2015 (8) TMI 236 - HC - FEMA

Waiver of pre deposit - contravention of Section 3(b) and 6(2) of FEMA read with Regulation 5 of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 read with para 8 of Schedule I to Regulation 5(1) of Foreign Exchange Management (Transfer of Issue of Security by a person resident outside India) Regulations, 2000 - Imposition of penalty - Amount remitted for franchisee in IPL, reached BCCI through concerns abroad rather than the Indian subsidiary without making compliance with the Regulations under the Foreign Exchange Management Act, 1999. Held that - Once the Appellants claim that there is no revenue or financial loss and that the remittance to India has come through proper channels, namely through the banks, then, whether obtaining of permissions and approvals subsequently and whether incorporation of an Indian subsidiary later on would enable the Appellants to claim any benefit or seek any relief are other core questions involved in the Appeals. The Appellants would have to satisfy the Tribunal that monies may have been remitted by certain companies or concerns abroad to BCCI, but reached it not through an Indian subsidiary is something which should not invite penal consequences. Once the monies have reached the beneficiary through appropriate banking channels, then, there is no violation or breach of law is the case put up by the Appellants in these Appeals. Chairman was required to apply his mind to the differences that were noted by him. It was open for him to find out as to whether the Appellants having made out a prima facie case, could any relief be granted and in terms of the legal provisions. If the legal provisions enable the Tribunal to consider the case of undue hardship , whether that term is to be given a restricted meaning, namely, financial hardship alone or whether that should take in its import a prima facie case being made out and the point being arguable, a party would suffer unless the condition of pre-deposit is waived totally or partially. Prima facie case in favour of appellant. Appellants would have to satisfy the Tribunal that monies may have been remitted by certain companies or concerns abroad to BCCI, but reached it not through an Indian subsidiary is something which should not invite penal consequences.

Summary

Issues:
Appeal against order under Foreign Exchange Management Act, 1999 - Waiver of pre-deposit condition and stay of orders - Imposition of penalty for unlawful remittance - Division in opinion of Tribunal members - Chairman's order directing deposit and bank guarantee - Substantial questions of law for determination.

Analysis:
The judgment involves an appeal against an order passed under the Foreign Exchange Management Act, 1999, focusing on the waiver of the pre-deposit condition and stay of orders related to the imposition of a penalty for unlawful remittance. The Appellants, companies and individuals, participated in the Indian Premiere League (IPL) organized by the Board of Control for Cricket in India (BCCI). The Enforcement Directorate alleged violations of FEMA regulations due to remittances made through concerns abroad instead of the Indian subsidiary, leading to penalty imposition. The Appeals challenged the penalty amount and the Tribunal's decision on pre-deposit conditions.

The Tribunal members were divided in their opinion on the waiver of pre-deposit, leading the matter to the Chairman. The Chairman's order directed each Appellant to deposit 40% and furnish a Bank Guarantee for the remaining 60% of the penalty amount. The Appeals raised substantial questions of law regarding the Chairman's authority to order the deposit despite finding it excessive, and whether all members' grounds for waiver should have been considered.

The High Court found that the Chairman's order lacked a proper application of mind and should have balanced the rights and equities of the parties. The Court emphasized the need for the Tribunal to assess compliance with regulations, financial loss, and proper remittance channels. The Court criticized the blanket condition imposed by the Tribunal and emphasized the need for judicious exercise of discretion.

Ultimately, the High Court modified the Chairman's order, directing one Appellant to deposit a specific amount within a given timeframe to proceed with the Appeal. The Court instructed the Tribunal to dispose of the Appeals without being influenced by any tentative observations and clarified that all contentions on the merits of the controversy remain open for further consideration. Compliance with the Court's order was mandated, with consequences for any defaults and the liberty to apply for early hearing post-deposit.

In conclusion, the Appeals were disposed of with specific conditions imposed on one Appellant, emphasizing the need for a balanced approach, proper compliance assessment, and judicious exercise of discretion by the Tribunal.