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S.L. Ball Vs. M.S. Chopra - Court Judgment

LegalCrystal Citation
SubjectFERA
CourtDelhi High Court
Decided On
Case NumberElection First Appeal No. 9 of 1970
Judge
Reported inILR1971Delhi637
ActsForeign Exchange Regulation Act, 1947 - Sections 4(2) and 21
AppellantS.L. Ball
RespondentM.S. Chopra
Advocates: C.R. Mittal and; F.C. Bedi, Advs
Excerpt:
.....of a transaction being prohibited except with the permission of the central government or the reserve bank, legal proceedings on such a transaction are not barred. section 21(3) provides that even without such permission legal proceedings may be brought but no decree obtained in such proceedings can be enforceable without the permission of the central government or the reserve bank as the case may be.; where, as in the instant case, the court while passing a decree directed that the decree shall not be enforceable until or unless the plaintiff obtained permission as required by section 21 of the act and the plaintiff decree holder obtained such permission :; that the decree was not a nullity and incapable of execution:; (ii) foreign exchange regulations act (1947) - section...........by section 21 of the foreign exchange regulations act, 1947 from the central government or the reserve bank of india. the decree-holder obtained the requisite permission from the reserve bank of india and applied for execution of the decree. the judgment-debtor filed objeclions which were dismissed. this had led to this appeal. the objections of the judgment-debtor as far as they are relevant for the disposal of this appeal are as follows: 1.the decree was a nullity and incapable of execution 2. the permission granted to the decree-holder to execute the decree vide the letter of the reserve bank of india dated 18th november, 1966 was invalid and unenforceable(2) there were some other objections by the judgment-debtor concerning the effect of the judgment in the suit and the claim of.....
Judgment:

D. K. Kapur, J.

(1) This is an appeal by the judgment-debtor from an order passed on his objections under Sections 47 and 151 of the Code of Civil Procedure by the Executing Court. The decree which is being sought to be executed is for the recovery of Rs. 28,000 which was passed by the Subordinate Judge First Class, Delhi on 30th May, 1966. It appears that the parties had entered into a transaction at Hong Kong by which dollars had been sold to the judgment-debtor at the rate of Rs. 5.60 per dollar in place of the then official rate of Rs. 4.75 to the dollar. At the time of the passing of the decree the Subordinate Judge directed that the decree shall not be enforceable until and unless the plaintiff obtained permission as required by Section 21 of the Foreign Exchange Regulations Act, 1947 from the Central Government or the Reserve Bank of India. The decree-holder obtained the requisite permission from the Reserve Bank of India and applied for execution of the decree. The judgment-debtor filed objeclions which were dismissed. This had led to this appeal. The objections of the judgment-debtor as far as they are relevant for the disposal of this appeal are as follows:

1.The decree was a nullity and incapable of execution 2. The permission granted to the decree-holder to execute the decree vide the letter of the Reserve Bank of India dated 18th November, 1966 was invalid and unenforceable

(2) There were some other objections by the judgment-debtor concerning the effect of the judgment in the suit and the claim of the decree-holder to interest after the decree. The former question is really inter-connected with the two main objections mentioned already and the latter has been decided in favor of the judgmentdebtor. As regards the objections that now survive, it was held on the first question that the Executing Court could not again deal with, an objection which had been gone into and decided in the suit and, as regards the permission granted by the Reserve Bank of India it was held that the same was valid. Against this decision the judgment-debtor has appealed on the grounds that the decision on both points is wrong. As regards the first contested question, namely the validity of the decree sought to be executed the question really turns upon the effect of Section 4(2) of the Foreign Exchange Regulation Act, 1947. The said sub-section runs as follows:

'EXCEPTwith the previous general or special permission of the Reserve Bank, no person whether an authorised dealer 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.'

It will be seen from this provision that a transaction like the present is prohibited and the judgment-debtor thereforee contends that no decree on the basis of a prohibited transaction should have been passed by the court. There are two ways of disposing of A this objection. Firstly, this very objection was taken at the trial of the suit where it was contended that the official exchange rate being Rs. 4.75 and the rate adopted by the parties being at a much higher rate made the transaction illegal. The trial court, however, came to the conclusion that a decree could be passed inspire of the transaction being prohibited by Section 4(2) of the Act and relied for this view on the provisions of Section 21 of the Act. This matter having been settled by the court which tried the suit, is no longer open to challenge in the course of execution proceedings. The second way to deal with the objection is to see from the Foreign Exchange Regulation Act, 1947 itself as to whether a claim based on a prohibited transaction is barred or not. For this purpose, it is sufficient to refer to Section 21(3) of the Act which may be reproduced in full for the purposes of this case because it is also relevant for the other substantive objection

'21.Contracts in evasion of this Act (3)Neither the provisions of this Act nor any term (whether expressed or implied) contained in any contract that anything for which the permission of the Central Government or the Reserve Bank is required by the said provisions shall not be done without that permission, shall prevent legal 'proceedings being brought in (India) to recover any sum which, apart from the said provisions and any such term. would be due, whether as a debt, damages or otherwise, but- (a) the said provisions shall apply to sums required to be paid by any judgment or order of any Court as they apply in relation to other sums; and (b) no steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the Reserve Bank, as the case may be, may permit to be paid; and (c) for the purpose of considering whether or not to grant such permission, the Central Government or the Reserve Bank, as the case may be, may require the person entitled to the benefit of the judgment or order and the debtor under the judgment or order, to produce such documents and to give such information as may be specified in the requirement.'

This provision shows that inspire of a transaction being prohibited except with the permission of the Central Government or the Reserve Bank, legal proceedings on such a transaction are not barred. I have already referred to Section 4(2) of the Act where in it is stated that without previous general or special permission no person can enter into a transaction for conversion of Indian currency into foreign currency at a rate different from the authorised rate. Thus general or special permission had to be obtained from the Reserve Bank for entering into the transaction which has led to the suit. It is a different matter whether such permission would have been granted or not. The transaction is, there fore one to which Section 21 (3) of the Act is fully applicable because it is a transaction which, could have been entered into with the permission of the Reseve Bank. Section 21 (3) provides that even without such permission, legal proceedings may be brought but no decree obtained in such proceedings can be enforceable without the permission of the Central Government or the Reserve Bank as the case may be. In this case clearly, as the prior permission was to be obtained from the Reserve Bank, the permission for execution of the decree had also to be obtained from the Reserve Bank. This is exactly what has happened in this case. The decree was passed specifying that it would not be executable without permission. After that, the decree-holder has obtained the permission. Now he has applied for execution. He has acted according to the Section. I, thereforee, find no merit in this objection. This view of mine is supported by the judgment of the Madras High Court reported as R.. Arumugham V. R. Krishnaswamy, 1965, 2 M. L. J. 183 In that case it was held that a suit like the present was maintainable but execution was barred except to the extent permited by the Central Government or the Reserve Bank of India.

(3) As regards the second substantive question, the contention of the appellant is that before granting permission the Reserve Bank should have heard the appellant. I find no force in this submission also. The provisions of Section 21 (3) (b) show that the decree-holder is required to apply to the Central Government or the Reserve Bank as the case may be for permission to execute the decree. As regards the steps to be taken by the Reserve Bank in respect of such an application, reference has to be made to Section 21 (3) (c). It will be observed from this provision that it is for the Reserve Bank to call upon the person entitled to the benefit of the judgment to produce such documents or to give such information as may be specified in the requirement. It is also for the Reserve Bank in such a case to call upon the decree- holder and the judgment-debtor to produce documents and to give information as may be required. It is conceivable that the Reserve Bank may require no documents and may call upon neither party or may call upon one or other party. The question as to which documents are required by the Reserve Bank is not a matter which is justiciable and clearly requires no quasi-judicial functions to be performed by the Reserve Bank. The transaction is probably viewed by the Reserve Bank from a completely different angle to that of the parties themselves. This was a transaction between Indian citizens concerning the sale of 6,500 U.S. dollars. Probably the Reserve Bank came to the conclusion that there was no point in refusing the permission. In my view, this was a matter entirely within the discretion of the Reserve Bank and did not effect the rights of either the judgment-debtor or the decree-holder. There was in my view, no provision which required the Reserve Bank to act in a quasi-judicial manner for deciding whether to give permission or not. The authorities sought to be cited on behalf of the appellant relating to the powers and duties of a quasi-judicial body have thereforee no application to a case like the present and I need not refer to them. In my view the grant of permission does not require any hearing by the Reserve Bank. This view is supported by the judgment of the Madras High Court reported as A. R.. Ramiah V. Reserve Bank of India, 1970 I M.L.J. 1.. That decision was on a Writ Petition, wherein it was held that the power conferred on the Reserve Bank under Section 21(3)(b) and (c) was not a power coupled with 8 duty. The failure to give notice to the judgmentdebtor was held to be not vocative of natural justice. I fully agree with that view and concur with the decision that-

'......INview of such an object, it is entirely foreign to contend that before the permission as contemplated by Section 21 (3) (c) of the Act is granted, a notice must be given to the judgment-debtor and the judgment-debtor must be given an opportunity of being heard.............................. Having regard to the object and provisions of the Act, there is no scope for insisting that the principles of natural justice require that before the Reserve Bank of India grants permission to a decree-holder under Section 21 (3) (c) of the Act for executing the decree it must give an opportunity to the judgment-debtor and hear him.'

In view of this statement of the law I agree with the Executing Court that the objection of the judgment-debtor is not well founded.

(4) In view of my decision that the objections of the judgment- debtor have been rightly rejected by the court below I have to uphold the decision of that court dismissing the objections. I, thereforee, dismiss the appeal but because of the novelty of the questions raised order that the parties will bear their own costs in this Court.


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