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Jatin C. Jhaveri v. Union of India

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 11127 of 2011)Decided 13 May 2016
Civil Appeal No. 11127 of 2011
Chief Justice T.S. Thakur · Justice Uday Umesh Lalit

Background

In July 1993, one Ajit Dodia was stopped by Customs at Mumbai airport while trying to board a Hong Kong flight and found carrying over US $400,000 in cash in a suitcase and briefcase. Dodia and his brother stated that diamond trader Jatin Jhaveri had arranged the trip and packed the currency, though Jhaveri admitted handing over the suitcase but denied owning the money or having anything to do with the briefcase. Proceedings under the Customs Act and the Foreign Exchange Regulation Act (FERA) followed, resulting in confiscation and penalty orders by the Special Director of Enforcement, which were later overturned by the Appellate Tribunal (FERA) and the Bombay High Court, leading to cross-appeals by both Jhaveri and the Union of India before the Supreme Court.

Decision Breakdown

The Supreme Court held that the key legal question was whether Jhaveri had "acquired" foreign exchange without the general or special permission of the Reserve Bank of India as required under Section 8(1) of FERA, and found that no such permission had ever been produced or even claimed. It rejected Jhaveri's reliance on a separate RBI notification (under Section 13 of FERA, dealing with bringing currency into India) as irrelevant to the distinct "acquisition" requirement under Section 8(1), and found the Appellate Tribunal's and High Court's assessment on this point legally incorrect. The Court therefore set aside both lower rulings, restored the Special Director's original 1999 confiscation order, allowed the Union of India's appeals, and dismissed Jhaveri's own appeal/writ challenge; it further directed Jhaveri to refund (with 10% annual interest) the money that had been released to him during the litigation.

Lesson Learnt

Under foreign exchange control law, simply explaining how currency entered the country is not enough: a person must independently show they had the Reserve Bank's permission to "acquire" that foreign exchange in the first place, and failing to produce such permission can be fatal even years after the money has otherwise been returned.

Official source (sci.gov.in)View Judgment (PDF)

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