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TMI Blog2014 (1) TMI 1348X X X X Extracts X X X X X X X X Extracts X X X X ..... s against the Appellants on that ground - impugned orders by which the Appellants were found guilty of the violation of paragraph 3 of FLM read with Sections 6(4), 6(5) and 7 of FERA and the consequential imposition of penalty of Rs.50,000/- was wholly unjustified. The impugned orders are liable to be set aside and they are accordingly set aside. If the Appellants have parted with the penalty amount imposed under the impugned orders, the Respondent is directed to refund the same to the Appellants along with simple interest at the rate of 6% per annum, within two months from the date of this judgment - Decided in favour of assessee. - Civil Appeal No. 680 of 2014 (@ SLP (C) No. 7655 of 2011), Civil Appeal No. 681 of 2014 (@ SLP (C) No. 7657 of 2011) - - - Dated:- 16-1-2014 - Surinder Singh Nijjar And Fakkir Mohamed Ibrahim Kalifulla,JJ. JUDGMENT Fakkir Mohamed Ibrahim Kalifulla, J. 1. Leave granted. 2. In these two appeals, the challenge is to a common judgment of the Division Bench of the High Court of Judicature at Bombay in FEMA Appeal Nos.3 4 of 2008, dated 14th October 2010. 3. Brief Facts which led to the culmination of the present appeals are required to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Changers, in short FFMC. According to the learned senior counsel, such transactions as between the licensed FFMCs are wholly authorized under the provisions of FERA, as well as the Memorandum of FLM of the Reserve Bank of India. The learned senior counsel further contended that in the confiscation proceedings initiated against the Appellants, as well as M/s Hotel Zam Zam, as per the order dated 21.8.1998 it was found that no statutory violation can be attributed to the Appellants and therefore, the imposition of penalty as against the Appellants by the Original Authority and the confirmation of the same by the Tribunal and the Division Bench are therefore liable to be set aside. 6. As against the above submissions, Mr. Bagaria, learned Addl. Solicitor General would contend that by virtue of the statutory stipulations contained in sub-sections (4) and (5) of Section 6, Section 7 and 8 of FERA read along with paragraph 3 of the Memorandum of FLM of the RBI, there was a clear violation of the statutory provisions committed by the Appellants, hence the penalty imposed by the Original Authority as confirmed by the Appellate Authority, as well as the High Court cannot be faulted. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eve that any such contravention or evasion as aforesaid is contemplated by the person report the matter to the Reserve Bank. Section 8: Restrictions on dealings in foreign exchange:- (2) Except with the previous general or special permission of the Reserve Bank, no person, whether an authorized dealer or a money-changer or otherwise, shall enter into any transaction which provides for the conversion of Indian currency into foreign currency or foreign currency into Indian currency at rates of exchange other than the rates for the time being authorized by the Reserve Bank. Paragraphs 3 and 9 of the FLM Authorised Officials 3. All money-changers should arrange to forward lists giving full names and designations of their representatives who are authorized to buy and sell foreign currency notes, coins and travelers cheques on their behalf together with their specimen signatures, at the end of each calendar year to the office of Reserve Bank under whose jurisdiction they are functioning. Any changes in their list should also be brought to the notice of Reserve Bank. No person other than the authorized representative should be allowed to transact money-changing business on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny of paragraph 3 disclose that the said paragraph has been issued by the RBI to state as to who can be called as authorized officials of money changers. The said paragraph also imposes a restriction to the effect that other than an authorized representative, nobody else should be allowed to transact money changing business on behalf of the money changer. 11. Paragraph 9 virtually gives a free hand for the money changers to indulge in purchase of foreign currency etc., and the only restriction is that while making such purchase, the purchase value should be paid only by way of an instrument and not by way of cash. 12. Keeping the above provisions in mind, when we refer to the nature of transaction that had taken place as between the Appellants and M/s Hotel Zam Zam, the following facts are not in controversy: (a) The Appellants, as well as M/s Hotel Zam Zam, are licensed FFMC. (b) The Appellants sold foreign exchange of 1,47,000 US $ and 1,000/- sterling of UK as between April 1997 to June 1997 to M/s Hotel Zam Zam. (c) The purchase value of the above foreign currency was at a higher rate than the existing retail rate that prevailed in the market. (d) The purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efront. Under paragraph 9 of the FLM as between the money changers, a free hand has been given for purchase and sale of any foreign currency notes etc. in rupee value. The only restriction imposed therein is that the Indian rupee value of the foreign currency should not be paid by way of cash, but should always be paid in the form of an instrument such as banker s cheque/pay-order/demand draft etc., or by debiting to the purchasers bank account. Therefore, if under paragraph 9 such a free hand has been given to the money changers, namely, FFMCs in the matter of purchase of foreign currency etc., by making payments in the form of negotiable instruments under the relevant statutes, the question that would arise for consideration would be whether in a case of this nature where such a transaction had taken place in between two licensed FFMCs and the said transaction was carried on by exchange of foreign currency by way of payment in the form of pay-orders and that the sale effected by the Appellants and the purchase made by the other FFMC, namely, M/s Hotel Zam Zam was not disputed, can it still be held that there was any violation at all in order to proceed against the Appellants for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulged in some transaction, which was in violation of the provisions of FERA with which the Appellants were not in any way concerned. It can also be safely held that for any violation or contravention of the provisions of FERA or FEMA at the instance of M/s Hotel Zam Zam after the money changing transaction as between the Appellants and the said concern had come to an end, the Appellants cannot in any way be held responsible or proceeded against. 18. In our considered opinion that in the peculiar facts of this case and having regard to the nature of transactions which had taken place as between the Appellants and M/s Hotel Zam Zam in the manner in which it has been narrated in the impugned order of the Original Authority as noted by the Tribunal, as well as the Division Bench of the High Court, we are convinced that there was no scope to allege a violation of paragraph 3 of the FLM or for that matter Sections 6(4) and 6(5) of FERA, 1973. Based on the interpretation of Sections 6(4), 6(5) of FERA, 1973 and paragraphs 3 9 of the FLM, we have held that the Original Authority, the Appellate Tribunal as well as the Division Bench of the High Court failed to appreciate the issue in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghani was purchasing the dollars from other FFMCs were settled between her mentor Shri Suleman Tajuddin Patel and not considerations of any other kind. 21. Therefore, in the impugned orders of the Original Authority, as well as the Tribunal and the Division Bench, the sale effected by the Appellants on a rate higher than the rate prevailing in the market was not the basis for the alleged violation of paragraph 3 of the FLM read with Sections 6(4), 6(5) and 7 of FERA. In the confiscation order passed by the Customs Authorities, where again the Appellants were also one of the noticees, no fault was found as against the Appellants on that ground. In the light of our above conclusions, as regards the higher value at which foreign currency alleged to have been sold by the appellant to Hotel Zam Zam, the reliance placed upon the decision in P.V. Mohammad Barmay Sons (supra) has also no application. The said decision came to be rendered entirely under different facts which cannot be applied to the facts of the present case. 22. Having reached the above conclusions, we are convinced that the impugned orders by which the Appellants were found guilty of the violation of paragraph 3 of F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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