TaxTMI 
TaxTMI 
2008 (6) TMI 649
X X X X Extracts X X X X
X X X X Extracts X X X X
....,000 each against appellant P. Basu, Manager (in brief 'fourth appellant') and appellant Sukumar Mukherjee, Branch Manager (in brief 'fifth appellant'), for contravention of sections 6(4), 6(5), 7, 8(1), 49, 73(3) and 68 of Foreign Exchange Regulation Act, 1973, along with Para 11 of the Memorandum of Instructions of FLM issued by RBI, on the reason that the appellants, without due care and attention, sold foreign currency of US dollars 2,98,500 to fake passengers sponsored by fourteen fake companies/firms. While disposing off the application for dispensation of pre-deposit, this Tribunal by order dated 10-2-2006 rejected all the applications but allowed the appellants to deposit their respective penalty within 30 days from that date. The appellant successfully challenged this pre-deposit order dated 10-2-2006 before Calcutta High Court where pre-deposit order of this Tribunal is modified for furnishing of bank guarantee of (1) 20 per cent penalty by the appellant-company and (2) 15 per cent penalty by other appellants. According to the Counsel for the appellants, this order of Calcutta High Court is complied with. Presently, this appeal is taken up for final disposal on merits. 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urrency projecting their impending foreign business tour but all these sponsored persons are not traceable. From the chart given in Para 4 above, it becomes clear from a cursory glance that the same man is sponsored under Entry 2 and Entry 12 within a span of one month period but by two different firms. Here, the difference of days of proposed foreign two travels is also only of a month. Similarly, same person's name figure in Entry 3 and Entry 4 with a difference of travel days of a month. Again this is repeated in Entry 5 and Entry 6 where not only the travel day but the firm's name is also same. The description in Entry 7 and Entry 8 or Entry 13 and Entry 14 has again projected a question that how same firm is sponsoring two different names within almost a period of one month only. These factual situations are glaring in their nature and how could not invite due care and attention of the appellants will require further scrutiny. 6. Ld. Counsel Shri S.C. Ghosh has given written submissions where arguments are recorded with elaboration giving each argument a Serial No. and in total 12 seriatum numbers are given to these arguments contained in written submissions. These arguments ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct is applicable. 9. The language employed by section 49(4) of FEM Act, 1999, clearly stipulates that all offences committed under the repealed Act shall continue to be governed by the provisions of the repealed Act as if that Act has not been repealed. It is clearly available on the scene that adjudication order is passed under FER Act, 1973, because section 49(3) of FEM Act, 1999, permits taking cognizance of contravention of FER Act, 1973, within period of 2 years, i.e., up till 31-5-2002. 10. This right to appeal is a creature of statute. There is no inherent right of appeal unless given by statute whose provisions apply to an appeal. The Hon'ble Supreme Court in Om Prakash Batish v. Ranjit alias Ranbir Kaur AIR 2008 SC 2143 para 14 has observed as follows :-- "The right to file an appeal is a statutory right. The Parliament may not provide such a right at all. The right to file an appeal can be hedged with conditions. A limited right can also be conferred." (p. 2145) 11. It is well-settled in law that whenever law is altered during the pendency of any action or remedy the rights of the parties are decided according to law as it existed when the action began unle....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sions of the repealed Act which are thus re-enacted continue in force uninterruptedly unless the re-enacted enactment manifests an intention in compatible with or contrary to the provisions of the repealed Act. Such incompatibility will have to be ascertained from a consideration of the relevant provisions of the re-enacted enactment and the mere absence of saving clause is, by itself, not material for consideration of all the relevant provisions of the new enactment. In other words, a clear legislative intention of the reenacted enactment has to be inferred and gathered whether it intended to preserve all the rights and liabilities of a repealed statute intact or modify or to obliterate them altogether." (p. 373) 14. It is well-settled in law that the legal proceedings validity instituted are not effected by amended law though insofar as forum is concerned, the substituted forum shall automatically apply. In Purshotam Singh v. Narain Singh AIR 1955 Raj. 203, it was observed by Chief Justice Wanchoo (as his Lordship then was) that :-- "Section 6(e) has nothing to do with the forum where the investigation, legal proceeding or remedy has to be pursued. If the repealing A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....form one single class of appeals. Hence, a single set of legal provisions of FER Act, 1973, will apply for adjudication of all such appeals. The procedural law, including law of limitation, which is in built in the repealed statute, is required to be adhered to as provided in FER Act, 1973. 17. Though Foreign Exchange Regulation Act, 1973, admittedly gone out of the statute with effect from 1-6-2000 but section 49(3) of Foreign Exchange Management Act, 1999, talks about adjudication of the contraventions by adjudicating officer which takes place when repeal Act was in operation if cognizance is taken within a period of two years. Further, section 49(4) of Foreign Exchange Management Act, 1999, has saved the provisions of repealed Act so far as contravention committed of those provisions is concerned. In this situation it implicitly flows that adjudicating officer will take notice of the contravention and adjudicate the matter. From these provisions, it also flows that adjudicating officer will be in place but than the question arise that how without ample powers in favour of the Central Government. There is a presumption that the Legislature knows all the implications contained in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hopadhaya as adjudicating officer. Ld. Counsel has not brought out any prejudice caused to the appellants in this regard. Therefore, this argument is liable to be rejected having no force. 20. Another ground taken on behalf of the appellant is that investigation started much after repeal of Foreign Exchange Regulation Act, 1973. According to Ld. Counsel Shri S.C. Ghosh, investigation by itself is wrongly conducted because the RBI intimated Enforcement Directorate for further investigation of the matter by letter dated 1-8-2000 which is the date on which Foreign Exchange Management Act, 1999, was in operation and Foreign Exchange Regulation Act, 1973, is no more in force. This argument also is neither correct nor acceptable. As discussed while dealing with first ground above, the provisions of section 49(4) of FEM Act, 1999, clearly indicate that offences committed under Repealed Act shall continue to be governed under the provisions of Repealed Act, 1973. Secondly, even if it is accepted for the sake of argument that investigations are not legally permissible, this argument hardly benefit the appellants. It is well established that illegality of search and seizure by itself (inclu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are applicable, apply in relation to a money-changer as they apply in relation to an authorized dealer. Explanation.--In this section, 'foreign currency' means foreign currency in the firm of notes, coins, or traveller's cheques and 'dealing' means purchasing foreign currency in the form of notes, coins or traveller's cheques or selling foreign currency in the form of notes or coins." 23. The appellants have been granted a licence to act as FLM under the provisions of section 7 where by method of drafting by incorporation under sub-section (4) the provisions of sections 6 (4) and (5) of FER Act, 1973 are made applicable. In the authorization of license itself it is inherent and implicit that appellants shall act with due care and caution. This legal duty casts an obligation on the appellants to act in good faith. Though the words 'good faith' is not found either in the statute or the Instructions of FLM or ECM but this is implicit in the licence/authorization. Every licensee of a premises has to act in good faith and cannot permit a trespasser to encroach upon the site under his control and say that license agreement does not imbibe this legal duty. Further sub-section (4) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not cast a duty on appellants to act cautiously as a reasonable man should do while making sale and purchase of foreign currency. The defalcation by a fraudster is required to be detected and curbed as per the standard envisaged for a reasonable person. The foreign currency reserve of the country cannot be lost in the way a fraudster manages and manipulates to cause harm without active role played by a FLM to catch the defalcation. 26. Though licence/authorization under section 7 of appellants is still available and renewed from time to time as argued by Ld. counsel Shri S.C. Ghosh but this fact by itself cannot wipe out the contravention, if any of the provisions of the statute. The RBI enjoys grant of power by the Parliament to permit authorization who can also revoke the authorization either under general power as a commitment of grant under General Clauses Act or under the specific power available under section 6(3) of the statute. It is factually correct here to say that violation of conditions of authorization can lead to revocation of authorization but any revocation or renewal of authorization cannot be construed to wipe out a contravention if otherwise proved of the sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... only because of harsh consequences arise therefrom. . . ." (p. 588) 30. The above rules of interpretation raises a big question mark against the correctness of the contention of Ld. Counsel Shri S.C. Ghosh where he has argued that section 8 of FER Act, 1973 does not include the money changer but is only restricted to other persons. The relevant part of section 8 of FER Act, 1973, reads as under :-- "8. Restrictions on dealing in foreign exchange.--(1) Except with the previous general or special permission of the Reserve Bank, no person other than an authorized dealer shall in India, and no person resident in India other than an authorized dealer shall outside India, purchase or otherwise acquire or borrow from, or sell, or otherwise transfer or lend to or exchange with, any person not being an authorized dealer, any foreign exchange : Provided that nothing in this sub-section shall apply to any purchase or sale of foreign currency effected in India between any person and a money-changer. Explanation.--For the purposes of this sub-section, a person, who, deposits foreign exchange with another person or opens an account in foreign exchange with another person, shall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t;. By these provisions, reference is clearly made to section 8. In case it is found that appellants failed to comply with the conditions of authorization, they shall be deemed to have contravened sections of the FER Act under which they are permitted to acquire or sell or transfer foreign currency. The allegations are that these appellants have contravened section 8(1) which becomes absolutely clear when interpretation clause under section 49 is applied to authorization granted by RBI. 34. Next argument is about issuance of show-cause notice on 31-5-2002 which is the last date available under FER Act, 1973 where after 2 years sun set period ends up. It is contended that SCN is ante-dated but this contention is nothing but bald assertion without any basis. The show-cause notice was issued on 31-5-2006 within two years from the date of repeal of Foreign Exchange Regulation Act, 1973, as provided by sub-section (3) of section 49 of Foreign Exchange Management Act, 1999. In that situation, we do not agree to the other contentions of the Ld. Counsel that violations are wrongly dealt with under Foreign Exchange Regulations Act, 1973. The launching of prosecution under Foreign Exchange ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....license under the statute. The words to the effect that licensee shall act reasonably so as not to lead to contravention of statute are found incorporated in section 6(5) which by themselves create a duty to act in good faith. Also the implicit duty residing with the licensee, as discussed above conveys nothing less than good faith. Though, the word "good faith" is found or not defined in FER Act, 1973 nor expressly included in section 6 (4) and 6 (5), but this word is defined by section 52 of Indian Penal Code as well as by section 3(22) of the General Clauses Act. According to definition in Indian Penal Code 'good faith' is only when an individual acts with due care and attention which pre-supposes genuine efforts to reach to truth and not any ready acceptance of an ill natured belief (refer Harbhajan Singh v. State of Punjab AIR 1966 SC 97). To constitute good faith actual belief with some scanty ground of believing is not sufficient. The belief must be reasonable and not an absurd belief. Therefore, great care and caution is necessary. By definition under section 3(22) of General Clauses Act, the Legislature has laid stress on the aspect of honest behaviour but not on....