Statutory diligence in foreign exchange dealings upheld: authorised dealer liability, abetment, and penalties sustained despite delay and mens rea objections.

Delay, limitation under FEMA/FERA, and procedural objections did not invalidate the adjudication because the notice was issued within time and no acquiescence or waiver was shown. The bank, as an authorised dealer, was required to follow RBI directions and verify that foreign currency deposits in the NRE account complied with the governing conditions; its repeated acceptance of deposits when the account holder was not in India supported breach of statutory duty and abetment. The plea of issue estoppel failed because the earlier matter did not bar the present proceedings. For the individual appellant, mens rea was not a complete defence in this regulatory setting, and the penalties were upheld as not excessive.

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Issues: (i) Whether the proceedings were barred by delay, the sunset clause under FEMA, 1999, or any procedural defect in commencement of adjudication; (ii) Whether the appellant bank could avoid liability on the basis of issue estoppel, absence of negligence amounting to abetment, or the contention that only the Reserve Bank of India could act for the alleged violations; (iii) Whether the individual appellant could escape penalty for lack of mens rea and whether the penalties imposed were unsustainable.

Issue (i): Whether the proceedings were barred by delay, the sunset clause under FEMA, 1999, or any procedural defect in commencement of adjudication

Analysis: The notice initiating adjudication had been issued within the relevant time frame, and the procedural steps under the adjudication rules did not invalidate the commencement of proceedings. The absence of a prescribed period under FERA, 1973 did not make the proceedings invalid merely because there was some lapse of time. The concept of reasonableness had to be judged on the facts, and the record did not show acquiescence or waiver by the authorities.

Conclusion: The objection based on delay and limitation was rejected.

Issue (ii): Whether the appellant bank could avoid liability on the basis of issue estoppel, absence of negligence amounting to abetment, or the contention that only the Reserve Bank of India could act for the alleged violations

Analysis: An authorised dealer was bound by the directions of the Reserve Bank of India and had to satisfy itself that foreign currency deposits in an NRE account complied with the governing conditions. The bank accepted repeated foreign currency deposits when the account holder was not present in India and failed to verify the required conditions. Such conduct amounted to breach of the statutory duty of care and supported the finding of abetment. The plea of issue estoppel was unavailable because the earlier matter did not bar the present adjudication on the same footing, and the statutory scheme under sections 50 and 51 was not displaced by the Reserve Bank's separate penal power.

Conclusion: The bank's liability was upheld and the plea of issue estoppel failed.

Issue (iii): Whether the individual appellant could escape penalty for lack of mens rea and whether the penalties imposed were unsustainable

Analysis: In regulatory contraventions under FERA, 1973, mens rea was not a complete defence in the manner suggested by the appellant. The statute permitted a presumption of mental state, and the evidence showed repeated foreign exchange deposits made contrary to the governing restrictions. The penalties were also not shown to be excessive in relation to the contravention involved.

Conclusion: The individual appellant's challenge to guilt and penalty was rejected.

Final Conclusion: The adjudication orders were sustained, and all the appeals failed on merits.

Ratio Decidendi: An authorised dealer must exercise statutory diligence and comply with RBI directions when handling foreign exchange transactions, and repeated acceptance of prohibited deposits can amount to contravention and abetment under FERA, 1973; delay or absence of proved mens rea will not, by itself, defeat such regulatory proceedings.

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