FERA contravention under receipt and payment provisions requires knowledge, non-resident linkage, and unlawful receipt; RBI permission matters.

Contravention of section 9(1)(b) of FERA was said to require proof that money was received by or on behalf of a non-resident without corresponding inward remittance, together with knowledge of the essential facts making the receipt prohibited; bare receipt was insufficient. On the stated facts, inward remittance material, NRE withdrawals and bona fide belief in lawful receipt supported the appellants, and the related charge was unsustainable. Payments made from amounts lawfully received and covered by RBI general permission did not attract section 9(1)(d). Amounts earned by the second appellant for renovation work, recorded in his books and tax returns, were not receipts on behalf of a non-resident and did not fall within section 9(1)(b).

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Issues: (i) whether receipt of money could constitute contravention of section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 in the absence of proof of lack of corresponding inward remittance and requisite knowledge; (ii) whether payment made to the contractor could attract section 9(1)(d) where the payment was out of amounts otherwise lawfully received and covered by the Reserve Bank of India general permission; (iii) whether the second appellant received the amounts by order or on behalf of a non-resident so as to attract section 9(1)(b).

Issue (i): whether receipt of money could constitute contravention of section 9(1)(b) of the Foreign Exchange Regulation Act, 1973 in the absence of proof of lack of corresponding inward remittance and requisite knowledge.

Analysis: The provision was held to require more than a bare receipt of money. A contravention arises only where the payment is received by order or on behalf of a person resident outside India without a corresponding inward remittance, and the recipient has knowledge of the essential facts giving rise to the prohibited receipt. On the facts, the record showed inward remittance material, regular NRE withdrawals, and circumstances indicating bona fide belief that the amounts were lawfully provided. The department did not examine the source from whom the amounts were said to have been obtained, and the recipient was entitled to the benefit of doubt.

Conclusion: The finding of contravention under section 9(1)(b) against the first appellant was unsustainable and was set aside.

Issue (ii): whether payment made to the contractor could attract section 9(1)(d) where the payment was out of amounts otherwise lawfully received and covered by the Reserve Bank of India general permission.

Analysis: The payments to the contractor were traced to amounts received in connection with the renovation work, and the impugned amount under the charge was held to be within the portion not shown to be in violation of section 9(1)(b). Since the payment was made from amounts duly received, it fell within the general permission granted by the Reserve Bank of India under Notification No. FERA-6/74-RB dated 01-01-1974.

Conclusion: The finding of contravention under section 9(1)(d) against the first appellant was not sustainable.

Issue (iii): whether the second appellant received the amounts by order or on behalf of a non-resident so as to attract section 9(1)(b).

Analysis: The receipts by the second appellant were found to be his own business earnings for renovation work undertaken by him on a commercial basis and were duly accounted for in his books and income-tax returns. On those facts, the amounts could not be characterised as receipts by order or on behalf of Abdul Samad, and section 9(1)(b) was inapplicable.

Conclusion: The charge under section 9(1)(b) against the second appellant was not made out.

Final Conclusion: The impugned adjudication was set aside in its entirety and the appellants were relieved of the penalties imposed, with refund of the amounts deposited towards penalty.

Ratio Decidendi: A contravention of section 9(1)(b) requires proof that the recipient knew the payment was made by or on behalf of a non-resident without corresponding inward remittance, and payments made from lawfully received funds covered by reserve bank permission do not attract section 9(1)(d).

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