Tuesday, May 17, 2016

Jatin C. Jhaveri V/s.Union of India - May 13, 2016


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.11127 OF 2011

Jatin C. Jhaveri                                       ….Appellant


Union of India                                  …. Respondent


                      CIVIL APPEAL NOS.11128-31 OF 2011

Union of India                                         ….Appellant


Jatin  C. Jhaveri, etc.                             …. Respondents

                               J U D G M E N T

Uday U. Lalit, J.

These appeals arise out  of  common  judgment  and  order  dated  19.10.2010
passed by the High Court of Judicature at Bombay in  FERA  Appeal  Nos.64-66
of 2006 & in Writ Petition No.2976 of 2004.  The challenge in  Civil  Appeal
Nos.11128-11131 of 2011 at  the  instance  of  Union  of  India  is  to  the
decision of the High Court dismissing FERA Appeal Nos.64-66  of  2006  while
Civil Appeal No.11127 of 2011 filed by  one  Jatin  Jhaveri  challenges  the
dismissal of his Writ Petition No.2976 of 2004.

The facts leading to these appeals are as under:-

 On the  night  intervening  27th  and  28th  July,  1993,  one  Ajit  Dodia
intending to board a flight to Hongkong from Mumbai, had checked in  a  grey
suitcase and a black briefcase. On suspicion, the Custom  Officers  searched
the baggage and found the suitcase to be containing US $ 289,250  while  the
brief case contained US $ 114,300.  The currency was seized and  Ajit  Dodia
was questioned. He disclosed that he  was  to  accompany  Jatin  Jhaveri,  a
diamond trader, that his brother  Jitendra  Dodia  was  working  with  Jatin
Jhaveri  as a sorter, that his trip was  finalized  and  arranged  by  Jatin
Jhaveri who had driven him to the Airport.  In his statement Jitendra  Dodia
confirmed that he was working with Jatin  Jhaveri  and  that  he  and  Jatin
Jhaveri had packed US dollars in  bundles  in  the  evening.  However  Jatin
Jhaveri was not available for next two months i.e. till 27.09.1993.

In his statement dated 12.10.1993, Jatin Jhaveri confirmed that  he  was  to
accompany Ajit  Dodia to Hongkong on the  relevant  date  and  that  he  had
handed over his suitcase to Ajit  Dodia who in turn was to hand it  over  to
the brother of Jatin Jhaveri at Hongkong. He  however  denied  ownership  of
the currency in question and also stated that he had nothing to do with  the
briefcase. He repeated in writing to stress the point saying  “It  does  not
belong to me”. This incident led to initiation of proceedings under  Clauses
(d), (e) and (i) of Section 113 of the Customs Act, 1962  proposing  penalty
as well as confiscation of the currency.

In defence, Jatin Jhaveri now contended that he had  been  to  USA  in  June
1993 and had entered into contract for supply of polished diamonds and  that
in pursuance of the contract he had received  US  $  289,250.  According  to
him, his baggage that arrived along with him on 25.06.1993 had contained  US
$ 254,000 while other bag which  arrived  three  days  later  on  28.06.1993
contained remainder namely US $ 35,250.  In support of his  claim,  reliance
was placed on  Currency  Declaration  Form  No.100250  dated  25.06.1993  in
respect of US $ 254,000  and  Currency  Declaration   Form  No.10763   dated
28.06.1993  in  respect  of  US  $ 35,250. According  to  him  the  currency
was obtained and imported by  him  as  advance  payment  towards  supply  of
diamonds, that he could not deposit the currency in the  bank  as  the  bank
had refused to accept the same and therefore he was  proposing  to  take  it
along with him to Hongkong on 27.07.1993.  It  was  his  further  case  that
while he was going towards the Airport he had received a  message  that  his
mother was ill and  that  Ajit  Dodia  was  intercepted  with  currency  and
therefore he did not go to the Airport.

Commissioner of Customs by his order dated  30.08.1995  concluded  that  the
currency was being taken by Ajit  Dodia  illegally.   He  found  that  Jatin
Jhaveri had played a major role and made available the currency in  question
and had also packed and concealed the same in the  baggage  of  Ajit  Dodia.
As regards Currency Declaration Forms,  it was observed:

“Shri Jatin C. Jhaveri has  come  forward  with  two  Currency,  Declaration
Forms dated 25.6.93  and  28.6.93  to   substantiate  his  claim  that  this
currency was legally imported into India,  when he  had  come  from  USA  on
25.6.93 with US $ 2,59,250/- and made this declaration  before  the  Customs
on his arrival.  Had these currency declaration forms been with  Shri  Jatin
Jhaveri then in the normal course, they should have been  found  along  with
the foreign currency only and these  receipts  should  have  been  recovered
during the search of the office/residential premises of Shri Jatin  Jhaveri.
 He ought to have come forward before the Customs Officers on the  night  of
27th/28th July, 1993    after it was seized at the  time  of  its  smuggling
out.  He did not  do  so.   He  was  also  specifically  questioned  in  the
statement on 12.10.93 and he had made a statement claiming that  the  seized
foreign currency, did  not  belong  to  him.   Thus,  he  had  disowned  the
currency seized from the baggage of Shri Ajit Dodia.  Further  no  plausible
explanation or reason has been offered by him as to what prevented him  from
going abroad on 27th /28th July  1993.   Had  these  currency  been  legally
brought into India, Shri Jatin Jhaveri would have  perhaps  himself  checked
the baggage through Customs, but the fact that he left  to  be  checked  and
cleared through Customs by Shri Ajit Dodia itself indicate that he  did  not
have any honest design of flying abroad on that night and that  he  did  not
have any legal documents for possession of these currency”.

In the premises, he  ordered  confiscation  of  foreign  currency  of  US  $
403,550 (US $ 289,250 recovered from the suitcase and US $ 143,300 from  the
Brief case).  He also imposed penalty of Rs.10 Lacs on Jatin Jhaveri and  of
Rs.3 lacs on Ajit Dodia and of Rs.2 lacs on Jitendra Dodia.

A Show Cause Notice dated 21.11.1997 was thereafter  issued  by  Directorate
of Enforcement, Mumbai for contravention of provisions of Section 8(1)  read
with 64(2) of Foreign Exchange Regulation Act, 1973 (herein  after  referred
to as FERA).

On  27.11.1998  Appeal  Nos.C/537/95-Bom,  C/576/95-Bom   and   C/577/95-Bom
preferred by Jatin Jhaveri, Ajit Dodia and Jitendra Dodia against the  order
of the Commissioner of Customs were disposed by the Customs Excise and  Gold
Control Appellate Tribunal (CEGAT, for short), West Regional Bench,  Mumbai.
 It held that  though  Jatin  Jhaveri  had  disowned  the  currency  in  his
statement dated 12.10.1993, it did  not  mean  that  he  had  forfeited  the
ownership and could not make a claim in respect thereof at  a  later  stage.
The concerned Currency Declaration Forms  according  to  CEGAT  sufficiently
proved that the currency was brought in by said Jatin  Jhaveri.  It  however
held that  the  currency  amounting  to  US  $  289,250  was  sought  to  be
unauthorisedly exported, and was liable to confiscation but imposed fine  of
Rs. 9 lacs in lieu of confiscation of US $  289,250.  The  personal  penalty
imposed on Jatin Jhaveri was also reduced from Rs.10 lacs to 7 lacs.  In  so
far as currency amounting to US $ 143,300 was concerned, since no  one  made
any claim in  respect  thereof,  the  confiscation  was  confirmed  but  the
personal penalty imposed on Ajit Dodia was reduced to Rs.1 lac.  As  regards
Jitendra Dodia, it was observed that he  had  dissociated  himself  and  the
role attributed to him was also limited to packing the  bag.  This  decision
rendered by CEGAT was not challenged and attained  finality  in  respect  of
proceedings under the Customs Act.

Thereafter an addendum dated 06.08.1999 was issued  by  the  Directorate  of
Enforcement, Mumbai to the earlier Show Cause Notice dated 21.11.1997 as  to
why the currency in question be not  confiscated  under  the  provisions  of

The proceedings so  initiated  under  FERA  culminated  in  an  order  dated
04.10.1999 passed  by  the  Special  Director  of  Enforcement,  Mumbai.  He
observed  that  in  his  statement  dated  12.10.1993  Jatin   Jhaveri   had
emphatically denied having any  connection  with  the  seized  currency  and
there was no whisper in the statement that any part  of  that  currency  was
brought by him from USA which represented advance payment towards export  or
that he was in possession of relevant Currency Declaration Form  in  support
of his claim. He found that the Immigration/Embarkation Card of  Ajit  Dodia
was admittedly filled in by  Jatin  Jhaveri  which  indicated  that  he  was
physically present  at  the  Airport  along  with  Ajit  Dodia.  As  regards
genuineness  of  the  Currency  Declaration  Forms,  he  relied   upon   the
observations made by Commissioner of Customs, Mumbai in  adjudication  order
dated 30.08.1995 as quoted above. The Special Director concluded as under:-
“From  the  evidence   discussed   above,   only   irresistible   conclusion
forthcoming is that the entire foreign exchange of  US  $  403,  550  seized
from Shri Ajit Dodia by the  Air  Customs,  Mumbai  was  in  fact  illegally
acquired by the said Shri Jatin Jhaveri, as indicated in  the  impugned  SCN
and then transferred to Shri Ajit K. Dodia for its onward  transfer  to  his
(Shri Jatin’s) brother in Hongkong. Similarly, the notice, Shri  Ajit  Dodia
has in fact otherwise acquired the said foreign exchange  of  US  $  403,550
from Shri Jatin Jhaveri,  a  person  other  than  an  Authorised  Dealer  in
Foreign exchange in India, which was later on  seized  by  the  Air  Customs
Officers from Shri Ajit Dodia on 28.07.1993  under  the  panchanama.  It  is
equally abundantly crystal clear that Shri Jitendra Dodia has in fact  aided
and abetted said Shri Jatin Jhaveri  in transferring and  his  brother  Shri
Ajit K. Dodia in acquiring the aforesaid foreign exchange of  US  $  403,550
from said Shri  Jatin  Jhaveri.  All  the  three  notices  viz.  Shri  Jatin
Jhaveri, Ajit Dodia and  Jitendra  K.  Dodia  have  failed  to  produce  any
permission of the RBI as required under Sec.  8(1)  of  the  FERA  1973  for
acquiring/transferring     foreign     exchange     as     indicated      in
acquiring/transferring foreign exchange as indicated in  the  impugned  Show
Cause Notice. Thus the charges of contravention of Sec.  8(1)  of  the  FERA
1973 against Shri Jatin Jhaveri and Shri Ajit  Dodia and of  Sec.  8(1)  r/w
Sec. 64(2) of the FERA 1973  against  Shri  Jitendra  K.  Dodia  are  proved
beyond any doubt. Accordingly,  I  hold  them  guilty  of  these  respective
contraventions against them.

      Concluding thus, the Special Director imposed penalty  of  Rs.30  lacs
each on Jatin Jhaveri and Ajit  Dodia and of Rs.7.5 lacs on Jitendra  Dodia.
It was held that the currency in question was liable to  confiscation  under
Section 63 of FERA and it was so ordered.

This order of the Special Director was challenged  in  Appeal  Nos.454,  462
and  463  of  1999  by  Jatin  Jhaveri,  Jitendra  Dodia  and  Ajit    Dodia
respectively before the  Appellate  Tribunal  for  Foreign  Exchange,  which
disposed of those appeals by its order dated 10.03.2004.   It  accepted  the
appeal preferred by Jitendra Dodia and  held  that  he  could  not  be  held
guilty of the charge of abetment in acquiring and  transferring  of  Foreign
Exchange unlawfully. In appeal preferred by Ajit Dodia, the confiscation  of
currency amounting to US $ 114,300 was affirmed but the penalty was  reduced
to   Rs.1 lac. As regards, appeal preferred by Jatin Jhaveri,  the  Currency
Declaration Forms furnished by  him  were  taken  to  be  strong  pieces  of
evidence. It was observed as under:-
“Simply because of the fact that the custom  authorities  are  not  able  to
trace out office copies of these forms, it will not render  these  forms  as
not being authentic and therefore inadmissible. It is for the respondent  to
prove that these  forms  were  not  genuine.  As  regards  the  confirmatory
evidence of overseas buyers, the respondents  could  have  called  them  for
cross examination,  if  they  have  any  doubt  the  authenticity  of  their

Allowing the appeal preferred by Jatin Jhaveri, the  order  of  confiscation
in respect of US $ 289,250 was quashed on the ground  that  the  acquisition
was duly explained.

  The aforesaid order of the Appellate Tribunal was challenged by  Union  of
India represented by Director of Enforcement in the High  Court  of  Bombay.
Writ Petition No.2976 of 2004 was also preferred by  Jatin  Jhaveri  in  the
High Court contending that he was entitled to the release of  US  $  289,250
along with interest @ 18%. The High Court affirmed the  view  taken  by  the
Appellate Tribunal and  dismissed  FERA  Appeal  No.64-66  of  2006  by  its
judgment and order dated 19.10.2010.  It was  observed  that  the  order  of
CEGAT having attained finality, that  order  had  definite  bearing  on  the
controversy in question and though the  findings  recorded  in  the  Customs
proceedings may not be binding on FERA proceedings,   it  was  not  possible
for the High Court to take a different view  in  the  matter.  By  the  same
judgment the High Court allowed Writ Petition No.2976 of 2004  holding  that
Jatin Jhaveri was entitled to the currency amounting to  US  $  289,250  but
would not be entitled to any interest thereon.

3.    Jatin Jhaveri, being aggrieved in so far as rejection  of  prayer  for
grant of interest was concerned, preferred SLP (C) No.5788 of 2011.  On  the
other hand, Union  of  India  preferred  SLP  (C)  Nos.26671-26674  of  2011
challenging the dismissal of FERA Appeal Nos.64-66 of  2006.  Special  Leave
to Appeal in all the matters was granted by  this  Court  vide  order  dated
09.12.2011. During the pendency of these appeals, by order dated  14.02.2014
passed in Notice of Motion No.225 of 2012 in Writ Petition No. 2976 of  2004
preferred by Jatin Jhaveri, the Customs  Department  was  permitted  by  the
High Court  to  refund  the  amount  of  US  $  289,250  in  Indian  Rupees.
Accordingly amount of  Rs.1,83,09,525  was  refunded  and  credited  to  the
account of Jatin Jhaveri  subject to the undertaking to return the said  sum
with interest in case this Court were to accept  the  appeals  preferred  by
Union of India.

     Mr.  R.P. Bhatt,  learned  Senior  Advocate,  who  appeared  for  Jatin
Jhaveri submitted  that the currency declaration  forms  were  accepted  and
relied upon in  Customs proceedings and thus the aspect  of  “bringing  into
India” of the currency in question, was rightly held  in  his  favour.   The
ownership of the currency having been established, in his submission,  Jatin
Jhaveri was entitled  to  the  same.  On  the  other  hand,  Mr.   K.  Radha
Krishnan,  learned Senior Advocate,  appearing for Union of India  submitted
 that the  initial  statement  of  Jatin  Jhaveri  recorded  on  12.10.1993,
which itself was  more than two months  after  the  seizure,  did  not  even
whisper  about currency declaration forms and  no ownership  in  respect  of
currency was claimed. In his submission,  Currency  Declaration  Forms  were
rightly observed to be  suspicious  and  not  relied  upon  by  the  Special
Director.  It was further submitted that  the  scope  of  proceedings  under
FERA was distinct and  different  and  exoneration  in  Customs  proceedings
would not enure to the advantage of  the  person  concerned  in  proceedings
under FERA and in any case the crucial question which the High Court  failed
to appreciate was the absence of requisite permission  of  Reserve  Bank  of

Before we deal with rival submissions, it would  be  necessary  to  set  out
relevant provisions. The violation alleged in Customs proceedings  pertained
to Clauses (d) (e) & (i) of Section 113  of  the  Customs  Act,  1962.   The
relevant provisions of Section 113  with relevant clauses is as under:

“Section 113: Confiscation of goods attempted  to  be  improperly  exported,
The following export goods shall be liable to confiscation
(d)  any goods attempted to be exported or brought within the limits of  any
customs area for the purpose of being exported, contrary to any  prohibition
imposed by or under this Act or any other law for the time being in force;
(e)  any goods found concealed in a package  which  is  brought  within  the
limits of a customs area for the purpose of exportation;
(i)    any goods entered for exportation which do not correspond in  respect
of value or in any material particular with the entry made  under  this  Act
or in the case of baggage with the declaration made under Section 77;”

      Section 8(1) of FERA is as under:

“8. (1) Except with the  previous  general  or  special  permission  of  the
Reserve Bank, no person other than an authorised dealer shall in India,  and
no person resident in India other than an authorised  dealer  shall  outside
India, purchase or otherwise acquire or borrow from, or sell,  or  otherwise
transfer or lend to or exchange with, any person  not  being  an  authorised
dealer, any foreign exchange: Provided  that  nothing  in  this  sub-section
shall apply to any purchase or sale of foreign currency  effected  in  India
between any person and a money-changer.

The emphasis in the relevant clauses of Section 113 of the  Customs  Act  is
on an attempt to export goods contrary to  any  prohibition  imposed  by  or
under said Act or any other law in for the time  being  in  force.   On  the
other hand, what constitutes a violation under Section 8(1) of FERA is  when
a person, except with the previous special  or  general  permission  of  the
Reserve Bank, purchases or otherwise “acquires” any foreign  exchange.   The
emphasis in proceedings under FERA is, therefore,  on  such  acquisition  of
foreign exchange without the previous general or special permission  of  the
Reserve Bank. Any failure in that behalf would lead to  incidents  including
confiscation under Section 63 of the FERA.

 We have gone though the currency declaration  forms  in  question.   It  is
relevant that in his first statement dated  12.10.1993,  Jatin  Jhaveri  had
clearly dissociated himself and disowned the  currency  in  question.   This
statement  itself  was  more  than  two  months  after  the  seizure.    The
subsequent reliance on currency declaration forms  was,  therefore,  rightly
found suspicious by Special Director in his order  dated  04.10.1999.    Mr.
Bhatt, learned Senior Advocate placed before  us  letters  dated  14.06.1993
and 23.06.1993 in support of the  contention  that  contracts  were  entered
into pursuant to which currency amounting to US $ 289,250  was  received  by
Jatin Jhaveri while he was in USA.  These letters are bereft of any  details
and in our view are quite self-serving.  At the same time, as found  by  the
Special Director, the original passport of Jatin Jhaveri was never  produced
from which it could be established that he was in USA on the dates  alleged.

However, what is of greater significance and import is the  absence  of  any
special or general permission as contemplated under Section  8(1)  of  FERA.
No such permission is produced or relied upon.  In fact, that  is  not  even
the case that Jatin Jhaveri had applied for and got such  permission.    For
the purpose of Section 8(1) of FERA, “acquisition” of foreign exchange  must
be with general or special permission of the Reserve Bank  of  India.   Even
if the matter of ‘bringing into India’  of  the  currency  in  question,  as
submitted by Mr. R.P. Bhatt, learned Senior Advocate, is taken to have  been
established, though that part of the matter itself is not free  from  doubt,
the question regarding  ‘acquisition’  of  currency  must  be  independently
established in the light of  requirements  under  said  Section  8(1).   The
assessment in that behalf by the Appellate  Authority  under  FERA  and  the
High Court is completely incorrect.

Mr. Bhatt,  learned  Senior  Advocate  attempted  to  rely  on  Notification
No.FERA-81/89-RB dated 09.08.1989 as  amended  upto  09.03.1999,  to  submit
that by said Notification the Reserve Bank of India was  pleased  to  permit
any person to  bring  into  India  from  any  place  outside  India  foreign
exchange without any limit, provided a declaration in such form  as  may  be
specified by the Reserve Bank of India is made on arrival in  India  to  the
Customs Authorities.  First, said notification is in relation to Section  13
of FERA and not  in  relation  to  Section  8(1)  thereof.   Secondly,  this
notification was not adverted or referred to at any stage and  in  any  case
does not deal with acquisition as contemplated under Section 8(1) of FERA.

We, therefore, set aside  the  orders  passed  by  the  Appellate  Tribunal,
FERA and by the High Court while accepting the view  taken  by  the  Special
Director.   Consequently, Civil  Appeal  Nos.11128-11131/2011  preferred  by
Union of India are allowed and the order dated 04.10.1999 passed by  Special
Director of Enforcement, Mumbai, stands restored.  As  we  have  upheld  the
order of confiscation, the challenge preferred by Jatin Jhaveri in the  form
of his writ petition and consequential Civil Appeal No.11127/2011 must  fail
and said appeal is dismissed.

Since the amount of Rs.1,83,09,525/-  was  refunded  and   credited  to  the
account of Jatin  Jhaveri during the pendency of the proceedings subject  to
his undertaking to return  the  same  with  interest,   he  is  directed  to
refund the amount with interest @ 10% per annum within six  weeks  from  the
date of this judgment.

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


 (Uday Umesh Lalit)
New Delhi
May 13, 2016

No comments:

Post a Comment