Foreign exchange confiscation needs substantive contravention; mere form-based lapses and ultra vires surrender orders cannot stand.

A direction under section 33(2) of the Foreign Exchange Regulation Act, 1973 that effectively compelled surrender of identified money was beyond the limited power to call for information, and it was invalid because no show-cause notice or hearing was given before the order. The Court also held that adjudication could not rest on a mere technical lapse where A-2 and F.T.S. forms were signed by employees rather than passengers; absent any showing of defalcation or substantive misuse of foreign exchange, no contravention warranting confiscatory action was made out. Both impugned orders were set aside and relief was granted.

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Issues: (i) Whether the order requiring surrender of the petitioner's money, though purportedly made under section 33(2) of the Foreign Exchange Regulation Act, 1973, was within jurisdiction and valid; (ii) Whether the adjudication and confiscation order based on signed-by-employee A-2 and F.T.S. forms disclosed a contravention warranting proceedings under the Act.

Issue (i): Whether the order requiring surrender of the petitioner's money, though purportedly made under section 33(2) of the Foreign Exchange Regulation Act, 1973, was within jurisdiction and valid.

Analysis: Section 33(2) authorised calling for books, documents, or information. The impugned direction, however, did not merely seek information but required payment over of an identified amount on the footing that it was liable to confiscation. The amount belonged to the petitioner, yet no show cause notice was issued to him and he was not heard before the order was made. The direction therefore travelled beyond the limited power under section 33(2) and also violated natural justice.

Conclusion: The order was ultra vires and invalid, and the petitioner was entitled to relief in respect of the amount recovered under it.

Issue (ii): Whether the adjudication and confiscation order based on signed-by-employee A-2 and F.T.S. forms disclosed a contravention warranting proceedings under the Act.

Analysis: The finding against the petitioner rested essentially on the fact that the A-2 and F.T.S. forms were signed by employees or representatives rather than by the passengers themselves. The record did not show any defalcation of foreign exchange or any misuse of the amount intended for the passengers. The Court treated the alleged lapse as one of form and not of substance, held that not every departure from Reserve Bank directions attracts penal or confiscatory action, and emphasised that adjudication under the Act is quasi-criminal and requires a substantive infringement. In these circumstances, the contravention found under sections 6(4) and 6(5) read with section 49 could not be sustained.

Conclusion: The adjudication and confiscation order was unsustainable and had to be quashed.

Final Conclusion: Both impugned orders were set aside, the petitioner succeeded in obtaining refund with interest, and the challenge to the availability of writ relief on the ground of alternate remedy was rejected.

Ratio Decidendi: A direction that effectively compels surrender of property on the footing of confiscability cannot be justified as a mere information-gathering power, and in foreign exchange adjudication only a substantive contravention, not a technical lapse of form, can sustain confiscatory action.

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