TULIP STAR HOTELS LTD.versusSPECIAL DIRECTOR OF ENFORCEMENT

                       [2014] 1 S.C.R. 434


A                  TULIP STAR HOTELS LTD.
                                 v.
           SPECIAL DIRECTOR OF ENFORCEMENT
                (Civil Appeal No. 680 of 2014)
                       JANUARY 16, 2014
B
    [SURINDER SINGH NIJJAR AND FAKKIR MOHAMED
               IBRAHIM KALIFULLA, JJ.]

       Memorandum of FLM issued by RBI - Clause 9 -
C Sale of foreign currency - Restriction - Held: Under
  paragraph 9, as between the money changers, a free hand
  has been given for purchase and sale of any foreign currency
  notes etc. in rupee value - The only restriction imposed
  therein is that the Indian rupee value of the foreign currency
D should not be paid by way of cash, but should always be paid
  in the form of a negotiable instrument or by debiting to the
  purchasers' bank account - In the instant case, transaction
  was carried on by way of payment in the form of pay-orders
  - It cannot be held that whole transaction was in
E contravention of paragraph 3 of FLM.
        Clause 3-- Sale of foreign currency - 'Authorised
  officials' - Held: When a money changer operates its business
  from its premises, any transaction by way of sale or purchase
  as part of its money changing business should be carried out
F only through an authorized representative - In the instant
  case, it is not the case of respondent that neither of the two
  persons who indulged in the transaction of money changing
  business were not the authorized officials of their respective
  establishments and, as such, violation of paragraph 3 cannot
G be alleged as against appellants - Sale effected by
  appellants on a rate higher than the rate prevailing in the
  market was not the basis for the alleged violation of paragraph
  3 of the FLM read with ss. 6(4), 6(5) and 7 of FERA -

H                               434
  TULIP STAR HOTELS LTD. v. SPECIAL DIRECTOR OF          435
                 ENFORCEMENT

Impugned orders by which appellants were found guilty of the     A
violation of paragraph 3 of FLM read with ss. 6(4), 6(5) and 7
of FERA and the consequential imposition of penalty being
wholly unjustified, are set aside - Foreign Exchange
Regulation Act, 1973 - ss.6 (4), 6(5), 7 and 8.
                                                                 B
     The appellant in C.A. No. 680 of 2014, a company, and
its Executive Director (appellant in C.A. 681 of 2014), were
proceeded against on the allegations that they sold
foreign currency through unauthorized persons deputed                ...
                                                                     ,

by the purchaser in violation of ss 6(4), 6(5), 7 and 8 of
the Foreign Exchange Regulation Act, 1973 ("FERA") as            C
well as paragraph 3 of the Memorandum of FLM issued
by RBI. It was also alleged that the foreign exchange was
purchased from the appellant at a higher rate than the
exchange rate fixed by the RBI. The respondent imposed
a penalty of Rs.50,000/-, each on both the appellants.           D
Their appeals were dismissed by the Appellate Tribunal
for Foreign Exchange as also the Division Bench of the
High Court.

    Allowing the appeals, the Court                              E
     HELD: 1.1. The impugned orders cjisclose that the
only violation or contravention related td the stipulations
contained in paragraph 3 of the Memorandum of FLM
issued by RBI read with s.6(4) and 6(5) of FERA. Under
                                                                 F
paragraph 9 of the FLM as between the money changers,
a free hand has been given for purchase and sale of any
foreign currency notes etc. in rupee value. The only
restriction imposed therein is that the Indian rupee value
of the foreign currency should n.ot be paid by way of
cash, but should always be paid in the. form of a                G
negotiable instrument such as banker's t:~que/pay­
order/demand draft etc., or by debiting to the purchasers'
bank account. In the instant case, transaction ·~ad taken
place in between two licensed FFMCs and 'the said
transaction was carried on by exchange of foreign                H
   436     SUPREME COURT REPORTS             [2014] 1 S.C.R.


A currency by way of payment in the form of pay-orders.
  Therefore, it cannot be held that the transaction was in
  contravention of ss.6(4) and 6(5) of FERA and paragraph
  3 of FLM so as to attract a penalty. [para 14) [445-H; 446-
  A, C-D, E-G]
B
       1.2. The caption of paragraph 3 of FLM is "Authorized
  Officials". The purport of the said paragraph was to
  ensure that any licensed money changers should allow
  transaction of its money changing business in its
  premises only through such persons who are the listed
C authorized officials as certified by the office of the
  Reserve Bank under whose jurisdiction such money
  changers operate their business. The last part of
  paragraph 3 makes the position a little more clear which
  states that "no person other than the authorized
D representative should be allowed to transact money-
  changing business on behalf of the money-changer".
  Apparently, when a money changer operates its business
  from its premises, any transaction by way of sale or
  purchase as part of its money changing business should
E be carried out only through an authorized representative.
  [para 15) [446-H; 447-A-C]

      1.3. If such transaction had taken place as between
  the appellants and the purchaser, it should have been
F carried on only through their respective authorized
  representatives. The statement of the appellant in CA No.
  681 of 2014 discloses that on each occasion the
  transaction was negotiated by the Branch Manager of the
  appellant with one 'P' of the purchaser establishment. It
G is not the case of the respondent that neither of these two
  persons who indulged in the transaction of money
  changing business were not the authorized officials of
  their respective establishments. Therefore, violation of
  paragraph 3 cannot be alleged as against the appellants.
H [para 16) (447-D-G]
  TULIP STAR HOTELS LTD. v. SPECIAL DIRECTOR OF         437
                 ENFORCEMENT

     1.4. It can also be safely held that for any violation    A
or contravention of the provisions of FERA or FEMA at
the instance of the purchaser in the instant case, after the
money changing transaction as between the appellants
and the said concern had come to an end, the appellants
cannot in any way be held responsible or proceeded             B
against. [para 17] (448-A-B]

    1.5. In the peculiar facts of the case and having
regard to the nature of transactions which had taken
place as between the appellants and the purchaser in the       C
manner in which it has been narrated in the impugned
order of the Original Authority as noted by the Tribunal,
as well as the Division Bench of the High Court, there
was no scope to allege a violation of paragraph 3 of the
FLM or for that matter, ss.6(4) and 6(5) of FERA, 1973.
[para 18] (448-B-D]                                            D

    Collector of Customs vs. Swastic Woollens Pvt. Ltd. 1988
Suppl. SCR 370 =1988 (Supp) SCC 796, Commissioner of
Central Excise vs. Charminar Non-Wovens Ltd. 2009 (14)
SCR 205 = (2009) 10 SCC 770 and Ghisalal vs. Dhapubai          E
(dead) by LRs & Ors. 2011 (1) SCR 651 = (2011) 2 SCC 298
- help inapplicable.

     1.6. As regards the question of the higher value at
which the foreign currency was alleged to have been sold       F
by the appellants to the purchaser, suffice it to say that
in the impugned orders of the Original Authority, as well
as the Tribunal and the Division Bench, the sale effected
by the appellants on a rate higher than the rate prevailing
in the market was not the basis for the alleged violation
of paragraph 3 of the FLM read with ss. 6(4), 6(5) and 7       G
of FERA. In the confiscation order passed by the
Customs authorities, where the appellants were also the
noticees, no fault was found against the appellants on
that ground. [para 19 and 21] [448-F; 449-G-H; 450-A-B]
                                                               H
    438     SUPREME COURT REPORTS              [2014] 1 S.C.R.


A       P. V. Mohammad Barmay Sons vs. Director of
    Enforcement - 1992 (61) ELT 337 - help inapplicable.

      1.7. The impugned orders by which the appellants
  were found guilty of the violation of paragraph 3 of FLM
  read with ss. 6(4), 6(5) and 7 of FERA and the
8
  consequential imposition of penalty of Rs.50,000/- being
  wholly unjustified, are set aside. The penalty amount, if
  recovered be refunded to the appellants along with
  simple interest at the rate of 6% per annum. [para 22)
C [450-C-E]

                         Case Law Reference:

          1988 Suppl. SCR 370    help inapplicable     para 6

          2009 (14) SCR 205      help inapplicable     para 6
D
          2011 (1) SCR 651       help inapplicable     para 6

          1992 (61) ELT 337      help inapplicable     para 6

       CIVIL APP ELLATE JURISDICTION : Civil Appeal No. 680
E of 2014.

        From the Judgment and Order dated 14.10.201 O of the
    High Court of Judicature at Bombay in Fema Appeal No. 3 of
    2008.

F                               WITH

    C.A. NO. 681 of 2014.

        H.N. Salve, Sanjiv Sen, Abhinav Agrawal, Mahesh
    Agarwal, Rishi Agrawala, E.C. Agrawala for the Appelllant.
G
        S.K. Bagaria, ASG, P.K. Dey, Anando Mukherjee,
    Sidhartha Panda, B. Krishna Prasad, for the Respondent.

          The Judgment of the Court was delivered by
H
   TULIP STAR HOTELS LTD. v. SPECIAL DIRECTOR OF          439
                  ENFORCEMENT

     FAKKIR MOHAMED IBRAHIM KALIFULLA, J. 1. Leave                A
 granted.

     2. In these two appeals, the challenge is to a common
 judgment of the Division Bench of the High Court of Judicature
 at Bombay in FEMA Appeal Nos.3 & 4 of 2008, dated 14th           B
 October 2010.

        3. Brief Facts which led to the culmination of the present
  appeals are required to be stated. The Appellant in SLP
   No.7655 of 2011 is the company and the Appellant in SLP
   No. 7657 of 2011 was also proceeded against as the Executive C
  Director of the company. The Respondent issued a show cause
  notice against the Appellants dated 29th April 2002, wherein it
  was alleged that the Appellant in SLP No.7655 of 2011 sold
  foreign currency to the value of 1,47,000 US$ and 1000 Sterling
  £ of UK between 29.4.1997 to 5.6.1997 through unauthorized D
  persons deputed by M/s Hotel Zam Zam in violation of Sections
  6(4), 6(5), 7 & 8 of the Foreign Exchange Regulation Act, 1973
  (hereinafter called "FERA") as well as paragraph 3 of the
   Memorandum of FLM issued by RBI. The Appellants were
  called upon to show-cause why penalty should not be imposed E
  against them under Section 50 of FERA read with Section 49
  (3) & (4) of Foreign Exchange Management Act (hereinafter
  called "FEMA"). Subsequently, by order dated 28.10.2004 the
· Respondent imposed a penalty of Rs.50,000/- each on both the
  Appellants. The Appellants preferred appeals before the F
  Appellate Tribunal for Foreign Exchange in Appeal Nos.1259
  and 1260 of 2004, which were also dismissed by order dated
  2.7.2008. The above said orders of the Original Authority, as
  well as the Appellate Authority, were the subject matter of
  challenge before the Division Bench of the High Court in FEMA G
  Appeal Nos.3 & 4 of 2008. The Division Bench having
  confirmed the orders of the lower authority, as well as the
  tribunal, the Appellants have come forward with these appeals.

     4. We heard Mr. H.N. Salve, learned Senior Advocate for
 the Appellants and Mr. S.K. Bagaria, learned Addi. Solicitor     H
    440     SUPREME COURT REPORTS                  [2014] 1 S.C.R.


A   General for the Respondent. We also perused the written
    submissions filed on behalf of the appellant as well as the
    respondent. We also perused the order of the Original Authority,
    the Tribunal, as well as the Division Bench and having heard
    the counsel for the respective parties we proceed to decide
B   these appeals.

        5. Mr. Salve, learned senior counsel, appearing on behalf
  of the Appellants in his submissions mainly contended that there
  was no violation at all in the matter of Sale and Purchase by
  the Appellant company to M/s Hotel Zam Zam in relation to the
C sale of 1,47,000 US$, as well as 1000 Sterling £ of UK in
  between 29.4.1997 and 5.6.1997, inasmuch as both the
  Appellant company, as well as M/s Hotel Zam Zam are duly
  licensed Full Fledged Money Changers, in short FFMC.
  According to the learned senior counsel, such transactions as
D between the licensed FFMCs are wholly authorized under the
  provisions of FERA, as well as the Memorandum of FLM of the
  Reserve Bank of India. The learned senior counsel further
  contended that in the confiscation proceedings initiated against
  the Appellants, as well as M/s Hotel Zam Zam, as per the order
E dated 21.8.1998 it was found that no statutory violation can be
  attributed to the Appellants and therefore, the imposition of
   penalty as against the Appellants by the Original Authority and
   the confirmation of the same by the Tribunal and the Division
   Bench are therefore liable to be set aside.
F        6. As against the above submissions, Mr. Bagaria, learned
    Addi. Solicitor General would contend that by virtue of the
    statutory stipulations contained in sub-sections (4) and (5) of
    Section 6, Section 7 and 8 of FERA read along with paragraph
    3 of the Memorandum of FLM of the RBI, there was a clear
G   violation of the statutory provisions committed by the
    Appellants, hence the penalty imposed by the Original Authority
    as confirmed by the Appellate Authority, as well as the High
    Court cannot be faulted. It was also submitted that the Original
    Authority, the Appellate Tribunal and the High Court have
H   reached a concurrent finding based on documents, materials,
  TULIP STAR HOTELS LTD. v. SPECIAL DIRECTOR OF    441
ENFORCEMENT [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.)

as well as statements on record and the said conclusions are A
not perverse and therefore, the same do not call for interference.
Reliance was placed upon the decisions in Collector of
Customs vs. Swastic Woollens Pvt. Ltd. - 1988 (Supp) SCC
796, Commissioner of Central Excise vs. Charminar Non-
Wovens Ltd. - (2009) 10 SCC 770 and Ghisalal vs. Dhapubai B
(dead) by LRs & Ors. - (2011) 2 SCC 298. It was also
contended that Hotel Zam Zam purchased the foreign exchange
from the appellant at a higher rate than the exchange rate fixed
by the RBI and on this ground as well the proceedings initiated
against the appellant and the imposition of penalty was justified.  c
To support the said contention, reliance was placed upon the
decision in P. V. Mohammad Barmay Sons vs. Director of
Enforcement - 1992 (61) ELT 337.

    7. When we consider the submissions of the respective
counsel we find Sections 6(4), 6(5), 8(2) of FERA and Para 3        D
and 9 of the Memorandum of FLM of RBI, are required to be
noted which are as under:

    "Section 6 Authorised dealers in foreign exchange:-
                                                                    E
    6(4) An authorized dealer shall, in all his dealings in
    foreign exchange and in the exercise and discharge of
    the powers and of the functions delegated to him under
    Section 74, comply with such general or special
    directions or instructions as the Reserve Bank may, from
                                                                    F
    time to time, think fit to give, and except with the previous
    permission of the Reserve Bank, an authorized dealer
    shall not engage in any transaction involving any foreign
    exchange which is not in conformity with the terms of his
    authorization under this section.
                                                                    G
      6(5) An authorized dealer shall, before undertaking any
    · transaction in foreign exchange on behalf of any person,
      require that person to make such declaration and to give
      such information as will reasonably satisfy him that the
      transaction will not involve, and is not designed for the     H
      442      SUPREME COURT REPORTS                    [2014] 1 S.C.R.

A           purpose of, any contravention or evasion of the
            provisions of this Act or of any rule, notification, direction
            or order mad~ thereunder; and where the said person
            refuses to c<;Jmply with any such requirement or makes
            only unsatisfactory compliance therewith, the authorized
B           dealer shall refuse to undertake the transaction and
            shall, if fie has reason to believe that any such
            contravention or evasion as aforesaid is contemplated by
            the person report the matter to the Reserve Bank.

            Section 8: Restrictions on dealings in foreign
c           exchange:-

            (2) Except with the previous general or special permission
            of the Reserve Bank, no person, whether an authorized
            deafer or a money-changer or otherwise, shall enter into
D           any transaction which provides for the conversion of
            Indian currency into foreign currency or foreign currency
            irito Indian currency at rates of exchange other than the
            ~tes for the time being authorized by the Reserve Bank.

            Paragraphs 3 and 9 of the FLM
E
            ·Authorised Officials

            3. All money-changers should arrange to forward lists
            giving full names and designations of their
F           representatives who are authorized to buy and sell foreign
            currency notes, coins and travelers cheques on their
            behalf together with their specimen signatures, at the end
            of each calendar year to the office of Reserve Bank under
            whose jurisdiction they are functioning. Any changes in
G           their list should also be brought to the notice of Reserve
            Bank. No person other than the authorized representative
            should be allowed to transact money-changing business
            on behalf of the mqney-changer

            Purchases from other Money-changers and Authorized
H--         Dealers:-
  TULIP STAR HOTELS LTD. v. SPECIAL DIRECTOR OF    443
ENFORCEMENT [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

      9. Money-changers may freely purchase from other                A
     money-changers and authorized de?lers in foreign
     exchange or.their exchange bureau, any foreign currency
     notes and coins tendered bYthe letter. Rupee equivalent
     of the amount of foreign currency purchased should,
     however, be paid by way of a cross cheque drawn on their         B
     bank account or if made by way of a bankers' cheque/
     pay order/demand draft, it should be accompanied by a
     certificate from the bank issuing the relative instrument
     certifying that the funds for the instrument have been
     received by it by debit to the applicants bank account. In       c
     no circumstances should payments in respect of such
     sale be made in cash."

     8. Under Section 6(4) it is stipulated that a full fledged
money changer (FFMC) as an authorized dealer in foreign
exchange should strictly comply with the general or special           D
directions or instructions that may be issued by the RBI and that
except with the previous permission of the RBI, authorized
dealers should not engage in any transaction involved in any
foreign exchange, which is not in conformity with the terms of
his authorization. Under Section 6(5) it is stipulated that an        E
authorized dealer should before undertaking any transaction in
foreign exchange should ensure verification on certain aspects
in order to ensure that there is no contravention of the provisions
of FERA and if the FFMC has any reason to believe that any
such contravention or evasion is contemplated by a person who         F ·
seeks to indulge in any transaction in foreign exchange, the
·FFMC should report the matter to the RBI.

     9. Section 8 of FERA imposes restrictions on dealings in
foreign exchange. The said provision imposes restriction to the G
effect that no person other than the authorized dealer in India, ·
shall purchase or otherwise acquire or borrow any foreign
exchange. Under sub section 2, it is stipulated that except with
the previous general or special permission of RBI, an authorized
dealer or a money changer should enter into any transaction
                                                                   H
    444      SUPREME COURT REPORTS                  [2014] 1 S.C.R.


A providing conversion of Indian currency into foreign currency or
  vice versa, at rates of exchange other than the rates for the time-
  being authorized by RBI.

       10. De hors the above provisions, the other relevant
B provisions are paragraphs 3 & 9 of the Memorandum of FLM
  issued by the RBI. A close scrutiny of paragraph 3 disclose that
  the said paragraph has been issued by the RBI to state as to
  who can be called as 'authorized officials' of money changers.
  The said paragraph also imposes a restriction to the effect that
  other than an authorized representative, nobody else should be
C allowed to transact money changing business on behalf of the
  money changer.

       11. Paragraph 9 virtually gives a free hand for the money
  changers to indulge in purchase of foreign currency etc., and
D the only restriction is that while making· such purchase, the
  purchase value should be paid only by way of an instrument and
  not by way of cash.

       12. Keeping the above provisions in mind, when we refer
  to the nature of transaction that had taken place as between
E the Appellants and Mis Hotel Zam Zam, the following facts are
  not in controversy:

          (a)   The Appellants, as well as M/s Hotel Zam Zam, are
                licensed FFMC.
F
          (b)   The Appellants sold foreign exchange of 1,47,000
                US $ and 1,000/- sterling £ of UK as between April
                1997 to June 1997 to Mis Hotel Zam Zam.

          (c)   The purchase value of the above foreign currency
G               was at a higher rate than the existing retail rate that
                prevailed in the market.

          (d)   The purchase value was paid by M/s Hotel Zam
                Zam by way of Pay Orders.
H
  TULIP STAR HOTELS LTD. v. SPECIAL DIRECTOR OF    445
ENFORCEMENT [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

     (e)    Prior to the transaction, at the instance of the       A
            Appellants, a Xerox copy of the RBI license of M/s
            Hotel Zam Zam was produced and based on which
            the transaction was effected.

     (f)      The transactions were effected on 29.04.1997,        B
            · 06.05.1997, 29.05.1997 and 05;06.1997 and the
              amounts transacted were 7,000 US$, 1000 Sterling
              £ of UK, 40,000 US$ and 1,00,000 US$ on the
              respective dates. In all 1,47,000 US$ and 1000
              Sterling £ of UK were sold by the Appellants to M/   C
              s Hotel Zam Zam.

      (g)    All the above transactions were made and the
             foreign currency was handed over to Shri Rakesh
             Mahatre, a representative of M/s Hotel Zam Zam.
                                                                   D
      13. Based on the above undisputed facts relating to the
transaction as between the Appellants and Mis Hotel Zam Zam,
the Original Authority reached a conclusion that the Appellants
failed to verify the authorization in favour of the persons
concerned to buy/sell foreign exchange on behalf of the said E
money changers as contemplated under the relevant
provisions. In other words, it was concluded that it was
incumbent upon the Appellants by virtue of the terms of
instructions contained in paragraph 3 of the Memorandum of
FLM issued by RBI to have verified the bonafides of the persons F
deputed to them by Mis Hotel Zam Zam before handing over"
the foreign currencies to such persons. It was, therefore,
ultimately concluded that the said failure on the part of the
Appellants resulted in contravention of the directions contained ·
in paragraph 3 of the Memorandum of FLM read with Section
6(4), 6(5) and 7 of FERA Ultimately the Appellants were found G
guilty for the said contraventions and the penalty came to be
imposed. The said order of the Original Authority was confirmed
by the Tribunal, as well as the Division Bench. of the High Court.

    14. The above impugned orders disclose that the only           H
    446     SUPREME COURT REPORTS                 (2014] 1 S C.R


A violation or contravention related to the stipulations contained
  in paragraph 3 read with Section 6(4) and 6(5) of FERA. It will
  be relevant to note .that the variation in the rates of purchase
  value of the foreign cUfrency was not the basis for the ultimate
  conclusion about the contravention held against the Appellants.
B Therefore, keeping aside the said aspect, when we examine
  the contr~vention held proved against the Appellants, we feel
  it appropriate to make a reference to paragraph 9 in the
  forefront. Under paragraph 9 of the FLM as between the money
  changers, a free hand has been given for purchase and sale
c of any foreign currency notes etc. in rupee value. The only
   restriction imposed therein is that the Indian rupee value of the
  foreign currency should not be paid by way of cash, but should
  always be paid in the form of an instrument such as banker's
  cheque/pay-order/demand draft etc., or by debiting to the
  purchasers' bank account. Therefore, if under paragraph 9 such
0
   a free hand has been given to the money changers, namely,
   FFMCs in the matter of purchase of foreign currency etc., by
   making payments in the form of negotiable instruments under
   the relevant statutes, the question that would arise for
   consideratien would be whether in a case of this nature where
E such a transaction had taken place in between two licensed
   FFMCs and the said transaction was carried on by exchange
   of foreign currency by way of payment in the form of pay-orders
   and that the sale effected by the Appellants and the purchase
   made by the other FFMC, namely, Mis Hotel Zam Zam was not
F disputed, can it still be held that there was any violation at all
   in order to proceed against the Appellants for imposing a
   penalty? When we examine the said issue, we are unable to
   accede or countenance the stand of the Respondent that the
   foreign currencies to the values mentioned in the earlier
G paragraphs were handed over to the representative of Mis
   Hotel Zam Zam by one Mr. Rakesh Mahatre and, therefore, the
   whole transaction was in contravention of Sections 6(4) and
   6(5) of FERA and paragraph 3 of FLM.

H         15. When we examine paragraph 3 of FLM, we find that
  TULIP STAR HOTELS LTD. v. SPECIAL DIRECTOR.OF   447
ENFORCEMENT[FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

the caption of the $aid paragraph is "Authorized Officials". The   A
purport of the said paragraph was to ensure that any licensed
money changers should allow transaction of its money changing
business in its premises only through such persons who are the
listed authorized officials as certified by the office of the
Reserve Bank under whose jurisdiction such money changers          B
operate their business. The last part of paragraph 3 makes the
position a little more clear which states that "no person other
than the authorized representative should be allowed to
transact money-changing business on behalf of the. money-
changer". Apparently when a money changer operates its             C
business from its premises, any transaction by way of sale or
purchase as part of its money changing business should be
carried out only through an authorized representative.

     16. When we extend the application of the said stipulation
to the case of present nature, it can only be said that if such    D
transaction had taken place as between the Appellants and the
purchaser M/s Hotel Zam Zam, it ·should have been carried on
only through their respective authorized representatives. The
statement of Mr. Peter Kerkar, the Appellant in SLP (C)
No.7657 of 2011, disclose that on each occasion the                E
transaction was negotiated by the Branch Manager of the
Appellant with one Ms. Pinky of M/s Hotel Zam Zam. It is not
the case of the Respondent that neither of these two persons
who indulged in the transaction of money changing business
were not the authorized officials of their respective              F
establishments. If the said factum relating to the business
transactions, which had taken place as between the Appellants
and Mis Hotel Zam Zam is not in controversy, we .fail to see
how a violation of paragraph 3 can be alleged as against the
Appellants.                                                        G

      17. It is stated that after the transaction as between the
Appellants and M/s Hotel Zam Zam concluded, Mis Hotel Zam
Zam stated to have indulged in some transaction, which was
in violation of the provisions of FERA with which the Appellants
                                                                   H
    448      SUPREME COURT REPORTS                   [2014] 1 S.C.R.


A were not in any way concerned. It can also be safely held that
  for any violation or contravention of the provisions of FERA or
  FEMA at the instance of M/s Hotel Zam Zam after the money
  changing transaction as between the Appellants and the said
  concern had come to an end, the Appellants cannot in any way
B be held responsible or proceeded against.

        18. In our considered opinion that in the peculiar facts of
  this case and having regard to the nature of transactions which
  had taken place as between the Appellants and Mis Hotel Zam
  Zam in the manner in which it has been narrated in the
C impugned order of the Original Authority as noted by the
  Tribunal, as well as the Division Bench of the High Court, we
  are convinced that there was no scope to allege a violation of
  paragraph 3 of the FLM or for that matter Sections 6(4) and
  6(5) of FERA, 1973. Based on the interpretation of Sections
D 6(4), 6(5) of FERA, 1973 and paragraphs 3 & 9 of the FLM,
  we have held that the Original Authority, the Appellate Tribunal
  as well as the Division Bench of the High Court failed to
  appreciate the issue in the proper perspective while holding the
  appellant guilty of the violation alleged. Therefore, none of the
E judgments relied upon by the respondents for the proposition
  that concurrent findings of fact should not be interfered with
  does not apply to the facts of this case.

        19. Once we steer clear of the above position, we come
F to the question of the higher value at which the foreign currency
  was alleged to have been sold by the Appellants to M/s Hotel
  Zam Zam. As pointed out by us earlier, the said act was not
  the basis for the contravention and imposition of the penalty as
  against the Appellants. To rule out any controversy, the
  conclusion of the Original Authority as recorded in its order for
G finding the Appellants guilty of paragraph 3 of the FLM read
  with Sections 6(4), 6(5) and 7 of FERA, can be usefully
  extracted which reads as under:

          • ....... Thus by not insisting on the authorization from the
H         said Hotel Zam Zam disclosing the names, address and
   TULIP STAR HOTELS LTD. v. SPECIAL DIRECTOR OF    449
 ENFORCEMENT [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

     other parficulars of the persons deputed by them for           A
     purchasing foreign exchange from Mis Cox and Kings
     Travel & Finance Ltd., the said Mis Cox and Kings Travel
     & Finance Ltd. has contravened the directions contained
     in para 3 of the Memorandum FLM Rlw SEC. 6(4), 6(5)
     and 7 of the FERA, 1973. I, therefore hold them guilty         B
     for the said contraventions."

      20. This apart, when we refer to the confiscation order
  passed by the Commissioner of Customs in its order dated
· 21.08.1998, it has been specifically stated as under:
                                                                    c
     "The statements of Mr. Chitrang Mehta, Manager of Mis
     LKP dated 0617-08-97 .indicated that there is transactio9
     at prices higher than those prevailing market rates.
     However, it is also a known fact that the rates for the
     foreign exchange can be fluctuating and there is hardly        D
     any transaction effected at the rates which are recorded
     for that day to be prevailing in the market not only for the
     foreign currency but also for to be other goods e.g.
     shares in the stock market or the metals and other
     commodities being traded in the specific markets. It is        E
     also to be considered that large transactions were being
     entered into by them and profit made on the sales of
     such large transactions would not ipso facto induce me
     to conclude that the mere fact of sales at higher prices
     would be a preconcerted knowledge that the dollars sold        F
     are to be smuggled out of India. I find that the price at
     which Ms. Pinky Jaisinghani was purchasing the dollars
     from other FFMCs were settled between her mentor Shri
     Su/eman Tajuddin Patel and not considerations of any
     other kind."
                                                                    G
      21. Therefore, in the impugned orders of the Original
 Authority, as well as the Tribunal and the Division Bench, the
 sale effected by the Appellants oil a rate higher than the rate
 prevailing in the market was not the basis for the alleged
 violation of paragraph 3 of the FLM read with Sections 6(4),       H
    450     SUPREME COURT REPORTS                   [2014] 1 S.C.R.

A 6(5) and 7 of FERA. In the confiscation order passed by the
   Cu~toms Authorities, where again the Appellants were also
   one of the noticees, no fault was found as against the Appellants
   on that ground. In the light of our above conclusions, as regards
   the higher value at which foreign currency alleged to have been
B ·sold by the appellant to Hotel Zam Zam, the reliance placed
   upon the decision in P.V. Mohammad Barmay Sons (supra)
   has also no application. The said decision came to be rendered
   entirely under different facts which cannot be applied to the facts
   of the present case.
c      22. Having reached the above conclusions, we are
  convinced that the impugned orders by which the Appellants
  were found guilty of the violation of paragraph 3 of FLM read
  with Sections 6(4), 6(5) and 7 of FERA and the consequential
  imposition of penalty of Rs.50,000/- was wholly unjustified. The
D impugned orders are liable to be set aside and they are
  accordingly set aside. If the Appellants have parted with the
  penalty amount imposed under the impugned orders, the
  Respondent is directed to refund the same to the Appellants
  along with simple interest at the rate of 6% per annum, within
E two months from the date of this judgment. The appeals are
  allowed with the above directions.

    R.P.                                           Appeals allowed.