Case Note & Summary
The case involves a batch of appeals filed by the Union of India through the Enforcement Directorate against orders of the Appellate Tribunal for Foreign Exchange (ATFE) which set aside penalties imposed on various respondents, including Canara Bank, its officers, and other individuals, for alleged contraventions of the Foreign Exchange Regulation Act, 1973 (FERA). The background pertains to investigations into foreign exchange transactions involving the purchase of foreign currency from unauthorized sources and failure to realize export proceeds. The Enforcement Directorate issued show cause notices and imposed penalties under Sections 8(3), 8(4), and 18(2) of FERA. The ATFE allowed the appeals, holding that the evidence was insufficient and that the proceedings were barred by limitation. The High Court examined the legal issues, including the burden of proof in FERA cases, the requirement of reasonable time for initiation of proceedings, and the applicability of Section 68 of FERA to officers of a company. The court held that the ATFE had correctly appreciated the evidence and that the findings of fact were not perverse. The court also noted that the show cause notices were issued after an inordinate delay without any explanation, rendering the proceedings invalid. Consequently, the appeals were dismissed, and the orders of the ATFE were upheld.
Headnote
A) Foreign Exchange Regulation Act, 1973 - Contravention of Sections 8(3), 8(4), 18(2) - Burden of Proof - The burden of proving contravention of FERA provisions lies on the Enforcement Directorate. Mere suspicion or surmises cannot substitute proof. The adjudicating authority must base its findings on cogent and reliable evidence. (Paras 10-15) B) Foreign Exchange Regulation Act, 1973 - Limitation for Adjudication - Proceedings under FERA must be initiated within a reasonable period. Delay of several years in issuing show cause notices without explanation renders the proceedings liable to be quashed. (Paras 16-20) C) Foreign Exchange Regulation Act, 1973 - Section 68 - Liability of Officers of Company - Section 68 of FERA creates vicarious liability only when the contravention is committed by a company and the officer was in charge of and responsible for the conduct of business. The provision does not apply to individuals acting in their personal capacity. (Paras 21-25)
Issue of Consideration
Whether the Appellate Tribunal for Foreign Exchange (ATFE) was justified in setting aside the adjudication orders imposing penalties under FERA on the respondents for alleged contraventions of Sections 8(3), 8(4), and 18(2) of FERA, 1973.
Final Decision
The High Court dismissed all the appeals, upholding the orders of the ATFE setting aside the penalties.
Law Points
- Burden of proof in FERA contraventions
- Limitation for initiation of adjudication proceedings
- Standard of proof in quasi-criminal proceedings
- Applicability of Section 68 of FERA to officers of a company
