1977 (2) TMI 82 - SC - Companies Law

Whether the Indian currency constituting the sale proceeds of foreign exchange seized from the respondent was currency in respect of which the contravention had taken place? Held that - Appeal allowed. The intention of the legislature is clear from the Explanation to sub-section (IB) of section 23 which provides that for the purposes of the sub-section, property in respect of which contravention has taken place shall include deposits in a bank, where such property is converted into such deposits . If for this sub-section any property in respect of which a contravention has taken place includes deposits into which the property may be converted and can be reached even where the deposits are in a bank, it is not reasonable to think that the sale proceeds in Indian currency of any foreign exchange would be outside the scope of section 23(1B) and, therefore, not liable to be confiscated. In our opinion, the High Court was wrong in quashing the order of confiscation which we consider valid and lawful.

Summary

Issues: Interpretation of the words "in respect of" in section 23(1B) of the Foreign Exchange Regulation Act, 1947.

In this judgment, the Supreme Court of India analyzed the meaning of the words "in respect of" in section 23(1B) of the Foreign Exchange Regulation Act, 1947. The court referred to sections 4(1), 23(1)(a), and 23(1B) of the Act. Section 4(1) prohibits the sale of foreign exchange without permission, while section 23(1)(a) outlines penalties for contraventions. Section 23(1B) allows for the confiscation of currency or property related to contraventions. The case involved a respondent caught with Indian currency, the sale proceeds of foreign currency. The Director of Enforcement imposed a penalty and ordered the confiscation of the Indian currency. The High Court quashed the confiscation order, stating that the contravention was related to foreign currency, not the Indian currency seized.

The main issue was whether the Indian currency seized, being the sale proceeds of foreign exchange, fell within the scope of section 23(1B) as currency "in respect of" which the contravention occurred. The court interpreted the words "in respect of" broadly, akin to being "connected with." Referring to precedents, the court held that the sale proceeds of foreign currency, prohibited under section 4(1), were indeed covered by section 23(1B). The court emphasized the legislative intent, as evidenced by the Explanation to section 23(1B, which includes property converted into deposits. Therefore, the court concluded that the Indian currency seized was liable for confiscation under section 23(1B, rejecting the High Court's decision to quash the confiscation order.

Ultimately, the Supreme Court allowed the appeal, upholding the validity of the confiscation order and ruling in favor of the Director of Enforcement.