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1. This batch of appeals arises from an order dated 30 July 2008 of the Appellate Tribunal for Foreign Exchange in appeal against an order dated 16 August 2002 of the Special Director in the Enforcement Directorate.

2. Two notices to show cause were issued on 25 September 1998 to nine noticees. The Appellants in these proceedings are the company, its managing director and its director who are respectively noticees 1, 2 and 3. The allegation in the first notice to show cause was that during June to November 1995 the company which was a Full Fledged Money Changer (FFMC) authorised by the Reserve Bank released foreign exchange in the names of various persons contrary to the directions issued by the Reserve Bank of India. The foreign exchange was released allegedly without due verification of passports/ air tickets; without the presence of the travellers and without obtaining their signatures on the travellers' cheque; without making endorsement on the relevant passports and as a result foreign exchange was released to persons other than the applicants. The allegation was that both the travellers' cheques as well as currency PNP 3 FERA4-9.2.sxw notes in U.S. Dollars were released against the Business Travel Quota (BTQ). The BTQ scheme contained various conditions including the requirement that the passport of the traveller should be verified by the FFMC to ensure eligibility for release of the exchange; that the traveller should be in possession of an air ticket for travel to the country for which exchange was applied for; the passport should be endorsed with the amount of the exchange sold and the sale of foreign exchange should be made only on the personal application and upon identification of the traveller. Moreover, the traveller should invariably be required to sign the travellers' cheques in the presence of an authorised official. It was found that there was a breach of the special conditions attached to the BTQ scheme and that as a result there was a violation of the provisions inter alia of Section 7(4) read with Sections 6(4) and 6(5) of the Foreign Exchange Regulation Act 1973 (FERA 1973) read with Sections 49 and 68(1);

paragraphs 4, 11 and 12 of the memorandum of instructions issued by the Reserve Bank to FFMCs and Section 73(3).

3. In the second notice to show cause it was alleged that between the period 1995 to 1997 the company which is an FFMC authorised by the Reserve Bank to release foreign exchange, released foreign exchange amounting to U.S. $ 15,25,805/- to various persons on the basis of bogus documents without complying with the conditions prescribed by the Reserve Bank. It was accordingly alleged that there was a breach of the provisions of Section 7(4) read with Sections 6(4), 6(5) and 49 of the FERA, paragraphs 4, 11 and 12 of the memorandum of instructions of the Reserve Bank of India to FFMCs and Section 73(3).

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4. An adjudication took place before the Special Director of Enforcement and resulted in an order dated 16 August 2002. Insofar as the first show cause notice is concerned, the adjudicating officer came to the conclusion that foreign exchange under the BTQ scheme was released to certain agents from Trichy who were purporting to act for certain passengers. Certain passengers stated that they had not purchased foreign exchange and their passports had been misused for the purpose of obtaining foreign exchange. The adjudicating officer relied upon special conditions prescribed by the Reserve Bank at the relevant time in the Exchange Control Manual for the sale of foreign exchange under the BTQ scheme. Special Condition (4) required that the sale of foreign exchange should be made only on a personal application and identification of the traveller. Moreover, while issuing travellers' cheques, the traveller should invariably be required to sign the cheque in the presence of an authorised official and the purchaser's acknowledgment for receipt should be obtained in a receipt book. The adjudicating officer came to the conclusion that there was a violation of the applicable special conditions by the unauthorized release of foreign exchange. Noticee No.4 was an officer of the FFMC, Mr. S. Mygandan who was in charge of the Bangalore office of the company. The Special Director found on the basis of the evidence that special condition No.4 was meant for the company as an FFMC and appropriate instructions and guidelines should have been issued through the Managing Director and Director to all branches in advance to ensure proper compliance. Since such steps had not been taken and adequate evidence was not brought on the record to establish that due steps were taken, the company as PNP 5 FERA4-9.2.sxw well as its Managing Director and Director were held guilty of violation and came to be penalised. A personal penalty of Rs.2.50 lacs was imposed on the company, while a penalty of Rs.50,000/- each was imposed on the Managing Director and the Director who are in appeal.