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TMI Blog1989 (7) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... n regard to the sales of their computer systems to the DOE, Government of India for which the appellant was to receive 6.25 per cent of the FOB value of the orders secured and executed. SC executed two orders of FOB value in Japanese Yen 4,474,075,040 and Yen 812,370,453. Subsequent thereto, discussions were held between the appellant and SC and it was mutually decided that the amount of fee/commission payable to RR will be held By an independent third party, i.e., Allied Petro Agencies Inc. ('APA') in the London Bank and the same would be remitted to RR only after successful completion of the order. This understanding and the agreement between the two parties and APA of London were incorporated in the letters exchanged between the parties. In pursuance of the said agreement, a total commission amount to US $1,383,672.11 was remitted by SC to the London account of APA on various dates between January 1985 and April 1986. The same was finally remitted back by APA to India in favour of the appellant through normal banking channels after the SC issued a no objection certificate in respect of the said agreements. The appellants had not sought any permission of the Reserve Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have found a mention in the said provisions. The expressions 'purchase', 'otherwise acquire', 'borrow from', 'sell' or 'otherwise transfer' or 'lend to' or 'exchange with' do occur in the text of section 8(1), but there is no expression like payments due to. The provisions of section 8(1) do not appear to be attracted unless it is shown that the words 'due to' are equitable with acquisition, etc., occurring in section 8(1). The allegation that the amount mentioned in para 6 became due to RR on the dates of remittances mentioned therein is factually and legally incorrect. The expression 'payments due to' will imply the debts due in its favour, i.e., a right in law to demand payment and the corresponding duty on the part of a debtor to pay. The learned counsel submitted that what is due to a person is a debt. The question, therefore, would be what is a debt? The learned counsel referred to the judgment of Supreme Court in AIR 1966 SC 137 para 32 and some other judicial pronouncements which lay down that a debt is a present obligation to pay an ascertainable sum of money but a sum payable upon a contingenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial pronouncements. At the time when the foreign exchange was remitted by SC to Allied, RR had no capacity or entitlement or right to use it as one's own . RR did not at that point of time have possession or control over that money. As such, not being the owner of the foreign exchange on the various dates mentioned in para 6 of the SCN, there could be no question of RR's transferring or otherwise transferring any money to Allied. 8.4 The learned counsel submitted that in order to attract the provisions of section 14, a person must be the one who has title to and control over the money in foreign currency so as to be able to offer or cause the same to be offered for sale to RBI. In the present case, there is no doubt that until 7-8-1987, RR had no right to receive the foreign exchange in question. Even assuming that in a given case, right to receive foreign exchange has come into existence, nontheless, section 14 cannot be contravened until the person concerned has received title to or control over the money so as to be able to offer or cause it to be offered for sale to RBI. The above contention is supported by the authority of a judgment reported in (1985) Vol. 58 Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 987 when the full and final settlement letter was issued by SC. The mere fact that an agreement stipulating placing of some money in the hands of the third party outside India cannot ipso facto result in violation of Foreign Exchange Regulation Act for the reason that in order to constitute violation of FERA or to directly or indirectly avoid in any manner the operation of any provisions of FERA or of any rule or direction thereunder, it has to be established that by virtue of the agreement what was intended to be put in the hands of the third party was in fact the money belonging to or owned by a person to whom FERA applies. Collective reading of the agreement as also various documents referred to above and on record establishes that what was intended under the agreement to be put in the hands of Allied Petro was not the money of the RR but of SC and that Allied Petro was to act as an independent third party to hold the money in the interregnum until RR became entitled to or perfected its right to receive the fee. 5. A gist of department's arguments in respect of these charges appears in para 9 of the order and the same is reproduced below: On behalf of the department, it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1984 (especially article 3.3) read with letter dated 20-11-1984 of RR to SC, RR has contravened the provisions of section 47 of Foreign Exchange Regulation Act, 1973, inasmuch as it has the direct effect of otherwise transferring foreign exchange to any person other than an authorised dealer and failure to offer or cause to be offered for sale to an authorised dealer the said amount of US $ 13,83,672.11 within the stipulated period. 6. The following questions arise for determination in this appeal: (a) Whether, the appellant had at any time 'otherwise acquired' or 'transferred' any amount of foreign exchange to another person not being an authorised dealer in foreign exchange in contravention of section 8(1) of the Act? (b) Whether, having lawfully acquired the foreign exchange in question, the appellant failed to offer it for sale to an authorised dealer within the prescribed time vide Notification No. 47 of 1977 - RBI dated 24-11 -1977 in contravention of section 14 of the Act? (This will also include as to when the appellant can be said to have acquired the said foreign exchange)? (c) Whether, the agreement entered into by and between the appellant and SC - a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inally acquired by the appellant, will have to be read as part of the agreement and so read, the charge against the appellant must fail. The relevant clause of the agreement in terms of the letter dated 20-11-1984 stipulates that the remittance shall be made by SC in Account No. 01026339 of Allied Petro Agencies Inc. 9. It has been contended on behalf of the respondents that in terms of the contract, the amount of compensation became payable to the appellant in accordance with the relevant clause of the agreement but instead of receiving the same in India through normal banking channels, the payments were actually made to the foreign account of APA as and when it became due; that such payments having been made in the said foreign account violates the provision of section 8 and subsequent remittance of the said payment in foreign exchange through banking channels to India in August 1987 having been delayed for more than a month from the respective dates when the same were credited in the aforesaid account of APA violates section 14. The contention proceeds on the assumption as if the stipulation as to payment at a given time in terms of the aforesaid clause is tantamount to receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpreting statement should be inadmissible. Extrinsic evidence to determine the effect of an instrument is permissible when there remains a doubt as to its true meaning and evidence of the acts done under it is a guide to the intention of the parties. Interpreting the agreements in question in the light of the aforesaid documents, there should be no room for doubt that SC had remitted the amount in question to APA's London account as a stake on the condition that the same shall be remitted in favour of the appellant in India after the contracts in question are satisfied and SC issues a certificate about the satisfactory completion of these agreements, particularly because it was a specific term of the contract that in case of non-completion of whole or part of the contract, the corresponding amount of commission payable to the appellant will be deducted or refunded to SC. 12. In the light of the foregoing it is beyond doubt that although the amount of commission was payable by SC to the appellant at the stated intervals on the happening of certain contingencies such as signing of contract, issue of Letter of Credit and the payments received by SC for the supplies made, etc., ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position to appropriate the same. It is 'taking' in law for all purposes. The question of transferring the property or foreign exchange in violation of section 8(1) would arise only if the person charged is already in complete control of the same. Reference is invited to Pandharinath Kishtnah Reguntawar v. Dy. Director of Enforcement [1981] 51 Comp. Cas. 163 (Bom.). The transfer also involves actual giving away. A mere right created by words of mouth or otherwise will not amount to a transfer of property as such. In the instant case, the appellant not having complete domain on the amounts which were simply payable to them, cannot be said to have otherwise transferred the same to APA. 15. Section 14 read with the aforesaid Notification requires every person resident in India who 'owns or holds' any foreign exchange in India or abroad to offer the same or cause it to be offered for conversion to an authorised dealer within three months from the date of owning and holding the same, against payment in Indian rupee at the rate of exchange authorised by the Reserve Bank of India at a given time. The expression 'owns or holds' has more or less the same connotation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Adjudicating Officer is self-contradictory. Apart from the various observations made in different paragraphs of the order, it would be sufficient to refer to the observations appearing in para 32 thereof. For facility of reference, the same is reproduced below: While holding that RR have contravened the provisions of sect- ions 8(1), 14 and 47 of FERA 73 it is not possible to ignore altogether the pleas put forth by RR about the interpretation of the agreement and other connected documents. The plea put forth by RR that the investigations by the Enforcement Directorate were taken up only after the foreign exchange in question had been remitted through normal banking channel is quite weighty and needs to be given due consideration. No doubt, it is not lawful for any person or company to enter into any arrangement by which the remittance of foreign exchange is held in abeyance, it is quite likely that the parties to Agreement did not consider it unlawful to arrive at an arrangement by which the foreign exchange is permit-ted to be remitted in the country only on conclusion of the contract. In this regard, the particular provisions in the said Agreement to the effect that in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the absence of a mala fide intention on the part of RR or its directors. However, notwithstanding the above, the charges contained in the SCN for contravention of sections 8(1), 14 and 47 stand proved. 17. In view of the above dominant considerations, it was expected that the appellant should have been cleared of any possible contravention of sections 8(1) and 14, but it was not to be so. The legal aspects of the alleged contraventions have already been discussed in detail. The inference termed as 'possible' by the Adjudicating Officer is in fact the only correct and proper inference and conclusion on the facts and circumstances of this case. We have, therefore, no hesitation in holding that the aforesaid charges under the Show-Cause Notice are not made out. 18. Section 47 puts a legal embargo against a person to enter into any contract or agreement which directly or indirectly evades or avoids any provisions of the Act or of any rule, direction or order made thereunder. According to the Adjudicating Officer, the fact that the agreement in question contains a stipulation for remittance of foreign exchange from SC to APA conclusively establishes the contravention of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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