1965 (8) TMI 54 - SC - Companies Law

Whether the appellant contravened the provisions of sub-sections (1) and (3) of section 4 of the Foreign Exchange Regulation Act, 1947 (VII of 1947)? Held that - As we find the appellant guilty of an offence only under sub-section (3) of section 4 of the Act, we think the ends of justice will be met if a fine of ₹ 1,000 only is imposed on him. We, therefore, reduce the fine of ₹ 2,500 imposed on the appellant to ₹ 1,000. In the result the order of the Foreign Exchange Regulation Appellate Board is modified accordingly.

Summary

Issues:
Violation of sub-sections (1) and (3) of section 4 of the Foreign Exchange Regulation Act, 1947.

Analysis:
The appellant visited Far Eastern Countries between 1951 to 1956 after obtaining foreign exchange from the Government of India and deposited unspent amounts in current accounts of Chartered Bank branches without permission. The Enforcement Directorate found him guilty of contravening section 4 of the Act and imposed a penalty. The Appellate Board upheld the decision, leading to the current appeal.

The appellant argued that the amounts deposited were negligible, without creditor-debtor relationship with the bank, and free from conditions. The court examined section 4(1) of the Act pre-amendment, emphasizing the definition of "lend" as delivering something for use with the expectation of return. The court clarified the debtor-creditor relationship between a bank and customer, stating that deposits usually create a debt but not necessarily a loan. It concluded that depositing money in a bank for future use does not constitute a loan under section 4(1) of the Act.

Regarding section 4(3) of the Act, the appellant failed to sell unutilized foreign exchange to an authorized dealer promptly as required. The court noted that the foreign exchange was acquired for a specific purpose but remained unutilized, necessitating its immediate sale as per the law. Consequently, the court found the appellant in violation of section 4(3) of the Act.

The court held the appellant guilty only under section 4(3) and reduced the imposed fine from Rs. 2,500 to Rs. 1,000 for the offense. The judgment modified the decision of the Foreign Exchange Regulation Appellate Board, with each party bearing their own costs.