.AGRAWAL TRADING CORPORATION & ORS. versus COLLECTOR OF CUSTOMS AND ORS.

This is an appeal by certificate under Article 133 ( 1) (b) of the Constitu!ion against the judgment of the Calcutta High Court which dismissed an appeal from an order of the single Judge of that Court discharging a rule granted by it to the appellants calling on !he respondents-tire Collector of Customs and others-to show cause why certain orders under various sections of ithe Sea Customs Act and the Foreign Exchange Regulation Aot should not be quashed and why a writ!en complaint made by the r~spondents. under tire Foreign Exchange Regulation Ac.t and the case pending in the Court of the Presidency Magistrate, Calcutta, should not be stayed.

p. 87, margin A

The appellant is a registered partnership firm carrying on business of importers, exporters, commission agents, brokers and p;eneral merchants. It consists of two partners, Girdhari Lal Gupta and Pooran Mal Jain. On the 25'.h October 1958, tire Cashier of, the appellant-Bhag\Vandeo Tiwari handed over a consignment of wooden case to the Swiss Airways at Oum Dum Airport for being sent by air freight to Hongkong. According to the consignment note, the consignment was bein)1; sent by one Ramghawan Singh of Kamani Mansions, Park Street, Calcutta, who in fact was a fictitious person. The Shipping Bill showed !hat the consignment purported to contain Rassogolla, Achar, Papar and dried vegeta~es and it was being sent to one Ishwar Lal; 41, Wyndham St., Hongkonii: who is also alleged to be a fictitious person. After the consignment was accepted and when the Customs examined it for clearance on 25th October 1958 before i!s onward despatch to Honl!;kong, ithere was found concealed in a specially made secret cavity on the bat~ns nailed to the inner

p. 87, margin C

sides of the case, Indian currency notes of Rs. S 1,0001 •. An in\'estigation was set on foot and on 22nd January 1959 a search warrant was issued by the Presidency Magistrate, pursuan! to which the Customs Officers caused a search to be made of the office of the firm and the residences of the appellant's partners. In the course of search account books and other documen!s were

p. 87, margin E

seized. This investigation revealed that the Cashier, Bhagwandeo Tiwari had signed the consignment note as Ramchandra which, as the subsequent writings showed, were in his hand. Even the consignment note appears to have been typed on the typewriter of the appellant firm. It was further alleged that from a compa• rison of the consignment no~ with a letter admittedly sent out by the appellant firm and signed by one of its partners, Girdhari Lal Gupta, it became evident that the slip seized from the office of the appellant firm had contained entries, to show that Bhagwandeo Tiwari was tho person who actually transported and booked the oflendinp; consignment in question and that he 111ade an entry of Rs. l..23.73 being the Air freight paid for its transport to Hongkong which was the exact amount shown on the consignment the account slip was in his handwriting, and that the expenses note. Bhagwandeo Tiwari, it was said, had in fact admitted that and charl(es shown therein were also found in the books of account of the appellant firm. In view of this evidence, the customs awthorities served a natice on the appellant firm on April 2, 1959 by which after setting out in detail the aforesaid facts and after pointing out that the exportation of lindian currency out of India was in contravell'tion of section 8(2) of the Foreign Exchange Regulations Act 194 7 read with the Reserve Bank of India Noti· fication dated 27·2-1951 as specified therein, it was asked to show cause and to produce within four days of the receipt the notice, permit, if any, of the Reserve Bank of India, for export of the Indian currency and if it did not do so, it would be liable for prosecution 1mder section 23 ( 1) read with Eection 8 (2) of the Foreign Exchange Regulations Act. On 13·4-1959, the appellant firm replied to the notice denying that the firm had anything to do with the despatch of the box containing currency notes; that was not aware of any person by the name of Ramghawan Singh or Ishwar Lal, or that Bhagwandeo Tiwari had ever despatched the consignment in question or visited any Air office in connection therewith. It may be mentioned en passant that in the High Court, in the reply affidavit affirmed on 11-1-1960 to the affidavit in opposition, Girdhari Lal Gupta, one of the partners of the firm went even to extent of den}ing that Bhagwandeo Tiwari was the Cashier of the firm, notwithstanding the fact that in' the earlier reply to the show cause notice as also in the Writ Petition, it was tacitly assumed that he was the Cashier.

pp. 87–88, margin F

Apart from the criminal prosecutions that were launched against the partners, in the penalty proceedings which were initiated by the aforesaid show cause notice, the firm was held to be knowingly concerned in the offence and accordingly, a fine of Rs. 1,000/· was imposed on it under section 167(3) of the Sea Customs Act with a further personal liability of Rs. 1,000/under section 167 ( 37) of the said Act. It was further fined Rs. 51,000/- under section 167(8) of the Act read with sei;tion 23 (I ) of the Foreign Exchange Regulations Act. Apart from these fines, the currency notes of Rs. 51,000/- which were seized wen confiscated.

p. 88, margin F

This order was challenged before the. single Julge of the Calcutta High Court who, as already stated, had issued a rule but later discharged it. Against that order an appeal was filed but that also was dismissed. Of the four points that were urged in that appeal, the first three have been reiterated before us behalf of the appellant. viz. :- (1) Currency notes are not 'goods' and ilierefore the provisions of section 167(3), (8) and (37)

pp. 88–89, margin H

of the Sea Ctistoms Act are not attaroted; (2) A 'firm' is not a legal entity and therefore it cannot be a 'person' within the meaning of any

p. 89, margin B

of the above provisions of law; (3) Even if a firm be a person within the meaning ot the said provisions no penalty can be imposed on 1te firm or any of its members unless it appears from the evidence that the members of the firm had consciously taken any steps to violate the provisions of law; even so only the particular member a~ whom there is evi·

p. 89, margin B

dence of guilt can be held liable.

p. 89, margin D

Before dealing with the above contentions it will necessarY to consider the relevant provisions of ~he Foreign Exchange Regulations Aot · as also those under the Sea Customs Act, Sections 8(1), 23(a), (b), (IA), 23A, 23B and 23C of the Foreign Exchange Regulations Act and section 19, 167(3), (8) and (37) of the Sea Customs Act are relevant for •the purpose of this appeal. These are ~iven below :- "8(1). The Central Government may, by notification in ~he Official Gazette, order that, sub.iect to such exemptions, if any, as may be contained in the notification, no person shall, except with the general or special permission of the Reserve Bank and on payment of the fee, if any, prescribed bring or send into India any gold or silver or any currency notes or bank notes or

p. 89, margin D

coin whether Indian or forei)!n. ,

p. 89, margin G

Explanation-The bringing or sending into any port or place in India of any such article as aforesaid inttnded \Q be taken out of India without being removed from the ship or conveyance in which it is being

p. 89, margin G

carried shall nonetheless be deemed to be a bringing, 7-864Supcl(72

p. 89, margin H

[1972) 3 or as the case may be sending, into India of that article for the purposes of this sec!ion.

p. 90

(2) 23 (I). If any person contravenes the provisions of section 4, section 5, section 9 or sub-section (2) of section 12 or of any rule, direction or order made thereunder, he shall - (a) be liable to such penalty not exceeding three times the value of the foreign exchange in respect of which the contravention has taken place, or five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement

p. 90, margin A

in the manner hereinafter provided, or (b) upon conviction by a Court, be punishable with imprisonment for a term which may extend to two years, or with fine, or

p. 90, margin C

with both. 23(1A) Whoever contravenes - (a) any of the provisions of this Act or of any rule, direction or order made thereunder, other than those referred to in subsection (1) of this section and section 19 shall, upon conviction by a court. be punishable with imprisonment for a lel"m which may extend to tw0 years, or with

p. 90, margin D

fine or with both; (b) any direction or order made under section 19 shall, upon conviction by a court, be punishable with fine which mav extend

p. 90, margin E

to two thousand rupees. 23A. Without prejudice to the provisions of section 23 or to any other provision contained in this Act, the restrictions imposed by subsections (1) and (2) of section 8, sub-section (1) of section 12 and clause (a) of subsection (1) of section 13 shall be deemed to have been imposed under section 19 of the Sea Customs Act, 1878 (8 of 1878), and all the provisions of that Act shall have effect accordingly except that section 183 thereof shall have effect as if for the word 'shall',

pp. 90–91, margin F

therein the word 'may' were substituted. 23B. Whoever attempts to contravene any of the provisions of ·this Act or of any rule, direction or order made thereunder shall be deemed to have contravened that provision, rule, direc-

p. 91, margin A

tion or order, as the case may be: 23C(l) If t:he per~n committing a contri¥vention: is a company, every person who, at the time the Cl>ntravention was committed, was incharge of, and was responsible, to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly :

p. 91, margin B

Provided that nothing contained in this sub-section shall render any such person liable to punishment, if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such

p. 91, margin D

contravention. (2) Notwithstanding anything contained in subsection (1), where a contravention under this Act has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be

p. 91, margin D

proceeded against and punished accordingly''. Customs Act : "19. The Central Government may from tiine to tiine, by notification in the official Gu.etlle, prohibit or restrict the bringing or taking by sea or by land goods of any specified description into or out of India across ·any customs

p. 91, margin F

frontier as defined by the Central Government.

p. 91, margin G

167. The offences mentioned in the first column of the following schedule shall be punishable to the extent mentioned in the third column of the same with reference to such offences res- A pectively :of to

pp. 91–92, margin H

offe· I 2 If any person ship or land or General such shall ~d lo a not one

p. 92

thousand rupees.

p. 92

or any goods landed, or to

p. 92

of c if person found to on of any to cou&<ation

p. 92

of of under of section,

p. 92

of · a landing of goods. If any goods, the importation or such aoods shall lia· exportation of for

p. 92

prohibited or restricted and E under Chapter of im· ported into or exported India

p. 92

shall

p. 92

to a if attem~ value or or

p. 92

one thou·

p. 92

rupees. F if such goods found

p. 92

produced to of Customs as no such aooda; or if any sncb aoods, or aoods,

p. 92

found either G or to any manner on of any or if '-oods, exportation of prohibited or restricted as aforesaid, H brouahl to wharf to

p. 92

on 6olrd of for lion to problbillon or mtriclion.

p. 92

I 2

p. 93

that-

p. 93

to

p. 93

to of

p. 93

A perusal of these provisions would show that no gold or silver or any currency no~ or Bank notes or coin, whether

p. 93

Indian or foreign, can be sent to or brought into India, nor can any gold, precious stones or Indian currency or foreign-exchange other than foreign exchange obtained from an authorised dealer can be sent out of India without the general or special pennission of the Reserve Bank of India. These restrictions by virtue of section 23A of the Foreign Exchange Regulation Act are deemed to have been imposed under section 19

p. 93

of the Sea Customs Act and all the provisions of the latter Act shall have effect accordingly, except seC'tion 183 thereof shall have the effect as if for the word 'shall' !herein the word 'may' were substituted. What section 23A does is to incorporate by reference thn provisions of the Sea Customs Act by deeming ~he restrictions under section 8 of the Foreign Exchange Regulation Act to be

p. 93, margin F

prohibitions and restrictions under section 19 of the Sea Customs H Act. The contention is 'that since section 19 restricts the bringing or talcing by sea or by land goods of any specified description into or out of India, these restrictions are not applicable to the bringing in or taking out the currency notes which are not goods within the meaning of that section, and, therefore, the appellant is not guilty of any contravention of section 19 of ithe Sea Customs Act and cannot be subjected to the penal provisions of the said Act. This ar.gument, in our view, is misconceived, because firstly, it is a well accepted Legislative praotice to incorporate by reference, if the Legislature so chooses, the provisions of some other Act in w far as they are relevant for the purposes of and in furtherance of the scheme and objecls of that Aot and secondly, that merely because the restriotions specified in section 8 of the Foreign Exchange Regulation Act are deemed to be prohibitions and restri.ctions under section 19 of the Sea Customs Act, those prohibitions and restrictions are not necessarily confined to goods alone but must be deemed for the purposes of the Foreign Exchange Regulation Act to include therein rei!rictions in respect of the articles specified in section 8 thereof, including currency notes as well. The High Court thought that there is no definition of goods in the General Clauses Act and that contained in the Sale of Goods Act which excludes money is inapplicable inasmuch as that Act was a much later statute than the Sea Customs Aot· It is, however, unnecessary to consider this aspect because even if ·!he currency notes are not goods, the restrictions prescribed in section 8 of the Foreign Exchange Act cannot be nullified by section 23A thereof which incorporates section 19 of the Sea Customs Act. We cannot attribute to the Legislature the intention to obliterate one provision by another provision of the same Act. On the other hand, we construe it as furthering ithe object of the Act whiCh is to restrict the import into Or export out of India of currency notes and to punish contraventions of such res!rlctions.

pp. 93–94, margin G

The second contention that because the firm is not a legal entity, it cannot be a person within the meaning of Section 8 of the Foreign Exchange Regulation Act or of section 167 (3), (8} and· (37) of :he Sea Customs Act, is equally wrtenable. There is of course, no definition of 'person' in either of these Acts but the definition in section 2 (42) of the Genera,! Clauses Act 1897, or section 2(3} of the Act of 1868 would be applicable to the said Acts in both of which 'person' has been defined as including any company or associatioo or body of individuals whether incorporated or not. It is of course contended that this definition does not apply to a firm which is not a na:tural person and has no legal existence, as such clauses ( 3) , ( 8) and ( 3 7) of section 167 of the Sea Customs Act are inapplicable !O the appellant firm. In our_ view, the explanation to section 23C clearly negatives this contention, in that a company for the purposes of that section i5: defined to mean any body corporate and includes a firm or otherassociation of individuals and a Director in relation to a firm means a partner in the finn. The High Court was clearly right in holding that once it is found that there has been a contravention of any of th.e provisions of the ForeiAD Exchange Regulation Act read with Sea Customs Act by a finn, the partners of it who are in-charge of its business or are responsible for the conduct of the same, cannot escape liability, unless it is proved by them that ·!he contravention took place without their knowledge or they exercised all due diligence to prevent such contravention.

pp. 94–95, margin E

There is, also no warrant for the third submission that unless it appears from the evidence that members of the finn had consciously taken any steps to viola!e the provisions of law and even then only the particular members against whom there is evidence Of guilt, can alone be held liable. This contention was said to be based on a decision of this Court in Radha Krishlln Bhatia v. Union of India and others,(') that as the 'person concerne4' specified in section 167 ( 8) of the Sea Customs A" is the persdb actually involved or engaged or mixed up in conttavelliq tbe restrictions imposed under the Foreign Exchange Act or IJte S.. Customs Act, he must be the person who must be sllown to be actually concerned. That was also a case under section 167 ( 8) of the Sea Customs Act where, in fact, a number d. gold bars held to be smuggled were recovered from the · person of the appellant. The single Bench of the Punjab , lfigh : Court hid allowed the Writ Petition of the appellant on .ftle· l!Qlllif that die Collector had not recorded a finding that the ajlpdlant was connected with the act of smuggling gold into the country. This finding was set aside on a Let+.ers Patent Appeal and the writ l>Ctition was dismissed. This Court held that the concern of the appellant in the commission of the offence must be at a stage , J)rior to the compje~on of the offence of illegal importation of; gold into the country. The mere finding of fact recorded bf; the Collector of Customs about the smuggled· ~Id being rec0vere1f from the person of the appellant was not sufficient to concl~ that the appellant was ooncerned in the illegal importation al goJil::: into the country and, therefore, liable for penalty under _.. tion 167 ( 8 ) of the Act. What the order of the Collecb- of

p. 95, margin B

Customs must show is that he had considered thc·question o~ tile person being concerned in the commission of the offence ol. ille~al importation. of the p.oods. It should further indicate that the matters he had considered had a bearing on the question a,nd the reasons for his arriving at that conclusion. This has really no bearing on the question before us because under section 23B, even ail attemp! to contravene any of the provisions of the Act or of any rule, direction or order made thereunder shall be deemed to have contravened that provision, rule, direction or order as the case may be. In respect of this very incident where the petitioo:iers were prosecuted i! was held by this Coun in Girdhari Lal Gupta and another v. D. N. Mehta, Assistant Collector of Customs and another,(') that Girdhari Lal Gupta, one of the itwo partners and B~andeo Tiwari, Cashier, have been rightly convicted under the provisions of !he Foreign Exchange Regulation Act for contravention of the restrictions imposed under section 8 ( 2) read wiih section 23(1A) of the Foreign Exchange Regulation Acl In that case it was contended that there is no evidence to show that the contravention took place with the knowledge of Girdhari Lal Gupta or that he did not exercise due diligence to prevent such contravention. That contentiOD was negatived because he had not only stated under section 342, that he alone looks-after 1the affairs of the firm but it had been found that there were entries in his acco11nt books. It is itrue, that tbt relevant provisions of the Sea Customs Act are penal in character and the burden of proof is on the Customs authorities to bring home the guilt to 1he person alleged to have committed a particular offence under the said Act by adducing satisfactory evidence. But that is not to say that the absence of direct evidence to connect a person wilh tho offence will not attract the penal provisions to establish the guilt in a criminal proceedmg ol the type which the customs authorities have to take. The evidence of the kind which has been adduced in this case would bie sufficient to lead to the conclusion that the partner of the firm was interested in or involved iin attempting to export Indian currency notes out of India. As observed by this Conn in Thomas Dana v. The State of Punjab('). while dealing with section 167 of the Sea Customs Act, that "All criminal offences 'are offences but all offences in the sense of infringement of law are not criminal offences. Likewise, the other expressions have been: used in their generic sense and not as the)' are understood in the Indian Penal Code or other laws relating to criminal offences. . . . Out of more than 82 entries in the schedule to section 167, it is ooly about a dozen entries which contemplate prosecution in the crirnitial sense, the remaining entries contem.plate penalties other than punishments for a criminal offence".

pp. 95–96, margin F

In the Additional Collector of Customs v. Sita Ram Agarwal('), to which the High Court has referred, while dismissin11: the _appeal from the judgment of the Calcutta High Court, this Court had stated that "the High Conn was right when--!it observed that if any one is interes!ed or consciously takes any step whatever to promote the object of illegally bringing bulljon into the country, then even if no physical connection is established between him and the !hin11: brought, he will be guilty." In thl!t case, the respondent, Sita Ram Agarwal who was seen moving in the company of one Bhola Nath Gupta on the western pavement of J atindra Mohan Avenue, Calcutta, had proceeded in the direction of a taxi which had come to the place where they were, and on a sigrial being flashed, a Chinese national alighted therefrom, shook hands, with the respondent after which all the three boarded the taxi. A police constable who was on the spot raised an ala_rm and secured the respondent and his companion with the help of the members of the public. All of them were taken to th~ police station for the purpose of interrogation but the Chinese national tried to get away and started to run. He was chased and eventually secured. Before his apprehension, . however, he was seen to drop three packets which were found to contain ?.3 bars of illicit gold. The respondent was charged as a person concerned in the off~nce of attempting to import contraband gold' under sec!ion 167(8) of the Sea Customs Act. The High Court while holding that there was no evidence to establish that he was in conscious relation with the gold, observed, "in order ithat a person may be said to be'ro concerned, some

pp. 96–97, margin F

facts have to be proved which will es!ablish that he was in conscious relation with the gold in one or other of the several successive steps preceding its actual receipt into the country''. In order <that he was concerned in the offence, <;he High Court further winted out that there need be no physical connection between the J!Old and the person charged and "if the offence did not relate to his being concerned in ·'1le importation of the gold, but related to his having something to do with smuggled gold, the l>OSition might have been different''. The facts of •the instant case clearly disclosed, as was observed by the High Court, "a well laid plan". We have earlier stated that the currency notes were secreted in a cavity and were sought to be despatched out of the country in a package which ostensibly looked inocuous, containing eatables. The manner in which the attempt was made was to hood-wink the Customs officials and escape their detection. Further, the consignor and the consignee were not shown as real persons but were fictitious so that even if the a!tempt to smuggle out of the country the currency nates was detected, the real persons could not be traced. The charges and expenses incurred in connection with the despatch found in tthe entries in the books of account of the firm were the same as those relating to the offending package which was being despatched to Hongkong. The freight mentioned in ithe account slip is the exact amount which appears on the consignment note in respect of that offending package. The amount sough! be sent is half a lakh of rupees which can hardly be within the means of the Cashier, leading to the inescapable Inference that the firm through its partners was concerned in the attempt to transl!Iess ithe restrictions under section 8 of the Foreign Exchange Regulation Act and liable to penal action by virtue of section 23A under !he provisions of the Sea Customs Act. On these facts as A eatablished, the IDgh Court caine to the conclusion and in our view rlditly, that it was not unreasonable to infer that it was the finn which was interested in sending !he currency notes out of India in a clandestine ~r.

pp. 97–98, margin C

In this view, the appeal has no merits and it is dismissed with costs. S.N. Appeal dismissed.

p. 98