2016 (9) TMI 352 - Tri - FEMA

Proceedings leveled against co-noticee - appellant was resident outside India - Held that - Nothing incriminating from the raid carried out at the residential and business premises of the appellant could be found. There is no documentary evidence in support of the allegations of the respondent. There is no evidence on record to show that the appellant was involved in any act of alleged purchase and sale of foreign currency. For the alleged credits in banks the bankers or any of the alleged recipient of the gift cheques etc. none of the said bankers or alleged recipients have identified the appellant. We are also of the view that there appears to be breach of principles of natural justice as only three dates in the entire Adjudication Proceedings were fixed in 1999 and the Impugned judgment was passed on 30-08-1999 ex-parte. There is no report to the effect that the appellant was duly informed of the three dated fixed for the Adjudication Proceedings. Thus in our considered view it is a case where adequate opportunity to defend was not afforded to the appellant. The proceedings were concluded within a span of six months while in another matter with identical allegations for the alleged breach by the same Adjudicating Authority, proceedings against the appellant were dropped. We are in agreement with the Ld. counsel for the appellant that proper application of judicial mind has not been made effected while deciding the proceedings and the Adjudicating Authority was not clear about the role of the appellant in the Impugned Order. He has at several occasions wrongly mentioned noticee number of the appellant to be notice No. l instead of noticee No.2. It is also relevant to mention that opportunity for personal hearing was given on 23-03-1999 while the same Adjudicating Authority fixed 24-03-1999 in connection with SCN No. T-4/2/B/96 dated 24-03-1994. The evidence of hand writing expert as per settled legal position Is a mere opinion, however, it carries some weight and the appellant had filed a report denying that the disputed writing was not in his hand. It may also be mentioned here that the standard of proof under FERA was more stringent as compared to proceedings under FEMA and the Adjudicating Authority recorded different findings in these two matters of alleged breach of identical contraventions against the appellant i.e. of dropping the proceedings in one matter and holding him guilty in the impugned proceedings. Reliance has been wrongly placed upon the retracted statement without assigning reasons. The impugned order is totally without reasons and is non speaking and smacks of arbitrariness, therefore, it is unsustainable and consequently the appeal deserves to be allowed.

Summary

Issues Involved:
1. Alleged contraventions of the Foreign Exchange Regulation Act (FERA), 1973 by the appellant and co-noticees.
2. Validity of the adjudication proceedings and the ex-parte order.
3. Application of judicial mind and principles of natural justice.
4. Imposition of consolidated penalty and its justification.

Issue-wise Detailed Analysis:

1. Alleged Contraventions of FERA, 1973:
The investigation by the Enforcement Directorate (ED) revealed that Jeetu G. Lalwani and Prakash Parwani, both NRIs, maintained multiple NRE accounts in Pune. These accounts were credited with large amounts of foreign exchange and Indian currency, which were then used to issue cheques, drafts, and pay orders to various persons in India. The appellant and Rajendra D. Mehta were alleged to have purchased foreign exchange without RBI authorization and credited it to these NRE accounts, making payments to various persons in India. The appellant was accused of contravening sections 8(1), 8(2), 9(1)(a), and 9(1)(d) of FERA, 1973.

2. Validity of the Adjudication Proceedings and Ex-parte Order:
The adjudication proceedings were conducted ex-parte as the noticees failed to appear despite being given opportunities. The Adjudicating Authority found the appellant and Rajendra D. Mehta guilty of the alleged contraventions and imposed a consolidated penalty of ?50 lakhs on each. The appellant argued that the proceedings were held without proper notice and that he was not given a fair opportunity to defend himself. The Tribunal noted that only three dates were fixed for the hearings in 1999, and there was no evidence that the appellant was duly informed of these dates.

3. Application of Judicial Mind and Principles of Natural Justice:
The appellant contended that the Adjudicating Authority did not apply judicial mind and based the order on irrelevant considerations. The Tribunal observed that there were discrepancies in the adjudication order, including confusion between the noticee numbers and reliance on a retracted statement without proper reasons. The Tribunal also noted that the appellant had been exonerated in similar proceedings by the same Adjudicating Authority, highlighting a lack of consistency and proper application of judicial mind. The breach of principles of natural justice was evident as the appellant was not afforded adequate opportunity to defend himself.

4. Imposition of Consolidated Penalty and Its Justification:
The appellant argued that the imposition of a consolidated penalty was against the settled legal position, which requires separate penalties for distinct contraventions. The Tribunal agreed, stating that it would be difficult to segregate and determine the amount of penalty for different contraventions if some of the provisions were not upheld. The Tribunal found the imposition of a consolidated penalty unjustified and noted that the Adjudicating Authority did not provide a reasoned order, making it arbitrary and unsustainable.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order and directing the respondent to refund any pre-deposit made by the appellant. The Tribunal emphasized the need for proper application of judicial mind, adherence to principles of natural justice, and the requirement for separate penalties for distinct contraventions. The appeal was allowed due to the lack of evidence against the appellant, procedural irregularities, and inconsistencies in the adjudication process.