Holding

Mens rea is not required; a breach of the civil obligation under Section 10(1) of FERA suffices for penalty under Section 23(1)(a), and contravention of Section 10(1) is independent of any breach of Section 10(2) directions.

Summary

The Directorate of Enforcement prosecuted M.C.T.M. Corp. Ltd. and its directors for failing to repatriate foreign exchange held in Malaysia for over fifteen years, alleging contravention of Section 10(1)(a) of the Foreign Exchange Regulation Act, 1947 (FERA) and imposing penalties under Section 23(1)(a). The Appellate Board reduced the penalties, but the Madras High Court set them aside, holding that mens rea was required and that a breach of Section 10(1) was not complete without violating RBI directions under Section 10(2). The Supreme Court held that the proceedings under Section 23(1)(a) are adjudicatory, not criminal, and that mens rea is not an essential element for liability; a breach of the statutory civil obligation under Section 10(1) alone attracts penalty, independent of any violation of Section 10(2). Consequently, the appeal by the Directorate of Enforcement was allowed, the penalties on the directors were set aside, while the modified penalty on the company was upheld.

Issues considered

Whether mens rea is a necessary ingredient for imposing penalty under Section 23(1)(a) of FERA for contravention of Section 10(1)(a).
Whether a contravention of Section 10(1) is complete only if there is also a violation of RBI directions issued under Section 10(2).
The nature of proceedings under Section 23(1)(a) – adjudicatory versus criminal.

Legislation cited

Constitution of Indias. Article 20(2)
Foreign Exchange Regulation Act, 1947s. 10(1), s. 10(2), s. 23(1)(a)

Subjects

Foreign exchange repatriationFERAPenaltyMens reaAdjudicatory proceedingsSection 10Section 23Directorate of EnforcementReserve Bank of India directionsCivil obligation

Judgment

il(j .•
DIRECTOR OF ENFORCEMENT A
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 )-
B

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" c
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
D
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. E
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
F
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
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
216 SUPREME COURT REPORTS [1996] 1 S.C.R.

A 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

B
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
c 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 intention' or not. (222-E]

H Maqboo/ Hussain v. State of Bombay AIR (1953) :iC 325=(1953] SCR
DIRECTOR OF ENFORCEMENT'· M.C.T.M. CORPN. LTD. [DR. ANAND,!.] 217

730, referred to. A
5. The scheme of Clause (1) of Section 10 unambiguously indicates
that any person who has a right to receive in foreign exchange or its
payment in rupees in India shall not do or refrain frorri doing anything nor
take or refrain from taking any action, which has the effect of either
delaying or making the receipt of the whole or part of that foreign exchange B
or its payment in rupees to totally cease except, where he is expressly or by
some general direction auihorised or permitted by the Reserve Bank of
India to do so. The default is complete on the failure to get the foreign
exchange receivable in India, repatriated within a reasonable time after the
right to receive the same accrues. What is 'reasonable time' would depend C
upon the facts and circumstances of each case and it is neither possible nor
desirable to lay down any general formula in that behalf. (226-E-F]

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 27 of
1996.
D
From the Judgment and Order dated 9.3.88 of the Madras High Court in
A.A.O. Nos. 636-40 of 1980.

K.T.S. Tulsi, Additional Solicitor General, Dr. R.R. Mishra, V.K. Verma
& S.K. Sharma for the Appellant.
E
C. Ramakrishna for the Respondent.

Ambrish Kumar for the Respondent Nos. 4 & 5.

The Judgement of the Court was delivered by

DR. A.S. AN-'\ND, J. Leave granted. F

The respondents, a private limited company and its Dire,ctors were
proceeded against departmentally for having contravened the provisions of
Section IO(l)(a) of the Foreign Exchange Regulation Act, 1947 (hereinafter
referred to as 'the FERA, 1947'). The gravamen of the departmental case G
against the respondents was that they had failed to repatriate the foreign
exchange lying in Malaysia, which they had a right to receive in India and had
thereby failed to take or refrained from taking action which had the effect of not
securing the receipt of the foreign exchange in this country. In the charge sheet,
the respondents were alleged to have committed two contraventions of the
provisions of FERA, 1947 by the Directorate of Enforcement. The first charge H
218 SUPREME COURT REPORTS [1996] 1 S.C.R.
A related to their failure to repatriate foreign exchange of M,1laysian b 62186.42
being the sale proceeds of Nataraja Rubber Estate and Malaysian b 1,25,000,
being the Social Welfare Prize rnoncy \Von by the Co1npar y in 1960 while the
second Charge related to their failure to repatriate Mala~1sian b 3,56,222.44
being the profit earned by the Company fro1n the businc:;s carried on by the
branch of th.c re5pondcnt co111pany at Kuala Lu1npur as per the state1nent of
B profit and loss of the Company ending on 31.l2. l972. All the amount admit-
tedly belonged to the Company and had been disclos.ed by the Company in its
balance-sheet as v.•ell as in the return of inco1ne-tax for the relevant years.
Admittedly, the respondents had not obtained any special o: ger.eral permission
from the Reserve Bank of India authorising them to hold t 1e aforesaid foreign
C exchange lying with their branch at Kuala Lumpur in Mal.1ysia wilhout repat-
riating the same to India. The Dirccloratc of Enforcement in the departmental
proceedings, taken against the respondents, by its order dited 19.9.1977 held
the respondents guilty of committing both the contraventions mentioned in the
article of charges a~d in respect of the first charge impo~ed a penalty of Rs.
4,000 each on its Directors and of Rs. 40,000 on the respondent company while
D
in respect of the second charge imposed a penalty of Rs. 20,000 on each of the
Directors and a penalty of Rs. 2,00,000 on the respondent company, under
Section 23(l)(a) of FERA, 1947. Against the order date,] 19.9.1~77 the re-
spondents filed five separate appeals before the Appellate Board. The Board
took the view that since it was not a case where foreign exchange had been
E surreptitiously held abroad with any malqfide motive though it was retained in
Kaula Lumpur deliberately and intentionally. The contravention of the provi- .
sions was of a technical nature and therefore reduced the penalty to Rs. 2,000
on each of the Directors and to Rs. 20,000 on the company in respect of the
first charge and to Rs. 5000 each in the case of the Directors in respect of t_he
F second charge, while retaining the pe.ialty on the Company The Board rejected
the plea of the Company and its directors that since no time limit had been
specified for repatriation of the foreign exchange under Section I 0 of the ACl,
the respondents could not be held guilty of either of the chacges and opined that
since no period had been specifically prescribed for repatr ation of the foreign
exchange, it was implied that foreign exchange had to be repatriated within a
G reasonable time from the date when the right to receive 1he same accrued and
having regard to the long time taken by the Company, ·t followed that the
Company had failed to repatriate the foreign exchange within a reasonable
period. Foreign Exchange had not been repatriated even after the expiry of
more than 15 years from the date the right to receive i:. in India accrued).
H Dissatisfied, the respondents (the Company and its Directors) filed five separate
\
DIRECTOR OF ENPORCEMENT" M.C.T.M. CORPN. LTD. [DR. ANAND, J] 219
appeals before the High Court at Madras under Section 54 of FERA, 1973. Vide A
judgn1cnt and order dated 9th March, 1988, a Division Bench of the High
Court, allowed all the appeals and set aside the penalty as imposed by the
Directorate of Enforcement and modified by the Appellate Board. The High
Court i111er alia held that Section 10( 1) of FERA, 1947 is not an independent
section and unless sonic direction given under Section 10(2) by the Reserve
B
Bank of India \Vas contravened, no penal!y could be irnposcd for breach of
Section LO(! )(a) under Section 23(1 )(a) of FERA, 194 7. The High Court also
held that a finding regarding existence of "n1e!ls rea or criminal intent" for
failure to repatriate foreign exchange was necessary before the respondents
could be penalised for contravention of the provisions of Section IO(l)(a) of
FERA, 1947 and since in the instant case, the existence of 1nens -rea had not C
been found by the Directorate or the Appellate Board, the award of punishment
by way of levy of penalty under Section 23(1/'f\t) of FERA, 1947 was not
justifie~1is appeal by special leave has been filed by the Directorate of
EnforcMcnt, questioning the correctness of the order of the High Court.

Prin~ipally, there are two.questions which require our consideration in D
this appeal : (I) Whether existence of "mcns-rea" is a necessary ingredient for
establishing contravention of Section 10 punishable under Section of 23 FERA,
1947, and (2) whether Section 10(1) of FERA, 1947 i~ not an independent
provision making its contravention by itself punishable 'under Section 23(1)(a)
of FERA 1947 or whether its contravent ion can arise only if tl1ere is breach of E
some directions issued by the Reserve Bank of India under Section 10(2) of
FERA, 1947. ,

With a view to answer these questions, it would be appropriate to first
notice the relevant provisions of Section lO and 23 of FERA, 1947, as they
stood at the Material time, (prior to the amendment of the FERA in 1964 and F
1973). Those provisiqns read thus, :

S.10. Duty of persons entitled to receive foreign exchange, etc.

(1) No person who has a right to receive any foreign exchange or to
receive from a person resident outside India a payn1ei:t in rupees shall, G
except with the general or special permission of the Reserve Bank, do
-, or refrain from doing any thing or take or refrai9 from taking any
action which has the effect of securing -

(a) that the receipt by him of the whole of part of that foreign
exchange or payment is delayed, or H
220 SUPREME COURT REPORTS [1996] 1 S.C.R.

A (b) that the foreign exchange or pay1ncnt ceases in whole or in
part to be receivable by him.

(2) Where a person has failed to comply with the requirements of sub-
section (1) in relation to any foreign exchange or pay1ncnt in rupees.
the Reserve Bank n1ay given to hi111 such directions as appear to be .-::..
B expedient for the purpose of securing the receipt of the foreign exchange
or paytnent as t.he case 1nay be.

S. 23. Penalty and procedure. -

(1) If any person contravenes the provisions of section 4, section 5,
c section 9, section 10, sub-section (2) of section 12, section 17, section
18Aor section 188 or of any rule, direction or order rnade thereunder,
he shall -

(a) be liable to such penalty not exceeding three ti1nes the value of
the foreign exchange in respect of which the conlravention has
D taken place, or five thousand rupees, whichever is tnore, as tnay
be adjudged by the Directorate of Enforcen1ent in th~ manner
hereinafter provided; or

(b)

E 23.(IA) ................................................................. .

23.(IB) ............................................................... .

23A ..................................................................................... .

F 23B ..................................................................................... .

23C ............................................................................................... .

230. ··························································································

23E ........................................................................................ .
G
23EE .......................... : .................................................................. .

23EEE ........................................................................................... .

23F. If any person fails to pay the penalty imposed by the Director of
H Enforcement or the Appellate Board, or fails to comply with any of
DIRECTOR OF ENFORCEMENT'· M.C.T.M. CORPN. LID. [DR. ANAND, J.] 221
their directions or orders, he shall, on conviction before a Court, be A
punishable with in1prison1ncnl for a tenn which inay extend tu l\VO
years, or with fine. or with both.

The Preamble to FERA, 1947 provides key to the general purpose of the
Act, that purpose is to regulate certain pay1nents and dealings in foreign
exchange etc. for the conservation of foreign exchange resources of the country B
and for proper utilisation thereof. The Act is designed to safeguard and conserve
foreign exchange, which is essential for the econo1nic life of a developing
country like India Conservation of foreign exchange resources or the country
being the imperative need, it follows that any action, positive or negative,
which disenables this country fro1n utilising the foreign exchange to \Vhich it C
has right, to sub-serve the co1n1non good, would be violative of the relevant
provisions of FERA, 1947 punishable under Section 23(1 )(a) of FERA, 1947,
\vhich provision lays down one of the 1nodcs of punishment for the contravention
of the provisions of various sections enumerated therein, including Section I 0,
or of any rule, direction or order 1nadc thereunder. It is in this background that
we shall address ourselves to answer the two questions (supra). D

The High Court, \i..:hile dealing With the first question opined that Section
23 is a "penal provision" and, the proceedings under Section 23(l)(a) are
"quasi-cri1ninal" in nature and therefore. unless "criminality" is established, the
penalty provided under Section 23(1) (a) of the Act cannot be imposed on any E
person. The High Court thus held the existence of "mens-rea" as a necessary
ingicdient for the commission of an 'offence' under Section 10 of the Act and
in the absence of a finding about the presence of "mens-rea" on the part of the
offenders, no punishment under Section 23(l)(a) of FERA, 1947 could be
i111posed. For what follows, we cannot agree.
F
"Mens-rca" is a state of n1ind. Under the criminal la\.v, means-rea is
considered as the "guilty intention" and unless it is found that the-"accused" had
the guilty intention to commit the "cri1nc" he cannot be held "guilty" of
co1nmitting the crin1e. An 'offence' under Criminal procedure Code and the
General clauses Act, 1897 is defined as any act or omission "made punishable
by any law for the time being in force". The proceedings under Section 23(l)(a)
G
FERA, 1947 are "adjudicatory" in nature and character and arc not 'criminal
proceedings'. The officers of the Enforcement Directorate and other
ad1ninistrative authorities are expressly empowered by the Act to 'adjudicate'
only. Indeed they, have to act "judicially" and follow the rules of natural justice
to the extent applicable but, they are not 'Judges' of the "Criminal Courts" H
,-/
222 SUPREME COURT REPORTS [1996] l S.C.R.
A trying an 'accused' for comn1ission of an offence, as understood in the general
context. They pcrfonn quasi-judicial functions and do not act as "Courts" but
only as 'administrators' and 'adjudicators'. In the proceedings before them,
they do not try "an accused" for co1n1nission of "any crime" (not 1ncrcly an
offence) but determine the liability of the contravenor for the breach of his
"obligations" imposed under the Act. They impose 'penalty' for the breach of
B
the 'civil obligations' laid down under the Acl and not i1npose any "sentence"
for the coffimission of an offence. The expression 'penalty' is a word of wide
significance. Son1cti1ne, it means recovery of an a1nount as a penal 1neasurc
even in civil proceedings. An exaction which is no! con1pe11satory in character
is also termed as a 'penalty'. When penalty is imposed by an adjudicating
C officer, it is done so in 'adjudicatory proceedings' and not by \Vay of fine as a
result of "prosecution" of an 'accused' for co1nmission of an ''offence" in a
criminal Court. 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. An order made by an adjudicating
D authority under the Act is not that of conviction but of detennination of the
breach of tl?e civil obligation by the offender.

It is thus the breach of a_ "civil obligation" which attracts "penalty" under
Section 23(1) (a) FERA, 1947 and a finding that the delinquent has contrav~ned
the provisions of Section 10 FERA, 1947 would immediately attract the levy of
E 'penalty' under Section 23, irrespective of the fact whether the contravention
was n1adc by tl1e defaulter with any "guilly intention" or not. 1~hereforc, unlike
in a criminal case, where it is essential for the "prosecution" to establish that
the "accused" had the necessary f?Uilt.v i11tentio11 or in other words the requisite
'mens-rea' to conunit the alleged offence with which he is charged before
recording his conviction, t.he obligation on the part of the Directorate of
F Enforce1nent, in cases of contravention of the provisions of Section IO of
FERA, would be discharged \Vhere it is shown that the "bla1neworthy conducl"
of the delinquent had been established by wilful contravention by him of the
provisions of Section 10, FERAi 1947. It is the delinquency of the defaulter
itself ~hich establishes his "blameworthy" conduct, attracting the provisions of
G Section 23(l)(a) of FERA, 1947 without any further proof of the existence of
"mens-rca". Even after an adjudication by the authorities and levy of penalty
,-
under Section 23(l)(a) of FERA, 1947, the defaulter can still be tried and
punished for the commission of an offence under the penal law, where the act
of the defaulter also amounts to an offence under the penal law and the bar
H under Article 20(2) of the Constitution of India in such a case would not be
DIRECTOR OF ENFORCEMENT" M.C.T.M. CORPN. LTD. [DR. ANAND, J.] 223
attracted. The failure to pay the penalty by itself attracts 'prosecution' under A
_,.. ;.. Section 23F and on conviction by the 'court' for the said of_fencc i1nprison1nen1
may follow.

In Maqbnnl Hussain v. Slate n( Bombm'. AIR (1953) SC 325=[1953]
SCR, 730 a Constitution Bench of this court while considering the nature of
proceedings under the Sea Customs Act and FERA, 1947 dealt with the B
principle and scope underlying Article 20(2) of the Constitution. In that case
gold was found in possession of the appellant therein when he landed at the
Santa Cruz Airport. The appellant was detained and searched by the Customs
Authorities and gold was seized from his possession. Proceedings under Section
167 (8) of the Act were taken by the Customs Authorities and after recording C
evidence, an order was passed confiscating gold and giving an-option to the
owner to pay fine in lieu of such confiscation under Section 188 Sea Customs
Act. Since nobody carnc forward to redeem the gold, a complaint was filed in
the Court of the Chief Presidency Magistrate, Bombay against the appellant
charging him with having comn1itted an offence under Section 8 FERA, 1947.
The appellant thereupon filed a petition in the High Court of Bombay under D
Article 226 of the constitution seeking quashing of the complaint by contending
that his prosecution in the Court of the Chief Presidency Magistrale was in
violation of his fundamental right guaranteed under Article 20(2) of the
Constitution. It was the case of the appellant before the High Court that since
the complaint before the Chief Presidency Magistrate also proceeded on the E
footing that the appellant had committed an offence insofar as he brought gold
into India without any permit from the Reserve Bank of India on which
alleRatinns alone the gold stood already confiscated by the authorities under the
Sea Customs Act during the confiscation proceedings, he was being punished
twice for the sa11u: o,ffence which was not permissible in law in view of Article
F
20(2) of the Constitution. The High Court was of the opinion that the appellant
could claim protection of Article 20(2) only if he was the owner of gold which
had been confiscated. The Chief Presidency Magistrate was, therefore, directed
to first detennine the question of fact. After recording son1e evidence the Chief
Presidency Magistrate returned a finding that the appellant was the owner of
gold. The High Court, however, reversed the finding and sent the case back to G
• the trial court for its trial in accordance with law after refusing the benefit to the
appellant of the protection under Article 20(2) of the Constitution. By special
leave the appellant filed an appeal in this court. It was in this background that
the Constitution Bench proceeded to determine whether the appellant could be
said to have been prosecuted when proceedings for confiscation were taken by H
224 SUPREME COURT REPORTS [1996] l S.C.R.

A the Sea Customs Authorities for if it was found that the appellant had been .
prosecuted when proceedings were taken by the Sea Custorns Authorities to
confiscate gold, there was no scope left for the argument that he had not been
punished by the confiscation of gold and the option given to him to pay fiiie in
lieu of such confiscation. The Court examined in detail the a1nbit, scope and
applicability of the principle of "double jeopardy" in the light of the fundamental
B right guaranteed under Article 20(2) of the Constitution. The Court opined :

"It is clear that in order that the protection of Art. 20(2) be invoked by
a citizen there 1nust have been aprnsecution and punislunent in respect
of the same offence before a Court of law or a tribunal, required by law
c to decide the n1atlers in controversy judicially on evidence on oath
which it must be authorised by law to administer and not before a
tribunal which entertains a departmental or an ad1ninistrativc enquiry
even though set up by a statute but not required to proceed on legal
evidence given on oath. The very wording of Art. 20 and the words
used therein: "convicted", "co111n1ission of the act charged as an offence"
D "be subjected to a penalty", "commission of the offence", "prosecuted
and punished" "accused of any offence", would indicate that the
proceedings therein contemplated are of the nature of cri1ninal
proceedings before a Court of law or a judicial tribunal and the
prosecution in this context would mean an initiation or starting _of
E proceedings of a crin1lnal nature before a Court of law or a judicial
tribunal in accordance \Vith the procedure prescribed in the statute
which creates the offence and regulates the procedure."

The Court then laid down various tests for determining when a tribunal
can be considered to be a judicial tribunal and after referring to a catena of
F authorities relevant provisions of the Sea customs Act, 1878 and the nature of
the adjudicatory proceedings as contained in that Act, opined thatan adjudicatory
authority functioning under the Act was inerely an administrative machinery
for the purpose of adjudging confiscation, detennination of duty or the increased
rate of duty and for imposition of penalty as prescribed under the Act and not
G a judicial tribunal. The Court opined :

"We arc of the opinion that the Sea Custo1ns Authorities arc not
a judicial tribunal and the adjudging of confiscation, increased rate of J.--

duty or penalty under the provisions of the Sea Customs Act do not
constitute a judgment or order of a Court or Judicial tribuna 1 'lecessary
H for the purpose of supporting a plea of double jeoparty.
DIRECTOR OF ENFORCEMENT'· M.C.T.M. CORPN. LTD. [DR. ANAND, I.] 225

It therefore follows that when the Customs Authorities eonfiscated A
the gold in question neither the proceedings taken before the Sea
Custo1ns Authorities constituted a prosecution or the appellant nor did
the order of confiscation constitute a punish1ncnt inflicted by a Court
or .rudicial tribunal on the appellant. The appellant could not be said
by reason of these proceedings before the Sea custo1ns Authority to
B
have been "prosecuted and punished" for the same offence with which
he was charged before the Chief Presidency Magistrate, Bombay in
the complaint which was filed against him under S.23, Foreign Exchange
Regulation Act."

The Constitution Bench then laid down that though the administrative C
authorities functioning under the Sea Customs Act had the jurisdiction to
confiscate gold, illegally brought into the country, and levy penalty on the
defaulter, none the less the authorities were not trying a criminal case but
deciding only the effect of a breach of the obligations by the defaulter under the
Act. On a parity of reasoning what holds true for the adjudicatory machinery
under the Sea Customs Act holds equally true for the administrative or D
adjudicatory machinery, designed to adjudge the breach of a civil statutory
obligation and provide penalty for the said breach, under the FERA, 1947,
whether the breach was occasioned by any guilty intention or not is irrelevant.

ln "Corpus Juris Secundum" volume 85, at page 580, paragraph 1023, it E
is stated thus :

"A penalty imposed for a tax delinquency is a civil obligation,
remedial and coercive in its nature, and is far different from the
penalty for a crime or a fine or forfeiture provided as punish1ncnt for
the violation of criminal or penal laws". F
We are in agreement with the aforesaid view and in our opinion, what
applies to "tax delinquency" equally holds good for the "blameworthy" conduct
for contravention of the provisions of FERA, 1947. We, therefore, hold that
mens-rea (as is understood in crin1inal- Iaw) is not an essential ingredient for
holding a delinquent liable to pay penalty under Section 23(1 )(a) of FERA 1947 G
for contravention of the provisions of Section 10 of FERA, 1947 and that
penalty is attracted under Section 23 (1 )(a) as soon as contravention of the
statutory obligation contemplated by Section lO(l)(a) is established. The High
Court apparently fell in error in treating the "blameworthy conduct" under the
Act as equivalent to the com1nission of a "criminal offence,", overlooking the H
226 SUPREME COURT REPORTS [1996] l S.C.R.
A position that the "blameworthy conduct" in the adjudicatory proceedings is
established by proof only of the _breach of a civil obligation under the Act, for
which the defaulter is obliged to make amends by payment of the penalty
imposed under Section 23(1 )(a) of the Act irrespective of the fact whe.ther he
com1nilted the breach with or wi1hout any guilty intention. Our answer to the
first question formulated by us above is, therefore, in the negative.
B
Coming now.to the second question: In the instant case, on facts there is
no dispute that for more than 15 years, the foreign exchange owned by the
respondents had been lying in Malaysia and respondents had taken no action or
steps whatsoever to repatriate that foreign exchange which they had the right
C to receive in .India and had thereby failed to secure the receipt of the foreign
exchange in..India. Did.the respondents thereby contravene the provisions of
Section lO(l)(a) of FERA, 1947 or could it be said that unless the respondents
had violated a direction given under Section 10(2), the 'offence' under Section
10( 1)(a) could not be said to have been conunitted, attrncting the levy of penalty
under Sectio1i 23("1 )(a) ofFERA, , 1947? This precisely is the core of the second
D question framed by us above.

The Scheme of Clause (I) of Section IO in our opinion, unambiguously
indicates 'that any person who has right to receive in foreign exchange or its
payn1ent in rupees 'in India shall not do or refrain frorn.doing anything nor take
or refrain from taking any action, which has the effect of either delaying or
E making the receipt of the whole or part of that foreign exchange or its payment
in rupees totally cease except, where he is expressly or by some general
direction authorised or permitted by the Reserve Bank of India to do so. The
default is complete on the failure to get the foreign exchange, receivable in
India, repatriated, within a reasonable time after the· right to receive the ·same
F accrues. Wha.t. is "reasonable time" would depend upon the facts and
circumstances of each case and it is neither possible nor desirable to lay down
any general formula in that behalf. Where the delay in repatriation is not
unreasonable no·contravention of Section lO(l)(a) can be said to have been
conunitted. Section lO(l)(a), enacts·a contravention punishable under Section
23(1) of FERA, 1947. Section 10(2).enacts a distinct & separate contravention
G flowing fro~ disobedience of an order of directions issued by the Reserve Bank
of India to the person who has ltlready co1nrnitted a <.:ontravention u11der
Section JO( I). It iays down that where a person has failed to comply with the
requirement of sub-section (I) of Section IO for the repatriation of any foreign
exchange or its payment in rupees, the Reserve Bank of India may give to that
H person such directions as appear to the Reserve Ba_~k of India to be expedient
DIRECTOR OF ENFORCEMENT'· M.C.T.M. CORPN. LTD. [DR. ANAND. J.] 227
for the purpose of securing the receipl of foreign exchange or payn1cnt in A
).
rupees, as the case rnay be and lhe violation of those directions would attract
the penalty under Section 23(1 )(a) of FERA, 1947. The opening phrase of sub-
section (2) viz : "where a person has failed rn co1npZv with the require111e111s nf
sub-section (I) ............ " shows that the directions under sub-section (2) may be
given only l((ter a person has contravened the provisions of Section 10(1).
B
Thus, sub-section (2) is attracted after the contravention of sub-section (I) is
established meaning thereby that contravention of sub-section (1) is a distinct
offence, independent of the breach which may be committed subsequently by
disobedience of any order or direction issued under sub-section (2) and the
violation of the directions issued under sub-section (2) is not necessary to
complete the commission of an offence under sub-section (1) of Section 10. c
Sub-sections (1) and (2) of Section ( 10) take care of two distinct situations.
There is therefore no warrant to hold that the contravention under Section 10( 1)
is not possible unless there has been violation of the directions issued under
Section 10(2). Both sub-sections operate in different spheres and the issuance
of directions under sub-section (2) and the breach of those directions is not .the D
sine-qua-non for establishing the contravention contemplated by sub-section
(I) of Section 10 whereas failure to comply with the requirements of sub-
section (I) of Section 10 is necessary to enable the Reserve Bank of India to
issue specific or general directions under sub-section: (2) of Section 10. The
obligation to repatriate the foreign exchange, receivable in India, is a ~tatutory E
obligation and is not dependant upon any specific direction to be issued by the
Reserve Bank of India in that behalf u.nder sub-section (2) of Section 10. The
• object of enactment of Clause (2) of Section JO appears to be that the defaulter,
may after having been penalised for contravention of Section 10( 1) be still
directed to repatriate the foreign exchange, in whole or in part, by the Reserve
Bank of India and his failure to comply with those directions by itself would F
invite penalty u.nder Section 23( 1) (a) of the Act, notwithstanding the imposition
of penalty upon him for the breach of Section ·10(1) (a) of FERA, 1947.
Notwithstanding the imposition of penalty under sub-section (1) of Section 10,
the.Reserve Bank of India retains the authority to issue directions forrepatri~tion
etc. of the foreign exchange held by the defaulter abroad as the power to G
regulate dealings in Foreign Exchange do not get extinguished by imposition
-.,. of some penalty on the defaulter during adjudicatory proceedings.

Section 23 of FERA, 1947 prescribes penalties for contravention 0f the
provisions of Section 4, section 5, Section 9, Section 10, sub-Section (2) of
Section 12, Section 17, Section l 8A or Section 188 or of any rule, direction ,;r H
228 SUPREME COURT REPORTS [1996] 1 S.C.R.
A order made thereunder On ils plain reading, Section 23(1)(a) does not reslricl
its application to onIY one of the sub-sections of Section 10. Contraventions
envisaged by both the sub-sections of Section 10 attract penalty under Section
23 (1 )(a), unlike Section 12, of which only sub-section (2) invites lhe imposition
of penally under Section 23(l)(a). Had lhe Legislature intended to reslricl the
applicability of the provisions of Section 23 (l)(a) lo only one of the two sub-
B
sections of Section 10, it would have manifested its intention in the Section
itself by mentioning the specific sub-section. We arc, therefore, of the opinion
that contravention of sub-Section (I) of Section 10 would invite penalty under
Section 23 (I) (a) and penalty shall also be leviable for contravention of any of
the directions which may be issued by the Reserve Bank of India to such a
C person under sub-section (2) of Section 10 a(ler his failure to comply with sub-
section (1) of Section 10, notwithstanding the in1position of penalty for
conu·avention of Section 10( l)(a) of FERA upon that person. The High Court
was in error, if \Ve may say so with respect, to construe that the contravention
under Sub-section (1) of Section 10 is not complete unless there is also a
D violation of the directions issued by 'the Reserve Bank of India under Sub-
section (2) of Section 10 of FERA, 1947. That interpretation does violance to
the language of sub-section (2) of Section 10 and defeats the very object of the
Act and renders the statutory obligation to repatriate the foreign exchange
receivable in India as non-statutory, dependant. upon issuance of specific or
general directions by the Reserve Bank of India. Our answer to the second
E question, formulated in the earlier part of this judgment, therefore is in the
affirmative and we hold that for establishing contravention of snb section (1)
of Section 10 it is not necessary to establish that the defaulter has disobeyed any
directions issued by the Reserve Bank of India under Section 10(2) with regard •
to the repatriation of the foreign exchange receivable by him in India. The
F contrary view taken by the High Court is not sustainable.
In vie\v of our answer to both the questions above the judgment of the
High Court, impugned in this appeal, cannot be sustained and we accordingly
set it aside.

So far as the amount of penalty is concerned, the appellate Board, as
G already noticed, has modified the amount of penalty as imposed by the Directorate
of Enforcement. The learned Addi. Solicitor General, Mr. Tulsi, Submitted that
the appellant has no objection to the waiving of the entire a1nount of penalty in
s9 far as each one of the Directors is concerned, so1ne of who1n are reported to
have died during the pendency of the proceedings in this Court but that the
H penalty imposed upon the Company on both the charges docs not call for any
DIRECTOR OF ENFORCEMENT v. M.C.T.M. CORPN. LTD. [DR. ANAND, J.] 229

inte1ference, because of the inordinate delay in repatriation of the foreign A
exchange, which according to him has not been repatriated even till date as that
failure on the part of the Company has deprived this country to use the foreign
exchange to sub-serve the common good, all these years. Learned counsel for
the respondents does not controvert that the foreign exchange which was
receivable in India from Malaysia has not been repatriated even till date. We,
B
therefore, in view of the submissions made at the Bar set aside the penalty
imposed upon each of the Directors of the Cpmpany but maintain the penalty
imposed upon the Company, as modified by the Appellate Board. The appeal
succeeds and is allowed in the above terms. Jn the peculiar facts and circumstances
of the case, the parties shall bear their own costs.

M.K. Appeal allowed.