Foreign exchange ownership under section 9 requires title and control; credit notes alone do not amount to holding foreign currency.

Foreign exchange under section 9 of the Foreign Exchange Regulation Act, 1947 required title to and control over the currency so it could be offered for sale to the Reserve Bank. The High Court of Bombay reasoned that the words "owns or holds" do not extend to a mere right to receive foreign exchange. Amounts credited by foreign manufacturers through credit notes only showed a receivable in the petitioners' favour and did not give them control over the foreign currency. On that footing, the section 9 charge could not be sustained, and the related penalties were set aside.

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Issues: Whether amounts credited by foreign manufacturers through credit notes amounted to foreign exchange "owned or held" by the petitioners under section 9 of the Foreign Exchange Regulation Act, 1947.

Analysis: The expression "owns or holds" in section 9 was construed in the context of foreign currency moneys required to be tendered for sale to the Reserve Bank and in light of section 10, which deals with a person having a right to receive foreign exchange. For the purposes of section 9, ownership required title to and control over foreign exchange, and holding required control enabling the person to offer or cause the foreign exchange to be offered for sale to the Reserve Bank. Mere issuance or receipt of credit notes, which only evidenced that the foreign manufacturers had credited the petitioners in their own books, did not place title or control over the foreign currency in the petitioners. The petitioners had only a right to receive the amounts mentioned in the credit notes.

Conclusion: The amounts covered by the credit notes did not constitute foreign exchange owned or held by the petitioners under section 9, and the charge under that provision could not be sustained against them.

Final Conclusion: The order sustaining the section 9 contravention and the related penalties was set aside, while the remaining unchallenged part of the adjudication was left undisturbed.

Ratio Decidendi: A person owns or holds foreign exchange under section 9 only when he has title to and control over the foreign currency so as to be able to offer it for sale to the Reserve Bank; a mere right to receive foreign exchange, evidenced by credit notes, is insufficient.

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