1967 (2) TMI 106 - HC - FEMA

Summary

Issues Involved:
1. Jurisdiction and Pleas of Guilty
2. Interpretation of Section 12(2) of the Foreign Exchange Regulation Act
3. Conduct of Petitioners and Discretionary Nature of Certiorari
4. Constitutionality of Section 23(1) under Article 14 of the Constitution
5. Intrusion of Irrelevant Matter and Bias in Orders
6. Existence of Alternative Remedies
7. Penalization of Firms as Legal Persons

Issue-wise Detailed Analysis:

1. Jurisdiction and Pleas of Guilty
The petitioners invited adjudication by the Director of Enforcement and pleaded guilty to charges under Sections 4(1) and 12(2) of the Foreign Exchange Regulation Act. The learned Advocate-General argued that these facts should influence the court's perspective on the Director's orders. Conversely, the petitioners contended that the Director failed to exercise his jurisdiction properly by not ascertaining whether the ingredients of Section 12(2) were evident from the facts, irrespective of the pleas.

2. Interpretation of Section 12(2) of the Foreign Exchange Regulation Act
The interpretation of Section 12(2) was central to the case. The petitioners argued that the Director misconceived the ingredients of the offenses, as over-invoicing cannot be punished under Section 12(2). The court examined the procedure and terms of Section 12(2), finding that the legal obligations attach to either the seller or consignor. The court concluded that the Director was justified in holding the parties to their declarations and requiring them to repatriate the full amount payable by the foreign buyer, which is the same as the full export value.

3. Conduct of Petitioners and Discretionary Nature of Certiorari
The learned Advocate-General contended that the petitioners approached the court with unclean hands, tainting their conduct with fraud. The court acknowledged that the writ of certiorari is discretionary and can be denied if the applicant's conduct is tainted by fraud. The court emphasized that the petitioners' fraudulent contrivances should not be used as a defense to avoid penalties.

4. Constitutionality of Section 23(1) under Article 14 of the Constitution
The petitioners argued that Section 23(1) is violative of Article 14 of the Constitution, as it confers arbitrary power on the Director of Enforcement. The court held that the section does not offend Article 14, as the statute provides guidance for the exercise of discretion by the Director. The court also noted that the penalties imposed were not discriminatory and were based on the gravity of the offenses.

5. Intrusion of Irrelevant Matter and Bias in Orders
The petitioners argued that the Director's orders were vitiated by the intrusion of irrelevant matter and bias. The court found that the Director's narrative was based on facts disclosed by the parties and that the use of strong expressions was a reaction to the disclosures. The court concluded that the orders were not liable to be struck down on this ground.

6. Existence of Alternative Remedies
The court considered the existence of alternative remedies under the statute, noting that appeals are provided for under Section 23-E and Section 23-EE. The court held that the existence of alternative remedies, even if onerous, does not preclude the exercise of writ jurisdiction but is a relevant consideration.

7. Penalization of Firms as Legal Persons
The court addressed the argument that a firm cannot be penalized as a person under the Act. The court concluded that the definition of "person" in Section 3(42) of the General Clauses Act includes a firm, making it liable as such. The court also noted that the liability of partners should be scrutinized within the scope of Section 23-C of the Act.

Conclusion:
The court found that the Director of Enforcement acted within his jurisdiction and that the penalties imposed were justified. The court emphasized the discretionary nature of certiorari and the importance of the petitioners' conduct in seeking relief. The interpretation of Section 12(2) was clarified, and the constitutionality of Section 23(1) under Article 14 was upheld. The court also addressed the intrusion of irrelevant matter and the existence of alternative remedies, concluding that the orders were not liable to be struck down on these grounds. Individual proceedings were to be posted for disposal in light of these findings.