Foreign exchange contravention requires proof of knowledge and receipt for non-resident persons; penalty failed for lack of evidence.

Penalty under the Foreign Exchange Regulation Act could not be sustained where the record did not show that the appellant knew, at the time of receiving the amount, that the relevant directors were resident outside India. A later statement by the appellant was insufficient to prove earlier knowledge, and the adverse inference drawn from non-production of an agreement was not enough to replace proof of contravention. In the absence of evidence establishing receipt of payment on behalf of persons resident outside India in violation of the statute, the finding rested on inference and conjecture rather than proved facts, and the penalty was therefore unsustainable.

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Issues: Whether the appellant had received payment on behalf of persons resident outside India in contravention of Section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 so as to justify the penalty imposed.

Analysis: The material on record did not establish that, on the date of receipt of the amount, the appellant knew that the two directors were resident outside India. The later statement recorded from the appellant could not by itself prove such knowledge at the earlier point of time when the receipts were issued. The Tribunal also drew an adverse inference from non-production of an agreement, although the appellant's case was that no such agreement had been entered into beyond issuance of receipts for token money. In the absence of evidence to the contrary, the finding of contravention was based on inference and conjecture rather than proved facts.

Conclusion: The finding of violation was unsustainable and the penalty could not be upheld.

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