V V PURI Vs. ASSISTANT CONTROLLER RESERVE BANK OF INDIA NEW DELHI

JUDGEMENT

(1.) -By these two petitions under Article 226 of the Constitution (CivilWrit Nos. 207-D of 1966 and 275-D of 1966) Shri V. V. Puri and his wife have both separately challenged the order of the Assistant Controller, Exchange Control Department, Reserve Bank of India, dated August 19, 1965, rejecting their applications to issue permission in form 'P' to enable them to book their passages abroad and have further prayed that section 18B of the Foreign Exchange Regulation Act, 1947, through which the Reserve Bank of India purported to exercise this power may be declared to be unconstitutional and void and respondent No. I be directed to decide their applications according to law As the petitions involved questions of general importance, by order dated August 30, 1967, they were directed to be heard by a larger Bench.

(2.) The case of the petitioners for purposes of the reliefs claimed lies within a comparatively short compass. On March 12, 1963, they entered into an agreement with a French firm Messrs Francorex films (hereafter called 'the firm') to secure business for it by contacting prospective buyers and buying agencies in the various South East Asian and East European countries, where this firm held rights of exploitation, exhibition and distribution of a number of French films. Copy of this agreement was sent to the Reserve Bank of India and its copy on the record of this Court is Annexure I. In terms of this agreement, the petitioners were to tour the South East Asian and East European countries and contact the prospective buyers and buying agencies desirous or marketing the films held by the firm. On the conclusion of each sale, the firm was to pay 10 per cent of the net royalties received by it to the petititoners. For the tours that may be undertaken by them, the firm had to pay a maximum of two Economy class return passages out of Delhi to any point of the intended destination of the petitioners as also their hotel charges, transport charges and other expenses for stay in the countries visited by them in pursuance of the agreement. The payment had, however, to be recuperated by the firm, but only by adjusment from the commission becoming due to the petitioners in term of the agreement. According to clause 6, this agreement was lo hold good for a period of twelve months from the date of the first trip undertaken "unless extended by mutual consent". The petitioners were at liberty during each trip to do their own business also, such as sale of Indian or any other films in the countries visited by them. On March 28, 1963, they wrote to the Assistant Controller, Exchange Control Department of the Reserve Bank of India, requesting that a 'P' form be issued to enable them to book their passage to Japan. In reply, the Reserve Bank raised the query as to who was to bear the expenses of this journey, and the petitioners by letter dated April 7, 1963, informed the Bank that in terms of their agreement with the firm, copy of which had already been sent to it, the firm had to bear all the expenses. On July 6, 1963, an application in the prescribed form with the required particulars needed by the Bank to consider if the 'P' form should or should not be issued, was sent to it. After further correspondence and some clarifications, on August 29, 1963, the Bank granted permission to Shri V. V. Puri only to book the desired pasage on the condition that whatever foreign exchange was earned by him during this visit, would be repartriated to India through normal banking channels along with a detailed report on the business done or the royalty earned by him. In pursuance of this authorisation, on September 4, 1963 Shri Puri left Delhi-for Bangkok. From Bangkok, he states that he contacted his principals on telephone and was asked to immediately come over to paris for some important consultation. He. therefore, cut short his stay there and returned to India within 4 days without transacting any business under the agreement. By letter dated September 10, 1963, he approached the Bank for a fresh permission to book his passage to Paris and London. Respondent No. 1 pointed out that visits to London were not covered by the agreement and, this being so, Shri Puri agreed that London may not be considered to .be included in the proposed trip. The Bank, thereupon, issued the 'P' form in his favour vide approval No. 7794 dated December 3, 1963. Due to certain unavoidable reasons, however, he was not in a position to undertake the trip. On April 29, 1964. he again applied to the Bank for issuing a revised 'P' form. Correspondence again ensued between the petitioners and the Bank, the details of which are not relevant for purposes of the decision of the points in controversy, until by memorandum dated August 19, 1965 (copy Annexure 24), the petitioners were informed that the Bank could not grant the permission applied for under the existing Exchange Control Regulations. The petititioners contend that this refusal on the part of the respondents is wholly illegal and had and deserves lo be struck down.

(3.) In the affidavit in reply by Shri Madhav Kaluram Vijayakar. Deputy Controller, Exchange Control Department, Reserve Bank of India, New Delhi, the procedure evolved by the Bank from time to time in connection with the grant of permission to book passages for travel abroad as a result of the past experience was briefly indicated. According to his affidavit, till 1956, a basic travel quota of 600 pounds once in every two years was available to any person for travel to any country other than the Continent of America and Phillipines, but this basic travel quota was abolished in 1957 in view of the stringent foreign exchange position. While reviewing the position of foreign exchange in the year 1962, it was found that going abroad of persons, even though they obtained no foreign exchange, resulted in loss of exchange to the country. Such persons were apparently able to acquire in open markets abroad the exchange which would otherwise have been remitted to India. Diverse methods were resorted by such persons to achieve this purpose. The result was that foreign exchange earnings of the country, which were already at a low ebb, instead of showing any increase, remained steady since 1956 and in some cases showed a marked decline. Various measures were therefore adopted to check the continuous decline and lo conserve the foreign exchange. A decision in this context was taken that travel without release of foreign exchange should also be restricted. Directions in the form of circulars were issued by the Bank in pursuance of the powers conferred on it by subsection (3) of section 20 of the Foreign Exchange Regulation Act, 1947 (Act VII of 1947) (hereafter referred to as 'the Act'). The Steamer and Airline companies and travel agents were directed that they should book foreign passage only if (a) the traveller was in possession of a foreign exchange permit or (b) he held 'P' form approved by the Bank authorising the booking of the passage. The situation kept on being reviewed from time to time and several directions in the form of circulars and press notes were issued by the Bank summarising its current policy in the matter of the release of exchange as well as the approval of 'P' forms. The impugned order, it is stated, was passed in accordance with the policy decision contained in SPA Circular No. 3 dated April 15, 1965, issued by the Bank, which was then in force. The petitioners cases did not fall under any of the exempted categories mentioned in this circular and, therefore, the approval of the Bank could not be issued in their cases. Dealing with merits, it is admitted that copy of agreement Annexure I was sent to the Bank, but it was urged that it was not a genuine agreement and the sending of its copy did not amount to any approval of the agreement vis-a-vis the Foreign Exchange Regulations or the working of the Act. Provisions of section 18B of the Act were maintained to be perfectly legal and valid and the other contentions raised by the petitioners were also controverted.