Southern India Education Trust vs Foreign Exchange Regulation Appellate Board and Another

T. Sathiadev, J.—The Southern India Education Trust represented by its Chairman is the appellant herein. Action was initiated against it for

contravention of the provisions of Section 5(1)(aa) of the Foreign Exchange Regulation Act, 1947 by issue of a show cause notice dated 4-3-

1975 stating therein that in the year 1970, without the general or special exemption from the Reserve Bank of India, it had received otherwise than

through an authorised dealer in foreign exchange various amounts aggregating to Rs. 3,16,449 by order of persons resident outside India, and

which amounts were credited to their account with the Bank of Baroda, Teynampet, Madras on different dates as detailed in the Annexure thereto.

Appellant sent its reply and thereafter personal hearings were held, and both the authorities have concurrently held that appellant had contravened

as charged, and ultimately, a penalty of Rs. 20,000 having been imposed, this appeal is preferred.

The Directorate of Enforcement claimed that on information received that appellant had received certain donations from its well wishers abroad

oil compensatory, basis, a directive was issued as early as 1973 u/s 19(2) of the Act calling for details of the amounts received by Trust in the

Annexure enclosed containing a list of 61 persons, Detailed replies were received claiming that the College since its inception in 1955 had been

receiving public donation made by members in India and abroad and also by grants and loans from Central Government, State Government,

U.G.C., etc., and that annual reports of the Trust printed and published contain the names of all donors constituting the Trust, whether they actually

donated"" or ""paid"" or have ""promised to pay"" and annual reports are not the same as audited statement of accounts, and in or about

October/November, 1970, some members of the executive Council, had visited Malaysia, Saigon and Hong Kong to enrol new members and that

several merchants in those countries, who were nationals of India have promised to enrol themselves as members and that was why their names

have been included in the annual report to induce them to make the donations, and that as for the deposit of the amounts in Bank of Baroda to the

tune of about Rs. 3,16,449 the actual names of depositors and their addresses are not known and there being no transfer of money from outside

India, the amounts deposited in Bank without the knowledge of the Trust, and which had been taken into credit by the Bank in reduction of

overdraft loan, would not tantamount to any violation of the provisions of the Act. Thereafter, the Trust''s account with the Bank of Baroda were

inspected. The minutes book, the balance sheet, pay-in-slips, etc., were produced by appellant and scrutinised. Pay-in-slips disclose that in quick

succession in six instalments, during a short period between 27-11-1970 to 18-12-1970, a total amount of Rs. 3,16,449 had been deposited by

three persons viz., Abdullah, Gulam Mohammed and Abdul Hammeed. Extensive enquiries made at the Bank as well as other places failed in

tracing or locating these persons anywhere. Balance sheet of the Trust for the year ending 31-3-1971 showed this amount as collections during the

year but unvouched. In the printed annual report published relating to the said year, the names of 20 persons who are listed in the show cause

memo dated 4-3-1975 are found as patron members as well as donors, during the year and that they have paid the amount. Every year the list is

revised. In fact, these names and amounts find a place in stone inscriptions in the college premises. Total amount for the 20 persons comes to Rs.

2,12,169. The Executive Members of the appellant having visited Malaysia, Saigon, Koulalumpur, Singapore, etc., in October, 1970 and

immediately thereafter, these donations having been mentioned in the annual printed report and stone inscriptions having been made and the amount

having been deposited in the Bank within a short period in quick succession of six instalments there is a strong circumstantial evidence existing that

the amount deposited in the Bank represents the contributions made by those persons living outside India through unauthorised source. Hence,

appellant has contravened Section 5(1)(aa) of the Act.

Appellant took the stand that Trust was made aware of the deposit in the Bank only when it received the statement of account in January, 1971

and on the deposit made, it was the Bank which had adjusted it towards overdraft facilities, and therefore, there is no proof that the amount had

been received ""by order or on behalf of persons resident outside India"" and no nexus was established between the payments in the Bank and the

parties resident outside India and that the deposit into the Bank appears to be charitable donations or membership subscriptions by some

anonymous philanthropists, and the Trust is not responsible for what they have done and that annual reports of the Trust for 1969-70 and 1970-71

are not evidence of any violation of the provisions of the Act, and the names were printed because they have promised to become life members of

the Trust by intended payments of sums shown against their names, and that the balance sheet merely shows the total sum as not vouched for and it

is not entered in the Trust''s account and the names were retained in the inscriptions only to induce them to pay the promised amount, and

therefore, no contravention as alleged had taken place. The lengthy reply statement touches upon Articles 26 to 30 of the Constitution of India, the

persons who have visited the College, the service rendered by the College, unlikelihood of respectable persons resorting to contravene the

provisions of the Act, etc.

Mr. Rangarathnam, learned Counsel for the appellant, submits that the following substantial questions of law arise for consideration:--

Would voluntary donations made by unknown persons and resultant appropriation by a Trust unconscious of its source, result in a contravention

u/s 5(1)(aa) of the Act?

Can the entries made in annual reports relating to persons in Annexure to show cause notice, and their names found in stone inscriptions in the

College lead to a contravention u/s 5(1)(aa) of the Act in the absence of non-credit being made in the balance sheets?

Have not the authorities failed to comprehend the difference between ''promised to pay'' and ''inducement to pay'' as put forth by appellant,

under the peculiar facts and circumstances of this case?

He has argued all the three points as inter-connected and therefore they are dealt with together.

Appellant has admitted right through that a large sum of Rs. 3,16,449 was deposited to the credit of the trust account in six instalments during

the period between 27-11-1970 to 18-12-1970 in the names of three persons being Abdullah, Gulam Mohammed and Abdul Hammeed. In

1970, undoubtedly, this is a substantial remittance in the conduct of the affairs of the appellant-Trust. Equally, it is not disputable that in

October/November, 1970 members of the Executive Council of the Trust visited countries like Malaysia, Singapore, Saigon, Hongkong, etc.

Thereafter, this much of amount had been credited in its Bank account. There are certain other factors, which are not in dispute. The balance sheet

for the Trust for the year ending 31-3-1971 disclose that this amount had been credited as ""unvouched"". Every year the Trust publishes Annual

Reports containing a list of life members or patrons and the Annual Report for 1970-71 prepared as late in October, 1971, contains names found

in the Annexure alongside the amounts donated by them. Every year the list is revised with the addition of new members. The names of these

patrons are inscribed in the stone plaque with the amount contributed in the college building. These are the admitted facts, based on which it has to

be seen whether the explanation put forth by the Trust could be accepted or not.

Mr. Rangarathnam, learned Counsel for the appellant, strenuously pleads that contribution made voluntarily to a public trust or religious

institution and the like by unknown persons, could not be looked into to find out whether its origin or source is illegal, recipient being unaware

about it, the launching of proceedings for contravention of any of the provisions of the Act, overlooks the intendment of the enactment. Unless

there is a conscious receipt made, a violation u/s 5 as alleged, had not occasioned in this matter.

The proximity of the time within which a huge amount got remitted into the Bank of Baroda immediately after the return of the members of the

Executive Council of the Trust, on a trip made to South East Asian countries, which was for the avowed purpose of collecting donations for the

institution is a strong circumstance to hold that these deposits had been made in the Bank by resorting to compensatory payments. In the

explanation furnished by the Trust to the initial notice dated 7-8-1973, an Annexure mentioning the names of persons, who have donated through

approved channels was furnished and the amounts contributed do not show that anyone of them had chosen to donate to the extent of Rs.

3,00,000. Within a period of three weeks, three persons have remitted Rs. 3,00,000 in six instalments. This is a strange manner of sudden inflow

of donation and that too, all of them had not disclosed their whereabouts to the Trust. When such huge amount was credited, it claims that its Bank

adjusted this credit without getting its consent. In this background, the only irresistible inference to be drawn is that, the remittance made had a

direct connection with the visit made by the Executive Council members of the Trust to the Far Eastern countries in the previous month and that

soon after their return the deposits have been made.

It is not claimed by appellant anywhere that, after the visit of these countries through authorised source, it had received any amount from any of

the Indian nationals residing in those countries. The annexure to the explanation contains only one donation for 1970 which had come from the

Amir of Kuwait on 17-8-1970 for a sum of Rs. 41,894.74 which is from a middle east country.

On receipt of the statement of accounts from the Bank, Trust had not informed the Bank that it was not willing to accept payments from

undisclosed persons because it would lead to complications and answerability as had occasioned now. Consciously, it had allowed the amounts to

be retained in its account.

In the Annual Report published the names of the persons found in the Annexure and the amounts which they have paid, have been printed for

the year 1970-71. There is no ambiguity in the statement made therein about the amount having been paid by them. Year after year, such Annual

Reports have been pub lished and, the correctness of which had been vouchsafed. The list is a continuing one and contributions received during the

concerned year are added further in the representations made at the earliest point of time, in paragraph 14, it is stated

...It will be noticed that all these amounts which constituted the funds of the Trust, have been donated through the good offices of very important

personalities, Government or quasi-Govevnment, who had evinced interest and had intimate connection with the Women''s College....

The annexure relied upon in the said explanation contains the names of 61 persons involving a sum of about Rs. 3 � lakhs, which includes 20

persons now forming part of the show cause notice. In paras. 18 and 19 it is stated as follows:

...Deposit in the Bank by persons without informing the Trust or any of its members, is not receipt by any individual in his personal or other

capacity.

On the assumption aforesaid, the Trust published in its Annual Report that these donors had paid the promised amounts, but in the accounts of the

Trust, it was not possible to credit these amounts specifically against each individual donor, but the lump sum amounts, paid into the Bank without

the knowledge of the Trust, had been taken credit of by the Bank in reduction of the overdraft loan which reduction and adjustment became

known to the Trust only from the Bank statement. The Trust had not bean able to correlate these lump sum deposits to the individual donations

promised, by the respective donor members of the Trust.

Having stated so, it is sought to be explained away that because the patron members, whose names have been published in the Report, have

promised to make the donations mentioned as against them though they have not so far remitted them, still their names are mentioned, so as to

induce them to stand by the commitments made by them. Several years have rolled by, and no correspondence is produced to prove that

subsequently there had been correspondence with these twenty persons and how and to what extent at least one of them stood by the promise. A

very lengthy fabric had been woven by the appellant touching upon several irrelevant factors, thus making the representations as long as possible,

but want only to avoid meeting the point in issue. Every conceivable attempt had been made to bypass the irresistible inference drawable, on what

representations it had made to the general public in publishing Annual reports and in inscribing donor name in stone plaque. It had never chosen in

any one of its subsequent Annual Reports, to state that these parsons have let down the Trust, and therefore, their names have been removed and

they are no longer person members of the Trust. Unless contributions are received, there was no scope for anyone of them to be classified as

Donor members or patron members. Such a recognition and retention of membership would be available only on receipt of donations and not on

promise of donation. It is unbelievable that not a single paisa of donation was received, after the visit to those countries. In the absence of any iota

of material produced to show that atleast one member had stood by the promise and remitted through an authorised source, the inescapable

conclusion is, soon after the return of the Executive Council Members of the trust, it is at the instance of Trust, the amounts had been deposited in

the Bank.

11.Yet another factor is that the names of, these persons in Annexure are found in the stone inscription in the building. Having known names of

these I'' donors and the amounts deposited, their names and the amounts ought to have been included in Annual Report and in the stone inscription.

For publicising, their addresses are not a must. They have chosen to disclose their names. Yet, a different set of persons have been disclosed and

all of them were residing in countries visited by Executive Committee members. Here again, the unbelievable contention is put forth that the names

are retained only to induce them to stand by their assurance. Even till date of passing of the order by the appellate authority, no proof of remittance

made by them through RBI was produced for all by any of them. Even now before this Court, it is not the stand of the appellant that at least

thereafter, anyone had sent any sum with the prior permission of the Reserve Bank of India.

It is contended by appellant''s counsel that, unless there is conscious receipt of amounts and appropriations are made being fully aware that the

amount had been received otherwise than through an authorised dealer; the necessary ingredients of Section 5(1)(aa) do not exist. In support of

this claim, he relies upon State of Maharashtra Vs. Hans George, . It is a case which arose u/s 8(1) of 1947 Act, which deals with bringiug gold

into India without permission. The majority view was that, Section 8(1) lays an absolute embargo and the concept of ""bringing"" or ""sending"" would

exclude an involuntary bringing or an involuntary sending, but if bringing into India was a conscious act and was done with an intention to bringing

it, then the mere bringing constitutes the offence, and that no other ingredient is necessary to constitute a contravention of Section 8(1) than that

conscious physical act of bringing. On the language used in Section 8(1) read with Section 24(1) it was held that there is no scope for the

invocation of the rule that, besides the mere act of voluntarily bringing, any further mental condition is postulated as necessary to constitute the

offence. The minority view is that mens rea is necessary and if brought without knowledge on his part, then no offence is constituted and it is this

minority view learned Counsel for the appellant relies upon. No decision relating to Section 5(1)(aa) is relied upon for applying the rationale found

in minority view. As the admitted facts and the surrounding circumstances referred to above lead to the only conclusion that consciously,

deliberately and with an added element of dexterousness, soon after the visit to the Far East Asian Countries, the donations made by the well

wishers having been put into the Bank of Baroda at the instance of appellant it is not at all a case of involuntary donation made by unknown

persons. It was a conscious act done with an intent to bring this much of amount without general or special exemption from Reserve Bank of India.

Hence, it comes clearly within the ambit of Section 5(1)(aa) of the Act.

An attempt was made to claim that the remittance had gone in for establishment of an educational institution and it being a laudable purpose,

the authorities ought not to have imposed a heavy penalty. When a contravention is committed in the manner done, as to who had done it, and for

what purpose it had been done, and whether it had been spent for any philanthropic purposes or not, are totally irrelevant and have to be

eschewed from consideration. Means are more important than ends is what Father of this Nation had regularly imparted, but for any illegality, or

impropriety or immorality or unfairness, etc., committed, more often than not, the claims are being made of late that anything and everything illegal

can be committed covered up if investments in a public institutions or religious bodies are made.

Therefore, for all the reasons stated above as none of the points raised involve substantial question of law, the appeal is dismissed with costs.