# UNION OF INDIA & ORS v. M/S. RAI BAHADUR SHREE RAM DURGA PRASAD (P) LTD. & ORS

- **Citation:** [1969] 2 S.C.R. 727
- **Court:** Supreme Court of India
- **Decided:** 1968-11-19
- **Case number:** Civil Appeal Nos. 45 to 49 of 1968
- **Bench:** S. M. Sikri, R. S. Bachawat, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-ors-v-m-s-rai-bahadur-shree-ram-durga-prasad-p-ltd-ors-4586
- **Pages:** 28

## Headnote

Foreign Exchange R£gulation Act (7 of 1947), ss. 12, 22, 23 and
23A-Forcign Exchange Regulation Rules, 1952 r. 5 and Sea Custon1s
Act (8 of 1878), s. 167(8)-Scope of-Form requiring declaration
of
correct invoice value before export-If restriction under s. 12( 1) of the
F'or.eign Excha11f?e Regulation Act-Sea Custonzs Act, provisions of, when
can he invoked.
By a notificatiun dated August 4. 1947 issued under s. 12(1) of the
Foreign Exchange Regulation. Act, 1947 and the. Foreign Exchange Regulation Rules, 1952, and amended thereunder, the Central Government
prohibited the export to countries mentioned in its Schedule, of goods,
except by post, unless a declaration supported by such evidence as · may
be prescribed is furnished by the exporter to the prescribed authority
that the am,,unt representing the full export value of the goods has been
paid or would be paid within the prescribed period.
In 1957, the respondents shipped goods after furnishing to the prescribed
authority,
namely, the Collector of Customs a declarati'On in the statutory form
prescribed under the Foreign Exchange Regulation Rules, and the Collector of Customs passed the goods for shipment.
In 1965, the Dy. Collec1or of Customs issued a notice to the respondents calling upon them to sho\v
cause why a penalty under s. 167(8) of the Sea Customs Act. 1878,
should not be imposed, on the basis that the respondents under valued
the goods deliberately, that they gave in the prescribed form false particulars supported by false evidence-, that there \Vas a failure to repatriate
large amOunts of foreign exchanv,,e contrary to the
requirements
of
s. 12(2) and r. 5, thats. 12(1) of the Foreign Exchan.ge Regulation Act
and Rules required a declaration of the actual amount representing the
full export value and a mere declaration of any value would not be
~ufficient compliance with the provisions, that under the circumstances by
virtue of s. 23 A of the Foreign Exchange Regulation Act, the exportation
constituted an offence under s. 167(8) of the Sea Customs Act. The
respondents thereupon, filed_
a writ petition contending that the declaration to the Collector of Customs was sufficient compliance with
the
statutory pr'Ovisions and that the Collector havin.g passed the consignments for shipment, had no further
jurisdiction to take
proceedings
against them.
A single Judge of the High Court dismissed the petitio~s,
hut on appeal, the Divisional Bench allowed the petitions. In 'appeal
to this Court.
HELD : Per Bachawat and Hcgdc, JJ .. On the facts set out in the show
cause notice thl.! respondents could not be held to have
contravened
s. 12(ll.
( 1) Th.c r~gulations contained in the Act are enacted. in the econon1ic
anJ financial 1?terest of the coun.try.
Therefore,
the rigour and sanctity
of the regulations should he mruntained but at the same time it should
no_t be forgotten that s. 12(1) is a penal section, and in interpreting it
it is _not c?mpctent to the Court to stretch its language in order to carry out
the intention of the Legislature. [752 E]
728
SUPREME COURT REPORTS
[ 1969] 2 S.C.R.
To/aram Rc/11111al v. State of Bombay
[1955] 1 S.C.R.,
158,
164,
followed;
Re. H.P.C. Production Ltd. [1962] Ch. Dn. 466, 473, and London &
North Eastern Ry. Co. v. Beriman, [1946] A.C. 286, 295, applied.
(2) Neither s. 12(1) nor any other provision of the Act empowers
the rule-making authority to add to the restrictions imposed by the section,
and, for finding out the restrictions imposed by the section one can only
look at that section.
The only restriction placed by s. 12(1) read with
the notification~ dated August 4, 1947 is that no one should export any
goods from this country \Vithout furnishing the declaration mentioned in
s. 12(1). The items of information called for
in the prescribed form
cannot be considered as restrictions imposed by s. 12(1). They arc
meirely information called for the proper exercise· of the po\vers under
the Act. In fact many of them do nJt relate to t~e

## Text

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727
UNION OF INDIA & ORS.
V.
M/S. RAI BAHADUR SHREE RAM DURGA PRASAD (P)
LTD. & ORS.
November 19, 1968
[S. M. SIKRI, R. S. BACHAWAT AND K. S. HEGDE, JJ.]
Foreign Exchange R£gulation Act (7 of 1947), ss. 12, 22, 23 and
23A-Forcign Exchange Regulation Rules, 1952 r. 5 and Sea Custon1s
Act (8 of 1878), s. 167(8)-Scope of-Form requiring declaration
of
correct invoice value before export-If restriction under s. 12( 1) of the
F'or.eign Excha11f?e Regulation Act-Sea Custonzs Act, provisions of, when
can he invoked.
By a notificatiun dated August 4. 1947 issued under s. 12(1) of the
Foreign Exchange Regulation. Act, 1947 and the. Foreign Exchange Regulation Rules, 1952, and amended thereunder, the Central Government
prohibited the export to countries mentioned in its Schedule, of goods,
except by post, unless a declaration supported by such evidence as · may
be prescribed is furnished by the exporter to the prescribed authority
that the am,,unt representing the full export value of the goods has been
paid or would be paid within the prescribed period.
In 1957, the respondents shipped goods after furnishing to the prescribed
authority,
namely, the Collector of Customs a declarati'On in the statutory form
prescribed under the Foreign Exchange Regulation Rules, and the Collector of Customs passed the goods for shipment.
In 1965, the Dy. Collec1or of Customs issued a notice to the respondents calling upon them to sho\v
cause why a penalty under s. 167(8) of the Sea Customs Act. 1878,
should not be imposed, on the basis that the respondents under valued
the goods deliberately, that they gave in the prescribed form false particulars supported by false evidence-, that there \Vas a failure to repatriate
large amOunts of foreign exchanv,,e contrary to the
requirements
of
s. 12(2) and r. 5, thats. 12(1) of the Foreign Exchan.ge Regulation Act
and Rules required a declaration of the actual amount representing the
full export value and a mere declaration of any value would not be
~ufficient compliance with the provisions, that under the circumstances by
virtue of s. 23 A of the Foreign Exchange Regulation Act, the exportation
constituted an offence under s. 167(8) of the Sea Customs Act. The
respondents thereupon, filed_
a writ petition contending that the declaration to the Collector of Customs was sufficient compliance with
the
statutory pr'Ovisions and that the Collector havin.g passed the consignments for shipment, had no further
jurisdiction to take
proceedings
against them.
A single Judge of the High Court dismissed the petitio~s,
hut on appeal, the Divisional Bench allowed the petitions. In 'appeal
to this Court.
HELD : Per Bachawat and Hcgdc, JJ .. On the facts set out in the show
cause notice thl.! respondents could not be held to have
contravened
s. 12(ll.
( 1) Th.c r~gulations contained in the Act are enacted. in the econon1ic
anJ financial 1?terest of the coun.try.
Therefore,
the rigour and sanctity
of the regulations should he mruntained but at the same time it should
no_t be forgotten that s. 12(1) is a penal section, and in interpreting it
it is _not c?mpctent to the Court to stretch its language in order to carry out
the intention of the Legislature. [752 E]
728
SUPREME COURT REPORTS
[ 1969] 2 S.C.R.
To/aram Rc/11111al v. State of Bombay
[1955] 1 S.C.R.,
158,
164,
followed;
Re. H.P.C. Production Ltd. [1962] Ch. Dn. 466, 473, and London &
North Eastern Ry. Co. v. Beriman, [1946] A.C. 286, 295, applied.
(2) Neither s. 12(1) nor any other provision of the Act empowers
the rule-making authority to add to the restrictions imposed by the section,
and, for finding out the restrictions imposed by the section one can only
look at that section.
The only restriction placed by s. 12(1) read with
the notification~ dated August 4, 1947 is that no one should export any
goods from this country \Vithout furnishing the declaration mentioned in
s. 12(1). The items of information called for
in the prescribed form
cannot be considered as restrictions imposed by s. 12(1). They arc
meirely information called for the proper exercise· of the po\vers under
the Act. In fact many of them do nJt relate to t~e restrictions in1poscJ
bf the section. [751 C-FJ
(3) So far as goods sold to the foreign buyer arc concerned it is
possible for the exporter to know the, exact export value, but that \vould
not be the position when the goods are sent on consignment basis, and, in
such a case the: exporter can give onJy an estimated value.
If every declaration which does not state accurately the full export value of the goods
exported is held to be. a contravention of s. 12(1) then all exports on
consignment basis must Qe held to contravene the restriction imposed
by s . .12(1), but, the Legislature could not have intended that
min.or
m~stakes in giving the full export value should be. punished under s. 23A.
T·herefore, the· dei:larations given in the present case do satisfy the requirements of s. 12(1) though they did not correctly 'furnish all the information asked for in the fOrm, an.d hence, there \Vas no contravention
of the section. [751 H-752 DJ
(4) The main purpose of s. 12(1) is to get a declaration from the
exporter that he
has
either
brought
or _ will.
bring
back
the
amount representing the full export value of the goods.
The scheme of
the Act is that so far as customs authorities are concerned all that they
have to see is that no goods are exported without furnishing the declaration prescribed under s. 12(1). Once that stage is passed the rest of
the matter is left in the hands of the Reserve Bank and the Director oE
Enforcement under ss. 12(5) and (6). [752 B, 754 F]
(5) Beforn a case can be held to fall within the scope of ss. 23A.
and 167(8) of the Sea Customs Act, 1878, could be invoked, it must
be shown that there has been a contravention of the restrictions imposed bys. 12(1); but the language of s. 12(1) does not permit the
interpretation that the Legislature intended that the offen~s complain.i:;d
in these· proceedings should be punishable under s. 23A.
The contraventions complain~d of in this case arc really contraventions of s. 12(2)
an.d r. 5 and they arc punishable, the formc.r, under s. 23 and the Jatter,
under ss. 22 and 23. [751 B-C, G]
Per Sikri, J. dissenting. On the facts alleged by the Customs authorities no case for the issue of a writ to the authorities had been made
out.
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(1) The Act. \Vas enacted in the in.terests of national economy. Since
a de1iberate large, scale contravention of its provisions would have serious
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effects, it should be construed so as to make it workable. No subject
"'"
can insist on an interpretation which wHI have the effect of sabotaging
the national economy. [739 H-740 A]
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UNION V. RA! BAHADUR SHREERAM LTD.
72[)
(2) As s. 12(1) itself does not imp·ose any restrictions and contemplates mies being made on : (a) evidence which is to support declaration; (b) authority
to which the declaration is to be furnished;
and
( c) the n1anner of payment; the re1Strictions imposed by rules which are
n::ferrable to the section must be treated as restrictions imposed by the
section. [740 HJ
Welli1111dale v. Norris
(1909]
1 K.B. 57, 64, Wicks v.
Director of
Public Prosecution, [19471 I All E.R. 205, 206, R. v.
Wicks,
[1946]
2 All E.R. 529, 531 and Rathbone v. Bundock, [1962] 2 All E.R. 257,
applied.
Dr. Indranwni Payare/al Gupta v. W, R. Nathu, [1963J 1 S.C.R.
721. 737, distinguished.
U.S. v. George R. Eaton, 36 L.Ed. 591 and Singer v. U.S. 89 L.Ed.
258, 290. referred to.
( 3) Even in a case where the amount has not been rece.ived, then.:.
n1ust be declaration of some actual figure, which, according to the declaration represents the 'full export value' It may be an estimate if the
goods have not been sold before the· export, but a figure must be il"ldicated.
The requirement of supporting evidence and r. 5 (2) (ii) requiring the statement of the invoice value in the declaration indicatt: that
an actual figure has to be mentioned.
Section 12(1) ·and the notification impose a conditional prohibition an on exporter v.·hich he can lift
by a unilateral declaration. When such a power is conferred on an exporter by a statute good faith on his part must be implied an<l is a
condition pre-requisite. Section 22 provides that the declarant shall no:.
give any information which he knows or has reasonable cause, to beliel:e
to be false or not true Clerical mistakes and mistakes made bona
fide
even in respect of material particulars would not come, within the mischief of the section, hut a deliberate falsehood and deliberate eva<;ion of
the provisions of the section would be· a contravention of s. 12( 1) fnr
othenvise the ambit of the section read with s. 23A would be narro\ved
to the point of extinction.
An exporter and persons concerned in the
export, could \vith impunity give a deliberately false declaration but in
apparent compliance with s. 12(1) and deprive this country of foreign
exchange. There
is . no
distinction,
between
an exporter
and the
persons. c?ncerned
111
~he
~port when
no
declaration under
s.
12(1) is give~ at all and rn a case where the exporter gi,·es a deliberately
false declaration, for the purpose of the applicability of s. 167(8) of th
Sea Customs Act. [744 D-745 DJ
e
( 4) Since the same contravention may attract penalties under
the
Sea Customs Act as well as the Foreign Exchange Act it will be incongruous to hold that the restrictions imposed by s. 12(1) are cl'ff
t
!or the two acts. (740 F-G]
1 eren
The Mayor of Portsmouth v. Charles Smith JO AC 364 371
l' I
,
. .
,
, app 1e( .
.
( 5) Section 23A of the Foreign Exch
, A t d
h
, •· ·
1n1posed under s 12(1) t
h
b
. ange
c
eems t e re~.dct1::n1s
Cust
s A
:
o . ave
een imposed under s. 19 of the Sea
pen um
~t. without pre1ud1ce to th~ provisions in s. 23 dealin!! with
a Y1 an
f?roc~dure for contravention of the provisions of 8 ,_12
any ru e or dJrection or order mad th
d
p
. -
·
or
and therefore offenders v,rho vio1at: th~reun ~r. o~ ore1gn Exchange Act
ed with both, under the Foreign E
h
se ~s nct10ns could be proceeedSea Customs Act
It mai' b , thxct ang~
e1J:ulation Act as well as the
.
t
·
.
e
a
act10n can b
take
·
expor er under other sections of th
F
.
E
e
n against an
e
ore1gn
xchange Regulation Act
730
SUPREME COURT REPORTS
[ 1969] 2 S.C.R.
or the Sea Customs Act, but that does not prevent action under s. 23A
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read with s. 12(1) with the aid of customs authorities, both against ex·
•
porters and persons concerned in the prohibited export. [745 E--H]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 45 to
49 of 1968.
Appeals from the judgment and order dated September 20,
1967 of the Madras High Court in Writ Appeals Nos. 247 to 251
B
'>
of 1966.
.',.
C. K. Daphtary, Attorney-General,
Niren
De,
SolicitorGeneral, N. S. Bindra, Mohan Kumaramangalam, R. H. Dhebar,
A. S. Nambiar and S. P. Nayar, for the appellants
(in C.As.
Nos. 45 and 47 to 49 of 1968).
Nircn De, Solicitor-General, Mohan Kumaramangalam, N. S.
Bindra, R. H. Dhebar, A. S. Nambiar and S. P. Nayar, for the
appellants (in C.A. No. 46 of 1968).
c
A. K. Sen, Soli Sorabji, S. R. Vakil, B. D. Barucha,
G. L.
~-
Sanghi, and S. K. Dho/akia, for the respondents (in C.A. No. 45
of 1968).
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N. A. Palkhivala, Soli Sorabji, D. N. Misra, S. R. Vakil and
B. D. Barucha, for the respondent (in C.As. Nos. 46 and 49 of
1968).
G. L. Sanghi, S. R. Vakil and B. D. Barucha, for respondents
(in C. A. No. 4 7 of 1968) and their respondent (in C.A. No. 48
of 1968).
N. A. Palkhiva/a, P. P. Ginewala, D. N. Mukherjee and Ajit
Chaudhury, for interveners Nos. 1 to 4.
A. K. Sen, S. D. Khetri, Avadh Behar; and R. N. Bajoria, for
intervener No. 5.
.
N. A. Palkhivala and D. N. Gupta, for intervener No. 6.
M. C. Chagla and D. N. Gupta, for intervener No. 8.
N. A. Palkhivala, A. K. Basu, S. C. Mitter and I. N. Shroff,
for intervener No. 7.
·
M. C. Setalvad and M. K. Banerjee, for intervener No. 9.
SJKRI, J. delivered a dissenting Opinion.
The Judgment of
BACHAWAT and HEGDE JJ. was delivered by HEGDE, J.
Sikri, J. These five appeals by certificate are directed against
the judgment of the High Court of Madras whereby the High
Court accepted the Writ Appeals against the judgment of Kailasam, J., in Writ Petitions Nos. 1592, 1593, 1594 and 1601 of
1966 and 3948 of 1965, and directed the issue of writs of prohiE
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UNION v. RA! BAHADUR SHREERAM LTD. (Sikrf, J.)
7 31
bition to the Union of India, the Collector of Customs, Madras,
and the Deputy Collector of Customs, Visakhapatnam, appellants before us, prohibiting them from taking any action in pursuance of certain show-cause notices issued by the Deputy Collector Customs, Visakhapatnam. Common questions of law are
involved in these appeals and it would suffice if I give facts in
Writ Petition No. 1592 of 1966 out of which Civil Appeal No. 45
of 1968 arises.
The relevant facts in that writ petition, for appreciating the
points raised before us, are as follows: On February 17, 1965,
the Deputy Collector of Customs, Visakhapatnam, issued memorandum No. S/21/14/65 to Mis. Rai Bahadur Seth Shreeram
Durgaprasad (Private) Ltd., Tumsar, and five others, hereinafter
referred w as the Shippers. In this memorandum, in brief, it was
stated that the Shippers had entered into a formal contract on
October 13, 1965, with Ml s.
Intercontinental
Ores
Supply
Corporation, New York, for the shipment of 20,000 tons of
Indian Manganese Ore of the grade of 43% Mn., from the port
of Visakhapatnam at a price of $0.157 per unit of Manganese per
dry long ton, f.o.b. Visakhapatnam/Bombay. The Shippers exported froin the port of Visakhapatnam 3,300 tons of Indian
Manganese per s.s. 'ALPHEM' under the cover of Shipping Bill
No. 187 dated March 20, 1957, declaring therein that the export
was being made in pursuance of the aforesaid contract. A G.R.l.
form was attached. It was stated that a certain not.e-book which
had been seized earlier in August 1963 disclosed that a sum oi
$25298.24 was received on April 21, 1957, from INOSCO, i.e.,
Intercontinental Ores Supply Corporation, New York, the consignee of the subject goods, the amount having been credited
to an account in the name of Gangadhar Narsinghdas Agrawal
with the Trust Co. of North America, 115, Broadway, New
York. It was further alleged in the memorandum that the Shippers had derived financial benefits in respect of the subject export
over and above those revealed to the Customs Authorities and/ or
other concerned authorities and the information about them was
deliberately suppressed. It was further alleged that this constituted a contravention of s. 12(1) of the Foreign Exchange Regulation Act, 1947, read with Notification No. 12(17)-F.1/47 dated
August 4, 1947, as amended, issued thereunder and the Foreign
Exchange Regulation Rules, 1952.
I may mention that by this notification the Central Government had prohibited "the export otherwise than by post of any
goods either directly or indirectly to any place outside India other
than any of the countries or territories in the Schedule annexed
to this order unless a declaration supported by such evidence as
may be prescribed is furnished by the exporter to the prescribed
732
SUPREME COURT REPORTS
[1969] 2 S.C.R.
authority that the amount representing th~ full export val~e ?f
the goods has been or will within the prescnbed penod be paid m
the prescribed manner."
Accordin" to the Deputy Coilector Customs, the goods have
been thus exported in contravention of the restrictions and prohibitions imposed under s. 19 of the Sea Customs Act, 1878, read
withs. 12(1) and the Notification No. 12(17)-F.1/47 dated August
4 1947 issued thereunder, ands. 23A of the Foreign Exchange
R~gulati~n Act, 194 7, which exportation constituted an offence
liable to be punished under s. 167(8) of the Sea Customs Act,
1878.
Accordingly, the parties concerned were called upon to
explain the matter and show cause in writing to the Collector of
Custom~, Madras, why a penalty should not be imposed on them/
him under s. 167(8) of the Sea Customs Act, 1878.
It appears that a number of such memoranda were issued in
respect of diverse shipments. Thereupon five petitions were filed
in the High Court of Madras. In Writ Petition No. 1592 of 1966
it was alleged that 125 show-cause notices had been issued to the
petitioners on various dates and it was prayed that a writ of prohibition or other appropriate writ, order or direction under Art. 226
of the Constitution of India prohibiting the respondents from taking any action in pursuance of the said show-cause memos, may be
issued.
Various allegations were made but I need only mention the
following allegations.
It was submitted that the petitioners had
complied with the statutory provisions inasmuch as a declaration
in statutory form had been furnished to the prescribed authority,
to wit, the Collector of Customs, and the Collector of Customs.
having passed the consignments for shipment, had no further
right or jurisdiction to take proceedings relating to the consign-
- ments in question. It was contended that if a declaration is found
to be false, it did not mean that there was a breach of the provisions of s. 12(1).
In reply it was contended that what was required nnder s.
12(1) of the Foreign Exchange Regulation Act and the Rules was
not any value bnt the actnal amount representing the full export
value, and a mere declaration of any value would not be sufficient compliance with the provisions of s. 12(1) of the Foreign
Exchange Act.
. The lea~ned Si~gle Judge, Kailasam, J., dismissed the petit10ns.
V ar1ous pomts were urged but on the point addressed to
us he held that the declaration to be given by the exporters meant
not only that the value of the goods will be paid in the prescribed
manner but also that the full export value of the goods given is
the correct value.
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UNION V. RA! BAHADUR SHREERAM LTD. (Sikri, J.)
733
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I may mention that before the Division Bench the case of the
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Revenue was clarified in an affidavit and we may set out para 5
thereof:
"Since the Court has now directed the respondents
to file a supplemental affidavit clarifying the stand taken
by the department I state respectfully that the stand
taken by the department both in the show-cause memo
and here is that the essence of the offence committed by
the appellants is that in the declaration required under
section 12(1) of the Foreign Exchange Regulation Act.
they have deliberately given false particulars supported
by false evidence. By giving this fraudulent declaration,
they have secured the export of their goods. This fraud
vitiates the declaration itself, thereby making the export
one in violation of the prohibition contained in Section
12(1) of the Foreign Exchange Regulation Ac:.'°
It is not necessary to set out the modus operandi adopted by
the petitioners but I may mention that it was contended that a
scheme was entered into prior to the actual export and the goods
were undervalued deliberately and the department was induced
to accept their declarations by means of false evidence and fraudulent suppression of facts. It is suggested that by this method a
sum of Rs. 3,20,00,000 had been suppressed and there has been a
failure to repatriate a corresponding amount of foreign exchange
which had been earned surreptitiously. It was further stated that
this scheme was adopted for all the shipments covered by the
show-cause notices, and also for many other shipments in respect
of which show-cause notices yet remain to be issued .
The Division Bench on appeal came to the conclusion that
as the declarations were made under s. 12(1) and as they were
scrutinised by the authorities it is not possible to contend that
these goods were either exported or attempted to be exported in
violation of the prohibitions or restrictions imposed by law and
are, therefore, liable to be confiscated under s. 167(8) of the
Sea Customs Act.
The Division Bench further held that the
~leged fraud on t~e part of the petitioners did not make any
d1~erence. Accor~1!1g to the Division Bench "if the petitioners had
m!Sled t~e autho:1hes by false representations or failed thereby
to repatriate foreign exchange, by virtue of his obligation under
s. 12(2), these are different offences for which separate and specific penalties can be imposed."
The relevant statutory provisions at the time of exportation
were as follows :
"The Foreign Exchange Regulation Act, 1947 s.
12(1) The Central Government may, by notification in
4 Sup. CI/69-14
734
SUPREME COURT REPORTS
[1969] 2 S.C.R.
the Official Gazette, prohibit the taking or sending out
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by land sea or air (hereinafter in this section referred
to as e;port) of any goods or class of goods specified in
the notification from India directly or indirectly to any
place so specified unless a de~laration suppo!ted ~y
•
such evidence as may be prescnbed or so specified, 1s
furnished by the exporter to the prescribed authority
B
that the amount representing the full export value of the
i.,,
goods has been, or will within the prescribed period be,
-~
paid in the prescribed manner.
·
(2) Where any export of goods has been made to
which a notification under sub-section (1) applies, no
c
person entitled to sell, or procure the sale of the said
goods shall, except with the permission of the Reserve
Bank, do or refrain from doing any act with intent to
secure that .
(a) the sale of the goods is delayed to an extent
...
which is unreasonable having regard to the ordinary
•
course of trade, or
D
(b) payment for the goods is made otherwise than in
the prescribed manner or does not represent the full
amount payable by the foreign buyer in respect of the
goods, subject to such deductions, if any, as may be allowed by the Reserve Bank, or is delayed to such extent
E
as aforesaid :
Provided that no proceedings in respect of any conr-
travention of this sub-section shall be instituted unI
less the prescribed period has expired and payment for
the goods representing the full amount as aforesaid has
not been made in the prescribed manner.
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(3) Where in relation to any such goods the said
period has expired and the goods have not been sold and
payment therefor has not been made as aforesaid, the
Reserve Bank may give to any person entitled to sell the
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goods or to procure the sale thereof, such directions as
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appear to it to be expedient for the purpose of securing
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the sale of the goods and payment therefor as aforesaid,
and without prejudice to the generality of the foregoing
•
provision, may direct that the goods shall be assigned to
the Central Government or to a person specified in the
directions.
( 4) Where any goods are assigned in accordance with
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sub-section ( 3) the Central Government shall pay to
the person assigning them such sum in consideration of
the net sum recovered by or on behalf of the Central
UNION V. RAI BAHADUR SHREERAM .LTD. (Sikri, J.)
735
. ".
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Government in respect of the goods as may be determined by the Central Government.
(5) Where in relation to any such goods the value
•
as stated in the invoice is less than the amount which in
the opinion of the Reserve Bank represents the full exB
port value of those goods, the Reserve Bank may issue
~
an order requiring the person holding the shipping docu-
..) .
ments to retain possession thereof until such time as
the exporter of the
goods has made arrangements
for the Reserve Bank or a person authorised by the
Reserve Bank to receive on behalf of the exporter payment in the prescribed manner of an amount which rec
presents in the opinion of the Reserve Bank the full
export value of the goods.
(6) For the purpose of ensuring compliance with
the provisions of this section and any order or directions
.,
made thereunder, the Reserve Bank may require any
~
person making any export of goods to which a notifi·
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cation under sub-section (1) applies to exhibit contracts
with his foreign buyer or other evidence to show that the
full amount payable by the said buyer in respect of the
goods has been, or will within the prescribed period
be, paid in the prescribed manner.
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S. 22. No person shall, when complying with any
order or direction under section 19 or with any require-
-;
ment under section 19B or when making any application
'
or declaration to any authority or person for any purpose under this Act, give any information or make any
statement which he knows or has reasonable cause to
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believe to be false, or not true, in any material parti-
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culars.
S. 2.3. ( 1) If ~y person c?ntravenes the provisions
of sec1;1on 4, section 5, section 9 or sub-section (2)
. ~
of section 12 or of any rule, direction or order made
thereunder, he shall-
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. (a) be liable to such penalty not exceeding three
t1m.es the value of the foreign exchange in respect of
which the contravention has taken place, or five thousand rupi;es, whichever is more, as may be adjudged
by the Di:ector of Enforcement in the manner hereinafter proVIded, or
H
. C?) upon conviction by a Court, be punishable with
llllpr~sonment for a .term which may extend to two years,
or with fine, or with both.
736
SUPREME COURT REPORTS
[1969) 2 S.C.R.
(lA) Wheever contravenes-
(a) any of the provisions of this Act or of any rule,
direction or order made thereunder, other than those
referred to in sub-seetion (1) of this section and section
19, shall, upon conviction by a Court, be punishable
with imprisonment for a term which may extend to two
years, or with fine, or with both;
(b) any direction or order made under section 19
shall, upon conviction by a Court, be punishable with
fine which may extend to two thousand rupees.
(lB) Any Court trying a contravention under subsection (1) or sub-section (lA) and the authority adjudging any contravention under clause (a) of sub-section
(1) may, if it thinks fit, and in addition to any sentence or penalty which it may impose for such contravention, direct that any currency, security, gold or
silver, or goods or any other money or property, in
respect of which the contravention has taken place, shall
be confiscated to the Central Government and further
direct that the foreign exchange holdings, if any, or
the person committing the contravention or any part
thereof shall be brought back into India or shall be
retained outside India in accordance with the directions
made in this behalf.
Explanation.-For the purposes of this sub-section,
property in respect of which contravention has taken
place shall include deposits in the bank, where the said
property is converted into such deposits
(2) Notwithstanding anything contained in section
32 of the Code of Criminal Procedure, 1898, it shall
be lawful for any Magistrate of the first class, specially
empowered in this behalf by the State Government, and
for any Presidency Magistrate to pass a sentence of fine
exceeding two thousand rupees on any person convicted
of an offence punishable under this section.
(3) No Court shall take cognizance-
(a) of any offence punishable nnder sub-section (1)
except upon complaint in writing made by the Director
of Enforcement, or
(b) of any offence punishable under sub-section (lA)
of· this section or under section 54 of the Indian Income-tax Act, 1922, as applied by section 19 of this
Act, except upon complaint in writing made by the
Director of Enforcement or any officer authorised in
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UNION v. RAJ BAHADUR SHREE.RAM LTD. (Sikri, J.)
737
this behalf by the Central Government or the Reserve
Bank by a general or special order :
Provided that where any such offence is the contravention of any of the provisions of this Act or any rule,
direction or order made thereunder which prohibits the
doing of an act without permission, no such complaint
shall be made unless the person accused of the offence
has been given an opportunity of showing that he had
such permission.
(4) Nothing in the first proviso to section 188 of the
Code of Criminal Procedure, 1898, shall apply to any
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offence punishable under this section.
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S. 23A. Without prejudice to any provisions of section 23 or to any other provision contained in this Act,
the restrictions imposed by sub-sections (1) and (2) of
section 8, sub-section (1) of section 12 and clause (a)
of sub-section (1) of section 13 shall be deemed to
have been imposed under section 19 of the Sea Customs
Act, 1879, and all the provisions of that Act shall have
effect accordingly, except that section 183 thereof shall
have effect as if for the word "shall" therein the word
"may" were substituted."
0 The Sea Customs Act, 1878
167. The offe1_1ces mentioned in the first ~o1umn of the fc1kw:ng ~chedule
sh<;i11
b~ pumshable to the extent mentioned in the third cclumn of the
same with reference to such offences respectively:
Offences
8. If any goods, the importation
or exportation of which is for
the time being prohibited or
restricted by or under Chapter
!Y of this Act, be imported
mto or exported from India
contrary to such prohibition or
restriction; or
If any attempt be made so to
import or export any such
goods; or
If any such goods be found in
any package produced to any
officer of Customs as containing
no such goods; or
Sections
of this Act
to which
offence has
reference
18
&
19
Penalties
Such goods shall be liable
to confiscation·
and
'
Any
person
concerned in
any such
offence
shall
bo
liable to a penalty
not ex ..
ceeding three times the
value
of the goods, or not exceeding
one thousand rupee.s,
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738
SUPREME COURT REPORTS
Offences
If any such goods, or any dutiable
goods, be found either before or
after landing or shipment to have
been concealed in any manner on
board of any vessel within the
1imits of any port in India; or
If any goods, the exportation of
which is prohibited or restricted
as aforesaid, be brought to any
wharf in order to be put on board
of any vessel for exportation
contrary to such prohibition or
restriction.
"Foreign Exchange Regnlation Rules, 1952.
-
[1969] 2 S.C.R.
Penalties
3. Form of declaration.--(!) A declaration under
section 12 of the Act shall be in one of the forms set
out in the First Schedule as the Reserve Bank may by
notification in the Gazette of India specify as appropriate
to the requirements of a case.
(2) Declarations shall be executed in sets of such
number as indicated on the forms.
4. Authority to whom declaration to be furnished.
(I) The original of the declaration shall be furnished to the Collector of Customs : provided .that when
export is by post, the original of the declaration shall
be furnished to the postal authorities.
(2) Copies of the declaration shall be submitted to
the authorities and in the manner specified qn forms.
(3) The documents pertaining to every export passed by the Customs shall within 21 days from the date
of the export, be submitted to the authorised dealer
mentioned on the relevant declaration form, unless the
Reserve Bank, in its discretion, authorises otherwise .
5. Evidence in support of declaration. (I) The Reserve Bank, or subject to such directions, if any, as
may be given by the Reserve Bank, the Collector of
Customs or the postal authorities, may, to satisfy themselves of due compliance with section 12 of the Act,
..
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UNION v. RAI BAHADUR SHREERAM LTD. (Sikri, J.)
739
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require such evidence in support o~ the declaratio_n as
• '·
may satisfy them that the exporter 1s a person resident
in India, or has a place of business in India.
(2) The Reserve Bank, or subject to such directions,
if any, as may be given by the Reserve. ~ank, the C?llector of Customs, or the Postal authorities may requrre
B
any exporter to produce in support of. the declaration
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such evidence as mai be in his possession or power to
".
satisfy them.
(i) ...
(ii) that the invoice value stated in the declaration
c
is the full value of the goods; and (iii) that the amount
representing the full export value of the goods has been
or will be paid to the exporter.
Explanation.-. .. ,,
The points which have emerged from the discussion at the
7'
Bar and which require determination may be formulated thus :
~
D
(1) What is the meaning of the expression "restrictions imposed by sub-section (1) of section 12" occurring in s. 23-A of
the Exchange Act ? Can other sections of the Exchange Act be
looked at for determining the ambit of the restrictions imposed
by s. 12(1) ? Do restrictions imposed under the Rules made under
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the Exchange Act and relating to s. 12(1) come within the meaning of this expression '!
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(2) What is the true meaning of the words "a declaration
.
supported by such evidence as may be prescribed or so specified
is furnished by the exporter to the prescribed authority that the
amount representing the full export value of goods has been or
F
will within the prescribed period be paid in the prescribed manner" ? Is it necessary that the declaration shall be made honestly
?r in good faith ? Should it disclose the true export value? Is
1t a breach of the sub-section if a declaration is made honestly
,
but happens to show incorrect export value to a small but not
~
material extent? Does not a deliberately false declaration con-
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travene the provisions of s. 12(1)?
(3) If an action is a contravention of s. 12(1) and other provisions of the _Excha~ge ~ct, e.g., ss. 22, 23, 12(2), 12(3) and
12(5), . was It the mtentlon that it should be treated as a contravention of s. 12(1)?
H
. Before deali1_1g with point (1) mentioned above, a few preli-
·"I
m1~ary observatmns may be made.
I have to construe an Act
wh!ch was enacted in the interest of the national economy.
A
deliberate large-scale contravention of its provisions would affect
740
SUPREME COURT REPORTS
[1969] 2 S.C.R.
the interests of every man, woman and child in the country. Such
an Act, I apprehend, should be construed so as to make it workable; it should, however, receive ·a fair construction, doing no
violence to the language employed by the Legislature.
It was
said that if two constructions are possible the one that is in
favour of the snbject should be accepted.
It is not necessary
to pronounce on this proposition for I have come to the conclusion that there is one true construction of s. 12(1). But I should
not be taken to be assenting to this proposition in so far as it is
applicable to an enactment like the Exchange Act, for no subject
has a right to sabotage the national economy.
Coming to the first point, I find that the following words of
Lord Blackburn express my views as to how the construction of
s. 23A should
be approached.
He was dealing with a case
where a single section of an Act of Parliament has been introduced
into another Act. He said in The Mayor of Portsmouth v.
C.harles Smith(') :
"When a single section of an Act of Parliament is
introduced into another Act, I think it must be read in
the sense which it bore in the original Act from which it
is•taken, and that consequently it is perfectly legitimate
to refer to all the rest of that Act in order to ascertain
what the section meant, though those other sections are
not incorporated in the new Act. I do not mean that if
there was in the original Act a section not incorporated,
which came by the way of a proviso or exception on that
which is incorporated, that should be referred to. But
all others, including the interpretation clause, if there
be one, may be referred to."
It seems to me that this is the correct way of looking at s.
23A of the Exchange Act for another reason.
The restrictions
imposed by s. 12(1) cannot be different for the purpose of the
Exchange Act from that for the purposes of s. 167(8) of the Sea
Customs Act, for the breach of s. 12(1) may also be punishable
under the Exchange Act. In other words, the same contravention
may attract penalties under the Sea Customs Act as well as the
Exchange Act, and it would be incongruous to hold that the restrictions imposed by a section are different for different Acts.
Then am I entitled to take into account the restrictions imposed by the Rules made under s. 27 of the Exchange Act? It
seems to me that rules not referrable to s. 12(1) cannot be taken
into account, but any restrictions imposed by rules referrable to
s. 12(1) must be treated as restrictions imposed by s. 12(1). Section 12(1) itself contemplates rules being made on three points,
(!) 10 A.C. 364, 371.
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UNION v. RA! BAHADUR SHREERAM LTD. (Sikri, J,)
741
i.e. (1) the evidence which is to support the declaration, (2) the
authority to which the declaration is to be furnished; and (3)
manner of payment.
It was said that the words "by sectio11
12(1)"' exclude the restrictions made under the Rules. But though
in some contexts and scheme of an Act this proposition may be
true, the general rule is as stated by Lord Alverstone, C.J., in
We/lingdali:. v. Norris(') as follows :
"If it be said that a regulation is not a provision of
an Act, I am of opinion that Rex v. Walker( 2 ) is 1n
authority against that proposition.
I should certainly
have been prepared to hold apart from authority that,
where a statute enables an authority to make regulations
a regulation made under the Act becomes for the purpose
of obedience or disobedience a provision of the Act. The
regulation is only the machinery by which Parliament
has determined whether certain things shall be or shall
not be done."
These observations were approved by tbe House of Lords in
Wicks v. Director of Public Prosecution(') thus :
"There is, of course, no doubt that, when a statute
like the Emergency Powers (Defence) Act, 1939, enables
an authority to make regulations, a regulation which is
validly made under the Act, i.e., which is intra vires
of the regulation-making authority, should be regarded
as though it were itself an enactment. As the Court of
Criminal Appeal has pointed out in its judgment, that
was decided by the Divisional Court in Willingdale v.
Norris('), and it appears to me that that decision is
perfectly correct. Consequently, the charge against the
appellant here was, in effect, that he had committed
crimes defined or contained in the Act of Parliament."
The Court of Criminal Appeals had stated in R. v. Wicks ('),
as follows :
"The first observation which the court would make
is that they are in complete agreement with the decision
of the Divisional Court in Willingdale v. Norris(') that
where a statute enables an authority to make regulations,
a regulation made under the Act becomes for the purpose of obedience or disobedience a provisiqn of the
Act.. The regulation is only the machinery by which
Parliament has determined whether certain things shall
or shall not be done.
Jt is, therefore, clear that the
(I) [1909] l K.B. 57, 64.
(2) [1875] L.R. IO Q.B. 355.
(3) [1947] I All E.R. 205, 206.
(4) [19461 2 All E.R. 529, 531'.
742
SUPREME COURT REPORTS
[1969) 2 S.C.R.
regulations must be read as _thou~ they were contained
in the Act itself. They denve their efficacy solely from
the Act and accordingly expire with the Act, but it may
be that the legislature has provided that some restrictions or consequences shall remain effective notwithstanding the expiration of the Act."
A
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In a recent case, Rathbone v. Bundock(' ), the Divisional
Court following these cases held that regulation 89 of the Motor
\,..
Vehicles (Construction and Use) Regulations, 1955, was for the
· i,...
purpose of obedience or disobedience a provision of the Road Traffic Act, 1930.
In Dr. lndramani Pyarela/ Gupta
v.
W. R. Nathu
and
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Others(2 ) this Court was concerned, inter alia, with the interpretation of s.