Tulip Star Hotels Ltd vs Special Director Of Enforcement

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 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 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 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 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 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.

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 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 Sections 6(4), 6(5) and 7 of FERA. In the confiscation order passed by the Customs 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 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.

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 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 two months from the date of this judgment. The appeals are allowed with the above directions.

January 16, 2014