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1985 DIGILAW 394 (DEL)

DARSHAN LAL v. UNION OF INDIA

1985-10-18

MALIK SHARIEF-UD-DIN, R.N.AGGARWAL

body1985
AGGARWAL, J. ( 1 ) BY this petition, under Art. 226 of the Constitution the petitioner Darshan Lal Sehgal has challenged the legality and validity of the order of detention dt. 25th April 1985 passed against him by Shri K. K. Dwivedi, Joint Secretary to the Government of India, under S. 3 (1) of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974. The detention order was passed with a view to preventing the petitioner from acting in any manner prejudicial to the augmentation of the foreign exchange. ( 2 ) THE Enforcement Directorate received secret information that the petitioner was indulging in unauthorised sale and purchase of foreign exchange at a large scale under the cover of having money changer licence at village Mehram Nagar, opposite Palam Airport, New Delhi. The information further was that the petitioner was buying foreign exchange from various passengers and porters at the Airport and selling the same on a premium to different persons. ( 3 ) ON the above information, a search was conducted on 14th Feb. , 1985 at the business premises at 8/10, Mehram Nagar, opposite Palam Airport, New Delhi, and residential premises at G-73, Bali Nagar, Delhi. As a result of the search of the business premises the following foreign currency and Indian currency were seized: SINGAPORE $ 110 u. S. $ 209 saudi Riyal 645 u. K. 11 qatar Riyals UAE dirhams 540 Bahrain Dinar 5 thai Bhat 80 Pak Rs. 1448 rs. 14,200 ( 4 ) THE search of the residential premises resulted in the recovery and seizure of documents and Pakistani Rs. 7180/ -. ( 5 ) THE petitioner was interrogated. The petitioner stated that he was the proprietor of M/s. Pawan Deep Sehgal and Co. at 8/10 Mehram Nagar, Opposite Palam Airport and he had the licence from the Reserve Bank of India for dealing in foreign currency/pakistani currency and that he had purchased the dollars on 11th Feb. , 1985 and Saudi Riyal on 12th Feb. , 1985 and these purchases were made by him as an authorised money changer licence holder and the said transactions are reflected in the books seized from him, and that the remaining foreign currencies were purchased by him on the morning of 14th Feb. , 1985 from a person whom he did not know personally. Regarding the Pakistani Rs. , 1985 and these purchases were made by him as an authorised money changer licence holder and the said transactions are reflected in the books seized from him, and that the remaining foreign currencies were purchased by him on the morning of 14th Feb. , 1985 from a person whom he did not know personally. Regarding the Pakistani Rs. 7180/- the petitioner stated that out of Pakistani Rs. 7180/- Rs. 6895/- were received by him in the capacity of money changer licence holder issued to him at Ballimaran, Chandni Chowk, Delhi and at 8/10, Mehram Nagar, opposite Palam Airport, New Delhi, by the Reserve Bank of India, and that the said amount is reflected in the sale purchase Register and cash memo concerning Pak currency. The petitioner further stated that the balance amount of Rs. 285/- was purchased by him from different persons, loaders, etc. The petitioner further explained the various entries made in the loose sheets and the note book recovered from him during the search. The petitioner admitted to have sold and purchased the foreign currencies mentioned in the note book and the exercise book. ( 6 ) ON 14th Feb. , 1985 the petitioner was arrested under S. 35 (1) of the Foreign Exchange Regulation Act, 1973 for contravention of S. 8 (1) and 8 (2) of Foreign Exchange Regulation Act, 1973 by the Enforcement Directorate. The petitioner was released on his furnishing a personal bond in the sum of Rs. 1 lakh with one surety in the like amount. ( 7 ) ON 25th April 1985 the impugned order was passed. ( 8 ) THE contention of Mr. Sibal, learned counsel for the petitioner, is that the petitioner holds three money changer licences and that two licences are in the name of his firm M/s. Bharat Deep and Co. , 5246 Ballimaran, Chandni Chowk, and these licences are for the purchase and sale of Pakistani currency notes and coins and the third money changer licence dt. 16 July, 1984 valid up to June 30, 1987, is in the name of M/s. Pawan Deep Sehgal and Co. for exchange of all types of foreign currency at the shop No. 8/10, Mehram Nagar, opposite Palam Airport, New Delhi, and that Smt. Kailash Sehgal, the wife of the petitioner, is the sole proprietor of M/s. Pawan Deep Sehgal and Co. for exchange of all types of foreign currency at the shop No. 8/10, Mehram Nagar, opposite Palam Airport, New Delhi, and that Smt. Kailash Sehgal, the wife of the petitioner, is the sole proprietor of M/s. Pawan Deep Sehgal and Co. and that all the purchases and sales of foreign currencies were made by the petitioner under the general licences in the name of M/s. Pawan Deep Sehgal and Co. He further contended that the Pakistani currency was changed under the licences issued in the name of M/s. Bharat Deep and Co. at shop No. 8/10, Mehram Nagar, opposite Palam Airport. Shri Sibal contended that the purchases and sales of various foreign currencies were made by the petitioner under the money changer licences granted by the Reserve Bank of India and thetransactions are legal. ( 9 ) SHRI Mehta, learned counsel for the respondents, contended that the petitioner was granted only restricted money changer licence and that under the memorandum of instructions to restricted money changers the restricted money changers can accept payment in foreign currency notes/coins or travellers cheques only to the extent necessary to meet cost of goods and/or services supplied/rendered to the customers and that they are not permitted to accept foreign currency from any person for conversion purposes. He further referred to para 18 of the memorandum of instructions and contended that a restricted money changer is not permitted to sell foreign currency notes and coins to the public. Mr. Mehta contended that the petitioner had been purchasing and selling foreign currency and that was clearly in violation of the terms of the licence. ( 10 ) WE have carefully gone through the grounds of detention and we find that the detention order was not passed on the ground that the petitioner had violated the terms/conditions of the licenses granted to him. There is not the faintest suggestion in the grounds of detention that the licence granted to the petitioner is restricted licence and he has violated the terms of that licence. Para 17 of the grounds of detention shows that the detention order has been made allegedly on the alleged admission by the detenu that he has been dealing in unauthorised sale and purchase of foreign currencies. Para 17 is important and it reads as under: "you have admitted that you have been dealing in unauthorised sale and purchase of foreign currencies since Oct. Para 17 is important and it reads as under: "you have admitted that you have been dealing in unauthorised sale and purchase of foreign currencies since Oct. , 1984 till date and that the foreign currencies so purchased and sold unauthorisedly other than in your capacity as money changer licence are mentioned in the exercise book, note book and lopse-sheets seized from your business and residential premises. " ( 11 ) FROM the above it is clear that the detention order is mainly based on the alleged admission of the petitioner that he has been dealing unauthorisedly in the purchase and sale of foreign currencies. The detention order is not based on violation of any of the conditions of the licence granted to the petitioner. ( 12 ) MR. Sibal referred to S. 8 (1) and 8 (2) of the Foreign Exchange Regulation Act, 1973 and contended that the petitioner under his licence was fully competent to convert Indian currency into foreign currency or foreign currency into Indian currency. S. 8 (1) and 8 (2) of the Foreign Exchange Regulation Act read as under: "8. Restrictions on dealing in foreign exchange.- (1) Except with the previous general or special permission of the Reserve Bank, no person other than an authorised dealer shall in India, and no person resident in India other than an authorised dealer shall outside India, purchase or otherwise acquire or borrow from, or sell, or otherwise transfer or lend to or exchange with, any person not being an authorised dealer, any foreign exchange. Provided that nothing in this sub-section shall apply to any purchase or sale of foreign currency effected in India between any person and a money changer. Explanation.- For the purposes of this sub-section, a person, who deposits foreign exchange with another person or opens an account in foreign exchange with another person, shall be deemed to lend foreign exchange to such other person. (2) Except with the previous general or special permission of the Reserve Bank, no person, whether an authorised dealer or a money changer or otherwise, shall enter into any transaction which provides for the conversion of Indian currency into foreign currency or foreign currency into Indian currency at rates of exchange other than the rates for the time being authorised by the Reserve Bank. " ( 13 ) IT is clear from a reading of sub-sec. " ( 13 ) IT is clear from a reading of sub-sec. (2) that a person authorised by the Reserve Bank can convert Indian currency into foreign currency and foreign currency into Indian currency at rates of exchange authorised by the Reserve Bank. ( 14 ) IT is not disputed that the petitioner possesses the money changer licences. The allegation is that he was indulging inunauthorised sale and purchase of foreign currency on a regular basis. The contention of the petitioner is that he was purchasing and selling foreign currencies under the licences granted to him. We find no allegation in the grounds of detention that the petitioner was indulging in the purchase and sale of foreign currency in violation of the terms/conditions of the licences granted to him. ( 15 ) WE find that the grounds of detention are vague. The detaining authority has not in the grounds of detention spelt out the reasons by which it has formed the opinion that the detenu is indulging in unauthorised sale and purchase of foreign currency. The detaining authority should have specified the breaches of the conditions of the licence committed by the detenu and supported them by referring to the available material. ( 16 ) IN the above view we hold that the detention order cannot be sustained. We allow the petition and quash the order of detention. Petition allowed.