Foreign exchange liability cannot arise from a counterparty's later conduct after a transaction between licensed entities is completed.

Where a foreign exchange transaction is completed between licensed money changers through authorised representatives, liability cannot be fastened for a later irregularity attributable only to the other party after the transaction has ended. The Bombay HC treated the matter as governed by the Supreme Court's interpretation of an identical transaction and held that the same statutory setting, memorandum instructions, and materially similar allegations required the same result. On that basis, the Court found that the adjudicating authority and the Appellate Tribunal had not appreciated the issue correctly, and the penalty orders could not be sustained.

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Issues: Whether the appellants could be held liable for contravention under the foreign exchange laws when the transaction was between licensed money changers and the alleged subsequent irregularity, if any, was attributable to the other side; and whether the impugned adjudication and tribunal orders could survive in view of the Supreme Court decision on the same controversy.

Analysis: The dispute was treated as covered by the Supreme Court's ruling on an identical transaction involving sale of foreign exchange between licensed full fledged money changers. The governing principle applied was that, where the transaction itself was carried out through authorised representatives of licensed entities and the sale and purchase were otherwise undisputed, a violation could not be fastened merely because of what the other concern did after the transaction had concluded. The Court held that the same statutory setting, the same memorandum instructions, and materially identical allegations were involved, and therefore the earlier Supreme Court interpretation bound the present case. On that basis, the adjudication authority and the Appellate Tribunal had failed to appreciate the issue in the proper perspective.

Conclusion: The appellants were not liable to be proceeded against on the facts found, and the impugned orders imposing penalty could not be sustained.

Ratio Decidendi: Where a foreign exchange transaction is concluded between licensed entities through authorised representatives, liability cannot be imposed for an alleged violation arising only from the other party's subsequent conduct after the transaction has ended.

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