DIRECTOR OF ENFORCEMENT versus M/S M.C.T.M. CORPORATION PVT. LTD. AND ORS.

Citation: [1996] 1 S.C.R. 215 · Decided: 19-01-1996 · Supreme Court of India · Bench: A.S. ANAND · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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il(j 
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DIRECTOR OF ENFORCEMENT 
Y. 
MIS M.C.T.M. CORPORATION PVT. LTD. AND ORS. 
JANUARY 19. 1996 
[DR. A.S. ANAND, AND fAIZAN UDDIN, JJ.] 
Foreign Exchange ReKulation Act, I 947-Sectiom JO(/)( a), I 0(2 )-
f'ailure to repatriate foreig11 exchange-Coutrave11tin:1 of provisio11s of 
FERA-Pe11alt.v just(fied-Meus-rea not necessary. 
Sectiou 23( 1) ( a)--Proceedings under Section 23 ( 1 )(a) are "cu(judicalory" 
i11 nature and character and are not "Crhninal Proceedin[!s". 
Respondent, a private limited company and its Directors, failed to 
take any action or steps for more than 15 years to repatriate the foreign 
exchange owned by it and lying in Malaysia, which it had the right to 
receive in India. 
Directorate of Enforcement initiated proceedings against the 
respondents. Respondents were found guilty of having contravened the 
provisions of Section 10 (1) (a) of FERA, 1947 and penalties were imposed 
both on the company and its directors. 
Appeals were filed by the respondents before the Appellate Board 
and the Board held that the contravention of the provisions was of a 
technical nature and reduced the penalty amount. 
Appeals filed before the High Court were allowed and the High 
Court interalia held that existence of mens-rea had not been found by the 
depanment or the ap1>ellant Board and therefore penalty under section 23 · 
(l(a) of FERA 1947 was not justified. It also held that the contravention 
under Section 10(1) is not complete unless there is also a violation of the 
directions issued by the Reserve Bank of India under section 10(2) of 
A 
B 
c 
D 
E 
F 
FERA, 1947. Hence this appeal by the Directorate of Enforcement. 
G 
Allowing the appeal, this Court 
HELD : 1. Me1vi-rea as is unders.tood in criminal law is not an 
essential ingredient for holding a delinquent liable to pay penalty under 
Section 23 (l)(a) of FERA, 1947, for contravention of the provisions of 
H 
215 
A 
B 
c 
216 
SUPREME COURT REPORTS 
[1996] 1 S.C.R. 
Section 10 of FERA, 1947, and that penalty is attrocted under Section 
23(l)(a) as soon as contravention of the statutory obli1:ation contemplated 
by Section 10 (l)(a) is established. It is delinquency ol' the defaulter itself 
which establishes his 'blameworthy' conduct, attracti:og the provisions of 
section 23(l)(a). of FERA, 1947, without any further proof of the existence 
of "mens-rea''. [225-G, 222-G] 
Corpus Juris Seciuulum (Vol. 85, Page 580, Para 1023), referred to. 
2. Sub-sections (1) and (2) of Section (10) take rare of two distinct 
situations. There is therefore no wairrant to hold that the contravention 
under Section 10(1) is not possible unless there has been violation of the 
directions issued under section I0(2). Both the sub-sections operate in 
different spheres and the issuance of directions under Sub-section (2) and 
the breach of those directions is not the sine-qua-non for establishing the 
contravention contemplated by Sub-section (1) of Section IO whereas failure 
to comply with the requirements of Sub-section (1) of Section IO is necessary 
D to enable the Reserve Bank of India to issue specific or general directions 
uuder Sub-section (2) of Section IO. The obligation to r"patriat~ the foreign 
exchange receivable in India is a statutory obligation and is not dependant 
upon any specific direction to be issued by the Reserve Hank of India in that 
behalf under sub-section (2) of Section 10. [227-D-E] 
E 
3. The proceedings under Section 23(a) of FERA, 1947 are 
adjudicatory in nature and character and are not "cri1ninal proceedings". 
The officers of the Enforcement Directorate and other administrative 
authority perform quasi-judicial functions and determine the liability of 
the contravener for the breach of his "obligation" im~osed under the Act. 
F 
They impose 'penalty' for the breach of the 'civi.l oMigation' laid down 
under the Act and not impose any 'sentence' for th" commission of an 
offence. Therefore, merely because 'penalty' clause exists in Section 23(l)(a), 
the nature of the proceedings under that section is not changed from 
'adjudicatory' to 'criminal prosecution'. [222-B-D] 
G 
4. The breach of a 'civil obligation' attracts 'penalty' under Section 
23(l)(a) FERA, 1947, and a finding that the delinquent has contravened the 
provisions of Section 10 of FERA, 1947, would immediately attractthe levy 
of' penalty' under section 23, irrespective of the fact whither the contraven-
tion was made by the defaulter with any· guilty inten
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