Union of India vs M. Shah Jehan

This civil miscellaneous appeal u/s 54 of the Foreign Exchange Regulation Act, 1973 (hereinafter referred to as ""the Act""), is against the order

dated November 5, 1984, of the Appellate Board under the said Act, modifying the order dated August 9, 1982, of the first authority, viz., the

Deputy Director, Enforcement Directorate, Madras 6.

There were three contraventions under the Act, one u/s 9(1)(b), another u/s 9(1)(d) and yet another u/s 9(1)(e) of the Act. But even according

to learned counsel for the appellant, in this appeal we are concerned only with the contravention u/s 9(1)(b) by the respondent. Regarding the

same, the first authority levied penalty of Rs. 5,000 u/s 50 of the Act and also confiscated u/s 63 of the Act, the sum of Rs. 50,000 involved in the

contravention, which was actually seized on February 15, 1982. But, the abovesaid modification made by the Appellate Board in the appeal

preferred before it by the respondent is that while it increased the abovesaid penalty from Rs. 5,000 to Rs. 20,000 adopting the procedure

prescribed u/s 52(5) of the Act, it set aside the order of the abovesaid confiscation made by the first authority. Hence this appeal.

The only argument of learned counsel for the appellant is that the Appellate Board should not have set aside the abovesaid confiscation order of

the first authority, but should have confirmed the said order of confiscation, particularly when the Appellate Board has held, while dealing with the

question relating to penalty, it observed that the penalty of Rs. 5,000 imposed by the first authority was very much on the lower side in view of the

surreptitious manner in which a heavy amount was being brought into the country without resorting to the banking channel. In this connection, he

relies on Rengaswamy v. Deputy Director [1987] 2 ECC 242 (Mad) and Union of India (UOI) and Another Vs. Vijay Chand Jain, .

On the other hand, learned counsel for the respondent submits that the discretion exercised by the Appellate Board in setting aside the

confiscation, while increasing the penalty to Rs. 20,000 does not call for interference in this appeal u/s 54 of the Act. He also submits that the

abovesaid decisions will not have any bearing on the present case.

We have considered the rival submissions. According to section 9(1)(b) no person in or resident in India shall ""receive otherwise than through

an authorised dealer, any payment by order or on behalf of any person resident outside India."" According to section 50 of the Act, inter alia, if any

person contravenes section 9(1)(b), ""he shall be liable to such penalty not exceeding five times the amount or value involved in any such

contravention or five thousand rupees, whichever is more... Section 51 of the Act says that for the purpose of adjudging u/s 50, the adjudicating

officer shall hold an inquiry in the prescribed manner and if on such enquiry he is satisfied that the person concerned has committed the

contravention, he may impose such penalty as he thinks fit. According to section 63 of the Act, inter alia, the adjudicating officer, the first authority

herein, adjudging any contravention u/s 51, ""may if he thinks fit"" in addition to any penalty, direct that any currency in respect of which the

contravention has taken place, shall be confiscated.

In the present case, the above referred to seizure of Indian currency of Rs. 50,000 was made on February 15, 1982, from the residential

premises of the respondent. On the same date, the incriminating statement was given by the respondent. According to it, as per instructions from

his father-in-law at Malaysia, he received the abovesaid sum of Rs. 50,000. As against this admission learned counsel for the respondent no doubt

points out that the respondent retracted from the said admission within two days thereafter, that is on February 17, 1982, itself. But it must be

noted, as found by the adjudicating officer, that on April 13, 1982, the respondent has sent a letter, in which he said that the abovesaid retraction

by telegram was not his own telegram, but it is the telegram given by his advocate without his instructions and knowledge. Further, on April 19,

1982 also, pursuant to the summons issued on March 22, 1982, the respondent retracted the statement and confirmed his original statement dated

February 15, 1982. No doubt, learned counsel for the respondent sought to argue that subsequently in the reply dated May 7, 1982, to the show-

cause notice issued on April 23, 1982, the respondent repudiated his original incriminating statement given on February 15, 1982. The said counsel

sought to contend that the statement made on April 13, 1982, and April 19, 1982, were given only due to threat and force exercised by the

department. But on perusing the said reply on May 7, 1982, we find that there is no such allegation in the said reply.

Taking all these into account, learned counsel for the appellant submits that the Appellate Board should not have set aside the confiscation. As

already stated, in this connection he relies on Rengaswamy v. Deputy Director [1987] 2 ECC 242 (Mad). The relevant passage in the said

judgment is as follows :

Once, it is established that by way of compensatory payment, the sum of Rs. 30,000 had been received by the appellant, it having been done in

contravention of the provisions of the Act and which had prevented the Government from getting the foreign exchange under the said transaction,

the entire amount being confiscated cannot be characterised as unjust. If the said amount, admittedly received unauthorisedly, is allowed to be

retained in full or a portion of its is allowed to be used by the appellant, it would result in only a nominal penalty being paid and the balance utilised

inspite of the illegality committed by the appellant. It is to avoid such contravention, being indulged, in provision having been made for confiscation,

and in a matter of this nature, by taking into account factors which are now pleaded, if the appellant is allowed to retain any portion, it would result

in the court permitting him to retain the illegally received amount. This would be against the intention of the Act. For this reason, this court considers

that the authorities, bearing in mind the circumstances under which the amount had been received by the appellant, and as it had resulted in the

contravention of section 5(1)(aa) of the Act, had not chosen to permit the appellant to retain any portion of the said amount.

Thus, in the abovesaid judgment, this court refused to interfere u/s 54 of the Act where only error of law can be urged, with the concurrent

order of the authorities below confiscating the amount of Rs. 30,000 in the contravention. Thus, the said case is a reverse case, compared with the

present one. Further, in the abovesaid case, while confiscation order was concurrent, the penalty of Rs. 5,000 levied by the first authority was

reduced by the Appellate Board to Rs. 3,000. In the present case, the penalty has been actually substantially increased by the Appellate Board

from Rs. 5,000 to Rs. 20,000. In the light of the abovesaid features, taking an overall view, we do not think that the present case warrants any

interference by this court with the discretion exercised by the Appellate Board in this regard.

No doubt, while dealing with the levy of penalty in paragraph 3 of the order of the Appellate Board, the Board has held that the respondent has

surreptitiously brought into the country a heavy amount without resorting to the banking channel. On that ground it increased the penalty to Rs.

20,000. While dealing with the confiscation in question in paragraph 4 of its order, it however, set aside the confiscation of Rs. 50,000. This setting

aside could be considered as only because of the substantial increase of the penalty originally levied. No doubt, the Appellate Board also refers to

certain earlier orders of the Board to support its setting aside order. But it does not state what actually is the content of the said orders, though it

says that applying the ratio of those orders, there appears no justification for confiscation, in a case such as the present one, where the respondent

herein is able to identify the source from which he received the amount. None of the two rival counsel appearing before me also is able to produce

a copy of the said earlier orders of the Board, relied on in the impugned appellate order. Anyway, as we have already stated, the setting aside of

the confiscation was presumably because of the substantial increase in the penalty, ordered by the Appellate Board.

No doubt, in the abovesaid extracted observation in Rengaswamy v. Deputy Director [1987] 2 ECC 242, it is stated that if the amount

involved in the contravention is allowed to be retained, it would result in only a ""nominal"" penalty being paid and the balance utilised in respect of

the illegality committed an that it is to avoid such contravention being indulged in provision has been made for confiscation. But in the present case,

it cannot be said that the penalty imposed by the Appellate Board is a nominal one. But as already mentioned, it is a substantial increase from what

is levied by the first authority. In the present circumstances, we do not think that the present case involves, any interference by us u/s 54 of the Act.

Union of India (UOI) and Another Vs. Vijay Chand Jain, also will not support the contention of learned counsel for the appellant. In that

decision of the Supreme Court while 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 Supreme Court mainly held that the High Court''s finding that the abovesaid

director had no competence to order the confiscation, was not correct and that was why the Supreme Court held that the High Court was wrong

in quashing the order of confiscation. In other words, the question in the said Supreme Court case mainly turned on the competency or jurisdiction

of the Director of Enforcement to order confiscation on the facts of the said case. In the present case, the question of competency or jurisdiction of

the Appellate Board in setting aside the confiscation, does not arise. But the only argument is that the Appellate Board was not justified on the facts

in setting aside the confiscation. Viewed in this light, the said Supreme Court decision has no application to the present case.

Accordingly, we see no reason to interfere with the order of the Appellate Board within the four corners of section 54 of the Act. The civil

miscellaneous appeal is, therefore, dismissed. However, in the circumstances of the case, there will be no order as to costs.