SUSHIL KUMAR MODI Vs. STATE OF BIHAR

JUDGEMENT

(1.) BY judgment and order dated March 11, 1996 this Court directed the Central Bureau of Investigation (CBI) to enquire into the cases of excess drawals and expenditure in the Department of Animal Husbandry in the State of Bihar and lodge cases where drawals are found to be fraudulent, and take the investigation in such cases to its logical end. The Income Tax Department was also directed to initiate such action as may be considered fit, necessary and expedient under the Income Tax Act, Wealth Tax Act, etc. against persons involved in the Animal Husbandry 'Scam '. The earlier part of the order was modified by the Supreme Court to the extent that the CBI was directed to investigate cases already instituted by the State Police. Both the CBI and Income Tax Department have been making investigation and inquiry and submitting status reports from time to time. Later in view of certain facts coming on the record suggesting prima facie violation of the provisions of the Foreign Exchange Regulation Act, 1973(FERA) the Enforcement Directorate was also directed to make investigation into the concerned cases.

(2.) ON November 6, 1998, on behalf of the Enforcement Directorate Mr. D.Roy Chaudhary took the stand that on account of judgment of the Foreign Exchange Regulation Appellate Board (FERA Board) in a batch of cases decided on June 30, 1997 the Directorate has some difficulties in making the inquiry in cases of 'remittances ' made by Non -Resident Indians (NRIs) during the period when the Immunity Scheme under the provisions of the Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 (in short the 'Immunities Act ') was in vogue. According to the counsel for the Enforcement Directorate the interpretation made by the FERA Board of certain provisions of the Immunities Act is not correct. It is only a Court, meaning thereby the Supreme Court or a High Court, which can interpret the Statute having the force of binding precedent. However, so far as the Directorate is concerned, it is bound by the decision of the FERA Board. Counsel urged that this Court may interpret the relevant provisions of the Immunities Act and give suitable directions so that the Enforcement Directorate may make inquiry into the cases of violations of the Foreign Exchange Regulation Act. On the request of the counsel, the matter was fixed for hearing on December 4, 1998, on which date it was heard at length. Mr. B.B.Ahuja, learned Sr. Counsel appearing for the Income Tax Department also gave valuable assistance to the Court.

(3.) BEFORE proceeding further, it would be apt to point out that Section 8 of the Foreign Exchange Regulation Act puts certain restrictions on dealing in Foreign Exchange. It lays down, inter alia, that except with the previous general or special permission of the Reserve Bank, no person other than an authorised dealer, shall in India purchase or otherwise acquire or borrow from, or sell or otherwise transfer or lend to or exchange with, any person not being an authorised dealer, any Foreign Exchange, nor he shall enter into any transaction which provides for the conversion of Indian currency at rates of exchange other than the rates for the time being authorised by the Reserve Bank. Where any foreign exchange is required by any person, other than an authorised dealer or a money changer, for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or fail to comply with any condition subject to which permission is granted. Section 9 of the said Act puts similar restriction on payment. This lays down that save as provided in the general or special exemption, no person in, or resident in, India shall (a) make any payment or for the credit of any person resident outside India, (b) receive, otherwise than through an authorised dealer, and payment by order or on behalf of any person resident outside India. It is not necessary to refer to the various provisions with their clauses and sub -clauses, for the purposes of this case. Having indicated the nature of the charging provisions of the said Act I would refer to the relevant provisions of the Immunities Act. That being the focal point for consideration, it would be appropriate to quote the relevant provisions of that Act. But before I do so, I must mention that the Act, as its long title and preamble would show, was enacted to provide for certain immunities to persons receiving remittances in foreign exchange and to persons owning the foreign exchange bonds and for certain exemptions from direct taxes in relation to such remittances and bonds and for matter connected therewith or incidental thereto. The Act which came into force on September 18, 1991 was intended to remain operative upto November 30, 1991 but, it appears, the period was extended to January 31, 1992.