PRAVANJAN PATRA Vs. REPUBLIC OF INDIA

JUDGEMENT

(1.) THE Petitioner who is a tax consultant has filed this writ petition by way of a Public Interest Litigation praying for issuance of a writ of mandamus directing the opposite parties to hand over the investigation of offences committed for erosion of Forex Reserve of the Nation to an independent agency preferably the Central Bureau of Investigation for threadbare investigation and book the culprits and punish them in accordance with law. He has filed the writ petition basing on the information and documents obtained from different print media as well as the electronic media which he has appended to the writ petition.

(2.) FACTS of the case are that for almost every developing country, reserves of foreign exchange is one of the most prestigious and valuable asset, as same reflects, not only the country's respect, status and dignity, but also one of the essential requisites for imports, cultural exchange, free movement of its citizens to other countries etc. and for this reason, specifically, a law has been enacted to regulate/deal with the foreign exchange. FOREX hedging is insuring price of Dollar or any other Foreign Currency which means the exporter or importer who intends to deal with Forex will be allowed to exchange at a particular price upto a particular amount for a particular period despite increase or decease in Forex Prince in the market. The Contract created between Companies/persons for such exchange at a fixed price and dealers is called derivative contract. In India, Reserve Bank of India is the only authority to regulate Forest. Dealers are appointed by Reserve Bank of India who are only authorized to buy or sale FOREX. Any individual/ Company has. to buy or sale FOREX through dealers only. They cannot do it in open market. Because of frequent dropping in Dollar rate as against rupee, it was given to understand to different corporate houses and exporters that there would be further decrease in Dollar rate as against rupee. Thus they were hurried to enter into derivative contracts with Forex dealers. Learned counsel for the Petitioner has submitted that when Dollar rate rose substantially, all the business houses were forced to deal with lower rate because of derivative agreement, for example when they were supposed to get Rs.50/ - for one Dollar for the price of goods exported, they were paid Rs.40/ - as determined in derivative agreement, the differential price of Rs.10/ - was taken by the dealers. When dealers were asked as to what they were getting, they replied that they were getting @ 10 paise per Dollar only. If that be so, where the rest of the money is going and who are the beneficiaries is required to be investigated. The further submission of the learned Counsel for the Petitioner is that some unscrupulous persons including officials of Bank and Reserve Bank of India and Union of India are hand in glove with some beneficiaries from which they are getting huge incentives at the cost of common citizens. The differential amount of money instead of coming to Forex Reserve of our country is going to Foreign Countries or unknown hands. There are many private and overseas dealers like Morgan and Stanley, Standard Chartered Bank, HSBC Bank, Thomas Cook, Indusind Bank, Citi Bank, ICICI Bank etc. Because of frequent dropping in Dollar rate as against rupee, it was given to understand to different corporate houses and exporters that there would be further decrease in Dollar rate as against rupee. Thus they were hurried to enter into derivative contracts with Forex dealers. Forex dealers entered into derivative contracts with the corporate and export/business firms on long term basis. As per exposure of Indian Economy, i.e. gross total export and import, they were permitted to cover only risk factor and up to 500 Billion Dollars. Interested dealers entered into contract worth 3 trillion Dollars, i.e. six times more than the exposure of India and the RBI merrily consented to this and by this process gambling started. When the business houses were required to enter into contract for 1 lakh Dollar, out of apprehension, they entered into contract for 2 lakh Dollars as a result when Dollar rate rose substantially, all the business houses were forced to deal with lower rate because of derivative agreement. Therefore, according to learned Counsel for the Petitioner, there is scam of about Rs.25 lakh crores.

(3.) PURSUANT to the aforesaid order, the CBI has submitted an inquiry report. In the report it has been averred that from a perusal of the relevant provisions of the FEMA, Derivative Contracts Regulations and the RBI Master Circulars, it transpires that derivative contracts in foreign currency, both rupee -foreign currency and cross currency are permissible under these provisions, subject to the following terms and conditions: