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2009 (4) TMI 455 - HC - Companies LawMoney-changers - Whether though the order states that the writ petitions were partly allowed specific instructions for return of the foreign currency were not issued nor was there any direction to pay interest whereas in the Writ Petitions there is a prayer for return of the foreign currency and the Travellers Cheques together with interest at 18% per annum? Held that - The order relating to foreign currency deserves to be confirmed the direction to refund foreign currency on 7-1-2000 gains relevance. We find that in CMP. Nos. 1861 and 1862 of 2002 in CMAs herein an order was passed on 20-2-2002 that there will an interim stay as prayed for and there was also a direction permitting the appellant/petitioner to encash the Euro currencies DM 4600 Austrian 2415 F.fr. 23, 250/- and UK pounds 5520 which are likely to expire and encash the same and deposit in the Bank. The foreign currencies which are subject matter of the writ petitions shall be refunded by the appellant together with interest at the relevant bank rate as modified by the Reserve Bank of India from time to time from 7-1-2000 till the date of payment. This direction will not apply to the foreign currencies deposited in Bank as per the orders passed in CMP referred to above. As regards those the interest shall be calculated from 7-1-2000 till the date of deposit alone since thereafter the Bank deposit would have gained interest. It is open to the writ petitioner to make an application to the third respondent in that regard who shall make necessary calculations as directed by us and refund the said amount. The third respondent is a party to the order. We have given direction to the writ petitioner to make an application only so that there may be a time frame within which the respondent shall comply with our direction which will be six weeks.
Issues Involved:
1. Competency of the Appeals filed by the Director of Enforcement. 2. Violation of section 7, read with sections 6(4), 6(5), and 49 of FERA, 1973. 3. Transaction beyond authorized place of business under Money Changer's license. 4. Prejudice due to non-placement of FLM license terms and conditions on record. 5. Tradability of discharged TCs for US$ 20,000. 6. Unauthorized transfer of foreign exchange in violation of section 8(1) of FERA, 1973. 7. Applicability of proviso to section 8(1) of FERA, 1973. 8. Interpretation of sections 7, 6(4), 6(5), 49, and 8(1) of FERA, 1973. 9. Application of presumption under section 59, read with section 71, of FERA, 1973. 10. Compliance with Foreign Exchange Regulation Act and FLM Instructions. Detailed Analysis: 1. Competency of the Appeals filed by the Director of Enforcement: The preliminary objection raised was that the appeals filed by the Director of Enforcement are incompetent as only the Central Government could prefer an appeal under section 35 of FEMA. The court analyzed the relevant notifications and concluded that the Director of Enforcement, acting on behalf of the Union of India, was authorized to file the appeals. The court rejected the preliminary objection, citing that the Director of Enforcement is an officer empowered to act for the Government. 2. Violation of section 7, read with sections 6(4), 6(5), and 49 of FERA, 1973: The Appellate Tribunal had held that there was no violation of these sections. The court examined the facts and concluded that the respondents, being authorized representatives of IMEC, were legally in possession of the foreign exchange and had not contravened these sections. The court upheld the Tribunal's finding that the possession of foreign exchange by the respondents was legitimate. 3. Transaction beyond authorized place of business under Money Changer's license: The court found that the respondents were merely in possession of the foreign exchange and were not engaged in any unauthorized transactions. The fact that they were found at a place other than the address mentioned in the license did not automatically imply a violation. The court noted that there was no evidence to suggest that the respondents were attempting to sell or purchase foreign exchange illegally. 4. Prejudice due to non-placement of FLM license terms and conditions on record: The court did not find this argument persuasive. It held that the respondents were aware of the terms and conditions of their license and had complied with them. The court noted that the respondents had produced documents to legitimize their possession of the foreign exchange. 5. Tradability of discharged TCs for US$ 20,000: The court found that the possession of discharged travelers cheques (TCs) by the respondents was not supported by any evidence regarding the details of the passengers who discharged the TCs. The court held that the explanation provided by the respondents was not credible and upheld the Adjudicating Officer's finding that the TCs were intended for unauthorized sale. 6. Unauthorized transfer of foreign exchange in violation of section 8(1) of FERA, 1973: The court concluded that the respondents, being authorized representatives of IMEC, had not acquired the foreign exchange in violation of section 8(1). The court noted that the foreign exchange was handed over to the respondents by their employer in connection with their business. 7. Applicability of proviso to section 8(1) of FERA, 1973: The court held that the proviso to section 8(1) did not apply in this case as the respondents were found to be in possession of the foreign exchange in their capacity as authorized representatives of IMEC. The court noted that the respondents were not engaged in any unauthorized transactions. 8. Interpretation of sections 7, 6(4), 6(5), 49, and 8(1) of FERA, 1973: The court upheld the Tribunal's interpretation of these sections, concluding that the respondents had not violated any provisions of FERA. The court emphasized that the respondents were legally in possession of the foreign exchange and had complied with the terms and conditions of their license. 9. Application of presumption under section 59, read with section 71, of FERA, 1973: The court held that the presumption under section 59 did not apply in this case as the respondents had provided a credible explanation for their possession of the foreign exchange. The court noted that the Department had failed to produce any evidence to contradict the respondents' explanation. 10. Compliance with Foreign Exchange Regulation Act and FLM Instructions: The court concluded that the respondents had complied with the Foreign Exchange Regulation Act and the FLM Instructions. The court noted that the respondents had produced documents to support their case and to legitimize their possession of the foreign exchange. Conclusion: The court partly allowed the writ petitions, directing the return of the foreign currency with interest at the relevant bank rate from 7-1-2000 till the date of payment. The court reduced the penalties imposed on the respondents and upheld the Tribunal's finding regarding the foreign currency. However, the court restored the Adjudicating Officer's order concerning the travelers cheques.
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