Technical breach of foreign exchange procedure was held insufficient to justify confiscation and penalty, while the remaining order was preserved.

Mere technical breach of procedural requirements, without any finding of misappropriation, undue advantage, or substantive contravention, was held insufficient to treat the petitioners as abettors of the Bank's foreign exchange breach or to sustain confiscation and penalty. The Bombay HC set aside the confiscation and penalty against the petitioners, but upheld the remainder of the adjudication order because the challenge was confined to their liability and the other findings were not required to be disturbed. The Court also held that the Single Judge's direction awarding interest was unwarranted and deleted it.

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Issues: (i) Whether the petitioners could be held liable for aiding or abetting the Bank's contravention so as to justify confiscation of Rs. 17,00,057/- and penalty of Rs. 60,000/-; (ii) Whether the adjudication order could be sustained in part and whether the interest directed by the Single Judge was liable to be set aside.

Issue (i): Whether the petitioners could be held liable for aiding or abetting the Bank's contravention so as to justify confiscation of Rs. 17,00,057/- and penalty of Rs. 60,000/-.

Analysis: The adjudication showed that the foreign exchange had been purchased against forms processed for Haj passengers and that the amounts had been paid to the Bank and distributed to the passengers. There was no finding of misappropriation, no finding that the petitioners derived any undue advantage, and no material showing that the passengers did not receive the foreign exchange. The signing of forms by employees on behalf of passengers, in the circumstances of large Haj groups and limited time, was treated as at most a technical irregularity or breach of formality. On that footing, the Court held that every breach of a rule or form does not amount to a substantive contravention attracting confiscation, and that the petitioners could not be treated as abettors of the Bank's contravention.

Conclusion: The confiscation of Rs. 17,00,057/- and the penalty of Rs. 60,000/- were not sustainable and were set aside in favour of the assessee.

Issue (ii): Whether the adjudication order could be sustained in part and whether the interest directed by the Single Judge was liable to be set aside.

Analysis: The adjudication order covered multiple parties and multiple consequences. The Court held that the Single Judge erred in setting aside the entire order, because the challenge before the Court was confined to the petitioners' liability and the remaining findings against the Bank and others were not required to be disturbed. The Court also accepted that the direction for 12% interest was unwarranted, particularly where the Department had established at least a technical breach of the procedural requirements.

Conclusion: The rest of the adjudication order was sustained, and the direction granting 12% interest was set aside.

Final Conclusion: The appeal succeeded only to a limited extent: the confiscation and penalty imposed on the petitioners were quashed, but the balance of the adjudication order was maintained and the interest awarded by the Single Judge was deleted.

Ratio Decidendi: Mere technical breach of procedural requirements does not, any finding of misappropriation, undue advantage, or substantive contravention, justify confiscation or penalty for aiding and abetting under the foreign exchange law.

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