1971 (12) TMI 107 - SC - FEMA

Supreme Court rules on foreign exchange regulation case, setting aside judgment and quashing order.

The Supreme Court allowed Civil Appeal No. 1452 of 1971, setting aside the High Court's judgment and quashing the impugned order for not meeting the ... Power under section 19(2) of the Foreign Exchange Regulation Act - requirement to specify the information, book or other document in the order - meaning of 'considers it necessary' - application of mind - nexus between documents sought and the purpose of the Act - invalidity of omnibus requisition orders lacking particularisationPower under section 19(2) of the Foreign Exchange Regulation Act - meaning of 'considers it necessary' - application of mind - requirement to specify the information, book or other document in the order - nexus between documents sought and the purpose of the Act - invalidity of omnibus requisition orders lacking particularisation - Validity of the order dated 22 May 1966 made under section 19(2) of the Act requiring the appellants to obtain and furnish documents in the custody of the Registrar of the Supreme Court. - HELD THAT: - Section 19(2) authorises the Central Government (or Reserve Bank) to require a person to furnish specified information, books or documents where it 'considers it necessary or expedient' for the purpose of the Act. The phrase 'considers it necessary' mandates deliberate, careful application of mind by the authority in relation to each document sought. The statute requires that the information, book or document be specified in the order so that the person directed is left in no doubt about what is required; penal consequences for non-compliance reinforce the need for particularisation. An order which purports to require 'all other books, papers and other documents relating to' the person, thereby embracing hundreds of records many of which have no conceivable relevance to the objects of the Act, manifests lack of due application of mind and absence of the requisite nexus between the documents and the Act's purposes. The Court distinguished powers of general search (under other statutes) where specification may be impracticable, holding that the reasoning for those search provisions does not validate an omnibus requisition under section 19(2). For these reasons the impugned order failed to satisfy the statutory precondition of considered necessity and specification and is not in conformity with section 19(2).The impugned order dated 22 May 1966 is quashed for want of the necessary application of mind and failure to specify with requisite particularity the documents required under section 19(2).Power under section 19(2) of the Foreign Exchange Regulation Act - requirement to specify the information, book or other document in the order - invalidity of omnibus requisition orders lacking particularisation - Whether the authority may make a fresh requisition complying with the requirements of section 19(2). - HELD THAT: - Although the impugned order was quashed for non-compliance with section 19(2), the Court expressly recognised that the Central Government may, if it duly applies its mind and frames an order which specifies the requisite documents and demonstrates the necessary nexus to the purposes of the Act, make a fresh order. The quashing was therefore confined to the defective order, without foreclosing lawful exercise of the statutory power in proper form.The authority is permitted to make a fresh order in due compliance with section 19(2); meanwhile the seized records are to be returned to the appellants after one month unless a valid order is made.Final Conclusion: The appeal is allowed; the High Court judgment is set aside and the order dated 22 May 1966 under section 19(2) is quashed for lack of application of mind and failure to particularise documents as required by the statute. The Central Government remains free to issue a fresh requisition that satisfies the requirements of section 19(2); records held by the Registrar to be returned to the appellants after one month unless a valid order is made. Issues Involved:1. Legality of the order under section 19(2) of the Foreign Exchange Regulation Act, 1947.2. Allegations of mala fide intent.3. Competency of the authority issuing the order.4. Conformity of the order with Article 77 of the Constitution.5. Violation of Articles 14, 19(1)(f) and (g), and 20(3) of the Constitution.6. Territorial jurisdiction of the High Court.Issue-wise Detailed Analysis:1. Legality of the order under section 19(2) of the Foreign Exchange Regulation Act, 1947:The Supreme Court found that the impugned order did not satisfy the requirements of section 19(2) of the Act. The Court emphasized that the power under this provision can only be exercised when the Central Government or the Reserve Bank considers it necessary or expedient to obtain and examine any information, book, or other document for the purpose of the Act. The Court held that the impugned order lacked due application of mind, as it included documents that had no relevance to the purpose of the Act. The order was therefore quashed.2. Allegations of mala fide intent:The appellants alleged that the order was passed mala fide at the instance of Shri Dutt, who was previously Chairman of the Company Law Board and later Secretary to the Government of India, Ministry of Finance. The High Court found that Shri Dutt had nothing to do with the issuing of the impugned order, and this finding was upheld by the Supreme Court.3. Competency of the authority issuing the order:The appellants contended that Shri Rana, respondent No. 1, was not competent to make the impugned order. The High Court held that Shri Rana was authorized to sign on behalf of the President, and this finding was not contested further in the Supreme Court.4. Conformity of the order with Article 77 of the Constitution:The High Court found that the impugned order was in conformity with Article 77 of the Constitution, which requires that all executive actions of the Government of India shall be expressed to be taken in the name of the President. This finding was upheld by the Supreme Court.5. Violation of Articles 14, 19(1)(f) and (g), and 20(3) of the Constitution:The appellants did not press this ground in the High Court in view of an earlier decision of the Supreme Court but reserved the right to agitate the question in appeal. The Supreme Court did not address this issue in detail as the appeal was allowed on other grounds.6. Territorial jurisdiction of the High Court:The High Court overruled the objection relating to territorial jurisdiction, and this finding was not contested further in the Supreme Court.Conclusion:The Supreme Court allowed Civil Appeal No. 1452 of 1971, set aside the judgment of the High Court, and quashed the impugned order. The Court held that the impugned order did not satisfy the requirements of section 19(2) of the Foreign Exchange Regulation Act, 1947, due to lack of due application of mind. Civil Appeal No. 1453 of 1971 was dismissed as infructuous. The records in question were to be returned to the appellants after a month unless another order was made under section 19(2) of the Act or other provision of law.