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Non-Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.11127 OF 2011

Jatin C. Jhaveri          ….Appellant

Versus

Union of India      …. Respondent

WITH  

CIVIL APPEAL NOS.11128-31 OF 2011

Union of India          ….Appellant

Versus

Jatin  C. Jhaveri, etc.   …. Respondents

J U D G M E N T  

Uday U. Lalit, J.

1. These appeals arise out of common judgment and order dated

19.10.2010  passed  by  the  High  Court  of  Judicature  at  Bombay  in

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FERA Appeal Nos.64-66 of 2006 & in Writ Petition No.2976 of 2004.

The  challenge  in  Civil  Appeal  Nos.11128-11131  of  2011  at  the

instance  of  Union  of  India  is  to  the  decision  of  the  High  Court

dismissing  FERA  Appeal  Nos.64-66  of  2006  while  Civil  Appeal

No.11127 of 2011 filed by one Jatin Jhaveri challenges the dismissal

of his Writ Petition No.2976 of 2004.

2. The facts leading to these appeals are as under:-

A.  On the  night  intervening  27th and  28th July,  1993,  one  Ajit

Dodia intending to board a flight  to Hongkong from Mumbai,  had

checked in a grey suitcase and a black briefcase. On suspicion, the

Custom Officers searched the baggage and found the suitcase to be

containing US $ 289,250 while the brief case contained US $ 114,300.

The currency was seized and Ajit Dodia was questioned. He disclosed

that  he was to accompany Jatin Jhaveri,  a  diamond trader, that  his

brother Jitendra Dodia was working with Jatin Jhaveri  as a sorter, that

his trip was finalized and arranged by Jatin Jhaveri who had driven

him to the Airport.  In his statement Jitendra Dodia confirmed that he

was  working  with  Jatin  Jhaveri  and  that  he  and  Jatin  Jhaveri  had

packed US dollars in bundles in the evening. However Jatin Jhaveri

was not available for next two months i.e. till 27.09.1993.

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B. In his statement dated 12.10.1993, Jatin Jhaveri confirmed that

he was to accompany Ajit  Dodia to Hongkong on the relevant date

and that he had handed over his suitcase to Ajit  Dodia who in turn

was to hand it over to the brother of Jatin Jhaveri at Hongkong. He

however denied ownership of the currency in question and also stated

that he had nothing to do with the briefcase. He repeated in writing to

stress the point saying “It does not belong to me”. This incident led to

initiation of proceedings under Clauses (d), (e) and (i) of Section 113

of the Customs Act, 1962 proposing penalty as well as confiscation of

the currency.   

C. In defence,  Jatin  Jhaveri  now contended that  he had been to

USA in June 1993 and had entered into contract for supply of polished

diamonds and that in pursuance of the contract he had received US $

289,250. According to him, his baggage that arrived along with him

on 25.06.1993 had contained US $ 254,000 while other bag which

arrived three days later  on 28.06.1993 contained remainder namely

US  $  35,250.   In  support  of  his  claim,  reliance  was  placed  on

Currency Declaration Form No.100250 dated 25.06.1993 in respect of

US  $  254,000  and  Currency  Declaration   Form  No.10763   dated

28.06.1993  in   respect   of   US  $  35,250.  According to  him the

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currency  was  obtained  and  imported  by  him  as  advance  payment

towards supply of diamonds, that he could not deposit the currency in

the bank as the bank had refused to accept the same and therefore he

was proposing to take it along with him to Hongkong on 27.07.1993.

It was his further case that while he was going towards the Airport he

had received a message that his mother was ill and that Ajit Dodia was

intercepted with currency and therefore he did not go to the Airport.

D. Commissioner  of  Customs  by  his  order  dated  30.08.1995

concluded that the currency was being taken by Ajit Dodia illegally.

He  found  that  Jatin  Jhaveri  had  played  a  major  role  and  made

available the currency in question and had also packed and concealed

the  same  in  the  baggage  of  Ajit  Dodia.   As  regards  Currency

Declaration Forms,  it was observed:

“Shri  Jatin  C.  Jhaveri  has  come  forward  with  two Currency, Declaration Forms dated 25.6.93 and 28.6.93 to  substantiate his claim that this currency was legally imported into India,  when he had come from USA on 25.6.93 with US $ 2,59,250/- and made this declaration before the Customs on his arrival.  Had these currency declaration forms been with Shri Jatin Jhaveri then in the normal course, they should have been found along with the foreign currency only and these receipts should have been recovered during the search of the office/residential premises of Shri Jatin Jhaveri.  He ought to have come forward  before  the  Customs  Officers  on  the  night  of 27th/28th July, 1993    after it was seized at the time of its smuggling  out.   He  did  not  do  so.   He  was  also

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specifically questioned in the statement on 12.10.93 and he had made a statement claiming that the seized foreign currency, did not belong to him.  Thus, he had disowned the currency seized from the baggage of Shri Ajit Dodia. Further  no  plausible  explanation  or  reason  has  been offered  by  him as  to  what  prevented  him from going abroad on 27th /28th July 1993.  Had these currency been legally brought into India, Shri Jatin Jhaveri would have perhaps himself checked the baggage through Customs, but the fact that he left to be checked and cleared through Customs by Shri Ajit Dodia itself indicate that he did not have any honest design of flying abroad on that night and that he did not have any legal documents for possession of these currency”.  

In the premises, he ordered confiscation of foreign currency of

US $ 403,550 (US $ 289,250 recovered from the suitcase and US $

143,300 from the Brief case).  He also imposed penalty of Rs.10 Lacs

on Jatin Jhaveri and of Rs.3 lacs on Ajit Dodia and of Rs.2 lacs on

Jitendra Dodia.

E. A Show Cause Notice dated 21.11.1997 was thereafter issued

by  Directorate  of  Enforcement,  Mumbai  for  contravention  of

provisions  of  Section  8(1)  read  with  64(2)  of  Foreign  Exchange

Regulation Act, 1973 (herein after referred to as FERA).

F. On 27.11.1998 Appeal Nos.C/537/95-Bom, C/576/95-Bom and

C/577/95-Bom  preferred  by  Jatin  Jhaveri,  Ajit  Dodia  and  Jitendra

Dodia  against  the  order  of  the  Commissioner  of  Customs  were

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disposed by the Customs Excise and Gold Control Appellate Tribunal

(CEGAT, for  short),  West  Regional  Bench,  Mumbai.   It  held  that

though Jatin Jhaveri had disowned the currency in his statement dated

12.10.1993, it did not mean that he had forfeited the ownership and

could  not  make  a  claim  in  respect  thereof  at  a  later  stage.  The

concerned  Currency  Declaration  Forms  according  to  CEGAT

sufficiently  proved  that  the  currency  was  brought  in  by  said  Jatin

Jhaveri. It however held that the currency amounting to US $ 289,250

was  sought  to  be  unauthorisedly  exported,  and  was  liable  to

confiscation but imposed fine of Rs. 9 lacs in lieu of confiscation of

US $ 289,250. The personal penalty imposed on Jatin Jhaveri was also

reduced from Rs.10 lacs to 7 lacs.  In so far as currency amounting to

US $ 143,300 was concerned, since no one made any claim in respect

thereof,  the  confiscation  was  confirmed  but  the  personal  penalty

imposed on Ajit Dodia was reduced to Rs.1 lac.  As regards Jitendra

Dodia, it was observed that he had dissociated himself and the role

attributed to him was also limited to packing the bag. This decision

rendered  by  CEGAT was  not  challenged  and  attained  finality  in

respect of proceedings under the Customs Act.

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G. Thereafter  an addendum dated 06.08.1999 was issued by the

Directorate  of  Enforcement,  Mumbai  to  the  earlier  Show  Cause

Notice dated 21.11.1997 as to why the currency in question be not

confiscated under the provisions of FERA.

H. The  proceedings  so  initiated  under  FERA culminated  in  an

order  dated  04.10.1999  passed  by  the  Special  Director  of

Enforcement,  Mumbai.  He  observed  that  in  his  statement  dated

12.10.1993  Jatin  Jhaveri  had  emphatically  denied  having  any

connection with the seized currency and there was no whisper in the

statement  that  any part  of  that  currency was brought  by him from

USA which represented advance payment towards export or that he

was in possession of relevant Currency Declaration Form in support

of his claim. He found that the Immigration/Embarkation Card of Ajit

Dodia was admittedly filled in by Jatin Jhaveri which indicated that he

was  physically  present  at  the  Airport  along  with  Ajit  Dodia.  As

regards  genuineness  of  the  Currency  Declaration  Forms,  he  relied

upon the observations made by Commissioner of Customs, Mumbai in

adjudication  order  dated  30.08.1995  as  quoted  above.  The  Special

Director concluded as under:-

“From  the  evidence  discussed  above,  only  irresistible conclusion  forthcoming  is  that  the  entire  foreign

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exchange of US $ 403, 550 seized from Shri Ajit Dodia by  the  Air  Customs,  Mumbai  was  in  fact  illegally acquired by the said Shri Jatin Jhaveri, as indicated in the impugned SCN and then transferred to Shri Ajit K. Dodia for  its  onward  transfer  to  his  (Shri  Jatin’s)  brother  in Hongkong. Similarly, the notice, Shri Ajit Dodia has in fact otherwise acquired the said foreign exchange of US $ 403,550 from Shri Jatin Jhaveri, a person other than an Authorised Dealer in Foreign exchange in India, which was  later  on seized by the Air  Customs Officers  from Shri Ajit Dodia on 28.07.1993 under the panchanama. It is  equally  abundantly  crystal  clear  that  Shri  Jitendra Dodia has in fact aided and abetted said Shri Jatin Jhaveri in  transferring  and  his  brother  Shri  Ajit  K.  Dodia  in acquiring  the  aforesaid  foreign  exchange  of  US  $ 403,550 from said Shri Jatin Jhaveri. All the three notices viz. Shri Jatin Jhaveri, Ajit Dodia and Jitendra K. Dodia have  failed  to  produce  any  permission  of  the  RBI  as required  under  Sec.  8(1)  of  the  FERA  1973  for acquiring/transferring  foreign  exchange  as  indicated  in acquiring/transferring  foreign  exchange  as  indicated  in the impugned Show Cause Notice. Thus the charges of contravention of Sec. 8(1) of the FERA 1973 against Shri Jatin Jhaveri and Shri Ajit  Dodia and of Sec. 8(1) r/w Sec.  64(2)  of  the FERA 1973 against  Shri  Jitendra  K. Dodia are proved beyond any doubt. Accordingly, I hold them  guilty  of  these  respective  contraventions  against them.

 Concluding thus, the Special Director imposed penalty of Rs.30

lacs  each  on  Jatin  Jhaveri  and  Ajit   Dodia  and  of  Rs.7.5  lacs  on

Jitendra Dodia. It was held that the currency in question was liable to

confiscation under Section 63 of FERA and it was so ordered.  

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I. This  order of  the Special  Director  was challenged in Appeal

Nos.454, 462 and 463 of 1999 by Jatin Jhaveri, Jitendra Dodia and

Ajit   Dodia  respectively  before  the  Appellate  Tribunal  for  Foreign

Exchange,  which  disposed  of  those  appeals  by  its  order  dated

10.03.2004.  It accepted the appeal preferred by Jitendra Dodia and

held that he could not be held guilty of  the charge of abetment in

acquiring and transferring of Foreign Exchange unlawfully. In appeal

preferred by Ajit Dodia, the confiscation of currency amounting to US

$ 114,300 was affirmed but the penalty was reduced to   Rs.1 lac. As

regards, appeal preferred by Jatin Jhaveri, the Currency Declaration

Forms furnished by him were taken to be strong pieces of evidence. It

was observed as under:-

“Simply because of the fact that the custom authorities are not able to trace out office copies of these forms, it will  not  render these forms as not  being authentic and therefore inadmissible. It is for the respondent to prove that  these  forms  were  not  genuine.  As  regards  the confirmatory  evidence  of  overseas  buyers,  the respondents  could  have  called  them  for  cross examination, if they have any doubt the authenticity of their version.”

Allowing  the  appeal  preferred  by Jatin  Jhaveri,  the  order  of

confiscation in respect of US $ 289,250 was quashed on the ground

that the acquisition was duly explained.

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J.   The aforesaid order of the Appellate Tribunal was challenged

by Union of India represented by Director of Enforcement in the High

Court of Bombay. Writ Petition No.2976 of 2004 was also preferred

by Jatin Jhaveri in the High Court contending that he was entitled to

the release of US $ 289,250 along with interest @ 18%. The High

Court  affirmed  the  view  taken  by  the  Appellate  Tribunal  and

dismissed FERA Appeal No.64-66 of 2006 by its judgment and order

dated 19.10.2010.  It was observed that the order of CEGAT having

attained finality, that order had definite bearing on the controversy in

question and though the findings recorded in the Customs proceedings

may not be binding on FERA proceedings,   it was not possible for the

High  Court  to  take  a  different  view  in  the  matter.  By  the  same

judgment  the  High  Court  allowed  Writ  Petition  No.2976  of  2004

holding that Jatin Jhaveri was entitled to the currency amounting to

US $ 289,250 but would not be entitled to any interest thereon.

3. Jatin Jhaveri, being aggrieved in so far as rejection of prayer for

grant of interest was concerned, preferred SLP (C) No.5788 of 2011.

On  the  other  hand,  Union  of  India  preferred  SLP  (C)

Nos.26671-26674 of 2011 challenging the dismissal of FERA Appeal

Nos.64-66 of 2006. Special Leave to Appeal in all the matters was

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granted  by  this  Court  vide  order  dated  09.12.2011.  During  the

pendency  of  these  appeals,  by  order  dated  14.02.2014  passed  in

Notice of Motion No.225 of 2012 in Writ Petition No. 2976 of 2004

preferred by Jatin Jhaveri, the Customs Department was permitted by

the  High  Court  to  refund  the  amount  of  US  $  289,250  in  Indian

Rupees.  Accordingly  amount  of  Rs.1,83,09,525  was  refunded  and

credited to the account of Jatin Jhaveri  subject to the undertaking to

return the said sum with interest in case this Court were to accept the

appeals preferred by Union of India.

4.      Mr.  R.P. Bhatt, learned Senior Advocate, who appeared for

Jatin  Jhaveri  submitted   that  the  currency  declaration  forms  were

accepted and relied upon in  Customs proceedings and thus the aspect

of “bringing into India” of the currency in question, was rightly held

in his favour.  The ownership of the currency having been established,

in his submission, Jatin Jhaveri was entitled to the same. On the other

hand, Mr.  K. Radha Krishnan,  learned Senior Advocate,  appearing

for Union of India submitted  that the initial statement of Jatin Jhaveri

recorded on 12.10.1993,   which itself was  more than two months

after  the seizure,  did not  even whisper   about currency declaration

forms and  no ownership  in respect of currency was claimed. In his

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submission, Currency Declaration Forms were rightly observed to be

suspicious and not relied upon by the Special Director.  It was further

submitted that the scope of proceedings under FERA was distinct and

different and exoneration in Customs proceedings would not enure to

the advantage of the person concerned in proceedings under FERA

and in any case the crucial question which the High Court failed to

appreciate was the absence of requisite permission of Reserve Bank of

India.

5. Before we deal with rival submissions, it would be necessary to

set  out  relevant  provisions.  The  violation  alleged  in  Customs

proceedings pertained to Clauses (d) (e) & (i) of Section 113 of the

Customs Act,  1962.  The relevant provisions  of  Section 113  with

relevant clauses is as under:

“Section 113: Confiscation of goods attempted to be improperly exported, etc:-

The following export goods shall be liable to confiscation …………………….….. ………………………….

(d)  any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; (e)  any goods found concealed in a package which is brought within  the  limits  of  a  customs  area  for  the  purpose  of exportation;

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…… (i)    any goods entered for exportation which do not correspond in respect of value or in any material particular with the entry made  under  this  Act  or  in  the  case  of  baggage  with  the declaration made under Section 77;”

Section 8(1) of FERA is as under:

“8. (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.

6. The  emphasis  in  the  relevant  clauses  of  Section  113  of  the

Customs  Act  is  on  an  attempt  to  export  goods  contrary  to  any

prohibition imposed by or under said Act or any other law in for the

time being in force.  On the other hand, what constitutes a violation

under  Section  8(1)  of  FERA  is  when  a  person,  except  with  the

previous special or general permission of the Reserve Bank, purchases

or  otherwise  “acquires”  any  foreign  exchange.   The  emphasis  in

proceedings under FERA is, therefore, on such acquisition of foreign

exchange without the previous general or special permission of the

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Reserve  Bank.  Any  failure  in  that  behalf  would  lead  to  incidents

including confiscation under Section 63 of the FERA.  

7.  We  have  gone  though  the  currency  declaration  forms  in

question.  It is relevant that in his first statement dated 12.10.1993,

Jatin  Jhaveri  had  clearly  dissociated  himself  and  disowned  the

currency in question.  This statement itself was more than two months

after  the seizure.   The subsequent  reliance  on currency declaration

forms was, therefore, rightly found suspicious by Special Director in

his  order  dated  04.10.1999.    Mr.  Bhatt,  learned  Senior  Advocate

placed before us letters dated 14.06.1993 and 23.06.1993 in support of

the  contention  that  contracts  were  entered  into  pursuant  to  which

currency amounting to US $ 289,250 was received by Jatin Jhaveri

while he was in USA.  These letters are bereft of any details and in

our view are quite self-serving.  At the same time, as found by the

Special  Director,  the  original  passport  of  Jatin  Jhaveri  was  never

produced from which it could be established that he was in USA on

the dates alleged.    

8. However,  what  is  of  greater  significance  and  import  is  the

absence of any special or general permission as contemplated under

Section  8(1)  of  FERA.  No such permission  is  produced or  relied

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upon.  In fact, that is not even the case that Jatin Jhaveri had applied

for  and got such permission.    For the purpose of  Section 8(1)  of

FERA,  “acquisition”  of  foreign exchange  must  be  with  general  or

special permission of the Reserve Bank of India.  Even if the matter of

‘bringing into India’ of the currency in question, as submitted by Mr.

R.P. Bhatt, learned Senior Advocate, is taken to have been established,

though that part of the matter itself is not free from doubt, the question

regarding ‘acquisition’ of currency must be independently established

in the light of requirements under said Section 8(1).  The assessment

in that behalf by the Appellate Authority under FERA and the High

Court is completely incorrect.

9. Mr.  Bhatt,  learned  Senior  Advocate  attempted  to  rely  on

Notification No.FERA-81/89-RB dated 09.08.1989 as amended upto

09.03.1999, to submit that by said Notification the Reserve Bank of

India was pleased to permit any person to bring into India from any

place outside India foreign exchange without any limit,  provided a

declaration in such form as may be specified by the Reserve Bank of

India is made on arrival in India to the Customs Authorities.  First,

said  notification  is  in  relation  to  Section  13  of  FERA and  not  in

relation to Section 8(1) thereof.  Secondly, this notification was not

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adverted or referred to at any stage and in any case does not deal with

acquisition as contemplated under Section 8(1) of FERA.

10. We,  therefore,  set  aside  the  orders  passed  by  the  Appellate

Tribunal,   FERA and by the High Court while accepting the view

taken  by  the  Special  Director.    Consequently,  Civil  Appeal

Nos.11128-11131/2011 preferred by Union of India are allowed and

the  order  dated  04.10.1999  passed  by  Special  Director  of

Enforcement, Mumbai, stands restored.  As we have upheld the order

of confiscation, the challenge preferred by Jatin Jhaveri in the form of

his writ petition and consequential Civil Appeal No.11127/2011 must

fail and said appeal is dismissed.

11. Since  the  amount  of  Rs.1,83,09,525/-  was  refunded  and

credited to the account of Jatin  Jhaveri during the pendency of the

proceedings  subject  to  his  undertaking  to  return   the  same  with

interest,  he is directed to refund the amount with interest @ 10% per

annum within six weeks from the date of this judgment.

12. The appeals are disposed of in the aforesaid terms.  No order as

to costs.

…………………………….CJI                                          (T.S.Thakur)

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……………………………….J (Uday Umesh Lalit)  

New Delhi May 13, 2016