Unauthorised foreign-exchange dealings and notice validity under FERA were upheld despite the appellant's authorised-dealer employment.

Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 were upheld as a valid basis for proceedings where the alleged conduct was treated as independent unauthorised foreign-exchange dealing, even though the appellant was employed by an authorised dealer. The absence of prescribed encashment certificates could be used as a circumstance to reject the appellant's explanation for the seized cash and foreign currency, without amounting to a separate unpled charge. The contention that any omission should have been dealt with only under Section 6(4) was also rejected, and the penalty order as affirmed in appeal remained undisturbed.

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Issues: (i) Whether a show-cause notice issued under Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 was invalid because the appellant was employed with an authorised dealer; (ii) whether penalty could be sustained on the basis that foreign currency was converted from incoming passengers without the prescribed format or encashment certificate when that specific allegation was not set out in the notice; (iii) whether any omission to issue encashment certificates attracted Section 6(4) of the Foreign Exchange Regulation Act, 1973 instead of Sections 8(1) and 8(2).

Issue (i): Whether a show-cause notice issued under Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973 was invalid because the appellant was employed with an authorised dealer.

Analysis: Section 6 concerns authorised dealers, whereas Section 8 prohibits dealing in foreign exchange by persons acting outside that regulated framework. The allegation was that the appellant used his own money to purchase foreign currency for personal gain, and that conduct was treated as independent of the bank's authorised-dealer functions. On that footing, the notice under Sections 8(1) and 8(2) was held not to be inherently illegal merely because the appellant was an employee of an authorised dealer.

Conclusion: The challenge to the notice on the ground of authorised-dealer status failed.

Issue (ii): Whether penalty could be sustained on the basis that foreign currency was converted from incoming passengers without the prescribed format or encashment certificate when that specific allegation was not set out in the notice.

Analysis: The absence of encashment certificates was treated as a circumstance used to test the credibility of the appellant's explanation for the cash and foreign currency found in his possession, not as an independent basis for punishment. The decisive question was whether the explanation for tallying the seized amounts with the bank accounts could be accepted. Since the absence of certificates went only to the rejection of that explanation, the penalty was not found to rest on a wholly new charge outside the notice.

Conclusion: The penalty was not vitiated on this ground.

Issue (iii): Whether any omission to issue encashment certificates attracted Section 6(4) of the Foreign Exchange Regulation Act, 1973 instead of Sections 8(1) and 8(2).

Analysis: The reasoning proceeded on the distinction between violations by an authorised dealer of licensing conditions or directions, and contraventions consisting of unauthorised dealing in foreign exchange. The Court held that the adjudication did not proceed on a separate charge of breach of RBI directions so as to compel invocation of Section 6(4), and the proceedings under Sections 8(1) and 8(2) were maintained.

Conclusion: The contention that only Section 6(4) applied was rejected.

Final Conclusion: The appeal was held to be without merit, and the penalty order as affirmed in appeal was left undisturbed.

Ratio Decidendi: A show-cause notice is not invalid merely because the notice is framed under provisions prohibiting unauthorised foreign-exchange dealings, if the alleged conduct is treated as an independent contravention of that regime, and a circumstance relied on to reject the explanation need not itself constitute a separate charge in the notice.

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