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Issues: (i) Whether the adjudicating authority could alter the charge midstream from one kind of foreign exchange contravention to another without prior notice and opportunity; (ii) whether penalty was sustainable where the alleged breaches were technical or venial and were committed under a bona fide belief in the absence of loss of foreign exchange or dishonest intent.
Issue (i): Whether the adjudicating authority could alter the charge midstream from one kind of foreign exchange contravention to another without prior notice and opportunity.
Analysis: The statutory procedure under Rule 3 of the Foreign Exchange Regulation (Adjudication Proceedings and Appeal) Rules, 1974 required a notice specifying the nature of the offence and a real opportunity to meet that allegation. The charge originally framed could not be converted into a materially different charge without a fresh notice. The proceedings were treated as quasi-criminal, and the absence of an express statutory power to alter the charge meant that reliance on criminal procedure principles could not cure the defect. Lack of prejudice did not validate an action taken without authority of law and in breach of natural justice.
Conclusion: The alteration of the charge without prior notice and opportunity was impermissible and the related notices could not be sustained.
Issue (ii): Whether penalty was sustainable where the alleged breaches were technical or venial and were committed under a bona fide belief in the absence of loss of foreign exchange or dishonest intent.
Analysis: The Court applied the settled principle that penalty is not ordinarily justified for a technical or venial breach, particularly where the conduct is not contumacious, dishonest, or in conscious disregard of legal obligation. On the facts, the amounts involved were small, the transactions arose in the ordinary course of business or under contractual adjustments, and the record did not show any intent to cause loss of foreign exchange or to defeat the law. The authorities below had also indicated in several instances that the breach was technical, adjustments were made in business dealings, or the amounts had been best efforts at recovery. In those circumstances, imposition of penalty was not warranted.
Conclusion: The penalties imposed for the remaining show-cause notices were unsustainable and the appellant succeeded.
Final Conclusion: The adjudication and appellate orders were set aside in entirety, and the proceedings founded on the subject show-cause notices failed.
Ratio Decidendi: In quasi-criminal foreign exchange adjudication, a materially different charge cannot be substituted without a fresh notice and opportunity, and penalty is not justified for a technical or venial breach committed under a bona fide belief without dishonest intent.
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