Foreign exchange compliance breach: penalty upheld where RBI conditions were violated despite lack of mens rea.

Contravention of binding RBI conditions for sale of foreign exchange was established where a full-fledged money changer released foreign exchange and travellers cheques without passenger applications, identification, or proper documentation. Internal generation of BTQ applications, register entries, and passport endorsements did not cure the breach, because the regulatory requirements were not satisfied before release. The attempted defence that the currency remained in custody also failed, as preparation and attempt to contravene were themselves punishable under the foreign exchange regime. Liability arose on proof of statutory breach, and absence of mens rea did not defeat penalty where the scheme imposed a regulatory obligation and did not make intent an ingredient.

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Issues: Whether the appellant contravened the Foreign Exchange Regulation Act by releasing foreign exchange and travellers cheques without personal application, identification and proper documentation, and whether the penalty imposed for such contravention was sustainable.

Analysis: The appellant, a full-fledged money changer, released foreign exchange in cash and travellers cheques without obtaining applications from the passengers and without identifying them as required by the RBI conditions governing sale of foreign exchange. The record showed that BTQ applications were generated internally, entries were made in the daily register, and passport endorsements were made without the passengers' prior applications or signatures. These facts established breach of the binding directions and conditions attached to the authorisation. The attempted defence that the foreign exchange remained in custody and had not been finally handed over did not assist the appellant, because preparation and attempt to contravene were themselves punishable under the Act. The statutory scheme imposed a regulatory obligation to exercise due care and caution, and the absence of mens rea did not negate liability where the contravention of the statutory obligation stood proved.

Conclusion: The contravention was proved and the penalty was rightly imposed.

Final Conclusion: The appeal failed on merits and the adjudication order sustaining the penalty was maintained.

Ratio Decidendi: In proceedings under a regulatory foreign exchange statute, proof of contravention of binding RBI conditions is sufficient to attract penalty, and mens rea is not required unless the statute expressly makes it an ingredient of liability.

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