1987 (5) TMI 337 - SC - FEMA

Supreme Court affirms Rs. 15,00,000 penalty for foreign exchange breach.

Rai Bahadur Seth Shreeram Durgaprasad Versus Director of Enforcement

Rai Bahadur Seth Shreeram Durgaprasad Versus Director of Enforcement - [1988] 63 COMP. CAS. 151 (SC), 1987 (3) SCC 27 Issues Involved:1. Interpretation of the term 'whoever' in Section 23(1) of the Foreign Exchange Regulation Act, 1947.2. Applicability of the amended Section 23(1) and Section 23C to contraventions occurring before the amendment.3. Vicarious liability of a partnership firm for contraventions under the Act.4. Retrospective application of procedural amendments.Issue-Wise Detailed Analysis:1. Interpretation of the term 'whoever' in Section 23(1) of the Foreign Exchange Regulation Act, 1947:The primary issue was whether the term 'whoever' in Section 23(1) of the Foreign Exchange Regulation Act, 1947, before its amendment by Act XXXIX of 1957, referred only to natural persons or also included associations of persons such as firms. The court held that the term 'whoever' was comprehensive enough to include an association of persons, such as a firm, and did not connote a natural person alone. The court stated, 'There is no reason why the word 'whoever' in the section should not receive its plain and natural meaning.' The court further elaborated that the word 'whoever' must be read in juxtaposition with Section 12(2) and must mean any person who commits a contravention of that section without exception, thus including corporate liability and any association of persons such as a partnership firm.2. Applicability of the amended Section 23(1) and Section 23C to contraventions occurring before the amendment:The appellants contended that the amended Section 23(1) and Section 23C, introduced by the Amendment Act effective from September 20, 1957, should not apply to contraventions that took place before the amendment. The court rejected this contention, stating, 'It is not correct to say that the amended section 23(1) of the Act does not apply to contraventions which took place before the Amendment Act came into force.' The court relied on the precedent set in Union of India v. Sukumar Pyne, which held that procedural amendments could be applied retrospectively unless there was a constitutional objection or violation of fundamental rights.3. Vicarious liability of a partnership firm for contraventions under the Act:The court examined whether a partnership firm could be held liable for contraventions under the Act. It concluded that the Act clearly contemplated adjudication proceedings against not only the person who committed the contravention but also cast vicarious liability on an association of persons such as a partnership firm. The court stated, 'The Act, therefore, clearly contemplated that adjudication proceedings under sub-section (1) of section 23 prior to its amendment could be initiated not only against the person who actually commits the contravention but also casts a vicarious liability on an association of persons such as a partnership firm or an artificial or a legal entity like a company.'4. Retrospective application of procedural amendments:The appellants argued that the procedural amendments introduced by the Amendment Act should not have retrospective application. The court rejected this argument, citing the decision in Sukumar Pyne's case, which held that procedural amendments could be applied retrospectively. The court quoted, 'It is well recognised that 'no person has a vested right in any course of procedure'... and we see no reason why this ordinary rule should not prevail in the present case.' The court concluded that the initiation of adjudication proceedings for failure to repatriate foreign exchange on shipments made before the amendment was permissible.Conclusion:The Supreme Court dismissed the appeal, upholding the High Court's decision to restore the order of the Director of Enforcement, which levied a penalty of Rs. 15,00,000 on the appellants for failure to repatriate foreign exchange. The court confirmed that the term 'whoever' in Section 23(1) included firms, that the amended provisions applied retrospectively to procedural matters, and that firms could be held vicariously liable for contraventions under the Act.