Indian Kanoon - Search engine for Indian Law

14. Elaborating his arguments, Mr. Vikram Chaudhari submitted that there were three other Central Preventive Acts apart from COFEPOSA, namely,

(a) National Security Act, 1980, (b) Prevention of Blackmarketing and Maintenance of Supplies of Essential Commodities Act, 1980 and (c) Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Act, 1974. In all these three enactments, there are corresponding penal provisions in the form of prosecution. However, in COFEPOSA viz., the power to detain a person to prevent him from indulging in any prejudicial activities relating to conservation or augmentation of foreign exchange is given although there is no corresponding penal punitive law available. He referred to various provisions of FEMA, particularly, Chapter IV that deals with contravention and penalties; Chapter V that provides for adjudication as well as appeal against the order of adjudicating authority vide Sections 16 and 17; Chapter VI that provides for establishment of Directorate of Enforcement; Section 40 that stipulates that the Central Government may in any peculiar circumstances suspend either indefinitely or for a limited period the operation of all or any of the provisions of FEMA and Section 49 which provides for repeal of FERA and sub-section (3) thereof that envisages that no court shall take cognizance of an offence under the repealed Act and submitted that there was major shift in the approach of the Legislature inasmuch as foreign exchange violation has been made a civil compoundable offence only under FEMA.

56. As noted above, FERA has been repealed by FEMA. FEMA was enacted to consolidate and amend the law relating to foreign exchange with the objective of facilitating the external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. Section 2(c) of FEMA defines ‘authorised person’ which means an authorised dealer, money changer, off-shore banking unit or any other person for the time being authorised under sub-section (1) of Section 10 to deal in foreign exchange or foreign securities. RBI may authorise any person to deal in foreign exchange or in foreign securities as an authorised dealer, money changer or off-shore banking unit or in any other manner as it deems fit. Section 10 provides for the complete procedure for authorisation of any person to deal in foreign exchange. Section 13 provides for fiscal penalty to the extent of thrice the sum involved in such contravention where such amount is quantifiable or upto two lac rupees where the amount is not quantifiable and where such contravention is a continuing one, further penalty which may extend to Rs. 5000/- for every day after the first day during which the contravention continues. On failure of a person to make full payment of the penalty imposed on him, Section 14 is an enforcement provision. If a person remains in default in discharge of the penalty awarded to him, he is liable to civil imprisonment. Section 15 provides for compounding of contravention. By Section 49, FERA has been repealed and sub-section (3) thereof provides : “Notwithstanding anything contained in any other law for the time being in force, no court shall take cognizance of an offence under the repealed Act and no adjudicating officer shall take notice of any contravention under Section 51 of the repealed Act after the expiry of a period of two years from the date of the commencement of this Act.”

57. It is true that provisions of FERA and FEMA differ in some respects, particularly in respect of penalties. It is also true that FEMA does not have provision for prosecution and punishment like Section 56 of FERA and its enforcement for default is through civil imprisonment. However, insofar as conservation and/or augmentation of foreign exchange is concerned, the restrictions in FEMA continue to be as rigorous as they were in FERA. FEMA continues with the regime of rigorous control of foreign exchange and dealing in the foreign exchange is permitted only through authorised person. While its aim is to promote the orderly development and maintenance of foreign exchange markets in India, the Government’s control in matters of foreign exchange has not been diluted. The conservation and augmentation of foreign exchange continues to be as important as it was under FERA. The restrictions on the dealings in foreign exchange continue to be as rigorous in FEMA as they were in FERA and the control of the Government over foreign exchange continues to be as complete and full as it was in FERA.

61. The following features, (i) detention order was issued on February 8, 2000 and the detenue was served with the same on February 15, 2000; (ii) the events had taken place when FERA was in place as FEMA had come into force only with effect from June 1, 2000; in view of the sunset clause in FEMA the prosecution for violation of FERA could continue for next two years; (iii) High Court had held the continued detention after coming into force of FEMA to be bad; (iv) the constitutionality of Conservation of Foreign Exchange (COFE) part of COFEPOSA was not in issue and the facts brought the prejudicial act within the mischief of FERA inviting penal consequences, were highlighted by the learned counsel for the petitioners to distinguish Venkateshan S.1 . We are afraid, the above features hardly render Venkateshan S.1 inapplicable to the issue raised before us. We are in complete agreement with the position stated in Venkateshan S.1: “if the activity of any person is prejudicial to the conservation or augmentation of foreign exchange, the authority is empowered to make a detention order against such person and the Act does not contemplate that such activity should be an offence”.