Jatin C Jhaveri Vs. Union of India, on 13th May, 2016, Supreme Court of India – Read Judgement

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Jatin C. Jhaveri ….Appellant
Union of India …. Respondent


CIVIL APPEAL NOS.11128-31 OF 2011


Union of India ….Appellant
Jatin C. Jhaveri, etc. …. Respondents
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.

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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.

…………………………….CJI (T.S.Thakur)

……………………………….J (Uday Umesh Lalit)

New Delhi
May 13, 2016

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