A. Michael Vs. Union of India (Uoi) - Court Judgment

Excerpt:
fera - return of seized articles - foreign exchange regulation act, 1973 - petitioners filed writ petitions for seeking direction against respondents/authority to return their seized article including foreign currencies and travellers cheques and also to take action against their officers, who seized petitioners' articles - order of release of abovesaid articles passed by tribunal after which present petitions were filed by petitioners - held, petitioner's possession of so many travellers cheques without any evidence that how he procured those cheques, strengthens the case of respondents/department - further, story of petitioners that there was non-availability of cash that is why they carry so much travellers cheques was without proper explanation and evidence which creates doubt - thus, direction of release of travellers cheques could not be implement and set aside - however, no illegality found in possession of foreign currency by petitioners - accordingly, writ petitions partly allowed upto imposing penalty on respondents and foreign currency - however, petitions in respect of travelers cheques dismissed and order of adjudicating officer in that respect confirmed - t.n. estates (abolition & conversion into ryotwari) act, 1948 [act no. 26/1948]. sections 5(2) & 67; [a.p. shah, cj, mrs. prabha sridevan & p. jyothimani, jj] suo motu revisional powers held, on a bare reading of the provisions of section 5(2) of the act, it is clear that the power conferred on the director by section 5(2) to cancel or revise any of the orders, acts or proceedings of the settlement officer is very wide. in the first place, the director need not necessarily be moved by any party in that behalf, and the power could be exercised either on an application by an aggrieved person or suo motu. for example, if the director comes to know that contrary to the scheme of the act or due to misrepresentation or fraud played, a patta had been granted to a person under the relevant provisions of the act, then to set right that mistake, the director should be enabled to exercise his power so as to effectuate the scheme of the act and to implement the purpose behind the act. the fact that the rule making authority has prescribed procedure in exercise of the powers under section 67 for making an application to the director does not mean that the suo motu power which is explicit in section 5(2) of the act is in any way curtailed or taken away. therefore, the contention of the respondent that making an application is sine qua non for invoking the power under section 5(2) of the act is not tenable. -- t.n. estates (abolition & conversion into ryotwari) act, 1948. sections 5(2) & 67; suo motu revisional powers held, on a bare reading of the provisions of section 5(2) of the act, it is clear that the power conferred on the director by section 5(2) to cancel or revise any of the orders, acts or proceedings of the settlement officer is very wide. in the first place, the director need not necessarily be moved by any party in that behalf, and the power could be exercised either on an application by an aggrieved person or suo motu. for example, if the director comes to know that contrary to the scheme of the act or due to misrepresentation or fraud played, a patta had been granted to a person under the relevant provisions of the act, then to set right that mistake, the director should be enabled to exercise his power so as to effectuate the scheme of the act and to implement the purpose behind the act. the fact that the rule making authority has prescribed procedure in exercise of the powers under section 67 for making an application to the director does not mean that the suo motu power which is explicit in section 5(2) of the act is in any way curtailed or taken away. therefore, the contention of the respondent that making an application is sine qua non for invoking the power under section 5(2) of the act is not tenable. prabha sridevan, j.1. heard mr. b. kumar, learned senior counsel appearing for the writ petitioners and respondents in the appeals and mr. k. ramasamy, learned special counsel for the respondents in the writ petitions and appellants in the appeals.2. w.p. no. 23744 of 2001 has been filed by a. michael, the respondent in cma. no, 205 of 2002 praying for issue of writ of mandamus to direct the deputy director, enforcement directorate, chennai, the 3rd respondent to return and refund all the seized foreign currencies, travellers cheques and the penalty amounts to him forthwith as ordered in the order of adjudication dated 7-1-2000 in reference no. dd/mas/i/2000 (s.s.) of the 3rd respondent and the order dated 18-7-2001 in appeal nos. 263 and 574 of 2000 of the appellate tribunal for foreign exchange along with the interest at 18 per cent per annum from the date of the seizure to the date of payment to the petitioner and also to pay the value of the foreign currencies which have become invalid due to the failure of the 3rd respondent to encash and deposit in a bank immediately on their seizure.3. w.p. no. 23745 of 2001 has been filed by a. michael, the respondent in c.m.a. no. 205 of 2002 praying for a issue of writ of mandamus to direct the respondent therein to file a complaint in writing under section 56 of the foreign exchange regulation act, 1973, (hereinafter referred to as fera), at the appropriate court at chennai prosecuting the officials responsible for the contravention of the provisions of section 57 of fera, on account of their failure to comply with the orders and directions contained in the order of adjudication dated 7-1-2000 and the order in appeal dated 18-7-2001.4. c.m.a. nos. 205 of 2002 and 206 of 2002 have been filed by the union of india represented by the director of enforcement, new delhi against the order passed by the appellate tribunal for foreign exchange, in appeal nos. 263 of 2000 and 574 of 2000 both dated 18-7-2009.5. since the issue involved in the civil miscellaneous appeals and the writ petitions are arising out of the same proceedings, they are taken up together for disposal.6. mr. b. kumar, learned senior counsel appearing for the respondents raised the following preliminary objections:1. the appeals filed by the director of enforcement are incompetent and it is only the central government who could prefer an appeal.2. there arises no question of law for consideration in the above appeals. of the two preliminary objections raised, objection no. 2 is required to be considered only if objection no. 1 is decided against the respondent. therefore, we proceed to consider the 1st objection.7. according to the learned senior counsel, the appeals filed by the director of enforcement as representing union of india would not satisfy the requirement of section 35 of the foreign exchange management act, 1999 (hereinafter referred to as fema). according to him, it is the central government which has to file the appeal and not the director of enforcement and this question is squarely covered by the decisions in director of enforcement v. rama arangannal air 1981 mad. 80 and mohtesham mohd. ismail v. spl. director, enforcement directorate [2009] 92 scl 299 (sc).8. section 35 of the fera refers to the central government being the aggrieved party in an appeal to the high court. therefore, the aggrieved party cannot be the deputy director or the directorate of enforcement, unless a specific power is given to him for filing the appeal. the learned senior counsel elicited the various sections which give the central government the power to do certain things and, according to those provisions, this would show that wherever necessary, the act specifically empowers the central government to authorise the director of enforcement or any other officer, for the purposes mentioned in the relevant sections, and since there is no provision in the act empowering the central government to authorise the director of enforcement to represent the union of india, the appeal itself is not maintainable.9. in rama arangannal's case (supra), the adjudication order was passed by the deputy director of enforcement holding the respondents guilty of contravention of the provisions of the act. the fera board allowed the appeal filed by the respondents. against that, the director of enforcement filed the appeal claiming himself to be aggrieved. even at the initial stage, preliminary objections were raised regarding the maintainability of such an appeal and, therefore, the director of enforcement filed a miscellaneous petition to amend the cause title by substituting the name of the appellant as government of india represented by the director of enforcement. a learned single judge of this court rejected the amendment petition on the ground that though it appears to be an innocuous one, the prayer in the miscellaneous petition really amounts to substitution of a new appellant in the place of the original appellant. it was observed that when the grounds of appeal showed the director of enforcement as the appellant, it is not open either to the director of enforcement or to the government of india to say that the appeal is filed by the government of india and, therefore, the amendment petition was dismissed. on the question of maintainability, the learned single judge held that unless the statute authorised the director of enforcement to file an appeal, he cannot do so. the learned single judge referred to sections 253 and 256 of the income-tax act and section 37 of the tamil nadu general sales tax act and held that many such instances can be cited where the statute specifically authorises the initial quasi-judicial authority to file an appeal. but since the statute did not specifically authorise the director of enforcement to do so, the appeal was liable to be dismissed as not maintainable on the ground that the director of enforcement cannot be said to be an aggrieved person. this decision is referred to in mohtesham mohd. ismail's case (supra). there, the question was whether the special director appointed under the fera can himself prefer an appeal before the high court against an order passed by the fema board. before the high court, the maintainability of the appeal was raised as an issue and reliance was placed on rama arangannal's case (supra). the supreme court referred to section 3 of fera, which provides for the classes of officers of enforcement as well as section 4 and section 5 relating to delegation of powers and held that from a bare perusal of section 5 of the act, it would be evident that notifications are required to be issued by the central government delegating specific functions under the act. the supreme court held that the adjudicating authority, in the absence of any power conferred upon it in this behalf by the central government, could not prefer any appeal against the order passed against the appellate board. therefore, the appeal was allowed. according to the learned senior counsel, this would settle the issue.10. learned special counsel appearing for the enforcement directorate, however, referred to certain notifications of the ministry of law. on 11-2-1958, the ministry of law issued a notification that the central government authorizes the officers specified in the schedule annexed to the notification of the government of india in the ministry of law no. s.r.o. 351, dated 25-1-1958 to act for that government in respect of judicial proceedings. the two senior central government standing counsels had raised two questions in a letter dated 24-7-1978 and the assistant legal adviser to the government of india clarified that the director of enforcement who is under item 9 to the schedule to the notification dated 25-1-1958 is the officer empowered to sign and verify the pleadings as well as act for the government and that even if the adjudicating authority is the director of enforcement, when he institutes or defends any appeal under section 54, he will be acting only as an administrative head of the director of enforcement and is fully empowered to defend or institute an appeal. the notification dated 16-2-2002 is issued by the ministry of home affairs, viz., the authentication orders and other instruments rules, 2002. it is seen here that with regard to the department of revenue, ministry of finance, the officers who may authenticate the orders and other instruments are the special directors/additional director/deputy director/deputy legal adviser. on 8-11-2001, there is a letter from the enforcement directorate which is addressed to the deputy director, enforcement directorate in new delhi, which is to the following effect:it has been decided to file an appeal against the order dated 18-7-2001 with regard to a. michael and m. soosai.11. a. michael and m. soosai are the respondents in the present appeals. the director was also requested to file an application for condonation of delay. on 20-11-2001, a letter is addressed from the enforcement directorate at new delhi to the deputy director, chennai, enclosing extracts of notes for information and other action. it is seen from here that a decision had been taken to file an appeal on the ground that the tribunal had not considered various points and it failed to appreciate the findings of the adjudicating officer. the file notings show that all the officers and authorities in the enforcement directorate have agreed with the deputy legal adviser's view that the matter deserves to be contested further. on 18-8-2008, the president of india was pleased to appoint the director of enforcement in the rank and pay of additional secretary. on 6-3-2009, there was an order empowering the officers in the rank of assistant director and above for the purposes of section 54 of fera and 35 of fema. therefore, the learned special counsel would contend that the decision had been taken only by the government to file an appeal and the officers who decided on behalf of the government have also been mentioned in the notifications and notices referred to above and the appeal itself has only been filed by the union of india represented by the director. therefore, all the criteria are satisfied. he submitted that neither rama arangannal's case (supra) nor mohtesham mohd. ismail's case (supra) will come to the aid of the respondents since in rama arangannal's case (supra), the central government was not a party and the deputy director had not filed the appeal representing the central government and there are observations in the supreme court's decision which clearly come to the aid of the appellant. learned special counsel also relied upon various decisions. we will refer only to those judgments which are applicable to the facts of this case.12. in m.m.t.c. ltd. v. medchl chemicals & pharma (p.) ltd. [2002] 108 comp. cas. 48 : 39 scl 270, the supreme court held as follows:. even presuming that initially there was no authority in the person who filed the complaint, the company can, at any stage, rectify that defect. at a subsequent stage, the company can send a person who was competent to represent the company.therefore, according to the special counsel, the defect, even assuming there is a defect, is a curable defect. the learned special counsel referred to v.s. mallimath v. union of india : [2001] 4 scc 31, wherein the supreme court held that the expression used in the proviso to rule 3(b) of the conditions of services rules has to be construed in the wider sense. he also referred to a judgment of p. sathasivam, j. (as he then was) sitting singly in application no. 177 of 2001 in insolvency notice no. 39 of 2001, where the same question was raised as to whether the proceedings initiated by the deputy director can be said to be done by the government of india and reliance was placed again on rama arangannal's case (supra). it was brought to the notice of the court then that the directorate of enforcement is an ex officio additional secretary to the government of india and reference was made to pradeep kumar biswas v. indian institute of chemical biology : [2002] 5 scc 111, where the supreme court explained that what is meant to be ex officio appointment. the learned judge also referred to v.s. mallimath's case (supra), wherein it was held that the expression 'government of india' includes all the officers functioning under the three wings and, therefore, it was held that the deputy director, enforcement directorate is an officer of the government of india coming under the department of revenue, ministry of finance and is not independent of the government of india; he is an officer of the union and his acts and duties are only official and he is acting for the government of india.13. we are of the opinion that this decision fully answers the question raised by the learned senior counsel appearing for the respondents in this case. in fact, in mohtesham mohd. ismail's case (supra), it is true that the supreme court held that the appeal filed by the adjudicating authority was not maintainable, but in the course of doing so, an observation was made that before the high court 'no notification was filed to show that the authority concerned was empowered to prefer an appeal on behalf of the central government; the central government was not even impleaded as a party to the appeal and the first respondent did not file the appeal on behalf of or representing the central government. it was filed in his official capacity as the adjudicating authority and not as a delegatee of the central government'. therefore, it is clear that when the appeal is filed by the union of india represented by the director, then the appeal is filed by the central government and the central government is the aggrieved party. the central government will have to be represented by an officer and the officer in this case is the proper officer as per the various notifications discussed above. in fact, in the letter dated 28-7-1979 signed by the assistant legal adviser to the government of india in response to queries raised by the senior central government standing counsel in his letter dated 24-4-1979, what he says is that the director of enforcement is the officer empowered to sign and verify the pleadings as well as act for the government. the crucial words here are not only signing and verifying the pleadings, but he is specifically empowered 'to act for the government'. the authentication order and rules also show that it is the correct officer who has signed the pleadings. the communication from the government of india, enforcement directorate, new delhi on 8-11-2001 shows that the decision has come from the government to file an appeal against the said order and not from the local directorate. it was also pointed out that in vineet narain v. union of india : air 1998 sc 889, considering the importance of the enforcement directorate, it was decided to upgrade the director's post to that of an additional secretary. in fact, in m.m.t.c. ltd's case (supra), the objection raised was that the complaint under section 138 of the negotiable instruments act, 1983 was not maintainable since it was not the proper officer who had initiated the proceedings and that the complaint could only be filed by a person who is in charge or the responsibility of the government and that a subsequent authorisation would not validate the complaint. the supreme court held that in that case, the eligibility criteria prescribed by section 142 is that the complaint must be by the payee or the holder in due course and that the said criteria was satisfied as soon as the complaint was in the name and on behalf of the appellant-company. if we adopt the same analogy to this case, the appeals are filed only by the union of india represented by the officer, who according to us, as per the records produced by the learned special counsel, is a person authorised in this behalf. therefore, the preliminary objection is rejected.14. now, we shall proceed to discuss the facts of this case. on 10-6-1997, the officers of the enforcement directorate, chennai apprehended one a. balasubrarnanian alias balu and m. soosai, manager and cashier, respectively of the international money exchange corporation, chennai (hereinafter referred to as imec), at the entrance of linghi chetty street on n.s.c. bose road, chennai -1, and during personal search recovered and seized the foreign currencies of us$ 10,000, uae dirhams 4,000, om 4,600, australian $ 2,415, french francs 23,250, uk pounds 5,520 in cash, us$ (travellers cheques) 20,000 duly discharged and indian currencies of rs. 4,300 along with documents as per mahazar from the person of shri m. soosai, under section 34 of the foreign exchange regulation act, 1973 (hereinafter referred to as fera). documents were recovered from a. balasubramanian and the office premises of imec under mahazar. the department recorded statements from the two persons under section 40 of fera and it is stated that they had admitted that the seized foreign exchange including the travellers cheques worth us$ 20,000, duly discharged, was being taken by them for sale unauthorizedly at burma bazar.the further allegation was that the imec and said two persons had dealt with the foreign exchange without the previous general or special permission of reserve bank of india.15. a show-cause notice, dated 8-12-1997, was issued by the special director of the enforcement directorate to the respondents herein and imec and mr. a. balasubramanian, calling upon them to show cause as to why adjudication proceedings as contemplated in section 51 of the foreign exchange regulation act, 1973, should not be held against them for the contraventions and as to why the foreign exchange of us$ 10,000, uae dirhams 4,000, om 4,600, australian $2,415, french francs 23,250, uk pounds 5,520 and us$ (tcs) 20,000 seized by the officers of enforcement on 10-6-1997 from the possession of shri m. soosai, cashier, of m/s. imec when he was travelling with shri a. balasubramanian, manager on a motorcycle near linghi chetty street, should not be confiscated to the central government under section 63 of the said act, being involved in contravention of the provisions of section 8(1) ibid.16. the noticees submitted their replies and the matter was taken up for adjudication. due to the raise in the monetary limit of adjudication of cases, the adjudication stood transferred to the deputy director, enforcement directorate, chennai. the adjudicating authority by order-in-original dated 7-1-2000, held that the charges levelled against mr. a. michael, proprietor of imec and mr. m. soosai, cashier, imec are established beyond reasonable doubt and they are guilty of the charges, and proceeded to impose penalty of rs. 5,000 for contravention of section 7, read with sections 6(4), 6(5) and section 49 of fera, rs. 50,000 for contravention of section 8(1) for otherwise transferring the travellers cheques and foreign currencies to m. soosai. further, the adjudicating authority ordered confiscation of the seized travellers cheques in terms of section 63 of the act. mr. m. soosai was imposed with the penalty of rs. 30,000 under section 8(1) of the act and rs. 15,000 under section 8(1), read with section 64(2) of the act. the seized foreign currencies of us$ 10,000 and assorted foreign currencies were ordered to be released with a direction to encash the same with a bank authorized to deal with the same. the charges framed against m/s. imec and a. balasubramanian, manager were dropped.17. aggrieved by the order of the adjudication, a. michael and m. soosai preferred appeals before the appellate tribunal for foreign exchange, new delhi. the tribunal by a common order dated 18-7-2001 allowed the appeals and set aside the order of the adjudicating authority and directed that the seized foreign currencies as well as penalty amount that has already been deposited to be returned. the above civil miscellaneous appeals have been preferred by the union of india represented by its director of enforcement against the common order of the tribunal dated 18-7-2001.18. in terms of section 54 of fera, (which was repealed with effect from 31-5-2000 and fema came into force with effect from 1-4-2000) an appeal shall lie to the high court only on a question of law from any decision or order of the appellate board under sub-section (3) or sub-section (4) of section 52 of fera. the following questions of law are raised for determination:1. despite the facts and circumstances indicated above, the appellate tribunal for foreign exchange has held that there is no violation of section 7, read with sections 6(4), 6(5) and 49 of fera, 1973 and, hence, the question of law has arisen for consideration.2. whether the indicated transaction beyond the authorized place of transaction of business in money changer's licence, without rbi permission, would tantamount to violation of fkm licence and provisions of fera, 1973 ?3. whether the respondent was prejudiced as to the non-placement flm licence terms and conditions on record ?4. whether the factum of signature and counter signature duly discharged in the tcs for us$ 20000 seized from shri. m. soosai will not be tradable foreign exchange ?5. whether the discharged tcs of us$ 20,000 in the hands of employees of imec for sale to burma bazaar would not amount to otherwise transfer in violation of section 8(1) of fera, 1973 ?6. the taking of foreign exchange/currencies by the employees of the authorized money-changer in the manner indicated above will amount to otherwise transfer as envisaged under section 8(1) of fera, 1973 and would amount to any contravention of fera, 1973.7. whether the learned appellate tribunal was right in deciding that such contraventions of provisions of fera, 1973 would be covered under proviso to section 8(1) of fera, 1973 and would render the contraventions inconsequential ?8. whether the interpretation of the learned appellate tribunal would result in impairing the scope and effect of provisions of section 7, read with sections 6(4), 6(5), 49 and 8(1), of fera, 1973 ?9. whether the finding of the learned appellate tribunal that there was no violation of section 7, read with sections 6(4), 6(5), 49 and 8(1), of fera, 1973 is in order?10. whether the presumption available under section 59, read with section 71, of fera, 1973 will squarely apply to the facts and circumstances of the case on hand and not applying such presumption by the learned appellate tribunal would tantamount to erroneous findings in law ?11. whether the findings and conclusions of the appellate tribunal are in accordance with foreign exchange regulation act and the flm instructions ?19. the show-cause notice extracts sections 7, 6(4), 6(5), 8(1) and 64(2) of the foreign exchange regulation act and also wanted the respondents to show cause as to why adjudication proceedings shall not be initiated against them for contravention of the above sections and why the foreign exchange shall not be confiscated. to put it in brief, the international money exchange corporation and a. michael, the respondent in c.m.a. no. 205 of 2002 were alleged to have contravened section 7, read with section 6(4) and 6(5), of the act for not complying with the condition subject to which the full-fledged money-changers license was granted to them and by otherwise transferring the foreign exchange to a. balasubramanian and m. soosai and for contravention of section 8(1), read with section 64(2), of the act, a. balasubramanian and m. soosai who are said to have otherwise acquired the foreign exchange and had allegedly attempted to sell the same to persons in burma bazaar. m. soosai, the respondent in cm. a. no. 206 of 2002, had been working as the cashier of m/s. imec. he was also an authorized representative and was empowered to buy and sell foreign currency notes. his specimen signature had also been furnished to the reserve bank of india, as required. according to him, he cannot be said to have otherwise acquired the foreign exchange from his own employer and he is bound to do such transactions in the course of his employment in terms of the full-fledged moneychangers license issued to him by the rbi.20. mr. b. kumar, learned senior counsel appearing for the respondents, submitted that the proviso to section 8(1) of the act provides that nothing in the sub-section would apply to any purchase or sale of foreign currency effected in india between any person and a money-changer. he submitted that when the foreign exchange in question was legally purchased by m/s. imec and proper vouchers for that transaction from authorized foreign exchange dealers were carried by him as an authorized representative of imec for delivering to m/s. dass india forex division, how he could be charged with the offences as aforesaid. learned senior counsel submitted that the circumstances under which a. balasubramanian and m. soosai had to carry the assorted foreign currency had been clearly explained and when the foreign exchange mentioned had been seized from their possession when they were travelling near linghi chetty street, there is nothing to indicate that it was to be sold to a person in burma bazaar. there is no factual foundation for that. learned senior counsel submitted that m. soosai is an authorized official and empowered to buy and sell foreign currency notes and travellers cheques and in view of the fact that it was in his possession handed over to him by his employer for being handed over to some one else, he cannot be said to have acquired the foreign exchange otherwise than in accordance. learned senior counsel further submitted that the foreign exchange in question was legally purchased by m/s. imec under proper vouchers by authorized dealers and these were also produced and that is why the tribunal had accepted the case of the respondents.21. as regards the travellers cheques, it was submitted that if a customer presents a travellers cheque that has already been countersigned, the acceptor, while taking it, should ask that person to once again sign the travellers cheque on the reverse and get the two signatures compared by folding the cheque over and satisfy himself about the truth of the signature. learned senior counsel submitted that if this is so, it is incorrect to state that the travellers cheque could be encashed by anyone anywhere. it was also submitted that the show cause memo merely extracts all the sections without specifically putting on notice the exact nature of contravention.22. learned special counsel appearing for the appellants submitted that it was on specific information that was received that the seizure was effected. there was nothing to show that dass india colour lab had asked for any money from the respondents and, therefore, the case that m. soosai and balasubramanian were proceeding with the foreign exchange in their possession to hand it over to dass india is a pure fabrication. there was a bulk sales of currency of various countries. one xavier, who was not authorized, had signed in the bulk note slip as a seller. balasubramanian had signed as a buyer, though the seller is imec and balasubramanian is admittedly an employee of imec.23. the case that the respondents had obtained the foreign exchange from thomas cook and other authorized dealers was also not proved because nobody from thomas cook or transcorp was examined at the time of seizure, there was no sale memo, it was produced only thereafter.24. the following decisions were cited - k.i. pavunny v. asstt. collector (head quarter) central excise collectorate : 1997 (90) elt 241 (sc), state of maharashtra v. mohd. yakub : air 1980 sc 1111, union of india v. abdul mohamed [2000] 10 scc 169, abdul mohamed's case (supra) was relied on by the learned senior counsel appearing for the respondents to show that unless there is positive material to show that the accused could be said to have acquired the foreign exchange in contravention of section 4(1), it cannot be established that the accused had 'otherwise acquired' the confiscated foreign exchange in violation of section 4(1) of the act, the expression 'acquired' must indicate something more than mere possession. this decision was relied on by the learned senior counsel to show that mere possession of the foreign exchange by m. soosai or balasubramanian would not help the case of the appellants.25. the license granted by the reserve bank of india to imec shows that they are empowered to purchase foreign currency notes/coins and travellers cheques and to sell foreign currency notes/coins on their behalf and also to sell on behalf of authorised dealers (and not on their own behalf) foreign currency travellers cheques only at the aforesaid address up to the limits specified, to eligible travellers proceeding abroad under basic travel quota/business visits and for such other purposes which may be approved by reserve bank for release of exchange by ffmc subject to the conditions in paras 11 and 12, flm and as may be notified from time to time by the reserve bank of india and also subject to other conditions. the terms and conditions accompanying the full-fledged money-changers license are that they should be conducted strictly in accordance with the directions contained in the memorandum of instructions. as far as travellers cheques are concerned, all travellers cheques purchased by the licenced money changer should be sold to an authorized dealer in foreign exchange immediately, i.e., on the next day. monthly statements should be given in respect of all transactions.26. as far as the memorandum of instructions to full-fledged money changers is concerned, there are two categories of money-changers, one is full-fledged and the other is restricted. full-fledged money-changers are those firms or individuals who are authorized to undertake by them purchase and sale transactions with the public. restricted money-changers are those shops, hotels, etc., which have been authorized to purchase foreign currency towards costs of goods supplied by them. in respect of authorized officials, it is stipulated that all money-changers should arrange to forward a list giving full names and designations of their representatives who are authorised to buy and sell foreign currency notes, coins and travellers cheques on their behalf together with their specimen signatures, at the end of each year to the office of reserve bank under whose jurisdiction they are functioning. any changes in the list should also be brought to the notice of reserve bank. no person other than the authorised representative should be allowed to transact money changing business on behalf of the money-changer. attention of money-changers is drawn to the conditions stipulated on the money-changing licence issued by the reserve bank. as far as the conditions governing the licence are concerned, money-changers are supposed to abide by these conditions besides the directions contained in the memorandum in their dealings. in respect of purchases from other money-changers and authorised dealers, it is stipulated that money-changers may freely purchase from other money-changers and authorised dealers in foreign exchange or their exchange bureau, any foreign currency notes and coins tendered by the latter. as per instruction 3 of the memorandum of instructions, which has already been extracted above, all money-changers should arrange to forward a list giving the full names and designations of their representatives who are authorized to buy and sell currency notes,27. ex. 6 is the specimen signature, allegedly given by international money exchange corporation, of the authorized signatories of their office. a xerox copy of ex.6 is enclosed in the typed set of papers and it is seen that while the names of soosai, balasubramanian and savarimuthu are shown as authorised signatories, which are shown in the paper book, the names of m. maharoof and michael appear to have been inserted. according to the respondents, the foreign exchange was handed over to them by imec in their capacity as employees. the foreign exchange was found in the possession of m. soosai and balasubramanian. both their names find a place in the communication sent to the reserve bank of india as per the terms of para 3 of memo flm, 1994. when the respondent has handed over the foreign exchange to his employees, who are also signatories and duly authorized in his behalf in connection with his business, it cannot be said that he has transferred the foreign exchange in contravention of section and the employees cannot be said to have acquired the foreign exchange when such foreign exchange has been entrusted to them by their employer in connection with the business.28. in this regard, the judgment of the supreme court in abdul mohamed's case (supra) will come to their aid. in that case, the supreme court held as follows:4. the pre-condition to attract section 4(1) would be 'buy or otherwise acquiring or borrowing from or sell or otherwise transfer or lend to or exchange with any person not being an authorised dealer, any foreign exchange'. from the fact that some foreign exchange was recovered from the car belonging to the respondent, the only provision which may possible get attracted is whether the respondent can be said to have 'otherwise acquired', inasmuch as all other expressions in sub-section (1) of section 4 are totally absent. the expression 'acquire' must have a definite connotation and it must indicate something more than mere possession. there is not an iota of material to indicate even that the respondent knew what the packet contained when it was delivered to him or when the packet was recovered from the car being intercepted. he has taken a plea that it was handed over to him at bombay to be carried to kasaragod and somebody would come to take it from him at kasaragod. such a plea, on the face of it, cannot be rejected ipso facto.the case in hand is even better. the employees of imec and as the authorized representative whose signatures have been forwarded to the reserve bank of india and who are allowed to transact money-changing business on behalf of the money-changer, their employer, when found in possession of the foreign exchange, cannot be said to have otherwise acquired such foreign exchange. except for the statements of soosai and balasubramanian, there is no corroborating evidence to show that they were attempting to sell the foreign exchange unauthorisedly to any other person.29. learned special counsel for the appellant submitted that the licence to deal in the foreign currency authorises the said licencee to purchase or sell foreign currency on behalf of the authorised dealers only at the address mentioned in the licence and the address mentioned in the licence is no. 54, cathedral road, madras-6. the fact that the respondents were found in possession of the foreign currency at a place other than the aforesaid address would automatically mean that they had contravened the provisions of the act. we are afraid, it is difficult for us to accept this. the licence is given to purchase foreign currency and sell foreign currency only at the aforesaid address, viz., the address mentioned in the licence. it is not the case of the appellant that soosai was selling or purchasing foreign currency. he was merely in possession of the foreign currency. what he might have wanted to do with the foreign currency is something that we do not know.30. in this connection, mohd. yakub's case (supra) may help. in that case, on receipt of secret information that silver would be transported, the customs officials surrounded the vehicles through which it was being smuggled and the trial court convicted the accused for attempting to smuggle silver out of india. the sessions court, in appeal, acquitted the accused on the ground that the facts proved by the prosecution fell short of establishing that the accused had attempted to export silver in contravention of the law. the supreme court allowed the appeal filed by the state and there the learned judges explained what is attempt:13. well then, what is an 'attempt? kenny in his 'outlines of criminal law' defined 'attempt' to commit a crime as the last proximate act which a person does towards the commission of an offence, the consummation of the offence being hindered by circumstances beyond his control'. this definition is too narrow. what constitutes an 'attempt' is a mixed question of law and fact, depending largely on the circumstances of the particular case. 'attempt' defines a precise and exact definition. broadly speaking, all crimes which consist of the commission of affirmative acts are preceded by some covert or overt conduct which may be divided into three stages. the first stage exists when the culprit first entertains the idea or intention to commit an offence. in the second stage, he makes preparations to commit it. the third stage is reached when the culprit takes deliberate overt steps to commit the offence. such overt act or step in order to be 'criminal' need not be the penultimate act towards the commission of the offence. it is sufficient if such act or acts were deliberately done, and manifest a clear intention to commit the offence aimed, being reasonably proximate to the consummation of the offence. as pointed out in abhayanand mishra v. state of bihar : [1962] 2 scr 241, there is a distinction between 'preparation' and 'attempt'. attempt begins where preparation ends. in sum, a person commits the offence of 'attempt to commit a particular offence' when (i) he intends to commit that particular offence; and (ii) he, having made preparations and with the intention to commit the offence, does an act towards its commission; such an act need not be the penultimate act towards the commission of that offence but must be an act during the course of committing that offence.in that case, accused 1 was driving the jeep, accused 2 was driving the truck and accused 3 was a cleaner. silver ingots were concealed in the jeep and in the truck. the accused gave false names and address. the accused were not dealers in silver. when the accused were surrounded, officers heard the sound of the engine of a mechanised vessel. the supreme court held that even though the last act was not completed, 'it is sufficient if the act or acts were deliberately done and manifest a clear intention to commit the offence aimed being reasonably proximate to the consummation of the offence and applying to the facts, they came to the conclusion that the silver ingots were concealed in two vessels under the cover of darkness. the accused had reached seashore. they had started unloading the silver near a creek from where a sound of an engine of a sea craft was also heard. therefore, even beyond the stage of preparation, most of the steps necessary had been taken. the only step remained was to load it on to the sea craft which was aborted by the intervention of the officers of law'. in that case, the supreme court has referred to smuggling being an anti-social activity which adversely affects the public revenue and earning of foreign exchange.31. in this case, if the offence had been made out or at least the respondents had committed an act which was sufficiently close for the consummation of the offence, then we might be able to accept the case of the appellant. here, the possession of the foreign exchange cannot be said to be illegal because they were authorized signatories and could have been rightly in possession of the foreign exchange. they were not at the moment when they were apprehended selling or purchasing foreign exchange. the only thing that might be said against them is that they were in linghi chetty street, which is somewhere in the vicinity of burma bazaar. they were proceeding on the cycle. it is difficult for us to accept the case of the appellant that the only conclusion that we can draw from this is that they were attempting to illegally sell the foreign exchange in burma bazaar. they have given an explanation for the bulk sale memo which was not seized along with the foreign currencies and it was produced only subsequently. it is not the case of the appellant that the bulk sale memos given by thomas cook and transcorp international were false and fabricated. all that they say is that it was not there at the time of seizure. but once the respondents had produced documents to support their case and to legitimize their possession of the foreign exchange, unless the department is able to adduce evidence or produce materials to show that these bulk sale memos cannot be relied on, we cannot reject them merely on the ground that they were not seized contemporaneously with the foreign exchange. therefore, the extracted statement of soosai is not corroborated by any other evidence. strict rules of criminal procedure and rules of evidence may not be applied to section 40 proceedings, where we can ignore rules of corroboration. if there is evidence of force or threat in recording statements, that is relevant too. if there are two probabilities, one of which rules out the involvement of the person, then we cannot order conviction. therefore, we are unable to interfere with the finding of the tribunal with regard to the possession of the foreign exchange.32. next we come to the travellers cheques. with regard to travellers cheques, the position is different. the destruction mahazar is signed by balasubramanian and soosai, who are the employees of imec. the destruction mahazar should have been with the travellers cheques. it was not seized along with the travellers cheques. the story given by michael is that inadvertently the passengers signed in both the places in each travellers cheque. he states:since m/s. imec was not accepting outstation cheques, they insisted on cash or bank demand draft towards the cost of the tcs; that the passengers collected back the btq applications and connected records and left the premises saying that they would come back soon with cash or bank drafts for purchasing the tcs; that the passengers did not come back to m/s. imec till the evening on 10-6-1997; that m/s. imec decided to destroy the 40 tcs in question, prepared the necessary destruction certificates and were to go to m/s. amex, spencer plaza, anna road, chennai-2, for getting the tcs punched as required by m/s. amed procedure; that in the meantime, m/s. imec deputed two of their employees for purchasing us$ 5000 from m/s. thomas cook, no. 112, nungambakkam high road, chennai-34 and another sum of us$ 5000 from m/s. transcorp international ltd., precision plaza, no. 281, mount road, teynampet, madras-18, legally and that there was some delay in the return of those employees.this explanation was not accepted by the adjudicating officer, who held thus:hence, the tcs in question were undoubtedly meant for sale unauthorisedly, as alleged in the memorandum.** ** **page 9 of the 'acceptor's reference guide' shows as to how acceptance of amex tcs are undertaken. it says thatamerican express tcs work on a simple 'signature and counter signature' principle.purchase:customer signs cheques here at the time of purchase.encashment:customer signs here, at the time when cheque is presented for encashment.acceptor must watch this counter-signature and then compare the two signatures to ensure that they are the same. the introduction to the said guide states that the procedure adopted to spot out dissimilar signatures and it is mentioned that if the authorities, who allow encashment spot and stop a fraudulent encasher they are awarded by american express. this instruction clearly shows that the normal procedure is signature and counter signature principle. but in the instant case, there is no dispute about the similarity of signatures. hence, when signatures and counter signatures are available, the tcs could be encashed. the investigation conducted in this case has shown that ma, imec have not retained even btq applications nor the so-called destruction certificate was fund to be in possession of m/s. imec and s/shri soosai and balasubramanian.the tribunal held that it cannot be said simply because the travellers cheques were countersigned that they were intended for illegal sale. if the appellant intended to sell the same illegally, it was easier for him not to sign these cheques at all, for in any case the buyer would be required to countersign the same at the time of their presentation, we are not able to accept this view. inadvertently passengers may sign the travellers cheques on both sides. we cannot rule out such human errors. but 30 passengers signing inadvertently at the same time is too big a pill to swallow.33. there is nothing to show that the travellers cheques were delivered to eligible passengers. m/s. imec did not have the btq applications. there were no documents to support the case of imec, balasubramanian and soosai that the travellers cheques in question had been delivered to eligible passengers, who had inadvertently discharged the travellers cheques. the destruction certificate was not in their possession at the time of interception. neither in their retraction letters nor at any point of time have the noticees mentioned anything about the destruction certificate. the rules relating to travellers cheques which show as to how encashment can be avoided do not in any way strengthen the case of the respondents. the possession of the discharged travellers cheques, when not supported by any evidence regarding the details of the passengers who discharged the travellers cheques and the reason why so many travellers cheques were in their possession strengthens the case of the department. the story that there was non-availability of cash and that one party refused to accept the value in cash is too vague a piece of evidence to absolve the respondents of the contravention alleged.34. for all these reasons, we hold that the appeals are maintainable. the order of the appellate tribunal for foreign exchange is set aside only insofar as the travellers cheques are concerned and the order of the adjudicating officer with regard to the travellers cheques is restored. since we are confirming the order of the tribunal with regard to the foreign currency, the penalty imposed on the respondents is reduced to rs. 45,000 (rupees forty five thousand only) in the case of a. michael and rs. 35,000 (rupees thirty five thousand only) in the case m. soosai. the writ petitions are partly allowed. there shall be no order as to costs. consequently, the connected miscellaneous petitions are closed.