K SADASIVAM Vs. SPECIAL DIRECTOR ENFORCEMENT DIRECTORATE

JUDGEMENT

(1.) THIS appeal is filed against the order passed in Appeal No.171 of 1993 dated 11.06.1999 by the Foreign Exchange Regulation Appellate Board, New Delhi, confirming the Order No.SDE(R)/IV/7/93 dated 26.02.1993 passed by the Special Director, Enforcement Directorate (Foreign Exchange Regulation Act), New Delhi.

(2.) THE facts, which are necessary to decide the issue involved in the appeal, are as follows: (a) THE appellant was working as Assistant Manager, Grade-I in the State Bank of India. THE State Bank of India, Extension Branch at Anna International Airport, is licensed by the Reserve Bank of India to act as authorised dealers and, therefore, they are entitled to purchase and sell foreign currencies and travellers' cheques to the passengers going abroad or coming from abroad at the Air Port Counter. While the appellant was working at the S.B.I.Extension Branch, Anna International Airport, he had a separate cash chest or Coffer and he had separate counter and the ledgers showing the opening balance, the amount dealt with, etc., are all separate for him. On 11.10.1990 at about 4.30 Hours, the Enforcement Directorate, on information, conducted inspection of the State Bank of India, Exchange Bureau, situated at the Arrival Hall of Anna International Airport, Madras, under the provisions of Section 43 of the Foreign Exchange Regulation Act ('FERA Act'). During the inspection, the following unaccounted foreign currencies and travellers' cheques were found in the counter of the appellant. U.S.Dollars 100 Australian Dollars 250 U.S. Dollars in Travellers' Cheques 400 Since the foreign currencies and travellers cheques in the counter of the appellant were found to be in conformity with the transaction dated 10.10.1990, the above said currencies were returned to the officer in the presence of witnesses. THEreafter, in the presence of witnesses, when the appellant's hand bag was searched by the officers of the Enforcement Directorate, the following foreign currencies and Indian currencies were found and recovered. U.S.Dollars 823 } from his Samsonite } hand bag Singapore Dollars 151 } Malaysian Ringgits 49 Indian currency Rs.3,590/-. Since the Indian and foreign currencies did not figure in the official transactions of the bank as per the records made available to the Enforcement Directorate Authorities, the said currencies were seized in the presence of witnesses under a Mahazar. THEreafter, the appellant was taken to the Enforcement Directorate Office and two statements were recorded from him, one on 11.10.1990 and another on 12.10.1990 and was remanded to custody on 12.10.1990. But, subsequently, the said statements were retracted by the appellant in the bail application filed on the date of remand, stating that the said statements were obtained by coercion and ill-treatment by the Enforcement Directorate Officers. (b). THE Bank Manager Mr.V.Krishnamoorthy made an inspection on 11.10.1990 and verified the accounts as well as the cash available in the cash chest belonging to the appellant and he prepared a summary of transactions, as per which, there was a shortage of cash to the tune of Rs.17,498/-. THE details of the summary of transactions as on 11.10.1990 are extracted hereunder: 1. Receipts (Miscellaneous transactions) Rs. 2,32,813.00 2. Opening balance on that date 1,72,375.15 ----------- Total 4,05,188.15 Less: Amount paid by the appellant for } 400 US Dollars and 250 Australian} Dollars, which the appellant had } purchased during the course } of the day } 20,310.00 ------------ Balance which must be available 3,84,878.15 ------------ Total closing balance as per summary of Transactions 3,84,878.15 Less: Cash available on physical verification 3,67,380.15 ----------- Shortage of cash 17,498.00 ----------- When the State Bank of India sent a letter dated 16.10.1990 to the appellant that there was a shortage of Rs.17,498/-, the appellant sent a reply to the bank that with the amount of Rs.17,498/-, all the bank money had been utilised in the normal course of banking transactions in purchasing foreign currencies from the incoming passengers and that if the foreign currencies seized by the Enforcement Directorate are returned, he can tally the same with the accounts. Accepting his reply, the bank did not take any further steps to recover the amount from the appellant.

(3.) SECTION 6 deals with Authorised dealers in foreign exchanges. Had there been any violation such as non-issuing of encashment certificate by the authorised dealer, then the respondent ought to have followed section 6 of the FERA Act. Whenever the authorised dealer commits any contravention of licensing conditions or other directions issued under section 73(3), it will amount to only violation of section 6(4), for which penalty could be imposed under section 50. But in the instant case, though the appellant is the authorised dealer, the respondent has invoked section 8 of the FERA Act, which deals about the purchase and dealing with the foreign currencies other than the authorised dealer, saying that since there is no encashment certificate, there is a violation of section 8(4), which reason assigned by the respondent is not legally correct. Further, the learned senior counsel submitted that even assuming for a moment that the non-issuance of the encashment certificate is in violation of licensing conditions or other directions of the Reserve Bank of India, unless those conditions or directions were given by the Reserve Bank of India under section 73(3), the said violations would not fall under any of the provisions of the Act. In support of his contention, the learned senior counsel has relied on the decisions reported in STATE OF MAHARASHTRA ..vs.. NARBHERAM M.PAREKH (1990 (Vol.48) TAXMAN-MAGAZINE 278), VALLIAMMAL ACHI ..vs.. DIRECTOR OF ENFORCEMENT (AIR 1983 MADRAS 92), L.I.C.OF INDIA ..vs.. ESCORTS LTD., (AIR 1986 SC 1370), GAJANAN VISHESHWAR BIRJUR ..vs.. UNKION OF INDIA (1994 (72) E.L.T.788 (S.C.), and COMMISSIONER OF CENTRAL EXCISE, BHUBANESHWAR-I ..vs.. CHAMPDANY INDUSTRIES LTD., ((2009) 9 SCC 466). Under such circumstances, the impugned order passed by the respondent is liable to be set aside.