1965 (9) TMI 35 - HC - Companies Law

Summary

Issues Involved:
1. Legality of the Reserve Bank of India's refusal to grant permission for foreign travel under the "guest hospitality" scheme.
2. Interpretation of the Reserve Bank's powers under the Foreign Exchange Regulation Act and the Reserve Bank of India Act.
3. Justiciability of the respondent's claim for a writ of mandamus.
4. Impact of the Reserve Bank's policy on foreign exchange resources.

Detailed Analysis:

1. Legality of the Reserve Bank of India's Refusal to Grant Permission:
The respondent, Mrs. Vasanthi Raman, applied to the Reserve Bank of India (RBI) for permission to travel to the United Kingdom under the "guest hospitality" scheme, where her cousin, Dr. R. Sridhar, would cover her expenses. Despite providing evidence of financial support from Dr. Sridhar, the RBI refused permission, citing a revised policy that only allowed such travel for meeting parents, sons, and daughters to conserve foreign exchange resources. The respondent filed a petition under Article 226 of the Constitution for a writ of mandamus to compel the RBI to grant the permission.

2. Interpretation of the Reserve Bank's Powers:
The court examined the RBI's powers under the Foreign Exchange Regulation Act, VII of 1947, and the Reserve Bank of India Act, 2 of 1934. Section 18B of the Foreign Exchange Regulation Act was particularly relevant, stating that no airline, shipping company, or travel agent shall book a passage for a journey outside India without the RBI's permission. The RBI argued that their refusal was justified under their statutory duty to regulate foreign exchange, which included indirect consequences of travel.

3. Justiciability of the Respondent's Claim for a Writ of Mandamus:
The court noted that a writ of mandamus could only be issued if there was a specific legal right and no specific legal remedy for enforcing that right. The respondent argued that her travel did not involve any release of foreign exchange, and thus the RBI's refusal was beyond its statutory power. However, the court found that the RBI's policy, even if indirectly affecting foreign exchange, was within its regulatory powers. The court cited various precedents, including Shivendra Bahadur v. Nalanda College and Devasahayam v. State, to emphasize that a writ of mandamus requires a legal duty and a corresponding right.

4. Impact of the Reserve Bank's Policy on Foreign Exchange Resources:
The court reviewed the RBI's policy documents, including a press note dated May 21, 1964, and a circular dated April 15, 1965, which highlighted the declining foreign exchange reserves and the need to control travel under the "guest hospitality" scheme. The court agreed with the RBI's assessment that even indirect consequences of such travel could adversely affect foreign exchange resources. The court noted that the RBI's policy was formulated after careful consideration of the economic situation and was not arbitrary or beyond its statutory powers.

Conclusion:
The court concluded that the RBI's refusal to grant permission for the respondent's travel was justified under its regulatory powers to conserve foreign exchange resources. The learned judge's (Srinivasan J.) decision to issue a writ of mandamus was overturned, and the appeal by the Reserve Bank of India was allowed. The rule nisi was discharged, and no order as to costs was made.