2009 (5) TMI 535 - HC - Companies Law

Penalty imposed for failure to furnish evidentiary proof of utilisation of foreign exchange remitted and for contravention of section 8(3) and 8(4) of Foreign Exchange Regulation Act, 1973 (FERA) Held that - As due opportunity was not given to the appellant to defend itself. Therefore, it would be in the interest of justice to set aside the impugned orders passed by the authorities below and to remand the matter back to the respondent No. 2 to hear the appellant on show-cause notice afresh after giving due opportunity of hearing and producing necessary documents in support of its contentions. Appeal allowed.

Summary

Issues:
Challenge to order imposing penalty under FERA for failure to provide proof of foreign exchange utilization and contravention of FERA sections 8(3) and 8(4).

Analysis:
The appellant challenged the order imposing a penalty of Rs. 7 lakhs for failure to furnish evidentiary proof of foreign exchange utilization and contravention of FERA sections 8(3) and 8(4. The appellant, a public limited company, facilitated hire-purchase finance for importing spare parts for a subsidiary. The appellant shifted its office multiple times, leading to issues with receiving notices. The show-cause notice was not received due to address changes. The appellant received the final opportunity notice in 2004, but insufficient time was given to produce necessary documents. The order imposing the penalty was passed hastily without considering crucial documents proving utilization of foreign exchange.

The appellant argued that the respondent took cognizance of the violation after the expiry of two years following the repeal of FERA, violating FEMA. It was contended that the appellant did not receive the 2002 show-cause notice and was not given a proper opportunity to present evidence. The respondent issued the show-cause notice in 2002 before the statutory time limit, making the action legal. The appellant's office address changes caused confusion, leading to non-receipt of notices. The appellant was not given sufficient time to present crucial evidence supporting its case.

The High Court observed that the appellant was not granted a fair opportunity to defend itself. The court found that important documents proving the appellant's compliance were received after the penalty order was issued, indicating a lack of due process. Considering the material before them, the court concluded that setting aside the impugned orders and remanding the matter for a fresh hearing was necessary. The court allowed the appeal, setting aside the orders and remanding the case for a new hearing to provide the appellant with a fair chance to present evidence and defend its position in compliance with the law.