Bona fide conduct and mens rea under FERA limit liability despite the statutory presumption of culpable mental state

Bona fide conduct and the absence of mens rea are treated as central to liability under the Foreign Exchange Regulation Act, 1973, even where a statutory presumption of culpable mental state exists under section 59. The commentary also notes a separate argument on the exception in section 9(2)(b) for payments linked to salary or services not arising from business or acts done in India, but records that this plea was not clearly adjudicated by the authorities below. The stated ratio is that, where the conduct is accepted as bona fide, a charge under the Act cannot be sustained without proof of the requisite culpable mental state.

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Issues: (i) whether the appellant's case fell within the exception under section 9(2)(b) of the Foreign Exchange Regulation Act, 1973 so as to exclude contravention for transfer of foreign exchange without permission; (ii) whether, in view of the finding that the appellant's conduct was bona fide, liability could still be sustained in the absence of mens rea under section 59 of the Foreign Exchange Regulation Act, 1973.

Issue (i): whether the appellant's case fell within the exception under section 9(2)(b) of the Foreign Exchange Regulation Act, 1973 so as to exclude contravention for transfer of foreign exchange without permission.

Analysis: The appellant relied on the statutory exception permitting the making of payment with foreign exchange received by way of salary or payment for services not arising from any business in, or anything done while in India. The materials showed that this plea had been raised in reply to the notice, but no clear finding had been recorded by the authorities below on whether the appellant's pension-linked foreign exchange transactions came within that exception.

Conclusion: The exception plea was not adjudicated by the authorities below and did not form the basis of the final finding.

Issue (ii): whether, in view of the finding that the appellant's conduct was bona fide, liability could still be sustained in the absence of mens rea under section 59 of the Foreign Exchange Regulation Act, 1973.

Analysis: The statutory presumption of culpable mental state under section 59 was considered alongside the finding that the appellant's conduct was undoubtedly bona fide. On that basis, the absence of mens rea was treated as fatal to the charge, because the appellant could not be held guilty where the requisite mental element was not established.

Conclusion: The appellant was not liable to be found guilty in the absence of mens rea.

Final Conclusion: The penalty could not be sustained and the appellant succeeded in the second appeal, with the adverse appellate order set aside.

Ratio Decidendi: Where the adjudicating authority accepts that the conduct is bona fide, a charge under the Foreign Exchange Regulation Act cannot be sustained without proof of the requisite culpable mental state, notwithstanding the statutory presumption.

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