Receiving Amount In INR From NRE Account Without Allegation Of Dealing In Foreign Exchange Not Violation Of Sec.8(1) FERA: Delhi High Court

The High Court was considering an appeal filed under Section 35 of the Foreign Exchange Management Act, 1999 (FEMA) read with Section 54 of the Foreign Exchange Regulation Act, 1973 (FERA), challenging the order of the Appellate Tribunal for Foreign Exchange under SAFEMA (Tribunal) dismissing the appeal filed by the appellant.

The Division Bench of Justice Navin Chawla and Justice Ravinder Dudeja stated, “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.”

Senior Advocate Pavan Narang represented the Appellant while Panel Counsel Vivek Gurnani represented the Respondent.

Factual Background

The Adjudicating Authority had imposed a penalty of Rs 5 lakh on the appellant for the alleged contravention of Section 8(1) of FERA. 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. Out of the amount so deposited, a cheque amounting to Rs 30 lakh was issued in favour of the appellant. 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 but a criminal prosecution was also launched against the appellant. The appellant was acquitted but the Adjudicating Authority imposed a penalty of Rs 5 lakh on the appellant, which was confirmed by the Tribunal. Aggrieved thereby, the appellant approached the High Court by filing an appeal mainly on the ground that the amount was transferred to the appellant in Indian currency and there was no violation of Section 8(1) of FERA.

Reasoning

Referring to Section 2(h) of FERA, the Bench explained 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 Bench further explained that the essential element is that it is payable in foreign currency at the option of the drawee or the holder of such instrument.

The Bench took note of the fact that the cheque was paid and was payable to the appellant only in the Indian currency. Referring to Section 8(1) of FERA, the Bench stated, “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.”

“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”, the order read.

Noting that the criminal proceedings culminated in the acquittal of the appellant, the Bench held that the order framing charge was no longer relevant and non-filing of the same by the appellant with the present appeal could not result in the dismissal of the appeal.

Thus, holding that the violation of Section 8(1) or 8(2) of FERA was not made out, the Bench set aside the order of the Tribunal and directed that the amount deposited by the appellant be refunded to him.

Cause Title: Prakash Chandra Yadav v. Directorate of Enforcement (Neutral Citation: 2026:DHC:3746-DB)

Appearance

Petitioner: Senior Advocate Pavan Narang, Advocates Manish Shukla, Nilash Tiwari, Aishwarya Chhabra, Himanshu Sethi

Respondent: Panel Counsel Vivek Gurnani, Advocate Kanishk Maurya

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