2016 (5) TMI 1383 - AT - FEMA

Contravention of Sections 8(3) and 8(4) of FERA, 1973 - direction of furnishing corporate guarantee - interpretation in the review petitioner that the corporate guarantee is a business consideration - Held that - The guarantor is bound to indemnify the authority to whom corporate guarantee is furnished. Relationship of business is not a necessary condition. Generally the corporate guarantee is furnished on the basis of overall performance and goodwill of the company for which the guarantee is furnished. This Tribunal earlier used to demand bank guarantee, however, when it was brought to the notice of the Tribunal that banks now a days provide bank guarantee only when the entire deposit is made to it, the Tribunal stopped demanding bank guarantee from the parties at the time of disposal of the applications for stay and waiver from pre-deposit. Demanding a bank guarantee in view of the poor financial conditions of an appellant in my view may tantamount to deprivation of the statutory right to appeal and for all practical purposes it will amount to demanding the deposit of entire amount of penalty imposed through the adjudication order. The case laws relied upon by the ld. counsel for the respondent justifying the order of modification of furnishing of corporate guarantee in place of bank guarantee. It may be pertinent to mention here that the corporate guarantee has been filed in compliance and must have been accepted, therefore, also the application is misconceived. It may be observed that moving such applications and contending that the Tribunal has deviated from the routine procedure without any ground amounts to scandalizing the Tribunal & attempt to lower its image in the estimation of public and is an aspersion upon the functioning of the Tribunal. The Enforcement Directorate is warned for future to desist from making such bald aspersions against the Tribunal which may have no basis. Safeguarding the interest of revenue does not mean that a party may be deprived of its statutory right to file an appeal. The review petition consequently deserves to be dismissed. Since the petition has been argued and might have been drafted by ld. legal consultant who is fairly new in the legal field, therefore, taking a lenient view, I am not imposing costs against the Enforcement Directorate for wasting the precious time of the Tribunal involved in the litigation and not directing for initiation of any other action. The review petition is dismissed.

Summary

Issues involved:
Review petition under Section 28(2)(f) of the Foreign Exchange Management Act, 1999 for modification of order dated 12-1-2015 passed by the Tribunal in Appeal No. 24/2012 regarding furnishing of corporate guarantee instead of bank guarantee for penalty amount.

Detailed Analysis:

1. Background and Facts:
The appellant-company was held guilty for contravention of FERA, 1973, and a consolidated penalty was imposed. An application for stay and waiver from pre-deposit of penalty was disposed of with a direction to deposit 15% of the penalty amount and furnish bank guarantee for the balance 85%. The appellant later sought modification of the order due to financial constraints.

2. Modification Application:
After considering the appellant's inability to secure bank guarantee without full pre-deposit, the Tribunal modified the order dated 25-11-2014 to allow the appellant to furnish a corporate guarantee for the balance 85% of the penalty imposed within 30 days.

3. Review Petition:
The Enforcement Directorate filed a review petition challenging the modified order, arguing that directing a corporate guarantee may jeopardize the realization of the penalty and deviate from established procedures. The petitioner contended that demanding a corporate guarantee could hinder the enforcement of penalties.

4. Respondent's Defense:
The respondent opposed the review petition, citing the appellant's financial evidence and the practical difficulties in obtaining a bank guarantee. The respondent argued that the Tribunal's decision to allow a corporate guarantee was justified considering the financial hardship faced by the appellant.

5. Tribunal's Decision:
The Tribunal emphasized that a review is not a routine procedure and should only be allowed in case of material errors leading to miscarriage of justice. The Tribunal clarified that demanding a bank guarantee from financially constrained appellants could impede their statutory right to appeal. The Tribunal dismissed the review petition, warning against baseless aspersions on the Tribunal's functioning.

6. Conclusion:
The Tribunal upheld its decision to allow the appellant to furnish a corporate guarantee instead of a bank guarantee, considering the financial circumstances and statutory rights of the appellant. The review petition was dismissed, and no costs were imposed due to the petitioner's relative inexperience in the legal field. The case was listed for final hearing before an appropriate bench on a specified date.