Delhi High Court
Om Parkash Kapoor And Anr. vs Special Addl. Director Of Enforcement ... on 18 July, 2000
Equivalent citations: 2000(56)DRJ505, 2001(73)ECC50
Author: J.B. Goel
Bench: J.B. Goel
JUDGMENT J.B. Goel, J.
1. These two appeals under Section 54 of the Foreign Exchange Regulation Act, 1973 (for short "the FERA 1973") arise out of the common judgment dated 1.7.1977 in Criminal Appeals No. 304/73 and No. 75/74 passed by the Foreign Exchange Regulation Appellate Board (for short "the Appellate Board"). These appeals have arisen out of the order/judgment dated 15.10.1973 passed by the Special Additional Director, Enforcement Directorate under Section 23 of the Foreign Exchange Regulation Act, 1947 (for short "the FERA 1.947").
The learned Special Additional Director had initiated penalty proceedings under Section 23 of the FERA 1947 for contravention of Sections 5(1)(a), 5(1)(c) and S.23B of the said Act against the following four persons:-
1. M/s. Kapur Sons & Company, a partnership firm;
2. Mr. O.P. Kapoor, as Organiser;
3. Mr. Arun Kapoor, Partner; and
4. Mr. K.K. Puri, as Manager;
a partnership firm, organiser, partner and Manager of the partnership firm who had organized and staged Holiday on Tee show on the basis of six show cause notice, I to IV being dated 13.5.1971 and V and VI dated 6.12.1971. The learned Special Addl. Director found all the four persons guilty and imposed various penalties in respect of all the six show cause notices. In all, a sum of Rs.1,71,500/- was imposed on M/s. Kapur Sons & Company, Rs. 25,000/- on Mr. O.P. Kapoor, Rs. 25,000/- on Mr. Arun Kapoor and Rs. 2,150/- on Mr. K.K. Puri. Three appeals No. 75/74, No. 304/73 and No. 306/73 were filed by Shri Kapoor, M/s. Kapoor Sons & Company and Shri K.K. Puri respectively. It is not known if any appeal was also filed by Shri Arun Kapoor and if so what happened to it. The learned appellate Board by common judgment dated 1.7.1977 partly upheld the order in respect of M/s. Kapoor Sons & Company and Shri O.P. Kapoor but accepted the appeal of Mr. K.K. Puri and set aside the order imposing penalty on him. It also set aside the order so far as penalty in respect of show cause Notice No. 5 was concerned against all persons. Penalty amount on the firm was also reduced but the penalty imposed on Shri O.P. Kapoor was maintained. The aforesaid two appeals have been filed against the said judgment.
Briefly, the facts are that M/s. Kapoor Sons & Company of New Delhi, a partnership firm wanted to organise and stage Holiday on Ice Shows in India by engaging foreign national artists. They had approached the Government of India, Ministry of Finance twice for permission to bring and employ some foreign artists, since foreign exchange was involved. However, their requests were turned down in or about April, 1970 "on account of the difficult foreign exchange situation". The appellants did not give up their efforts and approached the Ministry of Home Affairs for permission to employ some foreign national artists who were expected to come to India as tourists. This permission was also refused. The appellant made another attempt to the Ministry of Home Affairs stating that they had proposed to engage only British nationals or Commonwealth citizens for whom no visa was necessary as a temporary arrangement and that they will be replaced by Indian artists and that no payment was to be made in foreign exchange. The Ministry of Home Affairs informed that no permission was required in the circumstances. However, the fact that similar request had been turned down by the Ministry of Finance was not disclosed to Ministry of Home Affairs. The appellants then set up, organized and held the shows in New Delhi in the months of September/October 1970. When this fact came to the notice of the Directorate of Enforcement, they on inquiries found Shri O.P. Kapoor, Appellant was the person responsible for organising the shows. His statement was recorded by the Director on 7.10.1970 and again on 23.10.1970. From his statement, it was found that certain foreign national artists had arrived in Bombay and for their stay at Astoria Hotel, Bombay, a sum of Rs. 1,587.61 was paid by the appellants. From Bombay, the artists were brought to Delhi by air and their airfare amounting to Rs. 8,610/- and also for their stay at Lodhi Hotel, Now Delhi, a sum of Rs. 10,000/- was paid by the appellants. For the services rendered by the artists, they were further paid a sum of Rs. 1,14,484.74 on various dates. According to the Enforcement Directorate, this amounted to contravention of the provisions of Sections 5(1)(c) and 5(1)(a) of 1947 Act and accordingly four show cause notices dated 13.5.1971 and then two more show cause notice dated 6.12.1971 were issued. In the 5th show cause notice dated 6.12.1971 it was alleged that the appellants had acquired/borrowed foreign exchange amounting to US$ 1201.80 and ST. PD. 4297.50 from some person without the previous permission of the Reserve Bank of India for purchase of air tickets of aforesaid artists for air travel from London to India which was in contravention of Section 4(1) of the 1947 Act. And 6th show cause notices dated 6,12.1971 was issued to the effect that appellants had made payments of Rs. 74,757/- to M/s. General Travels, a travel agent, on behalf of the said 26 foreign artists for their air travel out of India which was in contravention of Section 5(1)(c) read with Section 23B of the 1947 Act.
Replies to these show cause notices were submitted. The special Addl. Director by his order held that there was contravention of Sections 5(1)(c) and 5(1)(a) and 23B of the 1947 Act and imposed penalty by his order/judgment dated 15.10.1973 on all the four persons.
M/s. Kapoor Sons & Company, Shri O.P. Kapoor and Shri K.K. Puri filed three appeals. The learned Appellate Board allowed the appeal of Shri K.K. Puri and partly allowed the other two appeals. These two appeals have been filed, one by M/s. Kapoor Sons & Company (Cr.A.330/73) and the other (Cr.A. 329/73) by Shri O.P. Kapoor; under Section 54 of the FERA 1973.
I have heard learned counsel for the parties. Learned counsel for the appellants has contended that appeal lies under Section 54 of the 1973 Act and has raised the following question of law:-
(A) That there is no contravention of the provisions of Section 5(1)(a), 5(1)(c) or Section 23B of the 1947 Act in as much as:-
1) The payments were made in Indian Currency and no foreign exchange was involved or paid and so it does not contravene the FERA Act as it deals with cases involving contravention of foreign exchange only;
2) The foreign artists, though foreign nationals, were in India when they were engaged by the appellants and so resident in India. As such payment made to them or on their behalf were made in India and as such it is not a case where payment was made to persons "residents outside India";
3) There was no provision under the 1947 Act for taking prior permission for engaging/employing in India of foreign nationals like such provision now made under Section 30 of the 1973 Act and so no permission of reserve Bank was required for making payments to or for them;
4) on the principle of Section 30 of the 1973 Act. permission of the Reserve Bank of India (for short RBI), if any, was required only where foreign nationals engaged in India where paid in foreign exchange and such foreign exchange is intended to be repatriated outside India. This was not the case and in fact in the agreements of employment entered into with the foreign artists it was specifically mentioned that they would neither be paid in foreign exchange nor repatriate the payments made to them out of the country.
Whereas learned counsel for the department/UOI has disputed these contentions and supported the judgment of the Appellate Board. He has contended that FERA 1947 and its Sections 5 and 23B not only deals with cases involving payments in foreign exchange but also payments made in Indian currency as rightly held by the authorities below.
It is not disputed that certain number of artists who were foreign nationals, were employed/engaged by the appellants for staging the Ice on Holiday shows in Delhi and they had actually performed the shows during September/October 1970. It is also not disputed that the following amounts were paid to or on their behalf by the appellants for this engagement:-
1) Rs. 1,587.61 to Astoria Hotel, Bombay for the stay of the foreign artists on their landing from abroad in India;
2) Rs. 8,610/- on account of their air passage from Bombay to Delhi;
3) Rs. 10,000/- on account of their stay in Lodhi Hotel at Delhi;
4) Rs. 1,14,484.74 paid to those foreign nationals for their service on various dates; and
5) Rs. 74,757/- to M/s. General Travels, New Delhi on behalf of the aforesaid 26 foreign artists for their outward air journey out of India. There is no dispute in respect of the 5th show cause notice pertaining to payments made for air fare from abroad to India perhaps by one Reg Park of U.K. It is not disputed that permission of Reserve Bank was not obtained for making these payments.
Relevant provisions of the 1947 Act which are alleged to have been contravened provided as under:-
5. Restrictions on payments:- (1) Save as may be provided in and in accordance with any general or special exemption from the provisions of this subsection, which may be granted conditionally or unconditionally by the Reserve Bank, no person in, or resident in, India shall-
(a) make any payment to or for the credit of any person, resident outside India;
(aa)
(b)
(c) make any payment to or for the credit of any person by order or on. behalf of any person resident outside India;
x x x x x x x x x 23B. Attempts - whoever attempts to contravene any of the provisions of this Act or of any rule, direction or order made thereunder shall be deemed to have contravened that provision, rule, direction or order, as the case may be.
23. Penalty and Procedure--(1) If any person contravenes the provisions of Section 4, Section 5, Section 9, Section 10, Sub-section (2) of Section 12, Section 17, Section 18-A or Section 18-B or of any rule, direction or order made thereunder, he shall:
(a) be liable to such penalty not exceeding three times the value of the foreign exchange in respect of which the contravention has taken place, or Five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement in the manner hereinafter provided, or
(b) Point No. 1 The first question is whether the provisions of the Act are attracted when payments are not made in foreign exchange but in Indian currency?
Section 5(1)(a) and 5(1)(c) do not specifically mention that payment to be in contravention thereof should be made in foreign exchange only. It mentions "any payment" which obviously would include payment in Indian currency also. The object of the Act also so requires. The Act of 1947 came into force on 25th March, 1947. The preamble of the Act gives the reasons why the passing of the Act had become desirable : as "An Act to regulate certain payments, dealings in foreign exchange and securities and the import and export of Currency and bullion"; It provided:-
"Whereas it is expedient in the economic and financial interests of India to provide for the regulation of certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion."
Prior to coming into force of this Act, there were various restrictions imposed by the defense of India Rules made under the defense of India Act, 1939 in respect of export of money and geld, dealings in bullion, purchase of foreign exchange and restrictions on payments. The defense of India Act and the Rules made thereunderremained in force during the continuance of the emergency and for a period of six months thereafter. This period expired on 30th September, 1946. However, under the Emergency Provisions (Continuance) Ordinance, 1946, the aforesaid provisions of the defense of India Rules which dealt with restrictions on dealings in foreign exchange and payments etc. continued till 25th March, 1947 on which date the present Act came into operation. :
The Statement of Objects and Reasons also so provided as under:-
"The shortage of foreign exchange is likely to continue in view of the disruption of the internal economy of so many nations, system of exchange control should be continued in the general interest of the countries. Also, the adherence of India to the International Monetary Fund requires her to, take certain measures' to regulate transactions in foreign exchange in order to fulfill the obligations of membership. Legislation is, therefore, necessary to give the Central Government powers to continue to control transactions in foreign exchange, securities and gold......"
The FERA Act, 1947 was enacted as a temporary measure, which was due to expire on the 31st December 1957, when it was enacted, it was hoped that the world trade and economic conditions would stabilise themselves after (he initial post-war period, but this anticipation has not been fulfillled. And obviously the nation continued to be short of foreign exchange and so it was placed permanently on the Statue Book also keeping in view various development programmes undertaken under its Five Year plans by the Amendment Act XXXIX of 1957. The Statement of Object and Reasons of the 1957 Amendment Act expressly stated "India still continues to be short of foreign exchange and it is necessary to ensure that our foreign exchange resources are conserved in the national interest."
In 1973, the old Act was repealed and replaced by the FERA 1973. The long title of which reads: "An Act consolidate and amend the law regulating certain payments, dealing in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currencies and bullions for the conservation of the foreign exchange resources of the country and the proper utilisation thereof in the interest of the, economic development of the country".
The object of these enactments thus is to earn, conserve, regulate and store foreign exchange in the interest of the economic development of the country. The scheme and design of this Act is directed towards that end and has to be viewed in that perspective.
Section 8(2) of the FERA 1947 categorically puts restrictions on export, inter alia, not only foreign exchange but Indian currency also as under:-
"8(2). No person shall, except with the general or special permission of the Reserve Bank or the written permission of a person authorised in this behalf by the Reserve Bank, take or send out of India any gold, jewellery or precious stone or Indian currency or foreign exchange other than foreign exchange obtained by him from an authorised dealer."
In case of any ambiguity in any provision of the Act, Courts resort to the rules of Interpretation of Statute. Normally Courts give effect to plain words as plain words may be expected to convey plainly the intention of the Legislature. However, intention of the legislature and not the words are paramount. Even where the words of Statutes appear to be prima facie clear and unambiguous, it may sometimes be possible that the plain meaning of the words does not convey and may even defeat the intention of the legislature. In that case intention of the legislature should be ascertained. Legislative intention may be gathered from several sources, such as, from the statues itself, from its preamble, from the Statement of the Objects and Reasons, amongst others and from all legitimate and admissible sources from where there may be light including its legislative history.
And haying so ascertained that intention, the Court then has to strive to so interpret the Statue as to promote/advance the object and purpose of the enactment. For this purpose, where necessary the Court may even depart from the rule that plain words should be interpreted according to their plain meaning, There need be no meek and mute submission to the plainness of the language. (Girdhari Lal and Sons v. Balbir Nath Mathur and Ors, ).
Also to be kept in mind is that the problems of high finance and fiscal policy are not and cannot be the province of the Courts for the very simple reason that Courts lack necessary expertise and are none of the business of the Courts.
The Act was obviously enacted in the economic and financial interest of the country. The Act is intended to deal with not only foreign exchange but also national currency which is likely to affect economic stability and development of the country, if proper balance is not maintained in foreign exchange resources and national economy.
A similar question had arisen in Reserve Bank of India v. Vasanthi Roman, 1966 (36) CC 416 (Madras) where it was contended that the FERA Act, 1947 deals only with cases involving foreign exchange and not otherwise. In that case, the respondent had approached the Reserve Bank of India for permission to go to U.K. to stay with her husband there for a short period and it was stated that the expenses for her travel and stay there would be borne by her first cousin who was a person of high means who was also joining in her stay there and as such she would not need any foreign exchange to meet her travel and stay expenses in U.K. and as no foreign exchange was involved, there should be no objection for permission being granted to her to go to U.K. The learned single judge had accepted it as under :-
To my mind unless the transactions involve a dealing in foreign exchange, no provision of the Act, no rule framed thereunder, no authority conferred on any person or body by the provisions of the Act can interdict such a transaction."
It was further observed that the travel aboard should be placed in an interdict only when it involves 9 threat on the foreign exchange resources or earnings of the country. The Division Bench in appeal considered the scope of the power and objects both of the Reserve Bank of India Act, 1934 and the FERA Act; 1947 and observed as under:-
"The preambles to both the Reserve Bank of India Act, 2 of 1934, and the foreign Exchange Regulation Act, VII of 1947, are themselves of interest on this aspect. The preamble to the former Act, states that it is expedient to . constitute a Reserve Bank for India to regulate the issue of bank notes and the keeping of reserves with a view to securing monetary stability in India, and generally to operate the currency and credit system of the country to its advantage. The second clause of the preamble refers to a doubt, in the disorganized state of the monetary systems of the world, whether it would 'be feasible to immediately determine a permanent basis for the Indian monetary system. Similarly, the Foreign Exchange Regulation Act, states in its preamble, that it is "expedient in the economic and financial interest of India to provide for the regulation of certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion." Under Section 7 of the Reserve Bank of India Act, the Central Government may make and the bank may receive such directions from the Central Government, from time to time, as that Government might consider it necessary in the public interest. Under Section 17, Clause 3(a), and Section 17, Clause (12), we have the powers of the bank defined, which include powers of purchase and sale of gold coin and foreign exchange. Under Section 40 of the same Act, the bank is clothed with powers in respect of trans actions in foreign exchange, and for authorising purchases and sale of when we turn to the Foreign Exchange Regulation Act, we find that various restrictions imposed upon transactions in foreign exchange, on payments in respect of blocked accounts, import and export of currency and bullion etc. under Sections 4(1), 5, 6, 7, 8 & 9. The important Section in the present con text is Section 18B which enacts that "No airline, shipping company or travel agent shall, except with the general or special permission of the Reserve Bank, and subject to such conditions, if any, as may be specified therein, book for person a passage for a journey, the, whole or any part of which is outside India".
Dissenting from the view taken by the learned single judge, it was observed as under :-
"The very criterion, as stated by the learned Judge, that "jurisdiction consists undoubtedly only in ensuring that the proposed travel abroad does not involve any expenditure of any foreign exchange", includes indirect consequences also. Otherwise, the interpretation would defeat the very purpose with which Reserve Bank has been clothed with powers of regulation, under the Reserve Bank of India Act, and the Foreign Exchange Regulation Act. We are of the view that the learned Judge has expressed the principle in too restricted a manner, when he states that there can be no interdict "unless the transactions involve a dealing in foreign exchange"; we think that the true criterion is that transactions which, by their character, may affect the foreign exchange situation adversely, whether directly or indirectly, would be included within the scope of the bank's regulative power." .
This has been referred to with approval by this court in the case of Arun Kumar v. Reserve Bank of India, New Delhi where it has been observed as under:-
"With a severe drain on the foreign exchange due to hike in petrol prices the foreign exchange position has become particularly difficult. The nation cannot afford to waste foreign exchange actual or potential, for the purposes of entertainment. There is also no substance in the petitioner's contention that since foreign artistes were not to be paid in foreign currency in India, no permission under Section 30 was necessary. As stated earlier the implication of regulation and control under Sections 29 & 30 was necessary. As stated earlier the implication of regulation and control under Sections 29 & 30 (as also the other Sections) cannot be construed in relation to an individual, the concerned artist or the Manager. The provisions of the said sections are to be liberally construed so as to arm the State with sufficient powers to deal with the matters which are so vital to the nation's economy. The approach to such problems is lucidly explained by Division Bench of Madras High Court in Reserve Bank of India v. Vasanthi Roman, (1966) 36 Com Cas 416. In that case the respondent had complained of the refusal of the permission by the Reserve Bank of India under the scheme of "Guest Hospitality or "Private Hospitality". The respondent wanted to go to U.K., where her expenses were to be financed by her first cousin. The court rejected the plea. The Division Bench held" We think that the true criterion is that transactions which, by their character may affect the foreign exchange situation adversely, whether directly or indirectly, would be included in the scope of bank's regulative powers". An argument in the present case is that the guest artistes are not to be paid in foreign currency during their stay in India and, therefore, they arc not likely to affect prejudicially the foreign exchange position. A similar argument was made by the respondent in the said Madras decision. The Division Bench held : "What is claimed is that the restrictions ought not to be imposed where the tour abroad does not directly impinge on the foreign exchange resources, or involve the release of foreign exchange. But that is too limited a view of the powers and functions of the appellant-bank, and we definitely consider that the matter should be judged not merely in relation to the facts of a given instance, but in relation to a policy, and to the conceivable consequences, direct or indirect of a large number of such cases." The submission of the petitioner is, therefore, rejected."
Financial transaction between a resident in India and non-resident may very often be not only complex but clandestine and beyond the control through the normal channels and agencies. In such matters the anxiety of the Government to prevent or restrict such transactions is understandable. Section 5 of FERA, 1947 has obviously been introduced with intent to restrict any monetary transaction in foreign exchange and in Indian currency between a resident in India and a non resident unless general or special permission/exemption from the Reserve Bank of India has been obtained. Section 5 of the Act, also specially prohibits making of "any payment' which necessarily would include payment in Indian currency.
It is the admitted case of appellants that the artists engaged were foreign nationals and had come to India as tourists before they were employed in India by (hem. Tourism is one of the most important foreign exchange earning source of the country. As tourists they were obliged to meet their expenses for stay and travel in India of their own, in foreign exchange. Instead of those tourists paying such expenses in foreign exchange, the appellants have paid those expenses on their behalf thereby depriving the country of that foreign exchange earning. In that view also it cannot be said that foreign exchange was not involved in this case. These payments clearly are in contravention of Section 5(1)(a) and Section 5(1)(c) of FERA 1947.
First point thus has no merit and is rejected.
Point No. 2Whether the foreign national artists at the time when payments were made to them or on their behalf were "residents in India" or "residents outside India".
The 1947 Act, docs not define either "resident in India" or "resident outside India". Since the Act, is intended to regulate foreign exchange transactions with a view to conserving the foreign exchange resources of the country; this object cannot be achieved without regulating with non-residents because transactions with a non-resident is likely to involve foreign exchange implications. Control of transactions with non-residents is primarily sought to be achieved by putting restrictions on the residents in India in their dealings with non-residents.
According to the New Lexicon Websters Dictionary, Delux Encyclopedic Edition, the word "resident" means :-
Resident: 1. Adj. residing; involving residence; 2. n. a person who resides for a considerable length of time in a certain place, the local residents.
In Black's Law Dictionary 6th Edition, the word "resident" means:-
"Resident. Any person who occupies a dwelling within the State, has a present intent to remain within the State for a period of time, and manifests the genuineness of that intent by establishing an ongoing physical presence within the State together with indicia that his presence within the State is something other than merely transitory in nature. The word "resident" when used as a noun, means a dweller, habitant or occupant; one who resides or dwells in a place for a period of more, or less duration; it signifies one having a residence, or one who resides or abides. Hansons v. P.A. Peterson Home Ass'n 35 111. App. 2nd 134, 182 N.E.2nd 237, 240. Word "resident" has many meanings in law, largely determined by statutory context in which it is used. Kelm v. Carlson, C.A. Ohio, 473 F. 2nd 1267, 1271."
And the word "residence" means :-
"Residence. Place where one actually lives or has his home; a person's dwelling place or place of habitation; an abode; house where one's home is; a dwelling house. Personal presence at some place of abode with no present intention of definite and early removal and with purpose to remain for undetermined period, not infrequently, but not necessarily combined with design to stay permanently. Residence implies something more than mere physical presence and something less than domicile.
Immigration law. The place of general abode; the place of general abode of a person means his or her principal, actual dwelling place in fact, without regard to intent, 8 U.S.C.A. 1101.
Legal Residence. The place of domicile or permanent abode, as distinguished from temporary residence. Permanent fixed place of abode which person intends to be his residence and to which he intends to return despite temporary residences elsewhere or despite temporary absences. U.S. v. Calhoun, CA.Fla., 566 F.2d 969, 973. Place recognised by law as residence of person.
In Shanti Prasad Jain v. The Director of Enforcement, FERA and Anr., the words "resident in India" were interpreted as "resident of India" and the appellant Shanti Prasad Jain who had gone to Germany temporarily to settle his business affairs and some payments were credited in the name of his companies which, it was alleged, contravened FERA, 1947. The Supreme Court held that though Settlements with German firms took place in Germany during his visit there, still he was resident in India and "resident in India" meant "resident of India" . The word "resident outside India" is antonym of "resident in India". Thus "resident outside India" is a person who is not "resident in India". A person is resident of that place where he has a permanent of fixed place of abode which he intends to be his residence and to which he intends to return despite temporary stay or sojourn elsewhere or despite temporary absence. A person who is not ordinarily resident of India but comes and stays in India on temporary visits or sojourn or as tourist without intention to reside in India for an indefinite period would not be a person "resident in India".
In this case, the foreign artists admittedly had come as tourists and not for the purpose of living for any indefinite period, but for short stay, during their sojourn as tourists. They had no intention to stay in India indefinitely. They cannot be said to be "residents of India" at the relevant time and were necessarily "residents outside India". Any payment made to them or on their behalf by the appellants clearly attracts Section 5 of the 1947 Act, as rightly held by the authorities below.
Sections 2(p) and 2(q) of the 1973 Act, are also relied. These define the words "person resident in India" and "person resident outside India" as under :-
2(p). "Person resident in India" means -
(i) a citizen of India, who has, at any time after the 25th day of March, 1947, been staying in India, but does not include a citizen of India who has gone out of, or stays outside India, in either case -
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(ii) a citizen of India, who having ceased by virtue of paragraph (a) or paragraph (b) or paragraph (c) of Sub-clause (i) to be resident in India, returns to, or stays in, India, in either case -
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
(iii) a person, not being a citizen of India, who has come to, or stays in, India, in either case -
(a) for or on taking up employment of India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for staying with his or her spouse, such spouse being a person resident in India, or
(d) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(iv) a citizen of India, who, not having stayed in India at any time after the 25th day of March, 1947, comes to India for any of the purposes referred to in paragraphs (a), (b) and (c) of Sub-clause (iii) or for the purpose and in the circumstances referred to in paragraph (d) of that sub-clause or having come, to India stays in India for any such purpose and in such circumstances.
Explanation : A person, who has, by reason only of paragraph (a) or paragraph (b) or paragraph (d) of Sub-clause (iii) been resident in India, shall, during any period in which he is outside India, be deemed to be not resident in India;
2(q). "Person resident outside India" means a person who is not resident in India;
The artists would not fall in Clauses 2(p)(i), (ii) and (iv) as they are not citizens of India. They also do not fall in claim 2(p)(iii) as they came as tourists and not for stay on employment. They were employed while in India. And under Section 2(q), a person who is not a "resident in India" is a person "resident outside India". This contention also has no merit.
Point No. 3Whether no permission was required under FERA, 1947 for engaging/employing foreign nationals artists in India?
There is no specific provision under the FERA, 1947 which requires foreign nationals/persons "residents outside India" to seek permission for employment in India. However, such provision had been made in Section 30 of FERA, 1973 which before its amendment in the year 1993, read as under :-
30. Prior permission of Reserve Bank required for taking up employment, etc., in India by nationals of foreign States.--(1) No national of a foreign State shall, without the previous permission of the Reserve Bank -
(i) take up employment in India; or
(ii) practice any profession; or carry on any occupation, trade or business in India, in a case where such national desires to acquire any foreign exchange (such foreign exchange being intended for remittance outside India) out of any moneys received by him in India by reason of such employment or the practicing of such profession or the carrying out of such occupation, trade or business, as the case may be.
(2). Where any national of a foreign State desires to obtain the permission of the Reserve Bank under Sub-section (1), he may make an application to the Reserve Bank in such form, in such manner and containing such particulars as may be prescribed.
(3). x x x x x Clause (1) of this sub-section thus categorically provided that for getting employment in India previous permission of Reserve Bank was required irrespective of the fact that if foreign exchange earning were intended or not to be intended for remittances outside India. This provision would also show that the intention earlier also was that for a foreign national to take up any employment in India required previous permission of the Reserve Bank of India. In any case the FERA, 1947 did not automatically exempt foreign nationals being paid by residents in India or being employed in India without the previous permission of the Reserve Bank of India under Section 5 of that Act. It is immaterial whether the permission for getting employment for the purpose of the Act was required or not as any payment made to a person "resident outside India" without permission of Reserve Bank contravenes Section 5 of the Act.
This contention thus also has no merit.
Point No. 4:
Whether the permission of the Reserve Bank of India was not required where the earnings in India by foreign nationals were not intended to be repatriated outside India either in Indian currency or in foreign currency.
For this, reliance has been placed to Section 30 of FERA, 1973 which has already been produced. Sub-section (1) of Section 30 of the FERA, 1973 (before its substitution by Amendment Act, 1993 ) required the previous permission of the Reserve Bank of India for taking up any employment in India irrespective of the fact whether foreign exchange earnings, if any, were intended for remittance outside India or not. it is no! that permission of Reserve Bank of India was required only where foreign exchange was to be repatriated out of India by a person who took up an employment in India. Section 30 of FERA, 1973 is thus also of no help and rather makes it explicit that no employment in India could be taken up by foreign nationals without the permission of the Reserve Bank of India. In this case the foreign national artists were employed and payments for their services were made without the permission of Reserve Bank of India. This contravenes Section 5 of the Act. This contention also has no force, Then, it was contended that there was no attempt within the meaning of Section 23B, as even if some payments were made to M/s. General Travels, the travel agent, for the outward journey of the artists by air but no tickets had been purchased for the foreign artists' journey out of India and the amount paid to the travel agent were refunded by reverse entry. It could be a case only of preparation and not attempt. Reliance has been placed on Malkiat Singh and Anr. v. State of Punjab, .
Under Section 23B, attempts to contravene any of the provisions of this Act is punishable as if those provisions of the Act were contravened.
The contravention of the provisions of the Act by the appellants came to the notice of the Director of Enforcement sometime after the Ice shows were being staged and on 7.10.1970 statement of Shri O.P. Kapoor, appellant, was recorded first. When he did not state anything about this. But in his statement made before the Directorate on 23.10.1970 in this respect he stated as under:
".........I am surrendering herewith 3 vouchers No. 328, 340 and 376 for Rs. 83,433/-, Rs. 11,508/- and Rs. 63,249/- respectively on account of payment made to M/s. General Travels, New Delhi on account of Air fare of the artists from Delhi/London. The entry for Rs. 83,433/- in respect of voucher No. 328 dated 10.10.70 has been reversed on 13.10.70. The other amounts stand paid to General Travels...."
This is admission by appellant that two payments of Rs. 11,508/-and Rs. 63,249/-i. c. Rs. 74,757/- were made to General Travels, the travel agent towards costs of their Air passage out of India. While reverse entry was made in respect of third payment. This third payment does not appear to be the subject matter of the show cause notice in adjudication proceedings. In the 6th show cause the contravention alleged is on account of payment of Rs. 74,757/- to M/s. General Travels on behalf of 26 foreign artists. This payment would amount to contravention of Section 5(1)(c) of FERA, 1947, though as mentioned in the show cause notice Section 23B of that Act which provides for penalty for attempt has also been alluded to. The findings of the learned adjudicating authority on this is in para 26 as under:
"In this particular case, we are concerned with M/s Kapoor Sons & Company and not with M/s. General Travels which was a separate business altogether. M/s. Kapoor Sons & Co. had actually transferred the amounts to M/s. General Travels and therefore, their part of the transaction was over. It is also an admitted fact that these payments were made towards the outward journey of these foreign artists who were persons outside India. It is only on account of the intervention of the Government and Enforcement Directorate that these foreign artists could not travel against these payments and that is why subsequently the General Travels refunded these amounts to M/s. Kapoor Sons & Co. But for these extraneous circumstances on which M/s. Kapoor Sons & Co., had no control, these amounts would have been utilised by M/s. General Travels for supplying the air tickets to these foreign artists. The 'attempt' was over as soon as M/s. Kapoor Sons & Co. had made available these funds to General Travels. As mentioned above, these payments would constitute a contravention of Section 5(1)(c) as they were made to discharge, the legal liability of these foreign artists. I, therefore, hold M/s. Kapoor Sons & Company guilty for contravention of the provisions of Section 5(1)(c) read with Section 23B of Foreign Exchange Regulation Act, 1947."
This was not the, case of the appellants that these amounts of Rs. 74,157/- were refunded by reverse entry or otherwise and on the other hand it was admitted that these payments were made towards outward air travel of the foreign nationals to and remained with M/s. General Travels for that purpose. Apparently the material on record has been misread or overlooked by the authority below. However, before the learned appellate Board, this contravention/point was conceded on behalf of the appellants as is so noticed in para 30 of the judgment which reads as under:-
"30, The sixth and the last show cause notice relates to an attempt on the part of the appellants to pay the return fare of the artists by making two pay merits on their behalf to General Travels, a firm of travel agents. Shri Oberoi at first attempted to argue that attempt was not an offence punishable under the Act but he did not press this when his attention was invited to Section 23B."
In view of this, this ground is also not available to the appellants in these appeals. In any case this finding is based on the material/admission made by the appellants before the authority below. This payment contravenes Section 5(1 )(c) of the FERA, 1947 though treated merely, as an attempt under Section 23B of the Act.
This contention also, thus, has no merit.
For these reasons, I do not find any merit in these appeals and the same are accordingly hereby dismissed.
The stay of recovery of the penalty amount from the two appellants granted by this Court in two appeals on October 26, 1977 stand vacated. The authority below shall take steps to recover the amounts or balance amount that may be due from the appellants in accordance with law.