Territorial reach of exchange-control law upheld for foreign bank accounts routed through Indian channels, with abetment sustained and penalties reduced.

A foreign bank operating non-resident rupee accounts through Indian banking channels fell within the territorial reach of exchange-control law because the impugned credits produced effects in India and were routed through arrangements in India; the jurisdiction objection therefore failed. Repeated credits, the bank's own telex instructions, and surrounding correspondence were sufficient to infer instigation and intentional aid, so abetment was upheld against the bank and its former chief executive officer, and the natural justice challenge based on non-supply of documents was rejected on the record relied upon. The Tribunal found the penalties disproportionate and reduced them accordingly.

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Issues: (i) Whether the Foreign Exchange Regulation Act, 1973 applied to the appellant bank and whether the adjudicating authority had jurisdiction over the impugned transactions; (ii) whether the appellant bank and its former chief executive officer were liable for abetment of the contraventions under the Act and whether the evidentiary challenge based on non-supply of documents succeeded; (iii) whether the penalties imposed were excessive and required reduction.

Issue (i): Whether the Foreign Exchange Regulation Act, 1973 applied to the appellant bank and whether the adjudicating authority had jurisdiction over the impugned transactions.

Analysis: The transactions concerned credits into the appellant bank's non-resident convertible rupee accounts maintained with banks in India, which enabled foreign exchange payments outside India and were effected through banking arrangements in India. The statutory scheme, including the territorial reach of the Act and the exchange-control framework, brought such transactions within the regulatory sweep of the Indian law. The fact that the appellant was a foreign bank did not exclude applicability where the impugned acts produced their effect in India and the account operations were carried out through Indian banking channels.

Conclusion: The jurisdiction objection failed and the Act was held applicable against the appellant bank.

Issue (ii): Whether the appellant bank and its former chief executive officer were liable for abetment of the contraventions under the Act and whether the evidentiary challenge based on non-supply of documents succeeded.

Analysis: The adjudicating authority relied on the repeated credits, the appellant bank's own telex instructions, and the surrounding correspondence to infer instigation and intentional facilitation of the unlawful credits. The principle of abetment was taken from the statutory offence provision read with the settled meaning of instigation and intentional aid. The challenge based on natural justice was rejected in substance because the telex originated from the appellant bank, while the meeting minutes and related material were treated as part of the relied-upon record showing the bank's awareness of the transactions. The burden regarding absence of culpable mental state was not discharged.

Conclusion: The finding of abetment was upheld against the appellant bank and the liability of the former chief executive officer was also sustained.

Issue (iii): Whether the penalties imposed were excessive and required reduction.

Analysis: Although the contraventions were sustained, the original penalties were found to be disproportionately high in the circumstances. The Tribunal considered the nature of the charge, the factual matrix, and the ends of justice, and reduced the monetary consequences accordingly.

Conclusion: The penalty on the appellant bank and the former chief executive officer was reduced.

Final Conclusion: The appeal arising from the later order was dismissed, while the appeals challenging the earlier order succeeded only to the extent of reduction of penalty, with the substantive findings on jurisdiction and contravention maintained.

Ratio Decidendi: A foreign bank maintaining and operating non-resident rupee accounts through Indian banking channels can fall within the territorial reach of exchange-control law where its instructions instigate or facilitate contraventions in India, and repeated conduct supported by surrounding correspondence may establish abetment even in the absence of direct physical presence in India.

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