K N MEHTA Vs. DIRECTOR OF ENFORCEMENT

JUDGEMENT

(1.) These are two connected appeals filed under section 54 of the Foreign Exchange Regulation Act, 1973 (herein called 'the Act') challenging the legality of order passed on 27th January, 1975, by the Foreign Exchange Regulation Appellate Board (herein called 'the Board') upholding the findings of the Director of Enforcement that Mr. K. N Mehta (appellant in Criminal Appeal No. 120 of 1975) and his wife, Mrs. Saraswati Mehta (appellant in Criminal Appeal No. 121 of 1975) were guilty of contravening the provisions of the Act. The imposition of penalty amounts on different counts is thus sought to be set aside.

(2.) The Director of Enforcement had originally issued II show cause notices to Mr. Mehta and six show cause notices to Smt. Saraswati Mehta for having dealt in foreign exchange in contravention of various provisions of the Act. After adjudication Mrs. Mehta was found guilty of one charge only; Mr. Mehta, however, was found guilty in respect of the charges covered under four show cause notices. The Board while maintaining the order of the Director on three charges, set aside his conviction and penalty for the offence covered under show cause notice No. V. For the remaining charges he was directed to pay penalty of Rs. 5000.00 on each count. Mrs. Mehta's appeal, however, was rejected and the penalty of Rs. 5000.00 imposed upon her was maintained.

(3.) The Director proceeded on the basis that the appellant were foreign nationals who not being domiciled in India were entitled to maintain and operate Bank accounts abroad by virtue of Reserve Bank Notification No. FERA/ 23/47/RB dated 8th July, 1947. It was further held by him that out of those accounts or funds they were permitted to make any payment to or credit of any person resident outside India. The prohibition imposed by section 5(1) (a) of the Act was not applicable as by virtue of another notification of the Reserve Bank of India (No. RBI(FERA)1 119/153-RB dated 30th July, 1953) persons in the category of the appellants were exempted from the provisions of the said sub-section. Hence the seven charges relating to such payments were dropped. His finding, however, was that as persons residents in India, was not permissible for them to borrow or lend foreign exchange from or to a person resident abroad. Further, or sale and mortgage of the property situate abroad, the foreign exchange obtained by them was liable to be repatriated. The Board has agreed with the above findings.