Authorised employees and lack of proof of unauthorised sale defeated foreign exchange contravention and confiscation

A licensed full-fledged money changer does not contravene foreign exchange law or licence conditions by entrusting foreign exchange and travellers cheques to duly authorised employees, where those employees were forwarded to RBI as authorised signatories and no specific breached condition was identified. On the alleged attempted unauthorised sale, the record contained no cogent evidence of an actual or intended illegal sale, and mere possession of discharged or countersigned travellers cheques was insufficient. The findings of contravention, penalty and confiscation were therefore unsustainable, and the impugned order was set aside.

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Issues: (i) Whether the handing over of foreign exchange and travellers cheques by a licensed full-fledged money changer to its duly authorised employees amounted to contravention of the Foreign Exchange Regulation Act, 1973 and the licence conditions. (ii) Whether the material on record was sufficient to sustain the finding of attempted unauthorised sale, penalty and confiscation.

Issue (i): Whether the handing over of foreign exchange and travellers cheques by a licensed full-fledged money changer to its duly authorised employees amounted to contravention of the Foreign Exchange Regulation Act, 1973 and the licence conditions.

Analysis: The names of the employees had been duly forwarded to the Reserve Bank of India as authorised signatories. The governing instructions permitted money changers to transact business through such authorised representatives, and therefore entrusting foreign exchange to those employees in connection with the business of the money changer could not be treated as a prohibited transfer. The finding that the appellants had violated the licence conditions was unsupported because the specific conditions allegedly breached were neither identified nor shown to have been contravened.

Conclusion: The alleged contravention on this aspect was not made out and the finding was unsustainable.

Issue (ii): Whether the material on record was sufficient to sustain the finding of attempted unauthorised sale, penalty and confiscation.

Analysis: The record did not contain cogent evidence of any actual or attempted unauthorised sale. The circumstances relied upon were held to be incomplete and the inferences drawn were regarded as speculative. The explanation regarding the travellers cheques was found plausible, and mere possession of discharged or countersigned travellers cheques did not establish intended illegal sale. Since the foundation for the contravention failed, the consequential confiscation also could not stand.

Conclusion: The attempt charge, penalty and confiscation were not sustainable.

Final Conclusion: The impugned order was set aside and relief was granted to the appellants on the merits of the alleged foreign exchange contraventions.

Ratio Decidendi: Where foreign exchange is entrusted by a licensed money changer to duly authorised employees in the course of business, and the record does not establish with cogent evidence an unauthorised sale or attempt thereof, contravention and consequential confiscation cannot be sustained on conjecture alone.

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