breach of Section 10(1)(a) under Section 23(1)(a) of FERA, 1947. The High Court also held that a finding regarding existence of "mens rea or criminal intent" for failure to repatriate foreign exchange was necessary before the respondents could be penalised for contravention of the provisions of Section 10(1)(a) of FERA, 1947 and since in the instant case, the existence of mens rea had not been found by the Directorate or the Appellate Board, the award of punishment by way of levy of penalty under Section 23(1)(a) of FERA, 1947 was not justified. This appeal by special leave has been filed by the Directorate of Enforcement, questioning the correctness of the order of the High Court.
(3.) Principally, there are two questions which require our consideration in this appeal:(1) Whether existence of "mens rea" is a necessary ingredient for establishing contravention of Section 10 punishable under Section 23 of FERA, 1947 and (2) 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 the Reserve Bank of India under Section 10 (2) of FERA, 1947.;