2005 (9) TMI 326 - HC - Companies Law

Issues Involved:
1. Establishment of a foreign company in India without RBI permission.
2. Misleading information in Form FC(RBI) regarding business activities.
3. Violation of RBI guidelines and FERA provisions by opening bank accounts and importing gold.
4. Applicability of Notification Nos. 180 and 188 of 1998.
5. Culpable mental state under Section 59 of FERA.
6. Question of law under Section 54 of FERA.

Detailed Analysis:

1. Establishment of a Foreign Company in India without RBI Permission:
The appellant argued that respondent No. 2, M/s. Maple Leaf Trading International, was established without the necessary RBI permission under Section 29(1)(a) of FERA. The adjudicating authority found the respondents guilty of this violation, but the Appellate Tribunal set aside the order, stating that respondent No. 2 was incorporated by Indian nationals and thus did not violate FERA provisions. The Tribunal noted that the company had disclosed its 51% foreign equity and had applied for FIPB approval for 100% equity transfer, indicating no intention to violate the law.

2. Misleading Information in Form FC(RBI) Regarding Business Activities:
The appellant alleged that respondent No. 2 provided misleading information in Form FC(RBI), claiming to be engaged in business management consultancy under NIC code 893 while its primary aim was trading in gold coins. The Tribunal found that the form was outdated and that respondent No. 2's declaration of engaging in business management consultancy was not false. The Tribunal held that the company was also involved in training individuals for selling gold coins, which justified the consultancy claim.

3. Violation of RBI Guidelines and FERA Provisions by Opening Bank Accounts and Importing Gold:
The appellant contended that respondent No. 3 and others violated RBI guidelines by opening bank accounts with repatriation facilities and importing gold without RBI permission. The Tribunal found that the bank accounts were opened lawfully under the amended Section 30(1) of FERA, allowing foreign nationals to repatriate part of their earnings. It also noted that respondent No. 1, ABN Amro Bank, imported gold on its own behalf and sold it to respondent No. 2 in Indian currency, which did not violate FERA provisions.

4. Applicability of Notification Nos. 180 and 188 of 1998:
The appellant argued that these notifications did not apply to respondent No. 2 as it was primarily engaged in trading, not exports. The Tribunal found that respondent No. 2 intended to engage in exports, as evidenced by correspondence and project reports. It held that the company was covered by Notification No. 180 of 1998, which allowed foreign equity up to 51% in trading companies primarily engaged in exports.

5. Culpable Mental State Under Section 59 of FERA:
The appellant claimed that the Tribunal ignored Section 59 of FERA, which presumes a culpable mental state for offences under the Act. The Tribunal examined the facts and circumstances to determine that the respondents had rebutted this presumption by proving they acted in good faith based on legal advice. The Tribunal's findings were based on material evidence and not on a misinterpretation of the law.

6. Question of Law Under Section 54 of FERA:
The appellant argued that the appeal raised a question of law under Section 54 of FERA. The Tribunal found that the appeal was based on factual findings rather than legal questions. It concluded that the findings were not perverse or against the material on record, and no question of law was raised.

Conclusion:
The High Court dismissed the appeal, upholding the Appellate Tribunal's findings that the respondents did not violate FERA provisions. The Court found no legal infirmity in the Tribunal's orders and concluded that the appeal did not raise any substantial question of law. The appeal was dismissed, affirming that the respondents acted within the legal framework and with bona fide intentions.

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