Export of Indian currency in cash to Bhutan breached exchange controls, but absolute confiscation was replaced by redemption fine.

A permission for rupee transactions with Bhutan did not authorise taking Indian currency notes out of India in cash beyond the prescribed export limit; the cash carriage to Bhutan was therefore contrary to the foreign exchange restrictions. However, because the currency was linked to a claimed bona fide business transaction, absolute confiscation was treated as excessive and was replaced with an option to redeem the currency on payment of fine. The note thus states that the legal violation was upheld, but the penalty was moderated in view of the commercial context.

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Issues: (i) Whether carrying Indian currency in cash from India to Bhutan in the circumstances of the case violated the foreign exchange restrictions and notification governing export of currency notes. (ii) Whether absolute confiscation of the currency was justified or whether redemption on payment of fine ought to be allowed.

Issue (i): Whether carrying Indian currency in cash from India to Bhutan in the circumstances of the case violated the foreign exchange restrictions and notification governing export of currency notes.

Analysis: The relevant provisions were read as permitting Indian rupee transactions with Bhutanese residents in the course of trade, but not as authorising carriage of currency notes out of India beyond the prescribed limit. The notification under the foreign exchange law specifically restricted taking Indian currency notes outside India to a small amount per person, with a limited exception for Nepal. On that construction, movement of a larger amount of Indian currency to Bhutan in cash was held to be contrary to the legal restrictions.

Conclusion: The cash carriage of Indian currency beyond the permitted limit to Bhutan was held to be in violation of the foreign exchange restrictions.

Issue (ii): Whether absolute confiscation of the currency was justified or whether redemption on payment of fine ought to be allowed.

Analysis: The authorities accepted that the currency was being taken in connection with a claimed business transaction with Bhutanese nationals. In those circumstances, complete forfeiture was considered excessive, and the case was treated as one warranting a less drastic consequence than absolute confiscation.

Conclusion: Absolute confiscation was set aside and an option to redeem the currency on payment of redemption fine was allowed.

Final Conclusion: The legal violation was upheld, but the penalty consequence was moderated by substituting absolute confiscation with redemption on payment of fine.

Ratio Decidendi: A statutory permission for rupee transactions with a neighbouring country does not by itself authorise export of Indian currency notes in cash beyond the prescribed limit, and where the surrounding circumstances show a bona fide business context, absolute confiscation may be replaced by redemption on fine.

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