1982 (12) TMI 148 - HC - Companies Law

Summary

Issues Involved:
1. Pre-zero exemption applicability.
2. Validity of the Government of India's notification dated June 15, 1977.
3. Competence of the executive to nullify a court judgment.
4. Applicability of the Foreign Exchange Regulation Act (FERA) to a foreign firm.

Detailed Analysis:

1. Pre-zero Exemption Applicability:
The petitioner contended that the funds held in the Chartered Bank, Singapore, were entitled to pre-zero exemption as they represented pre-1947 assets of the firm. The petitioner argued that the notification dated June 15, 1977, which sought to remove this exemption, could not operate retrospectively to affect an account already vested with such immunity. The court, however, noted that the exemption granted under the earlier notification could be withdrawn by a subsequent notification as per Section 21 of the General Clauses Act, 1897. The court concluded that the notification dated June 15, 1977, did not operate retrospectively but prospectively, covering both pre-zero and post-zero accounts.

2. Validity of the Government of India's Notification Dated June 15, 1977:
The petitioner argued that the Government of India could not issue the notification dated June 15, 1977, in the face of the decision in Writ Petition No. 3823 of 1970, which had not been modified or set aside in the writ appeal. The court observed that the appellate court in Writ Appeal No. 75 of 1974 had already taken note of the subsequent notifications and allowed the appeal, thereby setting aside the earlier decision. The court held that the notification dated June 15, 1977, was valid and did not nullify the earlier court judgment but was issued to give effect to the changed policy of the Government.

3. Competence of the Executive to Nullify a Court Judgment:
The petitioner contended that the executive was not competent to remove or nullify the basis of the judgment of a court by treating itself as a Legislature. The court rejected this contention, stating that the earlier judgment dealt with the scope of an earlier notification granting exemption to pre-zero accounts and did not address the power of the statutory authority to modify or alter the same by issuing a subsequent notification. The court emphasized that the power to issue a notification includes the power to add, amend, vary, or rescind the notifications from time to time.

4. Applicability of the Foreign Exchange Regulation Act (FERA) to a Foreign Firm:
The petitioner argued that being a foreign firm, the FERA would not apply to it, and the expression "person resident in India" defined in Section 2(p) of the Act would not include a firm registered outside India or having no office in India. The court, however, noted that the firm was controlled and managed by partners who were residents of India, and therefore, the firm itself should be taken to be a resident of India. The court referred to the fact that the firm had been applying for directions from the Reserve Bank of India (RBI) in relation to the foreign exchange it held, thus treating itself as governed by the provisions of the Act. The court concluded that the petitioner firm was a resident in India and that the Act was applicable to it.

Conclusion:
The court dismissed the writ petitions, holding that all the contentions advanced by the petitioner were not legally tenable. The notification dated June 15, 1977, was valid and operated prospectively, and the petitioner firm, being controlled and managed by residents of India, was subject to the provisions of the FERA.