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TMI Blog1965 (9) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... t to exceed a month. Certain letters from Dr. Sridhar were produced by Mrs. Vasanthi Raman (respondent), as evidence of his undertaking to defray her expenses of stay, and also thereby demonstrating that she would not require any release of foreign exchange for her tour. Notwithstanding these facts, she alleged that the Reserve Bank of India, purporting to act in accordance with the revised policy approved by the Government of India, declined the permission. According to the Reserve Bank, clearance for passage abroad will not be granted in respect of what is known as the "guest hospitality" or "private hospitality" scheme, except for meeting parents, sons and daughters. As all attempts by her to persuade the Reserve Bank to adopt a different attitude to her case proved futile, she instituted a petition under article 226 of the Constitution, praying for the issue of a writ of mandamus or other appropriate writ constraining the Reserve Bank to grant clearance of passage The Reserve Bank of India, Madras, opposed the writ proceeding, and contended, briefly stating the pleas that their refusal to grant the permission in Form "P" was perfectly justified, and in accordance with the lat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to passage clearances by the Reserve Bank embodied in Circular No. 3 dated April 15, 1965, and the current press note dated May 21, 1964. In his view, these did not appear to interdict the clearance of passage in cases where no release of foreign exchange, even for any incidental expenses, was sought. The criterion, as enunciated by the learned judge, was as follows : "To my mind, unless the transactions involve a dealing in foreign exchange, no provision of the Act, no rule framed thereunder, no authority conferred on any person or body by the provisions of the Act can interdict such a transaction." The learned judge then referred to V.G. Row v. State of Madras [1953] 2 MLJ 413 and observed that, though there was no question of a fundamental right, there was no law prohibiting travel abroad. He thought that the large powers conferred on the Reserve Bank, with reference to the regulation of foreign exchange, were subject to the basic requirement, the travel abroad should be placed under an interdict, only where it involved a drain on the foreign exchange resources or earnings of the country. Finally, he directed the issue of a writ of mandamus in the terms pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to time, as that Government might consider it necessary in the public interest. Under section 17, clause 3(a), and section 17, clause (12), we have the powers of the bank defined, which include powers of purchase and sale of gold coin and foreign exchange. Under section 40 of the same Act, the bank is clothed with powers in respect of transactions in foreign exchange, and for authorising purchases and sales of foreign exchange. When we turn to the Foreign Exchange Regulation Act, we find various restrictions imposed upon transactions in foreign exchange, on payments in respect of blocked accounts, import and export of currency and bullion, etc., under sections 4(1), 5, 6, 7, 8 and 9. The important section in the present context is section 18B which enacts that "No airline, shipping company or travel agent shall, except with the general or special permission of the Reserve Bank, and subject to such conditions, if any, as may be specified therein, book for any person a passage for a journey, the whole or any part of which is outside India." The broad situation is thus clear beyond any doubt. The Reserve Bank has statutory duties and powers in this vital respect. Indisputably, any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Indian tourist abroad. Such persons extending hospitality might be friends or relatives. When the exchange position worsened considerably, the authorities came to the conclusion, after a study, that the indirect consequences of the free grant of permission in such cases were very adverse to the foreign exchange position. Hence, a decision was finally taken not to grant "P" Form approval, for proceeding abroad, except for meeting parents, sons and daughters. There were certain exceptional categories, such as travel for obtaining special medical facilities, etc., which do not concern us. It is in this setting that we have to determine whether the learned judge (Srinivasan J.) was justified in his decision that, in the present case, a writ of mandamus should issue, constraining the authorities of the bank to grant the permission. It appears that arguments of two kinds were advanced before the learned judge, upon the probable modes in which cases of this category might worsen the foreign exchange situation. It was contended that the very booking of passage, even by an Indian airline, involved a trip abroad, which necessarily entailed expenditure for that airline in foreign cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, only after deep consideration, and a careful study of the trends of decline in the foreign exchange situation of this country, and the grounds therefore Clearly, there is a vital distinction between the magnitude of a consequence and its character, that is, whether it is direct or indirect. Obviously, where the consequence directly affects foreign exchange, even to a small extent, the interdict is justified as the learned judge himself points out. But even where the consequence is indirect, the magnitude might be compelling, owing to the large number of cases involved. When such a situation arises, control becomes essential. Nor is it very difficult to see how such indirect consequences might flow from the very grant of permission in all conceivable instances of this kind. Those resident abroad, who undertake to defray the expenses of Indians proceeding abroad, in that manner, might well expect, in return, that similar hospitality will be extended towards their friends and relations visiting India, even for appreciable periods of duration, with the inevitable consequences that they may fail to make remittances in foreign currency. That might at least be one causative factor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts undoubtedly only in ensuring that the proposed travel abroad does not involve any expenditure of foreign exchange, which would otherwise be available to the Government of India", includes indirect consequences also otherwise, the interpretation would defeat the very purpose with which the Reserve Bank has been clothed with powers of regulation, under the Reserve Bank of India Act and the Foreign Exchange Regulation Act. We are of the view that the learned judge has expressed the principle in too restricted a manner, when he states that there can be no interdict "unless the transactions involve a dealing in foreign exchange"; we think that the true criterion is that transactions which, by their character, may affect the foreign exchange situation adversely, whether directly or indirectly, would be included within the scope of the bank's regulative power. This anaylysis shows that the respondent has no enforceable right to obtain such a permission, unless the bank is exceeding its power or is acting arbitrarily; the corollary is that the bank has no duty to grant the permission, enforceable in law, so long as it is acting upon principle; when that principle is adumbrated, aft ..... X X X X Extracts X X X X X X X X Extracts X X X X
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