Foreign exchange contravention upheld, but penalty reduced sharply as the Tribunal found the sanction disproportionate.

Possession and dealing in foreign currency without prior or special RBI permission was treated as sufficient to establish contravention of sections 8(1) and 8(2) of the Foreign Exchange Regulation Act, 1973, and that finding was upheld. The Tribunal, however, held that the penalty imposed was excessive in light of the proved facts and the currency value involved, and reduced the penalty from Rs. 80 lakhs to Rs. 8 lakhs on each appellant. The result was affirmation of liability with substantial reduction of the punitive amount.

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Issues: (i) whether the appellants had contravened section 8(1) and section 8(2) of the Foreign Exchange Regulation Act, 1973 in relation to the seized foreign currency; and (ii) whether the penalty of Rs. 80 lakhs on each appellant was excessive and required reduction.

Issue (i): whether the appellants had contravened section 8(1) and section 8(2) of the Foreign Exchange Regulation Act, 1973 in relation to the seized foreign currency.

Analysis: The statements of the appellants and the seized documents were treated as sufficient material to show possession and dealing in foreign currency without the prior or special permission of the Reserve Bank of India. The later attempt to shift responsibility was not accepted, as the record showed admission of recovery of foreign exchange and involvement in its sale and purchase.

Conclusion: The finding of contravention under section 8(1) and section 8(2) of the Foreign Exchange Regulation Act, 1973 was upheld against the appellants.

Issue (ii): whether the penalty of Rs. 80 lakhs on each appellant was excessive and required reduction.

Analysis: Although the contravention was sustained, the Tribunal found the quantum of penalty to be excessive in the circumstances, particularly having regard to the value of the foreign currency involved and the material on record. The penalty was therefore rationalised to bring it in line with the facts proved.

Conclusion: The penalty of Rs. 80 lakhs on each appellant was reduced to Rs. 8 lakhs on each appellant.

Final Conclusion: The adjudication on contravention was maintained, but the punitive amount was substantially scaled down, resulting in a partial success for the appellants.

Ratio Decidendi: Where contravention of foreign exchange law is established on admitted possession and supporting documents, the finding may be sustained, but the penalty must remain proportionate to the proved misconduct and may be reduced if found excessive.

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