PETITIONER:
UNION OF INDIA AND ANOTHER
Vs.
RESPONDENT:
VIJAY CHAND JAIN
DATE OF JUDGMENT09/02/1977
BENCH:
GUPTA, A.C.
KRISHNAIYER, V.R.
CITATION:
1977 AIR 1302 1977 SCR (2) 952
1977 SCC (2) 405
ACT
Foreign Exchange Regulation Act 1947--s. 23(1B)--For-
eign Currency--Sale proceeds in Indian currency seized and
confiscated-- Government, if competent to confiscate.
HEADNOTE
Words and Phrases--"in respect of"--Meaning of.
Under s- 2(d) of the Foreign Exchange Regulation Act,’
1947 foreign exchange means foreign currency. Section 4(1)
prohibits the sale or purchase of foreign exchange by a
person other than an authorised dealer except with the
permission of the Reserve Bank. Section 23(1)(a) prescribes
a penalty for contravention of s. 4. Section 23(1B) pro-
vides that, in addition to the penalty which may be imposed
for such contravention, a court may direct that any curren-
cy or any other money or property in respect of which the
contravention has taken place shall be confiscated to the
Central Government. The explanation to this sub-section
provides that for the purpose of the sub-section property in
respect of which contravention has taken place shall include
deposits in a bank where the said property is converted into
such deposits.
A large sum of Indian currency which was the sale pro-
ceeds of foreign currencY, was recovered from the respond-
ent. In addition to imposing a penalty. the Director of
Enforcement confiscated the Indian currency seized from the
respondent. In a petition under art. 226 of the Constitu-
tion, the High Court held that the Director of Enforcement
had no competence to order confiscation of Indian. currency
because the contravention had taken place in respect of some
foreign currency and not in respect of the Indian currency
seized.
Allowing the appeal,
HELD: The currency in respect of which there has been con-
travention covers the sale proceeds of foreign currency,
sale of which is prohibited under s. 4(1). [954H]
The High Court was wrong in quashing the order of confis-
cation. The intention of the legislature is clear from the
Explanation to s. 23(1B). If, for this sub-section any
property in respect of which a contravention has taken place
includes deposits into which the property may be converted
and can be reached, even where the deposits are in a bank,
it is not reasonable to hold that the sale proceeds in
Indian currency of foreign exchange would be outside the
scope of s. 23(1B) and, therefore not liable to be confis-
cated. [955 A]
The words "in respect of" admit of a wide connotation.
In the context of s . 23 (1b) "in respect of" has been used
in the sense of being" connected with". [954 G]
Cuperd’s Trustees v. Inland Revenue Commissioners 174
L.T. Rep. 133 and S.S. Light Railway Co. Ltd. v. Upper Doab
Sugar Mills Ltd. & Anr. [1960) 2 S.C.R. 926 referred to.
JUDGMENT
CIVIL APPELLATE JURISDICTION Civil Appeal No. 2081 of 1968.
Appeal from the Judgment and Order dated the 30-3-1967 of
the Delhi High Court in Civil Appl. No. 112 of 1966.
G.L. Sanghi and Girish Chandra for the Appellant.
Y.S. Chitley and Ashok Grover for Respondent.
953
The Judgment of the Court was delivered by
GUPTA, J.--This appeal on certificate of fitness turns
on the meaning of the words "in respect of" occurring in
section 23(1B) of the Foreign Exchange Regulation Act,
1947. For a proper appreciation of the question, it is
necessary to refer to two other sections of the Act, section
4(1) and section 23(1)(a), before we turn to section
23(1B).
Section 4(1) lays down:
"Except with the previous general or
special permission of the Reserve Bank, no
person other than an authorised dealer shall
in India and no person resident in India
other than an authorised dealer shall outside
India, buy or otherwise acquire or borrow
from, or sell or otherwise transfer or lend
to, or exchange with, any person not being an
authorised dealer, any foreign exchange."
Section 23(1)(a) provides:
"If any person contravenes the provi-
sions of section 4, section 5, section 9,
section 10, sub-section (2) of section 12,
section 17, section 18A or section 18B or any
rule, direction or order made thereunder, he
shall-
(a) be liable to such penalty not
exceeding three times the value of the for-
eign exchange in respect of which the contra-
vention has taken place, or five thousand
rupees, whichever is more, as may be adjudged
by the Director of Enforcement in the manner
hereinafter provided, or
(b) x x x"
The part of section 23(1B) material for the
present purpose reads:
"Any Court trying a contravention under
sub-section (1) or sub-sction (IA) and the
authority adjudging any contravention under
clause (a) of sub-section (1) may, if it
thinks fit, and in addition to any sentence or
penalty which it may impose for such contra-
vention, direct that any currency, security,
gold or silver, or goods or any other money or
property, in respect of which the contraven-
tion has taken place, shall be confiscated to
the Central Government .... "
There is an explanation to this sub-sec-
tion which says:
"Explanation.--For the purposes of this
sub-section, property in respect of which
contravention has taken place shall include
deposits in a bank, where the said property
is converted into such deposits."
These are the facts on which the question of’ construc-
tion of "section 23(1B) arises. On the morning of January
28, 1966 the respondent who resides and carries on business
in Delhi arrived at Palam Airport by I.A.C..Flight No. 181.
A customs officer recover-
954
ed from his possession Indian currency amounting to Rs.
78,481/which sum, the respondent admitted, was the sale
proceeds of the foreign currency entrusted to him for sale
by someone else. On February 14, 1966 the second appellant,
Director, Enforcement Directorate, Ministry of Finance,
asked the respondent to show cause why the Indian currency
recovered from his possession, which admittedly was the sale
proceeds of foreign currency, should not be confiscated. The
second appellant was the authority adjudging under
section 23(1) (a) an alleged contravention of the provisions
of section 4. . On October 14, 1966 the second appellant
held on the evidence before him that the respondent was
guilty of contravening the provisions of section 4(1) and
imposed a penalty of Rs. 50,000/- under section 23(1)
(a). He further directed the sum of 78,481/- seized from
the respondent to be confiscated under section 23(1B). The
respondent moved the High Court of Delhi under Article 226
of the Constitution seeking an appropriate writ quashing
the order of confiscation. The High Court viewed the matter
as follows:
"What has happened is that foreign
currency had been sold for Indian currency.
In other words, a contravention under section
23(1)(a) had taken place in respect of some
foreign currency and not in respect of the
Indian currency seized."
Accordingly, the High Court held that the Director of
Enforcement "had no competence to order the confiscation of
the Indian currency in question" and quashed the impugned
order.
The contravention alleged is of section 4(1) which
prohibits, inter alia, sale of any foreign exchange. For-
eign exchange as defined in section 2(d) means foreign
currency. Under section 23(1B) any currency, security, gold
or silver, or goods or any other money or property "in
respect of which" the contravention has taken place is
liable to be confiscated to the Central Government. The
currency confiscated in this case was Indian currency. The
question is whether the Indian currency constituting the
sale proceeds of foreign exchange seized from the respond-
ent was currency in respect of which the contravention had
taken place. The words "in respect of" admit of a wide
connotation; Lord Greene M.R. in Cuperd’s Trustees v. Inland
Revenue Commissioner, C) calls them colourless words. This
Court in S.S. Light Railway Co. Ltd. v. Upper Doab Sugar
Mills Ltd. & Anr. (2), construction these words in section
3(14) of the Indian Railways Act, 1890 has held that they
are very wide. It seems to. us that in the context of
section 23(1B) in respect of has been used in the sense of
being "connected with’ and we have no difficulty in holding
that the currency in respect of which there has been contra-
vention covers the sale proceeds of foreign currency, sale
of which is prohibited under section 4(1). The intention of
the legislature is dear from the explanation to sub-section
(1B) of section 23 which provides that for
(1) 174 L.T. Rep. 133.
(2) [1960] 2 S.C.R. 926.
956
the purposes of the sub-section property in respect of which
contravention has taken place shall include deposits in a
bank where such property is converted into such deposits."
If for this sub-section any Property in respect of which a
contravention has taken place includes deposits into ’which
the property may be converted and can reached even where the
deposits are in a bank, it is not reasonable to think that
the sale proceeds in Indian currency of any foreign exchange
would be outside the scope of section 23(1B) and therefore
not liable to be confiscated. In our opinion the High Court
was wrong in quashing the order of confiscation which we
consider valid and lawful.
The appeal is accordingly allowed with costs.
P.B.R.
Appeal allowed..
956