Somnath Iyer, J.
1. These two writ petitions raise common questions, and so, could be disposed of by a common order. The petitioner in Writ Petition No. 441 of 1966 is a firm called K. O. Krishnaswamy. The petitioner in Writ Petition No. 443 of 1966 is another firm called Nagaraja Overseas Traders. Both these firms were proceeded against by the Director of Enforcement Directorate in respect of an accusation that they had contravened the provisions of Section 12(2) of the Foreign Exchange Regulation Act, 1947 (Central Act VII of 1947). The Director, after setting out the relevant facts concerning that accusation, proceeded to state that the two firms had pleaded guilty to thataccusation, and so, imposed a penalty in the following words:--
'Accepting their pleas, I find the first two firms, viz., M/s. K. O. Krishnaswamy and M/s. Nagaraja Overseas Traders and their respective partners guilty under Section 12(2) of the Foreign Exchange Regulation Act and, in view of the magnitude of the amounts involved, and the poor realisation of the export proceeds, I impose on either of the firms, a penalty of Rs. 3 lakhs each (Total Rs. 6 lakhs).'
Although the Director did find the partners also guilty of the offence with which they are charged, he did not impose any penalty on them individually.
2. We do not accede to the contention of Mr. Srinivasan that there is any obscurity in the language employed by the Director with respect to the question whether the penalty was imposed on both the petitioners or on only one of them. The word 'either' occurring in the relevant part of the Director's order means, in our opinion, each, and, there can be no doubt about it.
3. We are asked in these writ petitions to quash the penalties so imposed on the firms.
4. The material facts which are not in dispute are these: The two firms sent 52 shipments of art silk fabrices, ready-made garments, handicrafts and sari goods to Singapur and other places under declaration which they made as required by Section 12(1) of the Act in which they stated the value of the goods sold. The finding of the Director was that the statements in those declarations concerning the value of the goods so exported were false, and that there was, what he described, over invoicing with respect to those sales.
5. According to the declaration made by K. O. Krishnaswamy, the value of the goods exported by that firm through the 31 shipments with which we are concerned was Rs. 21,97,04662 while the finding of the Director in effect is that the price payable by the foreign buyer in Malasia for those goods was only Rs. 1,01,165,07. Similarly the declared value of the exported goods with respect to 22 shipments sent by Nagaraja Overseas Traders was Rupees 17,06,159.00, while their real value which was payable by the foreign buyer was Rs. 38,510.25. The director was of the opinion that under the provisions of the Act it was the duty of the two firms to repatriate the entire value of the goods stated in the declarations made by them under Section 12 (1) and that the repatriation of smaller sums of money amounted to a contravention of Section 12(2) of the Act.
6. Mr. Srinivasan appearing for petitioners contended that, that view taken by the Director receives no support from the relevant statutory provision.
7. Now, the relevant part of Section 12 reads:
'12(1) The Central Government may, by notification in the official gazette, prohibit the taking or sending out by land, sea or air (hereafter in this section referred to as export) of any goods or class of goods specified in the notification from India directly or indirectly to any place so specified unless a declaration supported by such evidence as may be prescribed or so specified, is furnished by the exporter to the prescribed authority that the amount representing the full export value of the goods has been, or will within the prescribed period be, paid in the prescribed manner. (2) Where any export of goods has been made to which a notification under Sub-section (1) applies, no person entitled to sell, or procure the sale of the said goods shall, except with the permission of the Reserve Bank, do or refrain from doing anything or take or refrain from taking any action which has the effect of securing that--
(a) the sale of the goods is delayed to an extent which is unreasonable having regard to the ordinary course of trade, or
(b) payment for the goods is made otherwise than in the prescribed manner or does not represent the full amount payable by the foreign buyer in respect of the goods, subject to such deductions, if any, as may be allowed by the Reserve Bank, or is delayed to such extent as aforesaid:
Provided no proceedings in respect of any contravention of this sub-section shall be instituted unless the prescribed period has expired and payment for the goods representing the full amount as aforesaid has not been made in the prescribed manner.
XX XX XX
Sub-section (1) of this section which authorises a notification regulating payment for exported goods, prohibits the export of such goods, except on condition that the exporter makes a declaration that the full export value of the goods has been, or will within the prescribed period be, paid. Sub-section (2) prohibits acts or omissions intended to delay the sale of the goods exported, or the payment of the full amount payable by the foreign buyer in respect of the exported goods, barring authorised deductions permitted by the Reserve Bank. While the delay in the sale of goods is prohibited by Clause (a) of Sub-section (2) of Section 12, the act, or omission which results in the failure of the payment of the full amount payable by the foreign buyer is what constitutes disobedience to Clause (b) of that sub-section.
8. The director was of opinion that there was disobedience to Clause (b), and, it is not the case of any one that there was any to Clause (a). If, on the facts statedby the Director and on the finding recorded by him, it can be said that there was no disobedience to Clause (b) of Section 12(2), the fact that the petitioners pleaded guilty to the charges brought against them can have no materiality and cannot support the imposition of a penalty which was in law not possible. So, the question to be decided is whether the petitioners did or refrained from doing any act which impeded the payment of the whole of the amount payable by the foreign buyer in respect of the exported goods. If they did not, there was no transgression of the Act.
9. The precise reason for which there was no payment by the foreign buyer of the value of the goods stated in the declaration made by the petitioners under Section 12(1) of the Act was set out in great detail by the Director. He stated in his order that the investigation made by him revealed the fact that the petitioners had over invoiced the goods exported by them, and that they resorted to that subterfuge for the purpose of misusing the provisions of the export promotion scheme under which, with respect to a substantial portion of the value of the goods which the petitioners purported to export, they became entitled to importlicenses in respect of which there was systematic trafficking for illicit gains.
10. The clear finding recorded by the Director was that the petitioners did not export goods of the value stated in the declaration, and that they inflated the value of the goods which they exported, solely with the intention of getting an import licence with respect to a substantial portion of such inflated value. Since, under the declaration made under Section 12(1) the petitioners were under a duty to repatriate the full value of the goods so exported, they resorted to the artifice, according to the Director, of securing foreign exchange of a corresponding value in the foreign country through the instrumentality of certain persons in India who offered to sell foreign exchange against payments in India in excess of the corresponding value of the foreign exchange in Indian currency. On the basis of these facts which, in the opinion o! the Director, had been fully established, he prepared a tabular statement setting out the value of the exported goods shown in the declaration under Section 12(1), the amounts repatriated and the foreign exchange acquired in Malasia and the amount which was described as the 'amount outstanding'.
That tabular statement reads:
Value of ex-port as shown in the GRI forms.
No.of shipments. Amount repatriated.
M/s. K. O. Krishnaswamy.
M/s. Nagaraja Overseas Traders, Bangalore.
(11) The Director, after setting out these figures, proceeded to observe-
'From the above statement, it will be clear that, as regards the first two firms, the total sum shown as outstanding (which is non-existent) and hence non-reparable, due to deliberate over-invoicing is Rs. 37,63,529-67 and that as regards the third firm M/s. K. O. Krishnaswamy had unauthorisedly purchased foreign exchange to the tune of Rs. 300,00/- for the purpose of repatriating it into India, under the guise of export proceeds.'
12. It is on this finding that the imposition of a penalty for contravention of Section 12 (2) of the Act was made to rest,
13. We are of the opinion that on the finding recorded by the Director, no transgression of Section 12 (2) of the Act could be deduced. The relevant part of Section 12 (2) (b) on which the Directordepended, prohibits an act or omission the consequence of which is the non-payment of the full amount payable by the foreign buyer in respect of the exported goods. So there would be a contravention of that part of Clause (b) only when the foreign buyer was under an obligation to pay a certain sum of money which represented the true market value of the exported goods purchased by him and there was non-payment of that entire sum of money in consequence of something done or omitted to be done by the exporter.
14. The Director thought that the full amount payable by the foreign buyer was the amount stated as the value of the exported goods in the declaration made by the petitioners in the prescribed form to which Sub-section (1) of Section 12 refers. But it is clear that the finding recorded by the Director himself that thevalue of the goods stated in the declaration was not the true value of the goods, is completely destructive of the view taken by him that that sum or money was the amount payble by the foreign buyer within the meaning of Clause (b) of Section 12 (2). What was overlooked by the Director was the contrariety between the language of Sub-section (1) and that of Clause (b) of Sub-section (2). While Sub-section (1) speaks of the 'full export value of the goods,' Clause (b) of Sub-section (2) refers to the 'full amount payable by the foreign buyer.'
15. It is abundantly clear that the amount to which Clause (b) of Sub-section (2) refers is distinct from the declared export value of the goods to which Sub-section (1) refers, for the obvious reason that not quite infrequently it may happen that the amount payable by the foreign buyer is not necessarily the value of the goods specified in the declaration. The value mentioned in the declaration may in a conceivable case be very much in excess of the market value of the goods especially when a higher value is mentioned in the declaration for some illegitimate purpose. And, if in such a case the stated value of the goods is not the price for which a foreign buyer purchases or would be willing to purchase them, which generally speaking is the market value of the goods, what is so payable by him as the price under a bona fide contract of sale, is, what should be repatriated and not the artificial value stated in the declaration. It is this distinction which is emphasised by the word 'payable' occurring in Clause (b) of Sub-section (2), which is not to be found in Sub-section (1).
16. We do not accede to the contention that the words 'amount representing the full export value of the goods' occurring in Sub-section (1) have reference to the 'amount payable by the foreign buyer' to which Sub-section (2)(b) refers, and that the amount referred to in the one is the same as the amount stated in the other. Else, it is difficult to understand why the language employed in Sub-section (2)(b) is so different from the language of Sub-section (1). Sub-section (1) does no more than to insist on a statement of the full export value of the goods, while Sub-section (2) (b) incorporates a prohibition against what impedes the payment of the full amount payable by the foreign buyer. It is clear that the one is not the same as the other.
17. Any other view may be productive of strange consequences. If, even in a case where an exporter states the correct value of the goods in his declaration under Sub-section (1), the goods are exported for sale in foreign country and there is an enormous increase in the price of those goods attributable to unforeseencircumstances or conditions, the acceptance of the contrary interpretation suggested by Central Government Pleader would produce the consequence that the exporter would be under an obligation to repatriate no more than the stated value of the exported goods. An interpretation which would thus enable the exporter to accumulate foreign exchange in the foreign country, notwithstanding the fact that the acquisition of such foreign exchange was possible by reason of the permitted export, cannot, in our opinion, be sound.
18. The true meaning, in our opinion, of the relevant part of Section 12(2)(b) is that the act or omission which is prohibited by it is what impedes the payment of the full amount payable by the buyer on a bona fide sale of the exported goods for a proper price. It is on this construction of that clause that we should examine the sustainability of the imposition of the impugned penalty.
19. Now, what is abundantly clear from Sub-section (2) of Section 12 is that it prohibits no act or omission which is antecedent to the exportation of the goods. That that is so, is clear from the opening words of that section which read 'where any export of goods has been made to which a notification under Sub-section (1) applies'. It is a subsequent act or omission after the exportation of the goods by reason of which there is non-payment of the full amount payable by the buyer which amounts to disobedience of the relevant part of Clause (b).
20. So, the question which the Director had to decide was whether there was any such act or omission on the part of the petitioners, and, it is clear from his order that he recorded no finding that there was any. On the contrary the act of the petitioner which in his opinion was in contravention of the law was what preceded the export of the goods, and that act was a false declaration under section 12(1) with respect to the full export value of the goods. While the firm of K. O. Krishnaswamy made a statement that goods of the value of Rs. 21 lakhs and more had been exported, the finding of the Director was that their value did not exceed a little more than a lakh of rupees.
Likewise, while the stated value of the goods exported by Nagaraja Overseas Traders was a little more than Rs. 17 lakhs, the true value was only Rs. 38,000 and more. Although in the tabular statement prepared by the Director, the sixth column purports to state what he described as the 'amount outstanding,' it is obvious that, that description of the amount specified in that column was not an accurate description as can be seen from what the Director himself stated in the course of his order which discussedthe effect of that statement. The Director had no doubt in his mind that the statement prepared by him revealed the fact that the sums of money shown as outstanding were 'non-existent and hence non-reparable'.
21. This finding recorded by the Director can have no other meaning than that those sums of money shown underneath the sixth column were not really payable foy the foreign buyer and so were notpaid. And the facts revealed by his investigation could not support any other conclusion. If X is the declared value of the exported goods but Y is the proper price for which they are sold, under a contract which is above the reproach ofcollusion or collaboration for circumven-tion of the law, the amount payable by the foreign buyer is Y and not X. The clear finding of the Director was that the amount repatriated in the cases before us was the whole of the amount properly payable by the foreign buyer.
22. It was at one stage suggested by Mr. Central Government Pleader that even so the permission of the Reserve Bank under Section 12(2)(b) should have been obtained by the petitioners for the repatriation of those smaller amounts. We do not agree.
23. It is plain that that permission to which Sub-section (2) refers has relevance only to deficiencies in the amounts payable by the foreign buyer, and, in the cases before us there was none. Such permission of the Reserve Bank which is permissible only for deficient repatriation for good and acceptable reasons, is scarcely necessary if there is no inadequacy and so no occasion for deduction.
24. So, once the Director reached the conclusion that the amounts stated by him in the fifth column of his tabularstatement were 'non-reparable' amounts, it became impossible for him to fasten on the petitioners any disobedience to Subsection (2) (b) of Section 12 of the Act,
25. That being so, the plea of guilty to which the Director referred in thecourse of his order cannot produce a transgression of the law when there wasin fact none.
26. In the view we take, it becomes unnecessary for us to discuss the furthercontention raised by Mr. Srinivasan that the words 'no person entitled to sell or procure the sale of the stated goods' occurring in Sub-section (2) exclude from its purview a case in which the export is made pursuant to an already completed sale, such as, the one in the cases before us. On that question, we abstain fromexpressing any opinion in these cases.
27. So, we allow these writ petitions and quash the penalties imposed on the petitioners.
28. No costs.
29. Petitions allowed.