9911796707
TMI Blog2015 (1) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... Mrs. Sharifa Haji Ebrahim and Mrs. Asma Aboobakar are the partners. Mrs. Sharifa Haji Ebrahim expired on or about 29th July 1997 and in view of the desire of Mrs. Asma Aboobakar to retire from the partnership firm with effect from 1st September 1997, a deed of admission-cum-retirement was executed on or about 1st September 1997. That is how the appellants' partnership firm consists of Mrs. Mehmooda Moosa, Mr. Aboobakar Haji Ebrahim and Mr. Haji Ebrahim Suleman. 5. It is the case of the appellants that the Special Director Enforcement Directorate, Mumbai issued a show cause notice, dated 29th April 2002 calling upon the appellants to show cause as to why adjudication proceedings under Section 51 of the Foreign Exchange Regulation Act, 1973 ("FERA" for short) read with Sections 49(3) and (4) of the FEMA should not be held in respect of the alleged contravention of the provisions of Sections 8(1), Section 6(4) and Section 6(5) read with Section 7 of Foreign Exchange Regulation Act, 1973 and paragraph 3 of the Memorandum of Instructions to full fledged money changers issued by the Reserve Bank of India. The allegations were in relation to foreign exchange of Rs. 20,86,005/- sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missed the issue inasmuch as when the monies or exchange left those licensed full fledged money changers and were in the hands of the third person, then, act and deeds of the third person would not face the present appellants with any violation or breaches of law. The foundation of this show cause notice and adjudication proceeding itself is erroneous and untenable in law. For all these reasons, the appeal be allowed. 8. Mr. Shetty has rested his pleas on the judgment of the Hon'ble Supreme Court in the case of Tulip Stars v. Enforcement Directorate, Civil Appeal No. 680 of 2014 together with 681 of 2014 decided on 16th January 2014. Mr. Shetty submits that the matters stand fully covered by the judgment of the Hon'ble Supreme Court and in that regard he has taken us extensively through this judgment which is reported in 2014 (5) SCC 162 = 2014 (302) E.L.T. 19 (S.C.). 9. On the other hand, Mr. Desai, learned Senior Counsel appearing on behalf of the respondent submitted that there is a distinction on facts of the present case and in the Supreme Court judgment. Therefore, would not cover the issue raised in this appeal. It is submitted by Shri Desai that insofar as auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tulip sold foreign currency of the value of 147,000 US $ and 1,000 Sterling of UK between 29th April 1997 to 5th June 1997 through unauthorized person deputed by Hotel Zam Zam in violation of Sections 6(4), 6(5), 7 and 8 of the FERA. They had also violated paragraph 3 of the Memorandum of Instructions to full fledged foreign exchange money changers issued by the Reserve Bank of India, New Delhi. The appellants before the Supreme Court were called upon to show cause why the penalty should not be imposed against them under Section 50 of FERA read with Sections 49(3) and 49(4) of Foreign Exchange Management Act (FEMA). The penalty was imposed of Rs. 50,000/- against each of these appellants. Their appeals before the Appellate Tribunal for foreign exchange failed. That resulted into filing FEMA Appeals in this Court. A Division Bench of this Court having confirmed the orders under challenge, the appellants M/s. Tulip and Mr. Peter Kerkar had to approach the Hon'ble Supreme Court. The arguments of the appellants' Senior Counsel and that of the Additional Solicitor General were noted. 12. We find that the show cause notices that have been issued in the present case to the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine the contravention held proved against the appellants, we feel it appropriate to make a reference to Para 9 in the forefront. 14. Under Para 9 of 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 Para 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 Za ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is stated that after the transaction as between the appellants and M/s. Hotel Zam Zam concluded, M/s. Hotel Zam Zam is stated to have indulged 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 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 Para 3 of ELM 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 Paras 3 and 9 of ELM, we have held that the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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