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2. The facts are not in dispute. Sale proceeds of foreign currency smuggled out of India were deposited by M/s Tiruchi Enterprises in their Bank account. Against such deposits, they obtained pay orders and bought more foreign currency from the appellants for the purpose of smuggling out. The appellants had no knowledge of the smuggling activities of M/s Tiruchi. Before the appellants were able to encash the pay orders, the Directorate of Revenue Intelligence officials seized the pay orders and directed the Banks to deposit the corresponding amounts with Revenue, which the Banks have done.

3. It is claimed on behalf of the appellants that the money taken over from the Bank represents sale proceeds of the foreign currency sold by them to M/s Tiruchi and hence it no longer represents the sale proceeds of foreign currency initially smuggled out and hence the same cannot be confiscated under section 121 of the Customs Act, 1962. They have also relied on the decision of the Apex Court in the case of Sohan Singh v. Sarwan Singh and Ors. - to plead that pay orders are as good as cash and since pay orders were given to them for bonafide sale of foreign currencies, the same cannot be confiscated.

4. It is argued by revenue that sale proceeds of foreign currency smuggled out were still lying in the Bank and the Bank has made over the amounts to Customs, hence the same is liable to confiscation. Revenue also avers that the pay orders were not encashed and hence the sale proceeds lying with the Bank had not changed its character. It is further averred that neither M/s Tiruchi nor the Bank have challenged the confiscation of the sale proceeds.

5. After hearing arguments from both sides, we find that the cited Apex Court decision was rendered in a totally different context. It was held therein that payment by way of bank draft is as good a payment as cash. The Apex Court held in that case that the demand for payment of cash would have been honoured by the Bank on behalf of the purchaser and hence refusal to accept the bank draft amounted to a breach of contract.

6. In the present case, the amounts have been seized from the bank before the appellants have been able to encash the pay orders. Having handed over the cash to Revenue which was deposited by M/s Tiruchi out of sale proceeds of smuggled out foreign currency, the Bank cannot obviously honour the pay orders. Applying the Apex Court decision cited above, it is clear in this case that since the Bank cannot honour the demand from the appellants for payment of cash, the appellants can take available legal remedies against M/s Tiruchi for breach of contract.