Receipt of Indian currency via cheque from an NRE account does not constitute a violation of Section 8 FERA.

The appellant received a cheque for Rs. 30 Lakhs in Indian currency on July 17, 1992, from an NRI, Akbar Veerji

The funds originated from Veerji’s Non-Resident External (NRE) account, which had been funded by deposits in US Dollars

The Respondent (ED) initiated proceedings alleging that receiving these funds constituted a violation of Section 8(1) of the Foreign Exchange Regulation Act (FERA), 1973.

On November 30, 2004, the Adjudicating Authority imposed a penalty of Rs. 5 Lakhs

Concurrently, the appellant was prosecuted and subsequently acquitted in criminal proceedings in 2017

The Appellate Tribunal upheld the penalty on May 29, 2024, prompting this appeal

1. Whether the receipt of Indian currency via a cheque drawn on an NRE account constitutes a violation of Section 8(1) or Section 8(2) of FERA

2. Whether the appeal was liable to be dismissed for suppression of a prior 2009 High Court order rejecting a challenge to the framing of criminal charges

Section 2(h) of FERA, which defines "foreign exchange" as foreign currency or instruments payable in foreign currency

Section 8(1) restricts unauthorized persons from dealing (purchasing, borrowing, lending, or transferring) in "foreign exchange"

Section 8(2), which prohibits the conversion of Indian currency into foreign currency (or vice versa) at rates other than those authorized by the Reserve Bank of India

The court found that Section 2(h) requires an instrument to be payable in foreign currency to qualify as "foreign exchange"; here, the cheque was strictly payable in Indian Rupees

Analyzing Section 8(1), the court held that the provision prohibits dealing in foreign exchange, not receiving Indian currency from an NRE account

It rejected the Tribunal’s reliance on the "Explanation" to Section 8(1), clarifying that the appellant neither opened an account in foreign exchange nor was lent money in foreign exchange

Regarding Section 8(2), the court observed that there was no allegation of currency conversion at an unauthorized rate, rendering the section inapplicable

The court dismissed the "suppression" argument, noting that the 2009 order regarding the framing of charges was superseded by the eventual acquittal and was irrelevant to the merits of the penalty appeal

The High Court set aside the Appellate Tribunal’s order dated May 29, 2024, and directed the Respondent to refund the deposited penalty amount to the appellant within four weeks