2019 (1) TMI 26 - HC - FEMA

Penalty under FEMA - Tribunal jurisdiction allowing waiver of deposit of penalty - Tribunal directed the appellant to deposit a sum of ₹ 12,00,000/-, which would amount to 25% out of the total amount ordered by the adjudicating authority by way of penalty - Held that - We are of the opinion that the direction already given in this appeal, dated 05.09.2018, would safeguard the interest of the Department, since the appeal itself has been directed to be listed by the Appellate Tribunal on 27.02.2019. Thus the appeal stands allowed and the order passed by the Tribunal is modified to the effect that the appellant shall pay a sum of ₹ 5,00,000/-, which the appellant has already paid. Consequently, the remaining amount of penalty, levied on the appellant, shall remain stayed till the disposal of the appeal by the Appellate Tribunal.

Summary

Issues Involved:
1. Appeal against order under Section 35 of Foreign Exchange Management Act, 1999.
2. Questions of law regarding waiver of penalty deposit.
3. Consideration of financial incapacity and case merits by the Appellate Tribunal.
4. Compliance with payment conditions and stay of further penalty recovery.
5. Modification of Tribunal's order regarding penalty payment.

Analysis:

1. The appeal was filed challenging the penalty imposed on the appellant under the Foreign Exchange Management Act, 1999. The Tribunal directed the appellant to deposit a portion of the penalty amount. The appellant raised questions of law regarding the waiver of the penalty deposit, non-consideration of their financial situation, and the principles laid down by the Supreme Court in a specific case.

2. The appellant submitted details to prove their financial incapacity and argued that they would face irreparable hardship if directed to deposit the specified amount. They also highlighted permissions granted by the Reserve Bank of India in similar cases. The Central Government Standing Counsel requested time for instructions and mentioned the appellant's delayed compliance with payment conditions.

3. The High Court observed that the Tribunal did not adequately address the appellant's financial situation and the merits of their case. The Court directed the appellant to pay a reduced sum within a stipulated time frame, staying further penalty recovery pending the appeal's disposal. The Court emphasized the need for cooperation from the appellant during the appeal process.

4. Subsequently, the appellant complied with the payment condition, and the Tribunal listed the case for hearing. The High Court, considering the circumstances, modified the Tribunal's order, confirming the payment made by the appellant and staying the remaining penalty amount until the appeal's resolution. The Court closed the miscellaneous petition related to the matter.

5. In conclusion, the High Court allowed the appeal, ensuring the appellant's cooperation during the appeal process and warning against dilatory tactics. The Court emphasized the importance of following the Tribunal's directives and reserved the right for the respondent to seek order variations if necessary.