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TMI Blog2012 (2) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... eserve Bank released foreign exchange in the names of various persons contrary to the directions issued by the Reserve Bank of India. The foreign exchange was released allegedly without due verification of passports/ air tickets; without the presence of the travellers and without obtaining their signatures on the travellers ' cheque; without making endorsement on the relevant passports and as a result foreign exchange was released to persons other than the applicants. The allegation was that both the travellers' cheques as well as currency notes in U.S. Dollars were released against the Business Travel Quota (BTQ). The BTQ scheme contained various conditions including the requirement that the passport of the traveller should be verified by the FFMC to ensure eligibility for release of the exchange; that the traveller should be in possession of an air ticket for travel to the country for which exchange was applied for; the passport should be endorsed with the amount of the exchange sold and the sale of foreign exchange should be made only on the personal application and upon identification of the traveller. Moreover, the traveller should invariably be required to sign the travellers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Bangalore office of the company. The Special Director found on the basis of the evidence that special condition No.4 was meant for the company as an FFMC and appropriate instructions and guidelines should have been issued through the Managing Director and Director to all branches in advance to ensure proper compliance. Since such steps had not been taken and adequate evidence was not brought on the record to establish that due steps were taken, the company as well as its Managing Director and Director were held guilty of violation and came to be penalised. A personal penalty of Rs.2.50 lacs was imposed on the company, while a penalty of Rs.50,000/each was imposed on the Managing Director and the Director who are in appeal. 5. As regards the second notice to show cause the Special Director found that the charge was duly established and that foreign exchange to the extent of Rs.15,25,805/was released for business visits of employees of nonexistent companies without verification of identities. In this, reliance was placed on the statement of noticee No.4 that he had released foreign exchange to certain companies on whose behalf applications were submitted by one Mr. Murali K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no connivance of noticees 2 and 3 (the Managing Director and the Director) with the officer in charge of the Bangalore office and that they had not received any illegal monetary benefits from the alleged transaction. Similarly, in regard to the second notice to show cause reliance was placed on the finding to the effect that there was no evidence to establish that the company and its Managing Director and Director were party to what is described as the dirty game of noticee 4 or that they were " " getting a monetary benefit out of the illegal conduct of the officer. In other words, it was submitted that the only allegation against the Appellants is a failure to discharge their responsibilities under the law and to ensure legal compliance. Learned counsel submitted that it was their specific defence in the course of the adjudication proceedings that the violation took place without their knowledge; the audit by the Reserve Bank of India had not found any untoward transaction and that an internal audit which had been conducted after the appointment of an auditor in 1996 had not reported anything adverse about the functioning of the Bangalore branch. Consequently it was urged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus companies, again in violation of the conditions imposed by the Reserve Bank of India to ensure that foreign exchange under the Business Visit Scheme which is availed of is not misused. In respect of both the show cause notices, it has been found that there was a release of foreign exchange in violation of the instructions of the Reserve Bank of India resulting in a violation of the relevant provisions of the FERA 1973 upon which the charge was founded. 10. Now subsection (1) of Section 68 provides that where a person committing a contravention of any of the provisions of the Act or of any rule, direction or order made thereunder is a company, every person who, at the time when the contravention was committed, was in charge of and was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. The proviso to subsection (1), however, lays down that nothing contained in the subsection shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ements made by the company for the proper conduct of the business in accordance with the guidelines of the Reserve Bank. That has not been explained. Perusing the statements and the reply upon which reliance has been placed on behalf of the Appellants at the hearing, it is evident that apart from a few vague averments, nothing has been established that would have enabled the adjudicating authority to hold that the defence was proved. As a Full Fledged Money Changer, the company is vested with custody of foreign exchange which has to be disbursed to bonafide travellers. The contravention in the present case is of a serious nature since it is evident that foreign exchange was disbursed to persons who were not bonafide travellers as in the case of the first notice to show cause under the BTQ scheme and to bogus entities as in the case of the second notice to show cause under the Business Visit Scheme. The contravention is therefore of a serious nature and it was for the Appellants to establish by leading cogent evidence a defence within the meaning of the proviso to subsection (1) of Section 68. That has not been done. The quantum of the penalty which has been imposed is not dispropor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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