2008 (2) TMI 811 - HC - FEMA

Stay/Dispensation of pre-deposit - non-compliance with the orders dated 31-5-2005 directing the petitioner to deposit 25% of the penalty within six weeks from the date of the order - Held that - Both the Tribunal and the learned Single Judge considered not only the aspect of whether or not a prima facie case is made out but have also considered the financial hardship aspect. The learned Single Judge on the plea of the appellant scaled down the penalty amount from 50% to 25% after considering all the facts and circumstances but the appellant failed to make payment of the pre-deposit amount despite modification of the order and also regardless of several adjournments granted to him for the aforesaid purpose. Having considered the findings recorded by the Special Director Enforcement the Tribunal and the learned Single Judge we do not think this to be an appropriate case where the appellant is entitled to any relief. The appeal has no merit and is accordingly dismissed.

Issues Involved:
1. Dismissal of writ petition for non-compliance with pre-deposit order.
2. Legality of the penalty imposed under the Foreign Exchange Regulation Act, 1973.
3. Financial hardship as a ground for waiving pre-deposit.
4. Prima facie case and balance of convenience.
5. Right to appeal and statutory conditions.

Issue-wise Detailed Analysis:

1. Dismissal of writ petition for non-compliance with pre-deposit order:
The appellant's writ petition was dismissed for non-compliance with the order dated 31st May 2005, which directed the appellant to deposit 25% of the penalty within six weeks. The appellant failed to comply with this order, leading to the dismissal of the writ petition on 13th September 2005. The court emphasized that the appellant's failure to comply with the interim order could only result in not being protected against prosecution proceedings.

2. Legality of the penalty imposed under the Foreign Exchange Regulation Act, 1973:
The Special Director, Directorate of Enforcement, New Delhi, imposed a penalty of Rs. 10 lakhs on the appellant for contravention of Sections 9(1)(b) and 9(1)(d) of the Foreign Exchange Regulation Act, 1973. The appellant was found to have received and made payments without permission from the Reserve Bank of India, amounting to Rs. 1,55,87,155/- and Rs. 1,51,92,935/-, respectively. The Appellate Tribunal for Foreign Exchange upheld this penalty, directing the appellant to deposit 50% of the penalty amount as a pre-condition for hearing the appeal.

3. Financial hardship as a ground for waiving pre-deposit:
The appellant contended that the pre-deposit of the penalty amount would cause "undue hardship" due to financial constraints. However, the court found no merit in this argument, noting that the appellant failed to provide substantial evidence of financial hardship. The appellant's claim was supported only by an unsigned typed copy of a certificate from a local MLA, which was insufficient to establish undue hardship.

4. Prima facie case and balance of convenience:
The court considered whether the appellant had a prima facie case and whether the balance of convenience favored waiving the pre-deposit requirement. The court found overwhelming evidence against the appellant, including his own admission and statements from recipients of the payments. The court concluded that the appellant did not have a strong prima facie case and that the direction to deposit 50% of the penalty was justified. The learned Single Judge had already scaled down the pre-deposit requirement to 25%, considering the appellant's plea, but the appellant still failed to comply.

5. Right to appeal and statutory conditions:
The court highlighted that the right to appeal is a statutory right and can be circumscribed by conditions, such as the requirement to deposit the penalty amount. The court referred to various judgments affirming that compliance with such conditions is mandatory for the appeal to be entertained. The court emphasized that the appellant's failure to comply with the pre-deposit order resulted in the dismissal of the appeal, and this was in line with legal precedents.

Conclusion:
The court dismissed the appeal, finding no merit in the appellant's arguments. The appellant's failure to comply with the pre-deposit order justified the dismissal of the writ petition. The court upheld the penalty imposed under the Foreign Exchange Regulation Act, 1973, and found no grounds for waiving the pre-deposit requirement based on financial hardship or prima facie merits. The statutory conditions for the right to appeal were deemed valid and enforceable.

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