Sankar Prasad Mitra, C.J.
1. This is an appeal from a judgment of T.K. Basu, J. delivered on the 18th Jan., 1977 in an application under Article 226 of the Constitution challenging a show cause notice dated the 13th Feb., 1975, issued by the Director, Enforcement Directorate, Government of India and an order/notice dated the 14th Nov., 1975, which the said Directorate had issued. The learned trial Judge has allowed the application and directed the issue of a writ in the nature of mandamus inter alia, calling upon the respondents to recall, cancel and withdraw the said notice dated the 13th Feb., 1975 and the said order/notice dated the 14th Nov., 1975.
2. On the 20th Feb., 1970, the Reserve Bank of India (hereinafter called 'R. B. I.') issued a press note advising foreign companies proposing to sell their Indian assets to obtain the prior approval of the R. B. I. before effecting sale, if repatriation of sale proceeds (of more than Rs. 10 lacs) is involved.
3. On Jan. 7, 1972, the National and Grindlays Bank Ltd., University Road, Bombay, applied to the R. B. I. for permission to sell 25,000 equity shares held by Ralli International Ltd., London (hereinafter called 'Ralli') in Oriental Carpet ., Amritsar (hereinafter referred to as 'OCM'), Ralli, an United Kingdom Company held 100% shares in OCM, an Indian Company.
4. The R. B. I. on the 17th March, 1972, communicated to the Bank its permission to enable Ralli to sell the shares in OCM. Apart from private placement of shares in favour of one J.L. Mehra (and his relatives) and Unit Trust of India (UTI) and Life Insurance Corporation of India (LIC), the R. B. I. directed that 12,250 shares plus such numbers as are not taken up by UTI and LIC were to be offered to public through a member of a recognised Stock Exchange. One of the conditions of the permission which the R. B. I. granted was
'No shares shall be allotted to any larger industrial house and persons connected therewith.'
5. The total sale proceeds of Rs. 61.25 lakhs were directed to be 'deposited in e Bank account and will be allowed to be repatriated' on conditions imposed by the R.B.I.
6. On the 30th April, 1972, Messrs. Harbans Singh Mehta & Co., a firm of brokers, issued an offer for sale on behalf of Ralli of 15,000 fully paid up equity shares held by Ralli in OCM. Thesa shares were of Rs. 100 each and were to be sold at Rs. 245/- per share. It was provided that applications from non-residents or their nominees and larger industrial houses and persons connected therewith would not be considered. It was provided further that the sellers reserved the right in their sole and absolute discretion to accept or reject any application whether wholly or in part.
7. This offer for gale was published in two leading newspapers in New Delhi on the 3rd May, 1972.
8. The respondent Saroj Kumar Bhotika on May 9, 1972, applied for purchase of 50 shares and remitted to the National and Grindlays Bank Ltd. a sum of Rs. 12,250.00. While applying for the shares he made a declaration that he was not a larger industrial house or a person connected therewith. Pursuant to this application Harbans Singh Mehta & Co. sold 50 shares in OCM to Saroj Kumar Bhotika. Bhotika, it is stated, still holds these shares.
9. On the 4th Jan., 1974, a summons was issued to Bhotika under Section 40 of the Foreign Exchange Regulation Act (hereinafter called 'FERA') of 1973 by the Enforcement Directorate, Government oil India, for his attendance on the 16th Jan., 1974 and for production of documents to show the source of funds with which investment was made for purchase of foreign shares in OCM.
10. Bhotika appeared before the officer concerned on Jan. 14, 1974 and produced certain documents,
11. On the 13th Feb., 1975, the impugned show cause notice was issued to Bhotika for contravention of Section 5 (1) of FERA of 1947 for payment of Rupees 12,250.00 to the credit of Ralli, e person resident outside India, without the RBI's sanction and thereby rendering himself liable to prosecution under Section 23 (1) of FERA of 1947. Bhotika was asked to show cause why adjudication proceedings as contemplated in Section 51 of FERA of 1973 (Section 23-D of FERA of 1947) should not be held for such contravention.
12. Bhotika showed cause on March 18, 1975. He denied that he was connected with larger industrial houses. He alleged that the words 'connected with larger industrial houses' had not been defined either in FERA or any other law or statute in force. He also alleged that he made payments in Indian Currency to the Bank and not to the credit of Ralli, a person resident outside India. His contention was that he had not violated the provisions of Section 5 (1) (a) of FERA of 1947.
13. On the 14th Nov., 1975, the Deputy Director of Enforcement issued the impugned order/notice after considering the cause shown to inform Bhotika that adjudication proceeding would be held. He was given an opportunity to present himself either personally or through his lawyer or other authorised representative,
14. On the 21st Nov., 1975, Saroj Kumar Bhotika filed a writ application in this Court as aforesaid. A Rule Nisi was issued and an interim injunction was granted.
15. The Rule was heard by T.K. Basu, J. By his judgment delivered on Jan, 18, 1977, T.K. Basu, J. has made the rule absolute. His Lordship has issued a Writ in the nature of mandamus for inter alia recall, cancellation and withdrawal of the notice dated the 13th Feb., 1975, and the order/notice dated the 14th Nov., 1975. This appeal, as we have seen, is directed against the order of T.K. Basu, J.
16. Learned counsel appearing for the parties, have advanced before us elaborate arguments on different points they wanted to raise for our consideration. It seems to us that this appeal can be disposed of by answering three principal questions raised on behalf of the parties. These questions are:
1. Whether the application under Article 226 of the Constitution is premature and, therefore, not maintainable
2. Whether there was any rational end proximate nexus between the object of FERA of 1947 or 1973 and the condition imposed by the RBI that the shares cannot be sold to larger industrial houses or to persons connected therewith
3. Whether the expressions 'larger industrial Houses'' and 'persons connected therewith' are vague, indefinite and uncertain
17. On the first question learned counsel for the appellant has urged before us that the respondent Saroj Kumar Bhotika cannot be said to be an aggrieved person at all. No penalty has yet been imposed on him. He has merely been served with a show cause notice and has been given an opportunity of personal hearing by. an officer having jurisdiction over these matters. Moreover, the Act itself contains elaborate provisions for appeals against any order that may be passed by the officer concerned.
18. Mr. Chakraborty, appearing for the appellant, has placed strong reliance on some of the recent decisions of the Supreme Court In Chanan Singh v. Registrar Co-operative Societies, Punjab, : (1976)IILLJ98SC , disciplinary proceedings against an employee were dropped by an enquiry officer who was not competent to impose the punishment. The proceedings were revived by the competent officer by issuing a fresh show cause notice. A writ petition challenging the revival of the proceedings, the Supreme Court held, was premature as no punitive action had yet been taken and there was no present grievance which could be ventilated in Court.
19. In Mani Subrat Jain v. State of Haryana, : 2SCR361 , it has been observed that a person can be said to be aggrieved only when a person is denied a legal right by some one who has a legal duty to do something or to abstain from doing something. No one can ask for a mandamus without a legal right.
20. In Geep Flashlight Industries Ltd. v. Union of India, : 1983(13)ELT1596(SC) , a notice under Section 131(3) of the Customs Act, 1962 was challenged. It was a notice for revision of an order for refund. There were prayers for issue of appropriate writs. The Supreme Court has held that prayers for writs in the nature of certiorari and mandamus were misconceived. There was no order either judicial or quasi-judicial which could attract certiorari. No mandamus could go because there was nothing which were required to be done or forborne under the Act. The issue of the notice required the parties to represent their case. There was no scope for mandamus to do any duty or act under the statute. A writ of prohibition could not be issued for the obvious reason that the Central Government had jurisdiction to revise.
21. Mr. Chakraborty had cited several other decisions of a similar nature with a view to contend that where there has been no excess of jurisdiction or no usurpation of jurisdiction or the adjudication proceedings contemplated by the relevant statute has not been completed a person is not entitled to invoke the writ jurisdiction of the High Court.
22. There is no dispute about the propositions urged by Mr. Chakraborty. But in view of the contentions raised before us on behalf of the respondent No. 1, we are unable to hold that this Court in the exercise of its writ jurisdiction cannot interfere in this matter provided that the Court is satisfied that the grounds urged are of substance. So far as this aspect of the matter is concerned the principal contentions of the respondent No. 1 are:
(i) There is no rational and proximate nexus between the object of the enactments (i.e. FERA of 1947 or 1973) and the impugned condition, namely, that the shares cannot be sold to larger industrial houses or a person connected therewith.
(ii) The condition that is imposed must, in order to be valid, be clear and unequivocal and must not be vague, uncertain or ambiguous.
(iii) Penal conditions must be strictly construed and in the case of any doubt or ambiguity a construction benefiting the citizen has to be accepted.
23. At least the first two propositions, could not be urged before the authority or authorities constituted under FERA of 1947 or 1973. From this point of view it would not be proper for us to reject this application on the ground that it is premature and, as such, not maintainable.
24. There have been numerous decisions on this subject. It would be enough to refer to a Full Bench decision of the Gujarat High Court delivered recently after the 42nd Amendment to the Constitution which has referred to almost all relevant authorities on, this question. The judgment is reported in AIR 1977 Guj 113 (FB) (A'bad Cotton Mfg. Co. v. Union of India). In paras 22 and 23 the Gujarat High Court has pointed out that a petitioner cannot be asked to exhaust his alternative remedies under a statute before entertaining a writ petition where the order is a nullity as being ex facie without jurisdiction or in non-compliance with the provisions of the statute or the essential principles of justice or on any other similar ground. In other words, where the challenge is on the ground that the order is an ultra vires order, the question of exhausting alternative remedy could hardly arise.
25. There is also another Full Bench decision of the Andhra Pradesh High Court delivered after the 42nd Amendment. This decision is reported in : AIR1977AP250 (FB) (Government of India v. National Tobacco Co. of India, Ltd., Calcutta). Commenting on the new Article 226 (1) (b) and (c) the Andhra Pradesh High Court in para 29 at page 263 observes:
'.........Mere existence of what is called 'another remedy' provided under the same law for the time being in force cannot always be said to be a remedy which is capable of giving such redress as is provided under Sub-clauses (b) or (c). The other remedy provided under other law shall not be illusory. That should be real. We may give an example to bring home this aspect. Supposing there is an appeal provided against the decision of a particular authority under a statute, the breach of which is complained of. But if it is manifest from the record that the primary authority has acted under the instructions or directions of the higher authority, which is also the appellate authority, then there is no point in saying that a Writ petition would not be available because there is the other remedy of appeal provided under a Statute or law. In such an event the appeal before the Appellate authority would be meaningless and illusory, because the appellate authority has already expressed an opinion on the point. To refuse to entertain a writ petition on this ground would be opposed to the very spirit of the present Article 226 in general and Sub-clauses (b) and (c) of Clause (1) and Clause (3) in particular, The words 'any other remedy for such redress' are significant and meaningful and they clearly bring out the intention of the Parliament that only that other remedy which is truly and really capable of giving such redress as is postulated in Sub-clauses (b) and (c) would be a bar to the maintainability of the Writ petition. Needless to say, that in order to find out whether there is such a bar to the entertainment of a Writ petition, the Court will have to examine the facts and circumstances of each case end the redressal that is sought and the nature of the other remedy that may be available under any other law for the time being in force. It is impossible and undesirable to lay hard and fast rule in this behalf.'
26. The present position in law seems to be that if redress can be had through the law under which the action under challenge is proposed to be taken, a Writ application would not be entertained. But when the challenge is such as cannot be determined by the authority appointed to take action, the Writ jurisdiction of the High Court remains unimpaired. In each case the Court has to see whether the ground on which the challenge is based can be entertained, tried and determined by the authority which the Statute has created. If the Court finds that that authority is incapable of dealing with that ground or making any pronouncement upon it, the Court would entertain an application for an appropriate Writ.
27. In the instant case as we have already observed, at least two of the grounds which the respondent No. 1 has raised cannot be gone into by any authority constituted under the FERA of 1947 or 1973. These two grounds are (a) that there is no nexus between the objects of the enactments and the impugned condition and (b) the impugned condition is vague, uncertain and ambiguous. We are, therefore, of opinion that the application was maintainable in law.
28. Let us take up the first point, namely, the point of nexus. The FERA of 1947 is 'An Act to regulate certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion'. The preamble is:
'Whereas it is expedient in the economic and financial interest of India to provide for the regulation of certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion ;
It is hereby enacted as follows:--''
29. In the Gazette of India, 9th Nov., 1946. Part V, page 410 of Objects and Reasons for the passing of the Act were published as follows:--
'A system of exchange control was set up in India on the outbreak of war in September 1939, for the purpose of conserving and directing to the best uses the limited supplies of foreign exchange available. The control was made effective through a series of rules under the Defence of India Act, 1939. These rules expired on the 30th Sept., 1946 but have been retained in force for another six months under the Emergency Provisions (Continuance) Ordinance, 1946. The shortage of foreign exchange is likely to continue in view of the disruption of the internal economy of so many nations, and the interruption of established channels of trade. It is, therefore, necessary that the system of exchange control should be continued in the general interest of the country. Also, the adherence of India to the International Monetary Fund requires her to take certain measures to regulate transactions in foreign exchange in order to fulfil the obligations of membership. Legislation is, therefore, necessary to give the Central Government powers to continue to control transactions in foreign exchange, securities and gold.'
'The Bill embodies the financial provisions of the Defence of India Rules relating to exchange control with certain modifications and amendments which experience over the past six years has shown to be desirable in the interest of clarity and effectiveness, and also certain additions such as the section relating to the import of currency and gold and the control over the proceeds, of the exports which are essentially exchange control matters, although administered by Collector of Customs for practical convenience. The provisions of the Bill have been drafted in such a manner that the degree of restrictions on foreign exchange transactions can be relaxed or increased by executive orders, either generally or for particular foreign currencies, in accordance with the needs of trade and finance or international agreements thus ensuring that flights of capital or wild speculation, which proved so injurious to foreign trade in the period between the two Wars, can be immediately controlled.'
30. From the above Statement of Objects and Reasons it is relevant for us to note that the object of the FERA of 1947 was to conserve and direct to the best uses the limited supplies of the country's foreign exchange and to control transactions in foreign exchange, securities and gold.
31. The FERA of 1947 was due to expire on the 31st day of Dec., 1957. That is why Bill No. 47 of 1957 was introduced into Parliament and in the Statement of Objects and Reasons published in the Gazette of India Extraordinary, Part II, Section 2 page 332 it was observed:
'When it (FERA of 1947) was enacted, it was hoped that the World Trade and economic condition would stabilise themselves after the initial post-war period, but this anticipation has not been fulfilled. India still continues to be short of Foreign Exchange and it is necessary to ensure that our Foreign Exchange resources are conserved in the national interest. The trend of events in this and other countries further indicates that the shortage is likely to continue for an indefinite period, and it is difficult to visualise at this stage that in any foreseeable future it will be possible to dispense with the exchange control altogether. Another important factor is the development programme under the Second Five Year Plan which compels us to husband and utilise our external resources properly. In the circumstances, the continuance of the Foreign Exchange Regulation Act has been unavoidable and it has been placed on a permanent footing.'
'The experience gained in the working of the Foreign Exchange Regulation Act has brought to light certain lacunae which hamper proper administration of the Act and the investigations and the legal proceedings thereunder. This opportunity is, therefore, being taken to carry out certain other amendments in the Act with a view to remove the defects. The most important of these amendments is the one providing for departmental inquiry and adjudication of foreign exchange offences by an authority constituted by Government on the lines of the Sea Customs Act.'
32. Here, again, we find that in 1957 the FERA of 1947 was being put on a permanent basis and the reason for doing so has been sufficiently explained. For our purposes in this appeal it is significant to note that India continued to be short of foreign exchange: it was necessary to ensure that foreign exchange resources were conserved in the national interest until it was possible to dispense with exchange control altogether. The Act was also making provisions for departmental inquiry and adjudication of foreign exchange offences by appropriate authorities. The whole idea, therefore, was to see that the country's foreign exchange resources are not wasted under any circumstances and are properly utilised to advance our national interest.
33. For 7 years the 1947 Act as emended was given a trial. On the 30th Dec., 1964, the President gave his assent to the Amendment Act LV of 1964 for removing certain difficulties which were experienced in the working of the 1947 Act; but the main purpose remained the same, namely, conservation of foreign exchange and directing foreign exchange to the best uses in national interest.
34. Last of all we have the FERA of 1973. In the Statement of Objects and Reasons placed before the Lok Sabha on the 29th Aug., 1972, it is observed:--
'The Foreign Exchange Regulation Act, 1947..........was originally enacted as a temporary measure; it was placed permanently on the Statute Book by Act 39 of 1957. There have been several amendments to the Act since then. In the light of the experience gained during the last several years, the Directorate of Enforcement and the Reserve Bank of India have suggested and Government agreed on the need for regulating, among other matters, the entry of foreign capital in the form of branches and concerns with substantial non-resident interest in them, the employment of foreigners in India, etc. The report of a study team appointed by the Government on the recommendation of the Public Accounts Committee in the 56th Report of 1968 to study the question of 'leakage of Foreign Exchange through invoice Manipulation' was received in June, 1971. The 47th Report of Law Commission on the 'Trial and Punishment of Social and Economic Offences' was also received in April, 1972. These reports have been taken into consideration and the present Bill has been drafted with the object of introducing the changes felt necessary for the effective implementation of Government's policy and removing the difficulties which have been experienced in the working of the Act.'
35. The Bill was referred to a Joint Committee of two Houses and was thereafter passed. It is now the FERA of 1973. Here also, it is interesting to notice that one of the purposes of the enactment was to prevent the entry of foreign capital in the form of branches and concerns with substantial non-residential interest. The legislation was seeking to prevent leakage of foreign exchange. In other words conservation of foreign exchange resources and proper utilisation thereof has always been, and still is, the object of the Act.
36. The object of the enactment has been discussed in several judicial decisions. We shall refer to only three of them. In : AIR1961Mad47 (Bhagwandas v. Union of India) it is stated that the enactment seeks to preserve rupee resources against foreign exchange in dollars. In : 1SCR123 (State of Maharashtra v. M.H. George) it is stated that the Act is designed to safeguarding and conserving foreign exchange which is essential to the economic life of a developing country. In : AIR1964Cal422 (S.P. Ghose v. Deputy Controller, Reserve Bank of India) D.N. Sinha, J. in para 3 at pages 423 to 424 has set out an excellent summary of the purposes of the Act. D.N. Sinha, J. says;
'The Foreign Exchange Regulation Act, 1947.........is an act to regulate certain payments, dealings in foreign exchange and securities and import and export of currency and bullion. It is permissible to look into the Objects and Reasons for passing the Act, in order to discover the background and the evils which it was intended to remedy. It is stated in the Objects and Reasons that a system of exchange control was set up in India on the outbreak of the second world war, in September, 1939, for the purpose of conserving and directing to the best uses, the limited supplies of foreign exchange available. Upon the termination of the War, it was found that the shortage of foreign exchange was likely to continue in view of the disruption of the internal economy of so many nations, and the interruption of the established channels of trade. Legislation was, therefore, necessary to give the Central Government powers to continue to control all transactions in foreign exchange, securities etc. The original Act was a temporary one but it has been found that India continued to be short of foreign exchange end it was difficult to visualise that in any foreseeable future it will be possible to dispense with exchange control altogether. Various Five Year Plans have made it necessary to husband and utilise all our external resources, and consequently for these various reasons the Foreign Exchange Regulation Act (hereinafter referred to as the 'said Act') has been placed on a permanent footing. Section 4 of the said Act, imposes restrictions in dealing with foreign exchange. It provides that except with the previous general or special permission of the Reserve Bank, no person other than an authorised dealer shall deal in foreign exchange. Section 5 of the said Act puts restrictions on payments. It, inter alia, provides that no person in India shall make any payment to any person resident outside India, save as may be provided in, and in accordance with, any general or special exemption granted conditionally or unconditionally by the Reserve Bank. This is a very sweeping restriction and it is interesting to recall the words of Lord Goddard, C. J, in Pickett v. Fesq. (1949) 2 All ER 705 dealing with the corresponding provisions of the English Act, being Exchange Control Act, 1947 :
'It may not generally be known how rigid end far-reaching are the provisions of the Exchange Control Act, 1947. It has been pointed out by high authority that if a person plays a game of cards in this country with a person who does not live in one of the scheduled territories as for instance -- an American -- and at the end of the game he hands in five shillings which he has lost to him, he is really committing an offence. I do not suppose that in these circumstances anybody would say that a serious offence has been committed or that there would be likely to be a prosecution but the Act is wide enough to cover such a case'.'
37. We have purposely set out the views of Sinha J. just to emphasise that the object of the Act was to husband and utilise the external resources of the country for economic development. This Act, it appears, is not concerned with concentration of economic power within the country itself. For the prevention of evils arising out of such concentration other enactments were necessary and were, in fact, made. We shall refer to them in due course.
38. Let us now examine how the parties before us had understood why the FERA was enacted. There is an affidavit by Thedavoor Krishna Rao Padmanavan affirmed on the 2nd Aug., 1976. Padmanavan at the time of affirming this affidavit was the Joint Controller, Exchange Control Department of the Reserve Bank of India. In para 13 of this affidavit at page 55 of the Paper Book Padmanavan has said:
'I say that under Section 5 (1) (a) of the said Act the Reserve Bank has power and necessary authority to see whether the purchase and sale transactions were in order from the exchange angle, whether the amount proposed to be remitted as the purchase of shares is fair and true value of the shares, that there was no excess remittance and that there was no remittance through unauthorised channel. All allegations to the contrary are denied.'
39. This paragraph has been affirmed by Padmanavan to be true to his knowledge. Section 5 (1) (a) of the FERA of 1947 prescribes that save as may be provided in and in accordance with any general or special exemption from the provisions of this sub-section which may be granted conditionally or unconditionally by the Reserve Bank, no person in, or resident in, India shall make any payment to or for the credit of any person resident outside India. Padmanavan is right when he says that the Reserve Bank has the power and authority to see whether purchase and sale transactions were in order from the exchange angle; but the question is whether in exercising its powers under Section 5 (1) (a) of the FERA of 1947, the Reserve Bank can impose a condition which has nothing to do with the 'exchange angle'. Padmanavan himself has indicated what the Reserve Bank would ensure before granting permission. The Reserve Bank will see whether the purchase price is a fair and true value of the shares; whether there is any excess remittance; or whether there is remittance through unauthorised channels. These are important considerations from the 'exchange angle' and from the point of view of conservation of foreign exchange; but we doubt whether the Reserve Bank can assume power for imposing conditions which are not linked to conservation or protection of foreign exchange at all.
40. It is interesting to note that there is another affidavit by Devi Dayal, the Deputy Director of the Enforcement Directorate, Special Unit, Cabinet Secretariat of the Government of India, affirmed on the 7th Aug., 1976. In para 21 of this affidavit at pages 84-85 of the Paper Book Devi Dayal has repeated the statements of Padmanavan. These are admissions by the appropriate authorities as to the object of enacting the FERA and in making this admission the authorities have correctly indicated the powers enjoyed by the RBI.
41. The Supreme Court has repeatedly pointed out that when an authority exercises a power conferred by a Statute and the exercise of that power is challenged in a court of law the authority must show that what has been done has a rational connection with the object proposed to be achieved by the Statute. There must be a direct and proximate connection between the condition or restriction imposed and the object sought to be achieved by the Act which confers the power to impose that condition or restriction. Indirect or farfetched or unreal connection must be struck down. Moreover, the condition imposed must not be vague or uncertain but definite and certain; vide Sodhi Shamsher Singh v. State of Pepsu, : AIR1954SC276 Hamdard Dawakhana v. Union of India, : 1960CriLJ671 and O.K. Ghosh v. E. X. Joseph, : (1962)IILLJ615SC .
42. We may in this connection refer to a decision on the English Exchange Control Act. It is a decision of the Chancery Division in re. H. P. C. Production Ltd., reported in (1962) 2 W. L. R. 51. Plouman, J. has taken the view that the question of construction of the Exchange Control Act has to be approached in the light of principles applicable to a Penal Statute. The Court has to look at all the surrounding circumstances and the mischief intended to be remedied. The Court will give effect to the words that have been used in the section but if on construing the relevant section or the order there appears any reasonable doubts or ambiguity a lenient view has to be adopted. A transaction to be punishable must fall fairly or squarely within the provisions of the Act and the order. Plouman J. has relied on a number of authorities which we need not refer to as we have extracted the broad principles that should weigh with us.
43. In the instant case, it seems to us, on application of the principles discussed above, that the imposition of the impugned condition has no rational or proximate nexus with the object of the enactment which is conservation of our foreign exchange, prevention of frittering away of our foreign exchange and the protection of our foreign trade interest in the matter of earning foreign ex-change.
44. Mr. Chekraborty, appearing for the appellant, has strongly relied on a recent judgment of the Supreme Court in the Supdt. and Remembrancer, Legal Affairs, West Bengal v. Girish Kumar, : 1975CriLJ874 . The Supreme Court was considering the provisions of Section 23 of the FERA of 1947 which deals with 'penalty and procedure' particularly those of Sub-sections (1) (a) and (1-A). In para 7 at p. 1033 the Supreme Court has said :
'The Preamble provides the key to the general purpose of the Act. That purpose is the regulation of certain payments, dealing in foreign exchange and securities and the import and export of currency and bullion in the economic and financial interest of India. The general purpose or object of the Act given in the preamble may not show the specific purpose of the classification made in Section 23(1)(a) and Section 23(1-A). The Court has, therefore, to ascribe a purpose to the statutory classification and co-ordinate the purpose with the more general purpose of the Act and with other relevant Acts and public policies. For achieving this the Court may not only consider the language of Section 23 but also other public knowledge about the evil sought to be remedied, the prior law, the statement of the purpose of the change in the prior law and the internal legislative history. When the purpose of a challenged classification is in doubt, the Courts attribute to the classification the purpose thought to be most probable. Instead of asking what purpose or purposes the Statute and other material reflect, the Court may ask what constitutionally permissible objective this Statute and other relevant materials could plausibly be construed to reflect. The latter approach is the proper one in economic regulation cases. The decisions dealing with economic regulation indicate that Courts have used the concept of 'purpose' and 'similar situations' in a manner which give considerable leeway to the legislature. This approach of judicial restraint and presumption of constitutionality requires that the legislature is given the benefit of doubt about its purpose. How far a Court will go in attributing a purpose which perhaps though not the most probable is at least conceivable and which would allow the classification to stand depends to a certain extent upon its imaginative power and its devotion to the theory of judicial restraint.'
45. Mr. Chakraborty invited us to use our imaginative power and our devotion to the theroy of judicial restraint to hold that the RBI had imposed the impugned condition to prevent concentration of economic power, This was the evil sought to be remedied by the condition that 'larger industrial houses' and 'persons connected therewith' would not be permitted to purchase the shares of OCM. Mr. Chakraborty wanted us to extend the benefit of doubt to the RBI and uphold the impugned condition.
46. We have considered the preamble to the Act, namely, the FERA of 1947 which, as the Supreme Court says, provides the key to the general purpose of the Act. We have also been taken through some of the relevant provisions of the Act but we have not been able to discover any indication in the Act express or implied, direct or indirect that one of the purposes is to prevent concentration, of economic power within the country. To achieve that purpose Parliament had enacted the Monopolies and Restrictive Trade Practices Act (LIV of 1969) (hereinafter called 'MRTP') on the 27th Dec. 1969. The preamble to that Act says that it is an Act:
'to provide that the operation of the economic system does not result in the concentration of economic power to the common detriment, for the control of monopolies, for the prohibition of monopolistic and restrictive trade practices and for matters connected therewith or incidental thereto.'
The appellants before us do not contend that the RBI had imposed any condition under the MRTP. The appellants' contention is that such a condition could be imposed under the FERA of 1947. This is a contention we are unable to uphold. Any step taken for conservation and utilisation of foreign exchange may be supported under the FERA. But a step to prevent concentration of economic power cannot, in our opinion, be said to be a step warranted by the FERA. In the absence of any direct or proximate nexus between the impugned condition and the object of FERA, we are of opinion that the condition must be struck down. Mr. Chakraborty referred us to the Supreme Court's observation in South India Coir Mills v. Addl. Collector of Customs, reported in : 3SCR905 . The Supreme Court has said that in cases of economic offences and specially in relation to the law of foreign exchange no leniency in the quantum of punishment is warranted. In the present appeal there is no charge of any economic offence in relation to foreign exchange. This is not a case of offences like smuggling of foreign exchange. The Supreme Court's observations, therefore, do not appear to be of relevance to us to the facts of the case.
47. Mr. Chakraborty has also argued before us that the RBI is a State within the meaning of Article 12 of the Constitution and in view of the provisions of Article 36 and Article 39(b) and (c), the RBI had imposed the condition to subserve the common good and to prevent concentration of wealth.
48. Article 39 is in Part IV of the Constitution which deals with 'Directive Principles of State Policies'. Article 37 in Part IV provides:
'the provisions contained in this Part shall not be enforceable by any Court, but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws.'
49. The directive principles, therefore, may be resorted to in making laws. If the State or authority falling within the definition of State does something to give effect to the directive principles, the Courts would take into consideration the relevant matters and express their opinions thereon. But when the authority claims that it has done something under powers conferred by a particular Statute, the Court's duty is to determine whether such power exists. If the Court comes to the conclusion that the Act complained of is outside the scope of the Statute the authority responsible for the Act, cannot take shelter under the Directive Principles of State Policy.
50. In the premises aforesaid, we hold that the RBI had no authority under the FERA of 1947 while granting permission under Section 5 (1) (a) to impose the condition that applications for purchase of the shares of OCM from larger industrial houses and persons connected therewith would not be considered.
51. The next point that arises is whether the expressions 'larger industrial houses' and 'persons connected therewith' are vague and indefinite. Counsel for both parties have conceded that if it be held that these expressions are vague and indefinite, the condition has to be struck down as ultra vires and illegal.
52. Mr. Siddhartha Sankar Ray, Learned Counsel for the respondents, has drawn our attention to various provisions of MRTP in order to contend that the expression 'larger industrial houses' has not been defined in any statute. In the MRTP there are definitions 'dominant undertakings' (Section 2(d) ) 'inter-connected undertakings' (Section 2(g)) and 'Monopolistic undertakings' (Section 2(j)); but there is no definition of 'Larger industrial houses' either in MRTP or any other Act. The expression 'larger industrial Houses,' according to Mr. Ray, is therefore vague and indefinite.
53. From the mass of evidence placed before us by Mr. Chakraborty it is clear that the meaning of the expression 'larger industrial houses' is well known to the commercial world. In the 'Report of the Industrial Licensing Policy Enquiry Committee' published by the Government of India in July, 1969, it was stated:
'........ we issued a questionnaire to all the apex Companies indicated in the Monopolies Enquiry Commission List of the 75 business groups ........ we decided to limit our own exercise regarding the composition of Houses to the 20 top Houses in the list of the Monopolies Enquiry Commission. Each of these had total assets exceeding Rs. 35 crores in 1964. These 20 Houses have been classified in our analysis as 'Larger Industrial Houses' ............''
vide page 14, para 2.14. At page 18 in para 2.32 of this Report a list of 20 Larger Industrial Houses has been set out. Item No. 5 in this list is 'Birla'. In the appendices volume II, page 11-10 to 11-17, the names of 203 concerns belonging to the Birla Group have been published.
54. This report and its appendices are clear indications that the commercial world knew since 1969 what was meant by the expression 'Larger Industrial Houses'. Secondly, in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) dated the 18th Feb. 1970, the Government of India announced the appointment of a commission consisting of Shri A.K. Sarkar formerly Chief Justice of the Supreme Court of India, in the exercise of powers conferred by Section 3 of the Commissions of Inquiry Act, 1962 to inquire into allegations which had been made to the Government against certain concerns which had been included by the Industrial Licensing Policy Enquiry Committee in the Larger Industrial Houses of Birla.
55. Another Notification was issued by the Government of India in the Gazette of India, Extraordinary, Part 1, Section (i), dated the 4th Aug. 1970, to make further enquiries by Shri A.K. Sarkar in respect of various alleged irregularities, lapses and improprieties of Larger Industrial Houses. In schedule 'D' to this notification 20 Larger Industrial Houses have been named and item No 5 is 'Birla'.
56. The concept of Larger Industrial Houses has been a live concept since 1969. Our attention has been drawn to 'Guidelines for Industries', 1975-76 and 1976-77 published by the Government of India. In both the Guidelines there are elaborate discussions about 'Larger Industrial Houses' which we need not refer to in details in this judgment.
57. All these publications of the Government of India have convinced us that the expression 'Larger Industrial Houses' does not suffer from any ambiguity or uncertainty in the World of commerce and industry. On the other hand it has acquired a definite connotation in business circles.
58. We would next take up the point whether the expression 'persons connected therewith' is vague and uncertain. In the Oxford English Dictionary, Vol. II, 1970 edition, the word 'connected' we find has the following meanings:--
1. Conjoin; fastened or linked together.
2. Joined together in order or sequence (as words or ideas); hence, exhibiting proper sequence and coherence of thought.
3. Related, associated (in nature of idea).
4. Of persons: related by ties of family, intimacy, common aims, etc. well-connected related to persons of good positions.
59. In the context of the above meanings we have to read the condition: 'No shares shall be allotted to any larger industrial house and persons connected therewith.' vide page 70 of the Paper Book.
60. To us the condition means that no share shall be allotted to a Larger Industrial House and no share shall be allotted to a person on whom a Larger Industrial House is in a position to exercise its influence. In other words, who would cast his votes or behave in the manner dictated by a 'Larger Industrial House.' In the instant case, therefore, we do not find any ambiguity in the expression 'Persons connected therewith.' We have before us the affidavit-in-opposition of Devi Dayal, Deputy Director, Enforcement Directorate of the Government of India, affirmed on the 7th Aug. 1976 Para 12 of this affidavit runs thus:--
'12. With reference to allegations contained in para 1 of the petition I deny that the petitioner is not related to or connected with a larger industrial house as falsely alleged or at all. I state that Nandlal Bhotika, Saroj Kumar Bhotika, Sm. Sabitri Devi Bhotika and Sm. Chanda Bhotika were at all material times and still are the partners and/or interested in K.C. Dey & Sons and other firms which deal with calcium carbide, staple yarn, cotton yarn, textiles, wooden materials etc. The said concerns of the Bhotikas acted and/or are still acting as dealers in respect of various products of Birla concerns as stated hereinbelow and their total turnover would be more than several lakhs of rupees in a year ......'
Devi Dayal has given the names of seven Birla concerns in this paragraph and has said:
'I state that the main businesses of the petitioners are connected with various Companies and firms of Birlas a larger industrial house and more or less they are dependent upon the income of the said Companies and firms of the said larger industrial house. I state that the petitioner and the said other Bhotikas were all interested and intimately connected with larger industrial house. I state that the petitioner did not disclose the said fact deliberately and suppressed the said fact at the time of purchasing the said shares of OCM ............ .'
61. From the facts disclosed in this affidavit there is no doubt in our mind that Saroj Kumar Bhotika the respondent No. 1 was a person connected with a larger industrial house. We are unable to accept the contention of Mr. Siddhartha Shankar Ray on the facts and in the circumstances of this case that the two expressions 'Larger Industrial Houses' and 'persons connected therewith' are vague and uncertain and the entire condition which the RBI had imposed was void for uncertainty. But we have already held that the RBI had exceeded its powers in imposing this condition as it had no rational direct or proximate connections with the object of the FERA of 1947.
62. Mr. Chakraborty then contended before us that if on any ground we hold that the condition aforesaid is bad, the entire permission granted by the RBI would fail and the transaction has to be set aside altogether. Mr. Siddhartha Shankar Ray, on the other hand, has urged that the condition aforesaid can be severed from the other conditions and the permission granted would stand except that the impugned condition cannot be enforced. Numerous decisions of English Courts were placed before us by Counsel for both the parties but we do not propose unnecessarily to discuss those cases in details. It would be enough for our purpose to refer to Halsbury's Laws of England, 4th Edn. Vol-I page 29 para 26 which runs thus:
'An order or other instrument or action may be partly valid and partly invalid. Unless the invalid part is inextricably inter-connected with the valid, a Court is entitled to set aside or disregard the invalid part, leaving the rest intact. The principles by which the Courts ought to be guided have not been clearly expounded, and they may well vary according to the context. It may be appropriate to sever what is valid if the character of what remains is unaffected. In a number of cases invalid conditions annexed to the grant of licences and permits have been held to be void on the assumption that the licence or permit can properly be allowed to stand unconditionally. In cases involving the validity of planning conditions the Courts have tended to be less ready to allow a grant of permission, shorn of an invalid condition, to stand, inasmuch as the competent authority might well have declined to grant unconditional planning permission in the first place. In such cases it appears that an invalid condition will be severable from the grant only if it is of a trivial nature or if it is extraneous to the use to which land may properly be put, of possibly if a Court can reasonably suppose that the authority would not have refused permission altogether had it known that the condition was invalid.'
63. The authorities cited before us are mostly those indicated in the foot-notes of the above article. In the case of a planning permission Courts may be reluctant to sever an invalid condition from the valid conditions. The Courts may take the view that the competent authority might have declined to grant an unconditional planning permission. The Courts may say that an invalid condition would not be severable unless it is of a trivial nature or extraneous to the use to which the land might be properly put. In special cases the Courts may be of opinion that the authority would have granted permission without the invalid condition if it knew that the condition could not be legally imposed. But we are here not concerned with a planning permission. We have to deal with a permission granted by the RBI under Section 5 (1) (a) of the FERA of 1947 subject to several conditions one of which has been found by us to be invalid. Our duty, therefore, is to examine whether the invalid condition is inextricably inter-connected with the valid conditions. We have to see whether we can disregard the invalid condition end leave the rest of the conditions intact. Cases vary according to context. In the instant case the RBI has imposed conditions in two parts. In the first part there are directions as to how 40% of the 25,000 shares are to be disposed of. They are to be offered to Shri J.L. Mehra and his relations at not more than Rs. 245/- per share subject to certain restrictions. In the second part there are directions as to how the balance of 60% of the 25,000 shares are to be disposed of 2,750 shares should be offered to UTI/LIC at Rs. 245/- per share. The remaining 12,250 shares plus such number as are not taken up by the UTI/LIC should be offered to the public on the following conditions:
1. There shall be a sale offer at Rs. 245/- per share through a member of a recognised stock exchange.
2. For the purpose of the aforesaid offer the Company should convert itself into a public limited company and should seek enlistment with a recognised stock exchange.
3. No shares shall be allotted to any larger industrial house and persons connected therewith.
64. The third condition has been held by us to be invalid; but it does not, especially in the context of all the conditions which the RBI has prescribed including the sale to J.C. Mehra and his relations, appear to be inextricably inter-connected with the two other conditions which are valid. We are, therefore, entitled to set aside or disregard the third condition leaving the two other conditions intact. In other words, it is appropriate on the facts and in the circumstances of this case to sever the third condition from the two other conditions inasmuch as by such severance the other two conditions remain unaffected.
65. Since the sale has taken place there is no reason in view of the conclusions we have reached to disturb or interfere with the sale.
66. It has been urged before us that the respondent Saroj Kumar Bhotika cannot approbate and reprobate. He has declared in writing that he is not connected with a larger industrial house. Now he cannot be allowed to say that the condition is illegal. The answer is that there is no estoppel against illegality or legal un-enforceability: vide : AIR1951Bom72 (Diubai v. Dominion of India) at p. 77 para 9.
67. In the result, this appeal is dismissed. The rule is made absolute. There will be a Writ in the nature of mandamus directing the respondents to the original petition to recall cancel and withdraw the impugned notices dated the 13th Feb. 1975 and the 14th Nov. 1975, respectively and to forbear from giving effect thereto in any manner whatsoever. There will be no order as to costs.
Salil Kumar Datta, J.
68. I agree.