TMI Blog2010 (10) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... as no obligation on the Appellants to check the credentials of the representative of the Hotel Zam Zam in terms of section 6(5) in view of para 9 of the FLM does not commend to us and has to be rejected. Thus we do not find any infirmity or illegality in the order passed by the ATFFE confirming the Order in Original. Resultantly, the question of law would have to be answered in favour of the revenue and against the appellants. - FEMA APPEAL NOS. 3 & 4 OF 2008 - - - Dated:- 14-10-2010 - V.C. DAGA AND R.M. SAVANT, JJ. Ms. Tanmayi Gadre for the Appellant. A.J. Rana, M.S. Bharadwaj and D.A. Dubey for the Respondent. JUDGMENT R.M. Savant, J. - By the above Appeals, the Appellants have challenged the common order dated 2-7-2008 passed by the Appellate Tribunal for Foreign Exchange, New Delhi by which order the Appeals filed by the Appellants above named came to be dismissed and the Order in Original dated 3-10-1994 came to be confirmed resultantly the penalty imposed on the Appellants above named was maintained. 2. Both the above Appeals have been admitted by this Court on 7-1-2009 on the following substantial question of law : "Once an Authorised D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s took place. In the said adjudication proceedings, the Commissioner of Customs held that various FFMCs, including the Appellant, did not have any preconcert knowledge of the violations and/or breaches committed by Hotel Zam Zam, whilst dealing with Hotel Zam Zam for sale of foreign exchange. It appears that consequently, no action was taken against the Appellant in Appeal No. 3/08. The matter has rested there as no further proceedings were initiated against the order passed by the Commissioner of Customs. Thereafter on 29-4-2002, the Enforcement Directorate issued Memorandum/show-cause notice dated 29-4-2002 alleging violation of the provisions of sections 6(4), 6(5), 7 and 8(1) of the FERA and para 3 of the Memorandum of Instructions to Full Fledged Money Changers ( FLM ) issued by the RBI. Gravamen of the allegations were as under : ( i )That the Appellant in Appeal No. 3/08 has not complied with the conditions under which authorization/license was granted by the RBI to the Appellant to deal in foreign exchange; ( ii )That the Appellant had dealt with foreign exchange contrary to the authorization/directives of RBI and/or had not adequately satisfied itself, whilst dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47,000 and Stg. Pounds 1,000 sold by M/s. Cox and Kings Travel Finance Ltd. to M/s. Hotel Zam Zam was in turn sold by the latter in the open black market. To sum up, had the said noticee company M/s. Cox and Kings Travel Finance Ltd. more vigilant while dealing with the foreign exchange transactions with M/s. Hotel Zam Zam, there could have been no occasion for the said M/s. Hotel Zam Zam to procure foreign exchange so easily from the noticee company M/s. Cox and Kings Travel Finance Ltd. and to sell the same in black market at premium. Thus by not insisting on the authorization from the said Hotel Zam Zam disclosing the names, address and other particulars of the persons deputed by them for purchasing foreign exchange from M/s. Cox and Kings Travel Finance Ltd., the said M/s. Cox and Kings Travel Finance Ltd. has contravened the directions contained in para 3 of the Memorandum FLM read with sections 6(4), 6(5) and 7 of the FERA, 1973. I therefore, hold them guilty for the said contraventions." The substance of the findings of the adjudicating authority in the Order in Original is that by not insisting on the authorization from the said Hotel Zam Zam, the Appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, Pheku Singh cannot also be sustained consistent with the findings in and the result of these appeals as the findings are interdependent and inextricably integrated. The conviction and sentence of Pheku Singh are also set aside and the said Pheku Singh, accused 3 in S.T. No. 168 of 1974 is also directed to be set at liberty forthwith." As can been seen from a reading of the aforesaid para in the said case that since the Apex Court had found infirmity in the test identification parade, the conviction and sentence of the Appellants were set aside. Resultantly, the conviction and sentence of the non-appealing accused was also set aside in view of the fact that some could not also be sustained in view of the findings recorded by the Apex Court, as the said findings are interdependent and inextricably integrated. The benefit of acquittal was, therefore, given to the non-appealing accused also. Insofar as judgment in Brathi alias Sukhdev Singh s case ( supra ) is concerned, the Apex Court has held as under : "When several persons are alleged to have committed an offence in furtherance of the common intention and all except one are acquitted, it is open to the appellate cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt had reached Hotel Zam Zam and it is Hotel Zam Zam which had thereafter misused the said foreign currency. The learned counsel for the Appellants for the said purpose relied upon the judgment of the Apex Court in the matter of Shanti Prasad Jain v. Director of Enforcement AIR 1962 SC 1764 wherein the Apex Court held that the proceedings under FERA are quasi-criminal in character and it is the duty of the respondent to make out the charges beyond all reasonable doubt that there has been a violation of the law; ( vi )That section 6(5) would have to construed in a manner that the obligation thereunder as regards the authorised representative is only to see that the sale takes place through the authorised representative of the seller FFMC and the seller FFMC has no corresponding obligation to see that whilst dealing with the purchaser FFMC whether it is dealing with the authorised representative; ( vii )That if two possible constructions of the provisions are possible, the interpretation which would avoid penalty is to be adopted. In support of this submission, the learned counsel for the Appellants relied upon the judgment of the H.P.C. Production Ltd., In re [1962] A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory authority as well as the ATFFE to the effect that the Appellant in its capacity as FFMC has not acted cautiously and responsibly whilst making the sale of foreign currency which duty has been cast upon the FFMCs by the provisions of FERA, a concurrent finding has also been recorded that during the period from April 1997 to June 1997 when the amount of US$ 147,000 and UK Pounds 1,000 was sold to Hotel Zam Zam, foreign exchange was handed over to one Rakesh Mhatre, the representative of Hotel Zam Zam of which person no details were available with the Appellants above named. The said findings of fact have been recorded on the basis of the material which was on record including the statement of Executive Director Shri Peter Kerkar, who is the Appellant in Appeal No. 4/08. 12. In the context of the challenge of the Appellants to the impugned order, it would be apposite to refer to the relevant provisions of the FERA as also the FLM issued by the RBI. So far as the instant Appeals are concerned, sections 6(4), 6(5), 7, 8(1) and 8(2) of the FERA and paras 3 and 9 of the FLM are relevant and the same are reproduced as under : "Section 6 Authorised dealers in foreign exchange. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted or has contravened any of the provisions of this Act or of any rule, notification, direction or order made thereunder : Provided that no such authorisation shall be revoked on the ground specified in clause ( ii ) unless the money-changer has been given a reasonable opportunity for making a representation in the matter; (4) The provisions of sub-sections (4) and (5) of section 6 shall, insofar as they are applicable, apply in relation to a money-changer as they apply in relation to an authorised dealer. Explanation. In this section, "foreign currency" means foreign currency in the form of notes, coins or traveller s cheques and "dealing" means purchasing foreign currency in the form of notes, coins or traveller s cheques or selling foreign currency in the form of notes or coins. Section 8 Restrictions on dealings in foreign exchange . (1) Except with the previous general or special permission of the Reserve Bank, no person other than an authorised dealer shall in India, and no person resident in India other than an authorised dealer shall outside India, purchase or otherwise acquire or borrow from, or sell, or otherwise transfer or lend to or exchange with, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onformity with the terms of his authorisation under this section. In terms of section 6(5) of FERA, the authorised dealer shall before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information as will reasonably satisfy him that the transaction will not involve and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, notification, directions or order made thereunder and where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorised dealer shall refuse to undertake the transaction and shall, if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to the Reserve Bank. Insofar as applicability of the said provisions are concerned, sub-section (4) of section 7 clearly declares that the said provisions namely sub-sections (4) and (5) of section 6 would apply in relation to a money-changer as they apply in relation to an authorised dealer. The facts of the instant case disclose that the said Hotel Zam Z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which would absolve the defaulter should be adopted in our view cannot be accepted. Insofar as section 6(5) is concerned, the language is plain and clear and there is no ambiguity so as to give rise to two interpretations. Going by a literal construction of the said provision, the same unequivocally leads to a conclusion that the obligation cast in section 6(5) is both on the seller as well as purchaser and cannot be restricted to only the seller. In a sense the said provision casts a duty and, in our view, the said duty has been cast by the Legislature with some purpose considering the fact that the FFMCs are dealing in foreign exchange. In the light of the above, the submission of the learned counsel for the Appellants that a penal provision should be construed in a manner so as to absolve the defaulter of the penalty cannot be accepted for the aforesaid reasons. Insofar as the submission of the learned counsel for the Appellants that insofar as Hotel Zam Zam is concerned, it was a licenced FFMC and therefore, what it did after the foreign exchange reached it was without the knowledge of the Appellants and there was, therefore, no mens rea on the part of the Appellants cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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