M.G. WAGH & ORS. versus JAY ENGINEERING WORKS LTD.

Citation: [1987] 1 S.C.R. 981 · Decided: 13-01-1987 · Supreme Court of India · Bench: M.P. THAKKAR · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

M.G. WAGH & ORS. 
v. 
JAY ENGINEERING WORKS LTD. 
JANUARY 13, 1987 
[M.P. THAKKAR AND K.N. SINGH, JJ.] 
Foreign Exchange Regulation Act of 1947, sections JO and 12 
(2)-Scope and Interpretation of-Whether section 12(2) designed to· 
prevent wholesale or partial evasion of repatriation of earnings from 
export of goods covers only sale proceeds of goods exported 'for sale' or 
to sale proceeds of goods exported 'on sale' in the context of safe.comp· 
feted before export-Words and phrases-Meaning of the expression 
'No person entitled to self or procure the sale of the goods.' 
Section 12(2) of the Foreign Exchange Regulation Act, 1947 which 
is designed to prevent wholesale or partial evasion of repatriation of 
. earnings from export of goods is to the effect that 'where any export of 
goods has been made to which a notification under sub-section (I) 
applies, no person entitled to sell, or procure the sale of the said goods 
shall, except with the permission of the Reserve Bank ......... ". In 
R. Ven'kata Subbu & Ors. v. The Directorate of Enforcement, Enforce-
ment Directorate, New Delhi & Anr., !LR Vol 3 Mad 1968 p. 18, the 
A 
B 
c 
D 
; 
Madras High Court held that section 12(2) covers not only sale proceeds 
of goods eYported "for sale" but also "on sale" in the context of sales 
completed before export, while the Calcutta High Court in the judg-
ment under appeal held that it covers sale proceeds of goods exported 
"for sale'' only. In view of the conflict of the opinions, the present 
appeal is by certificate. 
E 
-~ 
I 
Allowing the appeal and remitting the matters to the Competent 
Authority, the Court, 
HELD: l. l The expression 'no person entitled to sell or procure 
the sale of the said goods' cannot be so narrowly construed (as referable 
F 
to goods which have already been exported), so as to govern the scope of G 
section 12(2) in such a truncated manner which renders it virtually 
impotent in so far as transactions of 'exports on sale' are concerned. 
Too much is being read into too little for no more laudable a purpose 
than to paralyze the provision. The expression does not necessarily 
induce one to the conclusion that the legislature wanted to prevent 
abuse in the context of 'export for sale' only. The expression is mean· 
H 
981 
982 
SUPREME COURT REPORTS 
[1987] 1 S.C.R. 
ingful, relevant, and can co-exist in the context of abuse arising from 
,.._ 
A 'exports on sale' from completed transactions as well. [98SH;1186B] 
1.2 The said expression has been employed by the Legislature 
merely in order to indentify the accountable persons and is merely 
descriptive in that sense. The said expression does not restrict the op-
\. 
B eration of the Act to the persons who have not yet sold the goods. One 
would have to take a quantum jump in order to conclude that persons 
referred to in section 12(2) are the persons who have not yet sold the 
goods hut are entitled to sell the goods in future merely because the 'i 
expression 'entitled to sell' has been employed. The persons who have 
.... 
exported the goods to a foreign buyer, are not sought to be excluded 
I 
c 
from the operation of section 12(2). Clause (a) in terms adverts to the 
sale of goods being delayed. Clause (b) of section 12(2) adverts to pay-
1 
ment for the goods, otherwise than in the prescribed manner, and also 
envisions a case where the payment does not represent the ftill amount 
payable by the foreign buyer in respect of the goods. Clauses (a) and (b) 
are compatible both with transactions of export on sale as also to trans-
D actions of export for sale. They are compatible with all transactions 
pertaining to both types of sales. There is no warrant to assume that the 
Legislature has not made any provision in order to ensure that the full 
amount of the sale price is repatriated and foreign exchange earned 
tJierefrom is not lost to the Nation regardless of whether it is in respect 
of 'export on sale' or 'export for sale'. [986F; 987 A-Cl 
), 
E 
1.3 The avowed and the evident object of section 12 is to ensure 
that the Nation does not lose foreign exchange which is very much 
~ 
essential for the economic survival of the Nation. The exporter cannot 
be allowed to syphon away a part of the foreign exchange or to deprive y 
the Nation of the foreign exchange earned hy the exports. Such is the 
F 
philosophy of section 12. To take the view that the legitimate National t 
interest in the sphere of preservation of foreign exchang

Excerpt shown. Read the full judgment & AI analysis in Lexace.