Prakash Chandra Yadav vs Directorate Of Enforcement

$~18
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 30.04.2026
+ MISC. APPEAL(PMLA) 19/2024
PRAKASH CHANDRA YADAV .....Appellant
Through: Mr. Pavan Narang, Senior
Advocate with Mr. Manish
Shukla, Mr. Nilash Tiwari, Ms.
Aishwarya Chhabra and Mr.
Himanshu Sethi, Advocates.
versus
DIRECTORATE OF ENFORCEMENT .....Respondent
Through: Mr. Vivek Gurnani, Panel
Counsel for ED with Mr.
Kanishk Maurya, Advocate.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
NAVIN CHAWLA, J. (ORAL)
1. This appeal has been filed under Section 35 of the Foreign
Exchange Management Act, 1999 [hereinafter, “FEMA”] read with
Section 54 of the Foreign Exchange Regulation Act, 1973 [hereinafter,
“FERA”], challenging the order dated 29.05.2024 passed by the
learned Appellate Tribunal for Foreign Exchange under SAFEMA
[“the Tribunal”] in Appeal No. FPA-FE-311/DLI/2005, titled as, “Shri
Prakash Chandra Yadav vs. The Special Director, Directorate of
Enforcement, Delhi”, inter alia dismissing the appeal filed by the
appellant herein.
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Signed By:VAISHALI
PRUTHI
Signing Date:04.05.2026
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2. The appellant had filed the above appeal before the learned
Tribunal, challenging the order dated 30.11.2004, whereby the learned
Adjudicating Authority had imposed a penalty of Rs. 5 Lakhs on the
appellant for the alleged contravention of Section 8(1) of FERA.
3. The respondent had imposed the above penalty alleging that one
Akbar Veerji, an NRI, had opened a Non-Resident External [“NRE”]
account with the Canara Bank by depositing foreign exchange in the
following manner:-
i. 01.07.92 (cash) US $500/- equivalent to Rs.14,850/-
ii. 04.07.92 (cash) US $10,000/- equivalent to Rs.2,95,000/-
iii. 17.07.92 (F.I.T.T) US $1,39,000/- equivalent to Rs. 42,29,756/-.
4. Out of the amount so deposited, a Cheque amounting to Rs. 30
Lakhs was issued in favour of the appellant on 17.07.1992. Claiming
that the same was a violation of Section 8(1) of FERA, proceedings
were initiated not only for imposition of penalty under Section 50 of
the FERA but a criminal prosecution was also launched inter alia
against the appellant.
5. As far as the criminal prosecution is concerned, by an order
dated 30.11.2017 passed in CC No. 42/1/14, titled as, “Enforcement
vs. Nemi Chand Jain & Ors.”, the learned ACMM, Patiala House
Courts has been pleased to acquit the appellant. However, as far as the
penalty proceedings are concerned, as noted hereinabove, the
Adjudicating Authority imposed a penalty of Rs. 5 Lakhs on the
appellant vide order dated 30.11.2004, which has been confirmed by
the learned Tribunal by dismissing the appeal filed by the appellant.
The present appeal has been filed challenging the said order.
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Signed By:VAISHALI
PRUTHI
Signing Date:04.05.2026
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6. The learned Senior Counsel appearing on behalf of the
appellant submits that in the present case, as the amount had been
transferred to the appellant in Indian currency, there was no violation
of Section 8(1) of FERA. He submits that the impugned order has
wrongly interpreted Section 8(1) of FERA and is, therefore, liable to
be set aside.
7. On the other hand, the learned counsel appearing on behalf of
the respondent submits that the present appeal is liable to be dismissed
not only on the ground of suppression, inasmuch as the appellant has
failed to disclose in the appeal the judgment dated 06.04.2009 passed
by this Court in CRL.REV.P. 146/2007, titled as, “ Prakash Chand
Yadav vs. Enforcement Directorate ” [NC No. 2009:DHC:1166], by
which the revision petition filed by the appellant against the framing
of charge in the criminal case had been rejected by a learned Single
Judge of this Court, but even on merits. He submits that in the present
case, the alleged Loan Agreement dated 03.07.1992 relied upon by the
appellant, would show that the appellant was aware that the amount
been given to him as loan was from a NRE account, thereby showing
his connivance in violation of Section 8(1) of FERA.
8. He submits that the learned Tribunal has also upheld the
impugned penalty by placing reliance on Section 8(2) of FERA, which
prohibits conversion of foreign exchange into Indian Currency.
9. We have considered the submissions made by the learned
counsels appearing for the parties.
10. There is no dispute on facts inasmuch as it is not denied by the
appellant that he has received a cheque of Rs. 30 Lakhs from Akbar
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PRUTHI
Signing Date:04.05.2026
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Veerji, drawn on his NRE account, wherein the amount was deposited
by him in foreign currency, that is, US Dollars. It is also not disputed
that the cheque given to the appellant was, however, in the Indian
Currency.
11. The only issue that arises for consideration of this Court is
whether by receiving the said amount, the appellant can be said to
have violated Section 8(1) or Section 8(2) of the FERA.
12. In this regard, the relevant provisions of the FERA are
reproduced hereinbelow:-
“2(h) “foreign exchange” means foreign
currency and includes—
(i) all deposits, credits and balances
payable in any foreign currency, and
any drafts, traveller's cheques, letters
of credit and bills of exchange,
expressed or drawn in Indian currency
but payable in any foreign currency;
(ii) any instrument payable, at the option of
the drawee or holder thereof or any
other party thereto, either in Indian
currency or in foreign currency or
partly in one and partly in the other.
xxx
8. Restrictions on dealing in foreign
exchange.-
(1) Except with the previous general or special
permission of the Reserve Bank, no person
other than an authorised dealer shall in India,
and no person resident in India other than an
authorised dealer shall outside India,
purchase or otherwise acquire or borrow
from, or sell, or otherwise transfer or lend to
or exchange with, any person not being an
authorised dealer, any foreign exchange:
Provided that nothing in this sub-section shall
apply to any purchase or sale of foreign
currency effected in India between any person
and a money-changer.
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PRUTHI
Signing Date:04.05.2026
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Explanation.- For the purposes of this sub-
section, a person, who deposits foreign
exchange with another person or opens an
account in foreign exchange with another
person, shall be deemed to lend foreign
exchange to such other person.
(2) Except with the previous general or special
permission of the Reserve Bank, no person,
whether an authorised dealer or a money-
changer or otherwise, shall enter into any
transaction which provides for the conversion
of Indian currency into foreign currency or
foreign currency into Indian currency at rates
of exchange other than the rates for the time
being authorised by the Reserve Bank. ”
13. A reading of Section 2(h) of FERA would show that foreign
exchange means foreign currency and includes any other
instrument/deposit etc. payable in any foreign currency or in Indian
currency or in foreign currency at the option of the drawee or the
holder thereof; the essential element being that it is payable in foreign
currency at the option of the drawee or the holder of such instrument.
14. In the present case, it is not disputed that the cheque was paid
and was payable to the appellant only in the Indian currency.
15. A reading of Section 8(1) of FERA would further show that it
prohibits, except with the previous general or special permission of the
RBI, person other than an authorized dealer, to purchase or otherwise
acquire or borrow from, or sell, or otherwise transfer or lend to, or
exchange with any person, not being an authorized dealer, any foreign
exchange. It also prohibits any resident in India other than an
authorized dealer to outside India, purchase or otherwise acquire or
borrow from, or sell, or otherwise transfer or lend to or exchange with
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PRUTHI
Signing Date:04.05.2026
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any person, not being an authorized dealer, any foreign exchange. The
proviso to the Sub-Section carves out an exception for purchase or
sale of foreign currency effected in India between any person and a
money changer. The explanation further clarifies that for the purposes
of Sub-Section (1) of Section 8, a person who deposits foreign
exchange with another person or opens an account in foreign
exchange with another person, shall be deemed to lend foreign
exchange to such other person. What is, therefore, prohibited is the
dealing in foreign exchange in any manner, that is, by purchase or
otherwise acquiring or borrowing, or selling or otherwise transferring,
or lending or exchanging the same, except by the authorized dealer.
16. In the present case, the allegation against the appellant is not of
dealing in foreign exchange or of exchanging the same, but of
receiving an amount in Indian Rupees from an NRE account of Mr.
Akbar Veerji. The same cannot amount to a violation of Section 8(1)
of FERA.
17. The learned Tribunal in holding to the contrary has placed
reliance on an Explanation appended to Section 8(1) of FERA, and
held that even receipt of money in Indian currency from an NRE
account would be a contravention to Section 8(1) of FERA. We
cannot agree to such interpretation. The Explanation has to be read
strictly and in accordance with its grammatical meaning and a plain
reading of the same does not support the finding of the learned
Tribunal. The Explanation states that where the foreign exchange is
deposited with another person or an account in foreign exchange is
opened with another person, it shall be deemed to lending of foreign
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PRUTHI
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exchange to such other person. In the present case, there is no
allegation that Akbar Veerji has opened any account with the
appellant in foreign exchange or has lent the money to the appellant in
foreign exchange.
18. The learned Tribunal has further held that though it has not
been contended against the appellant and is not the basis of the penalty
proceedings initiated against him, the action of the appellant would
also amount to violation of Section 8(2) of FERA. We are unable to
agree with the said finding as well. Section 8(2) of FERA prohibits
any person, whether an authorized dealer or a money changer or
otherwise, from entering into any transaction which provides for
conversion of Indian currency into foreign currency or that of foreign
currency into Indian currency “at rates of exchange other than the
rates for the time being authorized by the Reserve Bank”.
19. In the present case, leave alone there being no allegation of
exchange of foreign currency into Indian currency or vice versa
against the appellant, there is also no allegation of the same being at a
rate of exchange other than the rate authorized by the Reserve Bank.
Section 8(2) of FERA, therefore, had no application in the facts of the
present case.
20. As far as the submission of the learned counsel for the
respondent that the present appeal is liable to be dismissed on account
of concealment of the order dated 06.04.2009 passed by the learned
Single Judge of this Court in CRL.REV.P. 146/2007, is concerned, we
may only note that the said order was passed rejecting the challenge of
the appellant against the order framing charge in the criminal case
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PRUTHI
Signing Date:04.05.2026
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against him. This Court, while rejecting the said challenge, had
observed as under:-
“ 12. In so far as the case of the petitioner is
concerned, it rests on the presumption that
there was proper remittance in the NRE
account of the account holder. It also depends
on the evidence which may be led by the
petitioner to show that this amount was
actually given to him by Vikram Virji. In the
absence of any evidence to the contrary and
the statement having been made by Vikram
Virji in his communication to Indian High
Commissioner, prima facie, the case of the
respondents that this money belongs to those
who were benefiting out of it such as the
petitioner in this case and the other accused
person is prima facie sufficient for framing the
charge against the petitioner. Therefore, to say
that charges have been wrongly framed at this
stage would not be justified in view of the
detailed reasons given by the ACMM while
framing the charges (supra). In so far as the
defence of the petitioner is concerned, it can
always be brought to the notice of Learned
ACMM during the course of trial.
13. Thus, I do not find any reason to interfere
with the order framing of the charge which has
to be passed by taking a prima facie view of
the matter and not on the basis of any concrete
evidence which may establish that petitioner
would certainly be convicted of the charges
leveled against him. I need not repeat the
judgments which have been already cited in
the order framing the charges in this regard.
Hence I do not find any merits in this case.
Petition filed by the petitioner is dismissed. Let
the parties appear before the Trial Court on
17.04.2009.
”
21. The above order was, therefore, passed only by considering
whether there is evidence on the basis of which the criminal
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PRUTHI
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prosecution of the appellant can proceed. The said criminal
proceedings have culminated in the acquittal of the appellant vide
order dated 30.11.2017 passed by the learned ACMM, wherein the
Court has held as under:-
“ 37. It has also come on record that during
the testimony of complainant witnesses i.e . of
Mr. R. K. Rawal that the money has not been
sent into India through Hawala, but has come
through banking channel into the account of
Akbar Veerji and admitted that the account
opened by him in India is NRE account and a
person residing abroad having Indian
nationality or any nationality could open an
NRE account in India and that the funds from
the NRE account could be taken back to the
country or it could be encashed in India by
cash or through Cheque. It is further admitted
by Sh. K. C. Abraham during his cross-
examination dated 07.03.2007, that the
transactions out of NRE account were in
Indian rupees and were made in India and
payments were made by Cheque. It is further
seen that the NRE account was maintained in
an Indian bank. It is now pertinent to mention
Section 8 (I) of FERA, 1973, which is as
under:
XXXX
41. Therefore, on perusal of the definition of
‘foreign exchange’, it is seen that the same
includes of deposits and credits and balance
payable in any currency and any drafts,
cheques, letters of credits and bills of
exchange expressed or drawn in Indian
currency, but payable in foreign currency.
Admittedly, it has come on record that the
NRE account was maintained in India was
payable in Indian currency and the payments
were made by cheques to the accused persons.
Nothing has come on record to show that any
kind of foreign exchange was acquired in this
case by the accused persons, as has been
alleged or is the proceeds of foreign exchange
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PRUTHI
Signing Date:04.05.2026
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which has not been dealt by an authorized
dealer in India.
42. In the present case, all money had been
received by the accused persons through
cheques of Indian currency and it is not the
case of the prosecution that foreign currency
was received by accused no. 2 and 3 in India
through cheques in NRE account. The money
has been deposited in an Indian bank and
payable by cheques. It has come on record,
who has deposited the money in the NRE
account maintained by Akbar Veerji and the
prosecution has failed to establish that what
kind of foreign exchange was credited or the
proceeds of which were received by accused
no. 2 and 3 in the present case. It has not even
come on record that in which country
allegedly was the amount of foreign exchange
that has been made was deposited or never
deposited the same and the Enforcement
Directorate has not even able to establish
whether the foreign exchange was deposited
by person, who was not the authorized dealer
as is the basis of the Section 8(1) of FERA,
1973, for which restrictions are provided for
dealing in foreign exchange. It is seen that in
order to attract the provisions of Section 8(1)
FERA, 1973, would be ‘buy or otherwise
acquire or borrowing or sell or otherwise lend
to exchange with any person not being an
authorized dealer, any foreign exchange.’
However, in the present case it is seen that
there is no evidence on record to indicate even
the possession of foreign exchange by the
accused persons as in the present case, three
cheques were issued by a NRE account
maintained with a bank in India, expressed in
Indian rupees and deposited in India which
has been admitted by the complainant
witnesses. Further, nothing has come on
record to show that the remittances made in
the NRE account maintained by Akbar Veerji
were not done by permissible modes.
”
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PRUTHI
Signing Date:04.05.2026
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22. In view of the above, the order framing charge was no longer
relevant and non-filing of the same by the appellant with the present
appeal, cannot result in the dismissal of the appeal.
23. In view of the above, we find that from the facts alleged against
the appellant, violation of Section 8(1) or 8(2) of FERA was not made
out.
24. The impugned order dated 29.05.2024 passed by the learned
Tribunal is accordingly set aside.
25. The appellant has deposited the penalty amount. The same be
refunded to the appellant within a period of four weeks from today.
26. The appeal is allowed in the above terms.
27. There shall be no order as to costs.
NAVIN CHAWLA, J
RAVINDER DUDEJA, J
APRIL 30, 2026/ vd/ma/ik
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