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AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For the Appellant: M.R.N. Kothandaraman, Advocate.
  • For the Respondent: K. Swamidurai, Additional Central Government Standing Counsel, Advocate.
Judges
  • Ramanujam
  • Maheswaran, JJ.
Acts
  • Section 81 (3) of the 1973 Act and if S. 6 of the General Clauses Act
  • S. 5 (1)(aa) and S. 9 (1)(b) of the Foreign Exchange Regulation Acts, 1947
  • Ss. 5 (1)(aa) and 9 (9)(b) of the Foreign Exchange Regulation Acts, 1947
  • Section 5(1)(aa) of the 1947 Act and Section 9(1)(b) of the 1973 Act.
  • FOREIGN EXCHANGE REGULATION ACT 1947
  • FOREIGN EXCHANGE REGULATION ACT 1973
  • S. 5(1)(aa) of the 1947 Act and S. 9(1)(b) of the 1973 Act
  • provisions of S. 9(1)(b) of the 1973 Act
  • SECTION 6 A GENERAL CLAUSES ACT
  • provision in Section 9(1)(b)
  • S. 5(1)(aa) of the 1947 Act
  • S. 9(1)(b) of the 1973 Act
  • Section 5(1)(aa)
  • Section 9(1)(b)
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • For the Appellant: M.R.N. Kothandaraman, Advocate.
  • For the Respondent: K. Swamidurai, Additional Central Government Standing Counsel, Advocate.
Judges
  • Ramanujam
  • Maheswaran, JJ.
Acts
  • Section 81 (3) of the 1973 Act and if S. 6 of the General Clauses Act
  • S. 5 (1)(aa) and S. 9 (1)(b) of the Foreign Exchange Regulation Acts, 1947
  • Ss. 5 (1)(aa) and 9 (9)(b) of the Foreign Exchange Regulation Acts, 1947
  • Section 5(1)(aa) of the 1947 Act and Section 9(1)(b) of the 1973 Act.
  • FOREIGN EXCHANGE REGULATION ACT 1947
  • FOREIGN EXCHANGE REGULATION ACT 1973
  • S. 5(1)(aa) of the 1947 Act and S. 9(1)(b) of the 1973 Act
  • provisions of S. 9(1)(b) of the 1973 Act
  • SECTION 6 A GENERAL CLAUSES ACT
  • provision in Section 9(1)(b)
  • S. 5(1)(aa) of the 1947 Act
  • S. 9(1)(b) of the 1973 Act
  • Section 5(1)(aa)
  • Section 9(1)(b)
See more information ...
Smart Summary

Summary of Legal Opinion (Ramanujam, J.)

Factual and Procedural Background

The appellant challenged the Foreign Exchange Regulation Appellate Board's order dated 5-10-1979, which affirmed an order dated 9-3-1976 of the Assistant Director of Enforcement. The Assistant Director had held the appellant guilty of contraventions of Section 5(1)(aa) of the Foreign Exchange Regulation Act, 1947 and Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973, and imposed an aggregate penalty of Rs. 15,000.

Facts as found and recorded by the enforcement authorities: on inquiry, the appellant first denied receiving payments under instructions from a person abroad, then in a subsequent statement dated 3-3-1976 admitted receiving (a) Rs. 2,000 in September 1973 (bank draft credited 19-9-1973) and (b) two further sums of Rs. 2,000 (Feb. 1974) and Rs. 1,000 (May 1974), all through persons in India on instructions from his co-brother S.A. Ibrahim residing in Singapore. Show-cause notices were issued for contraventions of the cited provisions; the Assistant Director conducted a personal hearing on 3-3-1976, found contraventions established and levied the penalty. The appellant appealed to the Appellate Board, which affirmed both liability and the penalty. The appellant then brought the present appeal against the Appellate Board's order.

Legal Issues Presented

  1. Whether, on the materials on record (including the appellant's subsequent admissions), the charge of contravention of Section 5(1)(aa) of the 1947 Act and Section 9(1)(b) of the 1973 Act was established.
  2. Whether sums received on 19-9-1973 (before the 1973 Act came into force) could be the subject of proceedings under the 1947 Act, or whether action in respect of that receipt had to be taken only under the 1973 Act.
  3. Whether the receipts in February and May 1974 amounted to violations of Section 9(1)(b) of the 1973 Act, in particular whether the Explanation to Section 9(1)(b) (which refers to payments received by order or on behalf of an authorised dealer without corresponding inward remittance) applied and required further proof of absence of inward remittance.

Arguments of the Parties

Appellant's Arguments

  • The evidence does not legally sustain the finding of contravention of Section 5(1)(aa) (1947 Act) and Section 9(1)(b) (1973 Act).
  • The Rs. 2,000 received on 19-9-1973 (before the 1973 Act's commencement) should be dealt with only under the 1973 Act and not under the repealed 1947 Act; hence the show-cause notice invoking the 1947 Act in respect of that receipt is not sustainable.
  • The receipts in Feb. and May 1974 do not amount to violations of Section 9(1)(b) because the Explanation to that section limits application to payments received by order or on behalf of an authorised dealer without a corresponding inward remittance; the department did not prove absence of such inward remittance, and the Explanation therefore cannot be applied.
  • Additionally, the appellant's counsel argued that where receipt is in the form of a cheque drawn on a bank authorised by the Reserve Bank of India to deal in foreign exchange, Sections 5(1)(aa) and 9(1)(b) would not be attracted; specifically, counsel contended a cheque receipt should not constitute a contravention.

Respondent / Enforcement Authorities' Position

  • The Assistant Director relied on the appellant's own subsequent statement (dated 3-3-1976) admitting receipt of the amounts on instructions from a person in Singapore; based on that admission, the Assistant Director held the appellant in contravention of the cited provisions and levied Rs. 15,000 as penalty.
  • The Assistant Director rejected the appellant's plea of ignorance of law, noting suppression in the appellant's original statement (dated 20-12-1975) and concluding the case was not fit for leniency.
  • The Foreign Exchange Regulation Appellate Board held that the Assistant Director's finding was based on the appellant's clear admission and could not be successfully challenged on appeal, and that the quantum of penalty was not excessive and needed no reduction.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
C.M.A. No. 288 of 1980 (batch) Earlier judgment adopting the view that the provisions of the 1947 Act can be invoked in respect of contraventions committed while the old Act was in force, by applying Section 6 of the General Clauses Act through Section 81(3) of the 1973 Act. The court followed this prior decision and held that the authorities rightly invoked the provisions of the 1947 Act for the appellant's contravention in September 1973.

Court's Reasoning and Analysis

The court's analysis proceeds in a sequence tied closely to the evidence, statutory text, and prior decision:

  1. Admission as decisive evidence: The court emphasized that the appellant's subsequent statement (3-3-1976) contained a clear admission that he received the sums on instructions from his co-brother in Singapore. That admission, made at the personal hearing and relied upon by the Assistant Director, established the factual basis for the contraventions alleged in the show-cause notices.
  2. On the cheque/authorised-channel contention: The appellant argued that receipt by cheque (through banks authorised by the Reserve Bank) would not attract Sections 5(1)(aa) and 9(1)(b). The court rejected this contention because, in the present case, the cheques were drawn on local banks by persons in India and there was no showing that the co-brother in Singapore had transmitted the amount through an authorised banking channel. The show-cause notice alleged that a third party in India drew the cheque and handed it to the appellant on instructions from abroad; that sequence cannot be equated with a transmission through authorised channels from the person abroad. On that basis the court held the violation of Section 5(1)(aa) was properly found.
  3. Applicability of the 1947 Act to pre-1973 conduct: The court addressed whether the 1947 Act could be invoked for the September 1973 receipt (before the 1973 Act commenced). It observed that Section 81(3) of the 1973 Act makes Section 6 of the General Clauses Act specifically applicable. Applying Section 6 (as made applicable) allows the old Act's provisions to be invoked in respect of offences committed while that Act was in force. The court relied on its prior decision in C.M.A. No. 288 of 1980 (batch) which had taken the same view, and followed that precedent to hold the 1947 Act could legitimately be invoked for the September 1973 contravention.
  4. Construction of the Explanation to Section 9(1)(b) of the 1973 Act: The Explanation states that where a person in India received any payment by order or on behalf of an authorised dealer without a corresponding inward remittance from any place outside India, that person shall be deemed to have received the payment otherwise than through an authorised dealer. The appellant contended the Explanation limited the scope of Section 9(1)(b) by requiring proof of absence of a corresponding inward remittance and that the Explanation did not apply because the receipts were not received by order or on behalf of an authorised dealer. The court agreed with the latter point: the Explanation applies to payments received by order/on behalf of an authorised dealer and thus requires additional proof of lack of corresponding inward remittance in such cases. In the present facts the amounts were received on instructions from a person outside India and not by order/on behalf of an authorised dealer; therefore the Explanation did not come into play. Consequently, the appellant's contention that the Explanation imposed an additional burden of proof did not arise.
  5. Conclusion of analysis: Because (a) the appellant's admissions established the factual basis for contraventions, (b) the cheque receipts in the factual context did not show transmission through authorised channels, (c) the 1947 Act could be applied to the September 1973 receipt by virtue of Section 6 (General Clauses Act) as made applicable by Section 81(3) of the 1973 Act and the prior decision, and (d) the Explanation to Section 9(1)(b) was not applicable on the facts of the Feb./May 1974 receipts, the three contentions advanced on behalf of the appellant failed.

Holding and Implications

HOLDING: The civil miscellaneous appeal is DISMISSED.

Direct consequences for the parties:

  • The findings of contravention by the Assistant Director (contravention of Section 5(1)(aa) of the 1947 Act in respect of Rs. 2,000 and of Section 9(1)(b) of the 1973 Act in respect of Rs. 3,000) were upheld.
  • The aggregate penalty of Rs. 15,000 imposed by the Assistant Director and affirmed by the Appellate Board stands.
  • There will be no order as to costs.

The opinion does not discuss any broader legal implications beyond the immediate case; it follows an earlier decision (C.M.A. No. 288 of 1980, batch) on the point about invoking the 1947 Act for pre-1973 conduct. The court did not indicate that it was creating any new precedent beyond applying and following existing authority.

Show full summary ...

    A.K.L Labbai Thambi Maraicar v. Government Of India, Enforcement Directorate And Others

    Ramanujam, J.:— The appellant herein is aggrieved against the order dated 5-10-1979, of the Foreign Exchange Regulation Appellate Board which affirmed the order dated 9-3-1976 of the Assistant Director of Enforcement holding the appellant guilty of contravention of S. 5 (1)(aa) and S. 9 (1)(b) of the Foreign Exchange Regulation Acts, 1947 and 1973 respectively and levying a penalty of an aggregate sum of Rs. 15,000 in respect of these violations.

    2. On information that the appellant has received certain payments from a person in India under instructions from a person resident abroad, the appellant was summoned to appear before the Chief Enforcement Officer. He gave a statement that two sums of Rs. 2000 and Rs. 3000 were received by him by sale of paddy and denied that the said amounts received by him represented payments received under instructions from a person residing abroad. As the statement given by him was found not satisfactory on enquiry, again he was summoned to appear on 3-3-1976 and on that date he gave a statement that his co-brother S.A Ibrahim working in Singapore as a clerk in a shop represented to him in September, 1973, that he has arranged to send a sum of Rupees 2000 by means of bank draft sent by a person in India, that he received the bank draft from a person in India and credited the same in his bank account on 19-9-1973. He also stated that he received two similar drafts for Rs. 2000 and Rs. 1000/- in Feb. 1974 and May, 1974, respectively in the same manner under instructions from S.A Ibrahim at Singapore through unknown persons in India and that the said amounts were spent by him for maintaining the family of S.A Ibrahim who were staying with him. In view of the said subsequent statement wherein the appellant has admitted that he has received a sum of Rs. 2000 in September, 1973, and a sum of Rs. 2000 in Feb. 1974, and a further sum of Rs. 1000 in May, 1974, under instructions from his co-brother S.A Ibrahim of Singapore through bank drafts drawn by persons in India, two show cause notices dated 3-3-1976 were issued to the appellants for contravention of Ss. 5 (1)(aa) and 9 (9)(b) of the Foreign Exchange Regulation Acts, 1947 and 1973 respectively for having received the various amounts referred to above from a local person other than an authorised dealer in foreign exchange without general or special exemption from the Reserve Bank of India. The appellant filed his objections on 3-3-1976 requesting the adjudicating authorities to decide the case on 3-3-1976 itself since it would be difficult for him to go over to Madras again in connection with the case from his native place. Accordingly the case was adjudicated on 3-3-1976. The Assistant Director of Enforcement gave a personal hearing to the appellant and during the personal hearing, he had admitted the contravention of the provisions of the Foreign Exchange Regulation Act, 1947 to the extent of Rs. 2000 and the provisions of the Foreign Exchange Regulation Act, 1973 to the extent of Rs. 3000. He further pleaded that the contravention was out of ignorance of law and that the transgression was unintentional. The Assistant Director of Enforcement, after perusal of the records and the statements made by the appellant both before and at the time of the personal hearing, found that the appellant had contravened S. 5(1)(aa) of the 1947 Act for having received a sum of Rs. 2000 and S. 9(1)(b) of the 1973 Act for having received the two payments amounting to Rs. 3000 and that the receipt of the amounts by the appellant cannot be said to be due to ignorance of law especially when he has suppressed the truth in his original statement dated 20-12-1975, and therefore it is not a fit case for extending any lenient treatment. For the said violations an aggregate penalty of Rs. 15000 was levied.

    3. The appellant took the matter in appeal and the Foreign Exchange Regulation Appellate Board found that the finding of the Assistant Director of Enforcement is based on the appellant's own statement dated 3-3-1976, wherein he has clearly admitted the contravention and therefore the finding cannot be assailed in the appeal. As regards the quantum of penalty the Board was of the view that the penalty levied was not excessive and, therefore there was no justification for reducing the penalty. In this appeal which is directed against the Appellate Board's order, the following three contentions have been raised by the learned counsel for the appellant, (1) On the materials on record the charge of contravention of S. 5(1)(aa) of the 1947 Act and S. 9(1)(b) of the 1973 Act cannot be said to have been established and therefore, the finding that the appellant is guilty of contravention of those provisions cannot be legally sustained. (2) Though the sum of Rs. 2000 had been received on 19-9-1973, in respect of such receipt action has to be taken only under the 1973 Act, and the show cause notice in respect of that receipt based on the violation of the provisions of the 1947 Act cannot be legally sustained. (3) As regards the receipts in February and May, 1974, they will not amount to violation of the provisions of S. 9(1)(b) of the 1973 Act as the Explanation to that section cannot be applied as the Department has not proved that there is no inward payment as contemplated in that explanation.

    4. So far as the first contention is concerned it is not in dispute that though the appellant originally denied the receipt of the amount through a person in India on the instructions given by a person residing in Singapore in his subsequent statement he has clearly admitted that he has received the amounts through persons in India on the instructions of his co-brother, S.A Ibrahim residing at Singapore, and his second statement contains a clear admission that he has committed the violation complained of in the show cause notice. He also states in his subsequent statement that he has received the amount out of ignorance of the law and therefore he must be leniently treated. In view of the said statement the authorities below are right in holding that the violation complained of in the show cause notice has been established. The learned counsel for the appellant contends that in these cases the appellant received cheques through banks which are authorised by the Reserve Bank of India to deal in foreign exchange and therefore there is no violation of either Section 5(1)(aa) of the 1947 Act and Section 9(1)(b) of the 1973 Act. According to the learned counsel wherever the receipt of money is in the form of a cheque that will not attract the above provisions. However, the learned counsel has overlooked the fact that the cheque in these cases has been drawn on a local bank by a person in India. It has not been shown that the appellant's co-brother residing in Singapore had sent the amount through banks which is an authorised channel, in which case it could be said that the money came through authorised channel and therefore there is no violation. The show cause notice in this case proceeds on the basis that on the instruction of his co-brother at Singapore, a third party drew a cheque and handed over the cheque to the appellant instead of bringing the cash and giving it to the appellant, he had brought a cheque drawn on some local bank and gave it to the appellant. This cannot be said to be in the nature of the amount being transmitted from the appellant's co-brother from Singapore to the appellant residing in India. In this view of the matter, the finding of the authorities below that the appellant has committed violation of Section 5(1)(aa) cannot be interfered with.

    5. On the second question that in respect of the violation that has taken place before the 1973 Act came into force the 1947 Act cannot be invoked as the said Act has been repealed, we are of the view that Section 6 of the General Clauses Act has been made specifically applicable by Section 81 (3) of the 1973 Act and if S. 6 of the General Clauses Act is applied then even in respect of offences which had taken place when the old Act was in force in view of Section 81 (3) of the new Act.

    6. We have already taken this view in C.M.A number 288 of 1980, batch wherein exactly a similar question arose. Following the said judgment we hold that the provisions of the old Act have rightly been invoked by the authorities below in respect of the violation of foreign exchange regulation committed by the appellant in September 1973, when the old Act was in force.

    7. Now we come to the third contention that in respect of the receipt of the two amounts of Rs. 2000/- and Rs. 1000/- in February and May, 1974, respectively the charge under Section 9(1)(b) cannot be taken to have been duly established. The explanation to Section 9(1)(b) as found in the 1973 Act is as follows:

    “Explanation: For the purpose of this clause, where any person in, or resident in India received any payment by order or on behalf of an authorised dealer without a corresponding inward remittance from any place outside India, then such person shall be deemed to have received such payment otherwise than through an authorised dealer”. According to the learned counsel for the appellant though Section 9(1)(b) containing the above explanation restricts the application of the provision in Section 9(1)(b) only to receipts without a corresponding inward remittance from any place outside India, a close reading of the explanation shows that it is intended to cover cases of payments received by order or on behalf of an authorised dealer in which case further proof that the receipt was without a corresponding inward remittance from any place outside India is necessary. In this case the explanation does not come into play for the amount has not been received by order or on behalf of an authorised dealer. Here the amount has been received on instructions from a person outside India and the same has not been received by the appellant by order or on behalf of any authorised dealer. Once the explanation is not found to be applicable in respect of the violation complained of under Section 9(1)(b) the further contention advanced by the learned counsel for the appellant that in respect of the violations complained of under the new Act the explanation also should be satisfied does not arise. All the three contentions therefore fail and the civil miscellaneous appeal, is dismissed. There will, however, be no order as to costs.

    8. Appeal dismissed.

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    Comments

    A.K.L Labbai Thambi Maraicar v. Government Of India, Enforcement Directorate And Others
    (Feb 11, 1982)