1978 (10) TMI 154 - HC - FEMA

Summary

Issues Involved:

1. Contravention of Section 4(1) of the Foreign Exchange Regulation Act, 1947.
2. Allegation of mala fide intention in initiating proceedings.
3. Interpretation of acquiring foreign exchange under Section 4(1).
4. Relevance of Foreign Travel Scheme and Reserve Bank of India's permissions.

Issue-wise Detailed Analysis:

1. Contravention of Section 4(1) of the Foreign Exchange Regulation Act, 1947:

The appellant, who was the Vice-Chancellor of Marathwada University, traveled abroad and received U.S. dollars from his brother while in the United States. The Deputy Director and the appeal court found that obtaining foreign exchange from his brother contravened Section 4(1) of the Foreign Exchange Regulation Act, 1947. The appellant's statement confirmed that he received $1,914.03 from his brother for travel and other expenses, which was deemed culpable under the Act.

2. Allegation of mala fide intention in initiating proceedings:

The appellant argued that the proceedings were initiated with extraneous or mala fide intentions, referring to certain letters and governmental communications. However, the court found this argument baseless, stating that the representation of the appellant himself led to the proceedings. The court noted that the Governor of the State, who is also the Chancellor of the University, had a legitimate interest in seeking information about the expenditure, and there was no evidence of mala fide intent influencing the Directorate's decision.

3. Interpretation of acquiring foreign exchange under Section 4(1):

Section 4(1) prohibits acquiring foreign exchange from anyone other than an authorized dealer without the Reserve Bank's permission. The court interpreted "otherwise acquire" to include any form of receipt of foreign exchange, including gifts. The court emphasized that the provision aims to regulate foreign exchange transactions to protect the country's economic interests. The appellant's receipt of foreign exchange from his brother was deemed an acquisition under Section 4(1), as it involved a transfer of funds for personal use.

4. Relevance of Foreign Travel Scheme and Reserve Bank of India's permissions:

The appellant argued that the Foreign Travel Scheme impliedly permitted acquiring foreign exchange from a host for maintenance and travel. However, the court found no basis for this claim in the Foreign Exchange Control Manual or the Scheme. The court noted that the Scheme allowed purchasing foreign exchange up to $500 from authorized dealers but did not permit acquiring foreign exchange from other sources while abroad. The court rejected the appellant's reliance on the Reserve Bank's letter, which stated that hospitality from his brother would not contravene Section 4(1), as the facts indicated a monetary transaction rather than mere hospitality.

Conclusion:

The court concluded that the appellant's actions breached Section 4(1) of the Act, as he acquired foreign exchange from a non-authorized dealer without the necessary permissions. The appeal was dismissed, and the court refused leave to appeal to the Supreme Court.