Broad foreign exchange prohibition upheld, but penalty reduced after the appellant failed to prove lawful acquisition of seized currency.

Section 8(1) of the Foreign Exchange Regulation Act was read broadly to prohibit acquisition of foreign exchange in India by any person other than an authorised dealer without Reserve Bank permission, so a claim of residence outside India did not take the appellant outside its scope. The appellant also failed to prove lawful acquisition of the seized foreign currency under section 71(3), as the material showed only earnings abroad and did not establish lawful savings brought into India; the factual findings below were not open to interference in an appeal confined to questions of law. The contravention finding was maintained, but the penalty was reduced from Rs. 20,000 to Rs. 5,000, with refund of any excess deposit.

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Issues: (i) whether a person resident outside India was outside the ambit of the prohibition in section 8(1) of the Foreign Exchange Regulation Act, 1973; (ii) whether the appellant had discharged the burden of proving lawful acquisition of the seized foreign currency under section 71(3) of the Foreign Exchange Regulation Act, 1973; and (iii) whether the penalty of Rs. 20,000/- required reduction in the facts of the case.

Issue (i): whether a person resident outside India was outside the ambit of the prohibition in section 8(1) of the Foreign Exchange Regulation Act, 1973.

Analysis: Section 8(1) was read as prohibiting acquisition of foreign exchange in India by any person other than an authorised dealer, subject to permission of the Reserve Bank. The width of the expression used in the provision was treated as extending the prohibition to all persons in India, and not as excluding a person merely because he claimed to be resident outside India.

Conclusion: The contention was rejected and the appellant was held not to be of the scope of section 8(1).

Issue (ii): whether the appellant had discharged the burden of proving lawful acquisition of the seized foreign currency under section 71(3) of the Foreign Exchange Regulation Act, 1973.

Analysis: The documents produced at best showed earnings abroad, but they did not establish that the seized currency represented lawful savings brought into India. The authorities had also found, on circumstantial evidence, that the appellant had not explained how much foreign currency was brought to India and how much remained abroad. Since the appeal lay only on a question of law, the factual appreciation recorded below was not open to interference.

Conclusion: The appellant failed to discharge the burden under section 71(3), and the finding of contravention was maintained.

Issue (iii): whether the penalty of Rs. 20,000/- required reduction in the facts of the case.

Analysis: The Court treated the default as one affecting penalty discretion rather than liability itself. While ignorance of law was no excuse, it was considered relevant to the extent of penalty. In view of the minimum penalty provision and the confiscation already ordered, the ends of justice were held to be met by a lower penalty.

Conclusion: The penalty was reduced to Rs. 5,000/-.

Final Conclusion: The liability finding was sustained, but the monetary penalty was substantially reduced, with consequential refund of the excess amount already deposited, if any.

Ratio Decidendi: In an appeal confined to questions of law under section 54 of the Foreign Exchange Regulation Act, 1973, factual findings on possession and lawful acquisition of foreign exchange will not ordinarily be disturbed, but the quantum of penalty may be interfered with if the discretion has not been appropriately exercised.

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