Foreign exchange contravention for crediting funds to a non-resident account without Reserve Bank permission

Crediting funds to the account of a person resident outside India without prior Reserve Bank permission constitutes a contravention of Section 9(1)(e) of the Foreign Exchange Regulation Act, 1973. The record showed that the sum was credited to a non-resident account, no permission had been sought, and the parties were expected to verify the recipient's residential status before dealing with the transaction. On that basis, the contravention was treated as established and the penalty was regarded as proportionate and upheld.

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Issues: Whether the appellants contravened Section 9(1)(e) of the Foreign Exchange Regulation Act, 1973 by placing a sum to the credit of a person resident outside India without the permission of the Reserve Bank of India, and whether the penalty imposed was liable to be interfered with.

Analysis: The amount was admittedly credited in the accounts of a person found to be resident outside India. Section 9(1)(e) prohibits placing any sum to the credit of a non-resident without Reserve Bank permission. No effort to obtain such permission was shown. The appellants were expected to ascertain the residential status of the person with whom they were dealing, and the record did not support the plea that the non-resident status was concealed from them. The material on record therefore established the contravention. The penalty was also found proportionate to the nature and quantum of the violation.

Conclusion: The contravention stood proved and the penalty was upheld. The appeals were dismissed.

Ratio Decidendi: Crediting money to the account of a person resident outside India without Reserve Bank permission constitutes a contravention under Section 9(1)(e) of the Foreign Exchange Regulation Act, 1973, and the party dealing with such person must ascertain the residential status before the transaction.

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