LexTULIP STAR HOTELS LTD. versus SPECIAL DIRECTOR OF ENFORCEMENT
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
A
B
[2014] 1 S.C.R. 434
TULIP STAR HOTELS LTD.
v.
SPECIAL DIRECTOR OF ENFORCEMENT
(Civil Appeal No. 680 of 2014)
JANUARY 16, 2014
[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.
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
B
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
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
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
E
F
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.
B
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]
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
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