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TMI Blog1977 (10) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... (of more than ₹ 10 lacs) is involved. 3. On Jan. 7, 1972, the National and Grindlays Bank Ltd., University Road, Bombay, applied to the R. B. I. for permission to sell 25,000 equity shares held by Ralli International Ltd., London (hereinafter called Ralli ) in Oriental Carpet Manufacturers (India) P. Ltd., Amritsar (hereinafter referred to as OCM ), Ralli, an United Kingdom Company held 100% shares in OCM, an Indian Company. 4. The R. B. I. on the 17th March, 1972, communicated to the Bank its permission to enable Ralli to sell the shares in OCM. Apart from private placement of shares in favour of one J.L. Mehra (and his relatives) and Unit Trust of India (UTI) and Life Insurance Corporation of India (LIC), the R. B. I. directed that 12,250 shares plus such numbers as are not taken up by UTI and LIC were to be offered to public through a member of a recognised Stock Exchange. One of the conditions of the permission which the R. B. I. granted was No shares shall be allotted to any larger industrial house and persons connected therewith. 5. The total sale proceeds of ₹ 61.25 lakhs were directed to be deposited in e Bank account and will be allowed to be rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in FERA or any other law or statute in force. He also alleged that he made payments in Indian Currency to the Bank and not to the credit of Ralli, a person resident outside India. His contention was that he had not violated the provisions of Section 5 (1) (a) of FERA of 1947. 13. On the 14th Nov., 1975, the Deputy Director of Enforcement issued the impugned order/notice after considering the cause shown to inform Bhotika that adjudication proceeding would be held. He was given an opportunity to present himself either personally or through his lawyer or other authorised representative, 14. On the 21st Nov., 1975, Saroj Kumar Bhotika filed a writ application in this Court as aforesaid. A Rule Nisi was issued and an interim injunction was granted. 15. The Rule was heard by T.K. Basu, J. By his judgment delivered on Jan, 18, 1977, T.K. Basu, J. has made the rule absolute. His Lordship has issued a Writ in the nature of mandamus for inter alia recall, cancellation and withdrawal of the notice dated the 13th Feb., 1975, and the order/notice dated the 14th Nov., 1975. This appeal, as we have seen, is directed against the order of T.K. Basu, J. 16. Learned counsel appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate writs. The Supreme Court has held that prayers for writs in the nature of certiorari and mandamus were misconceived. There was no order either judicial or quasi-judicial which could attract certiorari. No mandamus could go because there was nothing which were required to be done or forborne under the Act. The issue of the notice required the parties to represent their case. There was no scope for mandamus to do any duty or act under the statute. A writ of prohibition could not be issued for the obvious reason that the Central Government had jurisdiction to revise. 21. Mr. Chakraborty had cited several other decisions of a similar nature with a view to contend that where there has been no excess of jurisdiction or no usurpation of jurisdiction or the adjudication proceedings contemplated by the relevant statute has not been completed a person is not entitled to invoke the writ jurisdiction of the High Court. 22. There is no dispute about the propositions urged by Mr. Chakraborty. But in view of the contentions raised before us on behalf of the respondent No. 1, we are unable to hold that this Court in the exercise of its writ jurisdiction cannot interfere in this matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is capable of giving such redress as is provided under Sub-clauses (b) or (c). The other remedy provided under other law shall not be illusory. That should be real. We may give an example to bring home this aspect. Supposing there is an appeal provided against the decision of a particular authority under a statute, the breach of which is complained of. But if it is manifest from the record that the primary authority has acted under the instructions or directions of the higher authority, which is also the appellate authority, then there is no point in saying that a Writ petition would not be available because there is the other remedy of appeal provided under a Statute or law. In such an event the appeal before the Appellate authority would be meaningless and illusory, because the appellate authority has already expressed an opinion on the point. To refuse to entertain a writ petition on this ground would be opposed to the very spirit of the present Article 226 in general and Sub-clauses (b) and (c) of Clause (1) and Clause (3) in particular, The words 'any other remedy for such redress' are significant and meaningful and they clearly bring out the intention of the Parli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere published as follows:-- A system of exchange control was set up in India on the outbreak of war in September 1939, for the purpose of conserving and directing to the best uses the limited supplies of foreign exchange available. The control was made effective through a series of rules under the Defence of India Act, 1939. These rules expired on the 30th Sept., 1946 but have been retained in force for another six months under the Emergency Provisions (Continuance) Ordinance, 1946. The shortage of foreign exchange is likely to continue in view of the disruption of the internal economy of so many nations, and the interruption of established channels of trade. It is, therefore, necessary that the system of exchange control should be continued in the general interest of the country. Also, the adherence of India to the International Monetary Fund requires her to take certain measures to regulate transactions in foreign exchange in order to fulfil the obligations of membership. Legislation is, therefore, necessary to give the Central Government powers to continue to control transactions in foreign exchange, securities and gold. The Bill embodies the financial provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been unavoidable and it has been placed on a permanent footing. The experience gained in the working of the Foreign Exchange Regulation Act has brought to light certain lacunae which hamper proper administration of the Act and the investigations and the legal proceedings thereunder. This opportunity is, therefore, being taken to carry out certain other amendments in the Act with a view to remove the defects. The most important of these amendments is the one providing for departmental inquiry and adjudication of foreign exchange offences by an authority constituted by Government on the lines of the Sea Customs Act. 32. Here, again, we find that in 1957 the FERA of 1947 was being put on a permanent basis and the reason for doing so has been sufficiently explained. For our purposes in this appeal it is significant to note that India continued to be short of foreign exchange: it was necessary to ensure that foreign exchange resources were conserved in the national interest until it was possible to dispense with exchange control altogether. The Act was also making provisions for departmental inquiry and adjudication of foreign exchange offences by appropriate authorities. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge. In other words conservation of foreign exchange resources and proper utilisation thereof has always been, and still is, the object of the Act. 36. The object of the enactment has been discussed in several judicial decisions. We shall refer to only three of them. In (Bhagwandas v. Union of India) it is stated that the enactment seeks to preserve rupee resources against foreign exchange in dollars. In (State of Maharashtra v. M.H. George) it is stated that the Act is designed to safeguarding and conserving foreign exchange which is essential to the economic life of a developing country. In (S.P. Ghose v. Deputy Controller, Reserve Bank of India) D.N. Sinha, J. in para 3 at pages 423 to 424 has set out an excellent summary of the purposes of the Act. D.N. Sinha, J. says; The Foreign Exchange Regulation Act, 1947.........is an act to regulate certain payments, dealings in foreign exchange and securities and import and export of currency and bullion. It is permissible to look into the Objects and Reasons for passing the Act, in order to discover the background and the evils which it was intended to remedy. It is stated in the Objects and Reasons that a system of exchange cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a serious offence has been committed or that there would be likely to be a prosecution but the Act is wide enough to cover such a case'. 37. We have purposely set out the views of Sinha J. just to emphasise that the object of the Act was to husband and utilise the external resources of the country for economic development. This Act, it appears, is not concerned with concentration of economic power within the country itself. For the prevention of evils arising out of such concentration other enactments were necessary and were, in fact, made. We shall refer to them in due course. 38. Let us now examine how the parties before us had understood why the FERA was enacted. There is an affidavit by Thedavoor Krishna Rao Padmanavan affirmed on the 2nd Aug., 1976. Padmanavan at the time of affirming this affidavit was the Joint Controller, Exchange Control Department of the Reserve Bank of India. In para 13 of this affidavit at page 55 of the Paper Book Padmanavan has said: I say that under Section 5 (1) (a) of the said Act the Reserve Bank has power and necessary authority to see whether the purchase and sale transactions were in order from the exchange angle, whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a rational connection with the object proposed to be achieved by the Statute. There must be a direct and proximate connection between the condition or restriction imposed and the object sought to be achieved by the Act which confers the power to impose that condition or restriction. Indirect or farfetched or unreal connection must be struck down. Moreover, the condition imposed must not be vague or uncertain but definite and certain; vide Sodhi Shamsher Singh v. State of Pepsu, Hamdard Dawakhana v. Union of India, and O.K. Ghosh v. E. X. Joseph, . 42. We may in this connection refer to a decision on the English Exchange Control Act. It is a decision of the Chancery Division in re. H. P. C. Production Ltd., reported in (1962) 2 W. L. R. 51. Plouman, J. has taken the view that the question of construction of the Exchange Control Act has to be approached in the light of principles applicable to a Penal Statute. The Court has to look at all the surrounding circumstances and the mischief intended to be remedied. The Court will give effect to the words that have been used in the section but if on construing the relevant section or the order there appears any reasonable doubts or am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proper one in economic regulation cases. The decisions dealing with economic regulation indicate that Courts have used the concept of 'purpose' and 'similar situations' in a manner which give considerable leeway to the legislature. This approach of judicial restraint and presumption of constitutionality requires that the legislature is given the benefit of doubt about its purpose. How far a Court will go in attributing a purpose which perhaps though not the most probable is at least conceivable and which would allow the classification to stand depends to a certain extent upon its imaginative power and its devotion to the theory of judicial restraint. 45. Mr. Chakraborty invited us to use our imaginative power and our devotion to the theroy of judicial restraint to hold that the RBI had imposed the impugned condition to prevent concentration of economic power, This was the evil sought to be remedied by the condition that 'larger industrial houses' and 'persons connected therewith' would not be permitted to purchase the shares of OCM. Mr. Chakraborty wanted us to extend the benefit of doubt to the RBI and uphold the impugned condition. 46. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prevent concentration of wealth. 48. Article 39 is in Part IV of the Constitution which deals with Directive Principles of State Policies . Article 37 in Part IV provides: the provisions contained in this Part shall not be enforceable by any Court, but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws. 49. The directive principles, therefore, may be resorted to in making laws. If the State or authority falling within the definition of State does something to give effect to the directive principles, the Courts would take into consideration the relevant matters and express their opinions thereon. But when the authority claims that it has done something under powers conferred by a particular Statute, the Court's duty is to determine whether such power exists. If the Court comes to the conclusion that the Act complained of is outside the scope of the Statute the authority responsible for the Act, cannot take shelter under the Directive Principles of State Policy. 50. In the premises aforesaid, we hold that the RBI had no authority under the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger Industrial Houses'. Secondly, in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) dated the 18th Feb. 1970, the Government of India announced the appointment of a commission consisting of Shri A.K. Sarkar formerly Chief Justice of the Supreme Court of India, in the exercise of powers conferred by Section 3 of the Commissions of Inquiry Act, 1962 to inquire into allegations which had been made to the Government against certain concerns which had been included by the Industrial Licensing Policy Enquiry Committee in the Larger Industrial Houses of Birla. 55. Another Notification was issued by the Government of India in the Gazette of India, Extraordinary, Part 1, Section (i), dated the 4th Aug. 1970, to make further enquiries by Shri A.K. Sarkar in respect of various alleged irregularities, lapses and improprieties of Larger Industrial Houses. In schedule 'D' to this notification 20 Larger Industrial Houses have been named and item No 5 is 'Birla'. 56. The concept of Larger Industrial Houses has been a live concept since 1969. Our attention has been drawn to 'Guidelines for Industries', 1975-76 and 1976-77 published by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said concerns of the Bhotikas acted and/or are still acting as dealers in respect of various products of Birla concerns as stated hereinbelow and their total turnover would be more than several lakhs of rupees in a year ...... Devi Dayal has given the names of seven Birla concerns in this paragraph and has said: I state that the main businesses of the petitioners are connected with various Companies and firms of Birlas a larger industrial house and more or less they are dependent upon the income of the said Companies and firms of the said larger industrial house. I state that the petitioner and the said other Bhotikas were all interested and intimately connected with larger industrial house. I state that the petitioner did not disclose the said fact deliberately and suppressed the said fact at the time of purchasing the said shares of OCM ............ . 61. From the facts disclosed in this affidavit there is no doubt in our mind that Saroj Kumar Bhotika the respondent No. 1 was a person connected with a larger industrial house. We are unable to accept the contention of Mr. Siddhartha Shankar Ray on the facts and in the circumstances of this case that the two expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 63. The authorities cited before us are mostly those indicated in the foot-notes of the above article. In the case of a planning permission Courts may be reluctant to sever an invalid condition from the valid conditions. The Courts may take the view that the competent authority might have declined to grant an unconditional planning permission. The Courts may say that an invalid condition would not be severable unless it is of a trivial nature or extraneous to the use to which the land might be properly put. In special cases the Courts may be of opinion that the authority would have granted permission without the invalid condition if it knew that the condition could not be legally imposed. But we are here not concerned with a planning permission. We have to deal with a permission granted by the RBI under Section 5 (1) (a) of the FERA of 1947 subject to several conditions one of which has been found by us to be invalid. Our duty, therefore, is to examine whether the invalid condition is inextricably inter-connected with the valid conditions. We have to see whether we can disregard the invalid condition end leave the rest of the conditions intact. Cases vary according to context ..... X X X X Extracts X X X X X X X X Extracts X X X X
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