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of <h1>Court overturns penalties by Appeal Board, finds appellants not Indian residents under Foreign Exchange Regulation Act.</h1> <h3>KN. Mehta Versus Director of Enforcement</h3> KN. Mehta Versus Director of Enforcement - [1985] 57 COMP. CAS. 820 (DELHI) Issues Involved:1. Legality of the order passed by the Foreign Exchange Regulation Appellate Board.2. Determination of whether the appellants were 'persons resident in India.'3. Imposition of penalties for contraventions of the Foreign Exchange Regulation Act, 1973.4. Maintainability of the appeals in the High Court of Delhi.Detailed Analysis:1. Legality of the Order Passed by the Foreign Exchange Regulation Appellate Board:The appeals challenge the legality of the order dated January 27, 1975, by the Foreign Exchange Regulation Appellate Board, which upheld the findings of the Director of Enforcement. The Director found Mr. K.N. Mehta and Mrs. Saraswati Mehta guilty of contravening provisions of the Foreign Exchange Regulation Act, 1973. Specifically, Mr. Mehta was found guilty on charges covered under four show-cause notices, while Mrs. Mehta was found guilty of one charge. The Board maintained the penalties imposed by the Director, except for one charge against Mr. Mehta, which was set aside.2. Determination of Whether the Appellants Were 'Persons Resident in India':The core issue was whether the appellants were 'persons resident in India' under the Act. The Director of Enforcement proceeded on the basis that the appellants, being foreign nationals not domiciled in India, were entitled to maintain and operate bank accounts abroad. However, they were found guilty of borrowing or lending foreign exchange and not repatriating foreign exchange obtained from the sale or mortgage of property abroad. The Board agreed with these findings.The appellants argued they were not 'persons resident in India' and thus not liable under the Act. Mr. Mehta, a British citizen domiciled in Switzerland, came to India in 1968 for employment. Despite being registered as a foreigner, the Director and the Board concluded that Mr. Mehta was a resident in India based on his extended stay and employment. The Board did not rely solely on Mr. Mehta's admission but considered the duration and purpose of his stay in India.The court noted that the term 'person resident in India' implies more than a brief visit but not necessarily domicile. The Supreme Court in Shanti Prasad Jain v. Director of Enforcement clarified that the prohibition under the Act extends to residents of India, regardless of their physical location during the transaction. The court concluded that the appellants, having come to India for a specific period of employment, were not residents of India for the purposes of the Act.3. Imposition of Penalties for Contraventions of the Foreign Exchange Regulation Act, 1973:Mr. Mehta faced charges for failing to offer for sale 940 dollars' travellers cheque, not repatriating Rs. 42,000 Swiss Francs, borrowing money by mortgaging property in Switzerland, and lending lb50,000 to Mr. Kumar Kochar. The Board acquitted Mr. Mehta of the charge related to mortgaging property in Nairobi, as he did not own it. Mrs. Mehta was charged with receiving rent and dividends from her property in Nairobi and failing to offer the foreign exchange for sale to an authorised dealer.The court upheld the penalty for the travellers cheques but set aside other penalties, concluding that the appellants were not residents in India and thus not liable under the Act.4. Maintainability of the Appeals in the High Court of Delhi:A preliminary objection was raised regarding the maintainability of the appeals in the High Court of Delhi, arguing that the appellants ordinarily resided in Bombay. The court noted that the appeals were admitted in 1975 and heard on merits. Given the appellants no longer resided in India, the court held that the appeals were maintainable in the High Court of Delhi, particularly as the Board's decision was taken at Delhi.Conclusion:The court set aside the orders of the Board regarding the contraventions, except for the one relating to travellers cheques. Mr. Mehta's appeal was partly accepted, and Mrs. Mehta's appeal was allowed. The court concluded that the appellants were not 'persons resident in India' and thus not liable under the Foreign Exchange Regulation Act, 1973, for the contraventions alleged.
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