H.L. Anand, J.
(1) The question that this appeal under Section 23-E of the foreign Exchange Regulation Act, 1947. hereinafter called 'the Act' raised is a short but by no means an easy one whether a travel agency which, pursuant to a group travel scheme and in consideration of money received in India, provides not only passage abroad but board, lodging and transportation and renders certain other services to the passengers there, could be said to have sold foreign exchange to the passengers so as to be within the mischief of Section 4(1) of the Act.
(2) The facts, as found by the Director of enforcement in the original proceedings and confirmed by the Foreign Exchange Regulation Appellate Board in appeal under Section 23-E of the Act and which, by virtue of the aforesaid concurrent finding of facts, as indeed, the_limited scope of the present appeal, are beyond challenge, are that the appellant a travel agency, sponsored a scheme of group travel abroad is collaboration with a certain airline and perhaps some other people, with whom we are not concerned in the present appeal, by which in consideration of money received here in India .from each of the passengers, the appella
(3) Aggrieved by the aforesaid appellate .order, the appellant has challenged it on the ground that on the admitted facts it could not be said that the appellant had sold any foreign exchange to any of the passengers and had contravened the provisions of Section 4(1) of-the Act In the grounds of appeal, the finding on the second charge was also assailed but was given up at the bearing in the Court.
(4) Learned counsel for the appellant contended that on a true construction of the term 'sell' occurring in Section 4(1) of the Act, as it stood at the relevant time, it must be held that on the admitted facts the appellant could not be said to have sold any foreign exchange to any of the passengers. The finding of the Director of Enforcement, as indeed of the Appellate Board, were sought to be justified on behalf of the respondent on the grouad that what the appellant had found to have done was tantamount to sale of foreign exchange to the passengers, but learned counsel for the parties did not go beyond the formulation of the question before me and frankly admitted that they were unable to marshall either principle or precedent to support the-rival contentions and urged that the matter was one of first impression.
(5) A system of exchange control was set up in India of the outbreak of the Second World War with a view to conserve and Utilise to the best possible purpose the limited foreign exchange available to the country by series of Rules under the defense of India Act, 1939. Tnese Rules expired on September 30, 1946 but were continued in force for a period of six months under the Emergency Provisions (Continuous Ordinance) 1946 and as the shortage of foreign exchange Was likely to continue in view of the disruption of the internal economy of so many countries on account of the War and the interruption o' the external channel of trade, it was felt necessary that the system of exchange control 'bs continued in public interest. These restrictions were, thereforee, continued by the Act which was intended to regulate certain payments dealings in foreign exchange and securities and the importation and exportation of currency because it was considered expedient in .the economic and financial interest of the country to provide for such regulation, Sections 4 and 5 impose restrictions on dealings in foreign exchange and on payments while Sections 6 and 7 deal with blocked accounts and special a counts. Section 8 impose restrictions on import and export of certain currency and bullion while Section 9 provides for acquisition by Central Government of foreign exchange and Section 10 lays down the duty of persons entitled to receive foreign exchange. Section 11 confers power to regulate the uses of imparted gild and silver while Section 12 regulates payment for exported goods. Section 13 provides for regulation of export and transfer of securities: Section 13-A imposes restrictions on payment in respect of certain securities while Section' 14 deals with custody of securities. Section 15 provides for restriction on issue of bearer .securities and Section 17 imposes restriction on settlement, Sections 19 to 19-J confer various powers of search, arrest, examination of person, custody, of documents and to call for information and certain other matters connected with the proceedings that may be initiated under the Act. Section 23 provides for penalties for the contravention of the various provisions of the Act and the procedure for imposing such penalties. Section 23 A applies Customs Act, 1962 to the proceedings under the Act while Section 22-B defines 'attempt' to contravene the provisions of the Act. Section 23-D empowers the authority to adjudicate the contravention and an appeal is provided by Section 23-E to the Appellate Board. The decision of the Appellate Board is final subject to an appeal to this Court under Section 23.EE only on a question of law.Section23-F further provides fora penalty for contravention of an order made by Director of Enforcement and the Appellate Board in appeal and Section 24 deals with burden of proof while Section 24-A introduces presumption of documents in certain cases.
(6) It, is thus, clear that the Act is restrictive and penal in nature and was conceived in public interest with a view to regulate dealings in foreign exchange so as to conserve the foreign exchange needed for the requirement of the country. It is. however, common knowledge that inspire of these regulations, the Act has been observed more in its breach in certain respects, and in any event, 'whether such acts are within or outside the statute, there has been extensive dealing in foreign exchange which would be within the policy of the state even though it may be doubtful if those dealings would be within the provisions of it or not.
(7) Section 4 (1) of the Act, as it stood at the material time, is in the following terms.
4(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), buy or borrow from or sell or lend to or exchange with, any person not being an authorised dealer, any foreign exchange.'
(8) The Section was amended, inter alia, in the year 1964 by Act 55 of 1964 and in place of the terms 'buy or borrow from' and 'sell or lend to in sub-section (1), the expression 'buy or otherwise acquire or . borrow from' or 'sell or otherwise transfer or lend to' were substituted. Before the aforesaid amendment, sub section (1) imposed a restriction on any transaction purchase, borrowing, sale, lending or exchange of foreign exchange with any one other than authorised dealer while as a result of the amendment, the restriction was extended to acquisition other than buying and transfer other than sale as well.
(9) The term 'foreign exchange' is defined in Section 2(d) of the Act as follows ;- - .
'(D)'foreign exchange' means foreign currency and includes all deposits, - credits and balances payable in any foreign currency, and any drafts,traveller's cheques; letters of credit and bills of exchange, expressed or drawn inindian currency but payable in any foreign currency.'
(10) The term 'foreign curency' is defined in Section 2(c) of the Act as 'any currency other than Indian currency.'
(11) What then is the true meaning of the expression 'sell'............ foreign exchange' occurring in Section 4 (1) of the Act arid what is the ambit of the restriction imposed by the said sub section. The answer to the question depends on the principles which would apply to the interpretation of the aforesaid provisions for it is well settled that 'the solution of a particular problem of interpretation will often be determined by which principles or principles the Court chooses to apply ' Maxewll ; Interpretation of Statutes : 12th Edn. P. 39).
(12) The term 'sell' in its ordinary signification, as well as in legal parlance, means to transfer any property for a valuable consider. ation. The term 'foreign exchange '.according to the definition in the Act ''mans' currency othar than Indian currency and 'includes 'deposits, credits balances, drafts, travellers cheques.etc. and is not extended to be exhaustive so as to include goods or service that may be acquired by foreign exchange or in return for it. Ordinarily, thereforee, a transaction in respect of foreign exchange to be a sals within the mischief of sub-section (1) of Section 4, must consist of delivery of foreign exchange in specie to the buyer in consideration of money and the supply of goods or of rendering of service abroad in exchange for money received in India would, thus, seem to be outside the mischief of the provisions, for it could be said that in exchange for the money received in India, the recepient has merely procurred for and provided to the giver certain goods and services abroad. If that be the true construction of the provision, the restriction sought to be imposed on dealing in foreign exchange and the object sought to be achieved by the restriction would be easily made nugatory and ineffective by a simple device as was adopted in the present case. Would it not be possible, thereforee, to say that a provision, which was intended to impose restriction and to suppress a mischief, should be construed in such 'a manner so as to make the provision or the restriction incorporated in it effective and to suppress the mischief and advance the remedy which were in 'he contemplation of the Legislature and that in dealing with such a matter, the Court should look not to the form of the transaction but to the substance of it in order to determine if there has not been any contravention. It may then be argued with some justification that the intention of the Legislature in regulating dealines in foreign exchange under Section 4 (1) was, inter aha, to prohibit sale of foreign exchange without the permission of the Reserve Bank except through an authorised dealer and that what the travel agency had done in the present case, would be within the mischief of the provisions, even though it did not deliver foreign exchange in specie to the passengers, because it did provide goods and services to them, which would ordinarily have been arranged only with foreign exchange for, foreign exchange or for that matter, money after all was not an end itself but a means to an end and its worth all that it can buy or otherwise procure and that what the appellant had done was in any event as had as a sals of foreign exchange or a virtual sale of it. It may also be argued with some force that providing of any goods and services abroad of necessity would have involved foreign exchange. It would sound equally con- victing to say that the impugned act of the appellant would in any event be within the policy of the Jaw and the object that was sought fobs achieved by it and hold that it was outside the mischief of it, would make the mockery of the provision and render it almost nugatory.
(13) The mischief rule and evasion theory are not new in the realm of interpretation as external aids to the interpretation of statutes.
(14) As ear'y as the year 1584. it was observed in Heydon's case, 3 Co. Rep. 7a, that the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy, and to supress subtle inventions and evasions for continuance of the mischief, and pro private commando, and to add force and life to the cure and remedy, according to the true intent of the makers of the Act, probono publico ' Later in 1898, Lindly M R. observed in Re May- fair Property Co. (1898) 2 Ch. 28 that in order properly to interpret any statute it is necessary to consider how the law stood when the statute to be construed was passed and 'what the mischief was for which the old law did not provide, and the remedy provided by the. statute to cure that mischief. ' Following the aforesaid weighty observations, Courts have often considered the mischief or the object of ihe enactment as an aid to the interpretation of it and both restricted and extended meanings were given to expressions, depending on the context, on an application of the aforesaid Rule. Thus in the well-known case of Smith v Hughes, (1960) I W.L.R. 830, it was held construing the term 'in a street 'that the prostitutes who attracted the attention of passers-by from balconies or windows were soliciting in street and would still be within the mischief of the provision which prohibited soliciting 'in a street 'and Lord Parker C. J. observed that the Act was intended to clean up the streets, to enable people to walk along the streets without being molested or solicited by common prostitutes and that viewed that way the precise place from- which a prostitute addressed her solicitations to somebody on the road was wholly irrelevant. Again in Re Newspaper Proprietors' Agreement, (1962) L. R. 3 R. P. 360, the Court of Appeal' had that the duty of the Registrar under the Restrictive Trade Practices Act 1956 to maintain a register of agreements extended to agreements which had expired. This is how the extension was justified by Lord Denning M R. :
'IT is natural enough for the Act to speak in terms of existing agreements which are brought before the court, because those were the ones principally in mind, but there is no insuperable difficulty in applying its provisions to agreements which have expired or been determined before being brought to court. And when I bear in mind the mischief which it was intended to remedy, and the remedy which it has provided (by restraining agreements (in the future) to the like effect), I think that-it should be construed so as to apply to agreements that have expired or been determined.'
Similarly where Agricultural Holdings Act 1948 provided that a notice to quit an agricultural holding would bs invalid if it purported to terminate the tenancy before the expiration of 12 months from the end of the current year of tenancy, it was held to invalidatea notice to quit given before the commencement of the tenancy even though it did not fall within the strict words of the Section because it was felt that any other decision 'would have the effect of defeating the purpose of the statute.' (Lower v. Sorrell, (1963) 1 Q.B. 959.
(15) The application of the mischief rule and the theory of advancing the remedy, is not unknown even in the interpretation of penal statues. For example in the case of Scatchard v.Jhonson, (1888) 57 L.J.M.C. 41, the supply of beer to a drunken man and his sober companion was held to be within the mischief of the law even though it made 'selling' liquor to the drunken man penal audit had been ordered and paid for in that case by the sober companion. Similarly, in the case of Gorman v. Standen. (1964) 1. Q.B. 294, where a stepdaughter lived in brothel managed by her stepmother and had 'a part at any rate of the .say of what goes on at that house' it was held that the stepdaughter was 'assisting in the management of the brothel so as to attract the penal provision (r)f the Sexual Offences Act 1956. The Pharses 'prosititution', 'common prostitute' and 'purpose of prostitution' used in that statute were held to be not limited to the cases of prostitution as commonly undersstood and to cover all cases in which 'a wornen offers her body for purposes amounting to common lewdness for payment in return.'(R.v.Webb (1964) 1. Q B 357. Again the pharse ''a person committing' the offence of driving a motor vehicle while unfit through drink appearing in- Road Traffic Act 1960 was held in the case of Wiltshire v. Berrett, (1966) 1. Q.B. 312, to justify the arrest of a man who was 'apparently' committing the offence.
(16) Somewhat similar result follows by the application of the evasion theory. To quote Lord Cranworth: I never understand what is mant by evading an Act of Parliament. Either you are within the Act or you are not; if you are not within it, you are right; if you are within it, the course is clear, and it cannot be said that you are not within it because the very words of the Act may not have been violated.' (Edwards v. Hall 1856 6 De G.M. & G. 74.
INJeffries v. Alexander, (1860) 8 H. L. C. 594, Blackburn J. observed that to carry out effectually the object of a statate,it must be so construed as to defeat all atempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined : quando aliquid prohibetur, prahibetur at omne per quod devenitur adillud.'
(17) The two ramifications of the application of this theory to. the task of interpretation was succinctly summed up by Maxwell in his Intarpretation of Statutes, Twelfth Edition at page 117 thus : 'This manner of construction has two aspects. One is that the courts, miadful of the mischief rule, will not be astute to narrow the language of a statute so as to allow persons within its parview may. be escape its net. The other is that the statute may be applied to the substance rather than the mere form of transactions, thus defeating any shifts and contrivances which parties may have devised in the hope of thereby falling outsize the Act. When the courts find an attempt at concealment, they will, inthe words of Wilmot C. J., 'brush away the cobweb varnish, and shew the transactions in their true light.' 'Collins v. Blanterm (1767) 2 Wils K. B. 347. - ' It was, thus, held in Day v. Simpson, (1865) 34 L. J. M. C. 149, that the prohibition under the Theatre Act 1843 for the performance of plays without license, would extend to a performance where the players did not come on the stage, but acted in a chamber below it, and their figures reflected by mirrors go as to appear to the spectators as if they were en the stage.
(18) It must, however, be recognised that the process of construction of a statute by the various external aids to interpretation, such as the application of any of the principles referred to above, are subject to obvious limitations, in that while it is .possible to discover the true intendment of a provision by the application of these principles, nane of these provisions could legitimately entitle a court to do voilence to the language'of the statute or to give it a meaning that it does not have or to read into the statute that which is not there, for, to do that, would be to traasgress the limits of interpretation and digress into the realm of legislation which it is not open to a Court to do. What is outside the statute does not become within it by the application of any of the aforesaid principles merely because it is within the policy of it though outside the mischief of its provisions, for, it is well established that the policies incorporated in the statute or the object which prompted the enactment of it are nevertheless distinct from the provision that ultimately emerged from the legislative anvil and it is the end result with wich the Court is basically concerned. The policy of the statute may be an external aid in the process of interpretation but where the provision falls short of the policy, it is not open to the Court to extend the scops of it. I am not unaware of a larga body of judge-made laws in the United States and, to an extent even is India, notably in the field of industrial, adjudication and other legislation based on social action but I would resist the temptation of extending the scope of the provision with a view merely to bring it within the policy of the stature because apart from the other limitations, it is not possible to ignore that the statute with which I am concerned is admittedly a restrictive and a penal 'one and that being so, its terms must be strictly construed and if in the matter of construction it is found that two possible meanings could be attributed to an expression or a phrase, then the meaning which would be more favorable to the subject should be given. In (1887) 19 Q.B D. 638, it was observed.
'WEmust be very careful in construing the section because it imposes a penalty. If there is a reasonable interpretation which will avoid the penalty in any particular 'case we must adopt that construction. If there are two reasonable constructions. We most give the more lenient one. That is the settled rule for the construction of penal sections. There is another principle that I must have in mind, and that is that a man is entitled so to order his affairs as to avoid the provisions of the Order. This is a genuine transaction. There is nothing colourable about it. The whole question I have to determine is whether, on the true construction of the Act and the order and on the true interpretation of the acts and deeds of the parties, that transaction falls fairly and squarely within the provisions of the Act and the order.'
(19) The internal aid to the interpretation of this provision, as indeed the legislative history of it, would also militate against any extention of the meaning of the phrase 'sell foreign exchange'. The terms 'sell', 'borrow', 'lend' and 'exchange', have definite legal connot ation and must, having regard to the language of the,section, relation to 'foreign exchange' which has been defined. If the intention of the Legislature was tot merely to regulate the dealings inforeign exchange but to extend the restriction to supply of goods and services abroad in exchange for money received in India, surely an appropriate phraseology could have been used to bring such an act within the mischief of the statute. It is safe to preaume that since the imposition of these restrictions, there has been ever increasing trafic between this country and the rest of the world, 'both for commercial and non-commercial purposes, and it is common knowledge that hundreds of thausands of Indians who have gone abroad with paltry exchange permissible under the law make various arrangements, ranging from innocuous to the dubious ie make their visit both purposeful and comfortable and vet, when the restriction imposed by section 4 was sought to be made more rigorous by the Amending Act 55 of 1964, Parliament even though aware of the outcome of the administration of the statute contented ' itself.in its wisdom, by merely idding the phrase ''or otherwise acquire' and 'or otherwise transfer' in sub-section (1) of Section 4. thereby still leaving the conduct of the type complained of in the present case outside the mischief of the statute,
(20) It, this, appears that in enacting the provision the intention was to regulate commercial dealings in foreign exchange so as to leave outside the purview of the legislation various devices not involing foreign exchange directly, ranging from innocuous hospitality on reciprocal or other basis to more pronounced and dubious methods as was adopted in the present case, by which an Indian abroad could stay, move about and carry on limited commercial and non commercial activities. This probably was the result of a pragmatic approach of the Legislature to a complex problem, for, to clamp total prohibition of a sweeping width would not only stifle bona fide commercial, educational and other activities but may even have made the administration of the statute impracticable. If supplying goods and services abroad in exchange for money received here was to be within, the statute, where would one draw the line. For example, would an innocaous accep. tance of hospitality abroad by an Indian from a resident Indian or a foreigner, on the basis of some sort of reciprocity, be also within the statute or outside its purview. What would be the position of innocuous exchange of gifts which obviously would indirectly involve foreign exchange
(21) I am, thereforee, of the view that having regard to the nature of the statute, the ordinary meaning of the trms and.the application of the relevant principles of interpretation, it is not possible to give to the phrase 'sell foreign exchange' an extended meaning so as- to bring within its purview supply of goods and service abroad in exchange of money received in India and I have, thereforee, no option but to hold that the appellant had not been guilty of contravention of the provisions of-sub-section (1) of Section 4 of the Act.
(22) The appeal accordingly succeeds in part. The impugned' orders are set aside to the extent they relate to the charge of contravention of sub-section (1) of Section 4 of the Act including the impesition of penalty of Rs. 10,00.'/. The appellant would be entitled to the refund of the amount. '- .
(23) In the circumstances, the parties are left to bear their own costs in this appeal.