TMI Blog2009 (4) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - W.P. NOS. 23744 AND 23745 OF 2001 C.M.A. NOS. 205 AND 206 OF 2002 - - - Dated:- 24-4-2009 - PRABHA SRIDEVAN AND T.S. SIVAGNANAM, JJ. K. Ramasamy for the Appellant. B. Kumar and B. Sathish Sundar for the Respondent. JUDGMENT Prabha Sridevan, J. - Heard Mr. B. Kumar, learned senior counsel appearing for the writ petitioners and respondents in the appeals and Mr. K. Ramasamy, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be considered only if objection No. 1 is decided against the Respondent. Therefore, we proceed to consider the 1st objection. 7. According to the learned senior counsel, the appeals filed by the Director of Enforcement as representing Union of India would not satisfy the requirement of section 35 of the Foreign Exchange Management Act, 1999 (hereinafter referred to as FEMA). According to him, it is the Central Government which has to file the appeal and not the Director of Enforcement and this question is squarely covered by the decisions in Director of Enforcement v. Rama Arangannal AIR 1981 Mad. 80 and Mohtesham Mohd. Ismail v. Spl. Director, Enforcement Directorate [2009] 92 SCL 299 (SC). 8. Section 35 of the FERA refers to the Central Government being the aggrieved party in an appeal to the High Court. Therefore, the aggrieved party cannot be the Deputy Director or the Directorate of Enforcement, unless a specific power is given to him for filing the appeal. The learned senior counsel elicited the various sections which give the Central Government the power to do certain things and, according to those provisions, this would show that wherever necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed under the FERA can himself prefer an appeal before the High Court against an order passed by the FEMA Board. Before the High Court, the maintainability of the appeal was raised as an issue and reliance was placed on Rama Arangannal s case ( supra ). The Supreme Court referred to section 3 of FERA, which provides for the classes of officers of Enforcement as well as section 4 and section 5 relating to delegation of powers and held that from a bare perusal of section 5 of the Act, it would be evident that notifications are required to be issued by the Central Government delegating specific functions under the Act. The Supreme Court held that the adjudicating authority, in the absence of any power conferred upon it in this behalf by the Central Government, could not prefer any appeal against the order passed against the Appellate Board. Therefore, the appeal was allowed. According to the learned senior counsel, this would settle the issue. 10. Learned Special Counsel appearing for the Enforcement Directorate, however, referred to certain notifications of the Ministry of Law. On 11-2-1958, the Ministry of Law issued a notification that the Central Government authorizes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 6-3-2009, there was an order empowering the officers in the rank of Assistant Director and above for the purposes of section 54 of FERA and 35 of FEMA. Therefore, the learned Special Counsel would contend that the decision had been taken only by the Government to file an appeal and the officers who decided on behalf of the Government have also been mentioned in the notifications and notices referred to above and the appeal itself has only been filed by the Union of India represented by the Director. Therefore, all the criteria are satisfied. He submitted that neither Rama Arangannal s case ( supra ) nor Mohtesham Mohd. Ismail s case ( supra ) will come to the aid of the respondents since in Rama Arangannal s case ( supra ), the Central Government was not a party and the Deputy Director had not filed the appeal representing the Central Government and there are observations in the Supreme Court s decision which clearly come to the aid of the appellant. Learned Special Counsel also relied upon various decisions. We will refer only to those judgments which are applicable to the facts of this case. 12. In M.M.T.C. Ltd. v. Medchl Chemicals Pharma (P.) Ltd. [2002] 108 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned was empowered to prefer an appeal on behalf of the Central Government; the Central Government was not even impleaded as a party to the appeal and the first respondent did not file the appeal on behalf of or representing the Central Government. It was filed in his official capacity as the adjudicating authority and not as a delegatee of the Central Government". Therefore, it is clear that when the appeal is filed by the Union of India represented by the Director, then the appeal is filed by the Central Government and the Central Government is the aggrieved party. The Central Government will have to be represented by an officer and the officer in this case is the proper officer as per the various notifications discussed above. In fact, in the letter dated 28-7-1979 signed by the Assistant Legal Adviser to the Government of India in response to queries raised by the Senior Central Government Standing Counsel in his letter dated 24-4-1979, what he says is that the Director of Enforcement is the officer empowered to sign and verify the pleadings as well as act for the Government. The crucial words here are not only signing and verifying the pleadings, but he is specifically empowere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as FERA). Documents were recovered from A. Balasubramanian and the Office premises of IMEC under Mahazar. The Department recorded statements from the two persons under section 40 of FERA and it is stated that they had admitted that the seized Foreign Exchange including the travellers cheques worth US$ 20,000, duly discharged, was being taken by them for sale unauthorizedly at Burma Bazar. The further allegation was that the IMEC and said two persons had dealt with the Foreign Exchange without the previous general or special permission of Reserve Bank of India. 15. A show-cause notice, dated 8-12-1997, was issued by the Special Director of the Enforcement Directorate to the Respondents herein and IMEC and Mr. A. Balasubramanian, calling upon them to show cause as to why adjudication proceedings as contemplated in section 51 of the Foreign Exchange Regulation Act, 1973, should not be held against them for the contraventions and as to why the Foreign Exchange of US$ 10,000, UAE Dirhams 4,000, OM 4,600, Australian $2,415, French Francs 23,250, UK Pounds 5,520 and US$ (TCs) 20,000 seized by the Officers of Enforcement on 10-6-1997 from the possession of Shri M. Soosai, Cashier, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellate Board under sub-section (3) or sub-section (4) of section 52 of FERA. The following questions of law are raised for determination : 1. Despite the facts and circumstances indicated above, the Appellate Tribunal for Foreign Exchange has held that there is no violation of section 7, read with sections 6(4), 6(5) and 49 of FERA, 1973 and, hence, the question of law has arisen for consideration. 2. Whether the indicated transaction beyond the authorized place of transaction of business in Money Changer s licence, without RBI permission, would tantamount to violation of FKM licence and provisions of FERA, 1973 ? 3. Whether the respondent was prejudiced as to the non-placement FLM licence terms and conditions on record ? 4. Whether the factum of signature and counter signature duly discharged in the TCs for US$ 20000 seized from Shri. M. Soosai will not be tradable foreign exchange ? 5. Whether the discharged TCs of US$ 20,000 in the hands of employees of IMEC for sale to Burma Bazaar would not amount to otherwise transfer in violation of section 8(1) of FERA, 1973 ? 6. The taking of foreign exchange/currencies by the employees of the authorized money-changer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnature had also been furnished to the Reserve Bank of India, as required. According to him, he cannot be said to have otherwise acquired the foreign exchange from his own employer and he is bound to do such transactions in the course of his employment in terms of the full-fledged money- changers license issued to him by the RBI. 20. Mr. B. Kumar, learned senior counsel appearing for the respondents, submitted that the proviso to section 8(1) of the Act provides that nothing in the sub-section would apply to any purchase or sale of foreign currency effected in India between any person and a money-changer. He submitted that when the foreign exchange in question was legally purchased by M/s. IMEC and proper vouchers for that transaction from authorized foreign exchange dealers were carried by him as an authorized representative of IMEC for delivering to M/s. Dass India Forex Division, how he could be charged with the offences as aforesaid. Learned senior counsel submitted that the circumstances under which A. Balasubramanian and M. Soosai had to carry the assorted foreign currency had been clearly explained and when the foreign exchange mentioned had been seized from their posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mo, it was produced only thereafter. 24. The following decisions were cited - K.I. Pavunny v. Asstt. Collector (Head Quarter) Central Excise Collectorate 1997 (90) ELT 241 (SC), State of Maharashtra v. Mohd. Yakub AIR 1980 SC 1111, Union of India v. Abdul Mohamed [2000] 10 SCC 169, Abdul Mohamed s case ( supra ) was relied on by the learned senior counsel appearing for the respondents to show that unless there is positive material to show that the accused could be said to have acquired the foreign exchange in contravention of section 4(1), it cannot be established that the accused had "otherwise acquired" the confiscated foreign exchange in violation of section 4(1) of the Act. The expression "acquired" must indicate something more than mere possession. This decision was relied on by the learned senior counsel to show that mere possession of the foreign exchange by M. Soosai or Balasubramanian would not help the case of the appellants. 25. The license granted by the Reserve Bank of India to IMEC shows that they are empowered to purchase foreign currency notes/coins and travellers cheques and to sell foreign currency notes/coins on their behalf and also to sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of purchases from other money-changers and authorised dealers, it is stipulated that money-changers may freely purchase from other money-changers and authorised dealers in foreign exchange or their Exchange Bureau, any foreign currency notes and coins tendered by the latter. As per Instruction 3 of the Memorandum of Instructions, which has already been extracted above, all money-changers should arrange to forward a list giving the full names and designations of their representatives who are authorized to buy and sell currency notes. 27. Ex. 6 is the specimen signature, allegedly given by International Money Exchange Corporation, of the authorized signatories of their office. A xerox copy of Ex.6 is enclosed in the typed set of papers and it is seen that while the names of Soosai, Balasubramanian and Savarimuthu are shown as authorised signatories, which are shown in the paper book, the names of M. Maharoof and Michael appear to have been inserted. According to the respondents, the foreign exchange was handed over to them by IMEC in their capacity as employees. The foreign exchange was found in the possession of M. Soosai and Balasubramanian. Both their names find a pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence to deal in the foreign currency authorises the said licencee to purchase or sell foreign currency on behalf of the authorised dealers only at the address mentioned in the licence and the address mentioned in the licence is No. 54, Cathedral Road, Madras-6. The fact that the respondents were found in possession of the foreign currency at a place other than the aforesaid address would automatically mean that they had contravened the provisions of the Act. We are afraid, it is difficult for us to accept this. The licence is given to purchase foreign currency and sell foreign currency only at the aforesaid address, viz., the address mentioned in the licence. It is not the case of the appellant that Soosai was selling or purchasing foreign currency. He was merely in possession of the foreign currency. What he might have wanted to do with the foreign currency is something that we do not know. 30. In this connection, Mohd. Yakub s case ( supra ) may help. In that case, on receipt of secret information that silver would be transported, the Customs officials surrounded the vehicles through which it was being smuggled and the trial court convicted the accused for attempting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealers in silver. When the accused were surrounded, officers heard the sound of the engine of a mechanised vessel. The Supreme Court held that even though the last act was not completed, "It is sufficient if the act or acts were deliberately done and manifest a clear intention to commit the offence aimed being reasonably proximate to the consummation of the offence and applying to the facts, they came to the conclusion that the silver ingots were concealed in two vessels under the cover of darkness. The accused had reached seashore. They had started unloading the silver near a creek from where a sound of an engine of a sea craft was also heard. Therefore, even beyond the stage of preparation, most of the steps necessary had been taken. The only step remained was to load it on to the sea craft which was aborted by the intervention of the officers of law". In that case, the Supreme Court has referred to smuggling being an anti-social activity which adversely affects the public revenue and earning of foreign exchange. 31. In this case, if the offence had been made out or at least the respondents had committed an act which was sufficiently close for the consummation of the offenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in both the places in each travellers cheque. He states : "Since M/s. IMEC was not accepting outstation cheques, they insisted on cash or bank Demand Draft towards the cost of the TCs; that the passengers collected back the BTQ applications and connected records and left the premises saying that they would come back soon with cash or bank drafts for purchasing the TCs; that the passengers did not come back to M/s. IMEC till the evening on 10-6-1997; that M/s. IMEC decided to destroy the 40 TCs in question, prepared the necessary destruction certificates and were to go to M/s. AMEX, Spencer Plaza, Anna Road, Chennai-2, for getting the TCs punched as required by M/s. AMED procedure; that in the meantime, M/s. IMEC deputed two of their employees for purchasing US$ 5000 from M/s. Thomas Cook, No. 112, Nungambakkam High Road, Chennai-34 and another sum of US$ 5000 from M/s. Transcorp International Ltd., Precision Plaza, No. 281, Mount Road, Teynampet, Madras-18, legally and that there was some delay in the return of those employees." This explanation was not accepted by the Adjudicating Officer, who held thus : "Hence, the TCs in question were undoubtedly meant for sale unauthori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g about the destruction certificate. The rules relating to travellers cheques which show as to how encashment can be avoided do not in any way strengthen the case of the respondents. The possession of the discharged travellers cheques, when not supported by any evidence regarding the details of the passengers who discharged the travellers cheques and the reason why so many travellers cheques were in their possession strengthens the case of the Department. The story that there was non-availability of cash and that one party refused to accept the value in cash is too vague a piece of evidence to absolve the respondents of the contravention alleged. 34. For all these reasons, we hold that the appeals are maintainable. The order of the Appellate Tribunal for Foreign Exchange is set aside only insofar as the travellers cheques are concerned and the order of the Adjudicating Officer with regard to the travellers cheques is restored. Since we are confirming the order of the Tribunal with regard to the foreign currency, the penalty imposed on the respondents is reduced to Rs. 45,000 (Rupees forty five thousand only) in the case of A. Michael and Rs. 35,000 (Rupees thirty five thousand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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