2019 (5) TMI 477 - AT - FEMA

Stay petition - Offence under FEMA - amount imposed towards penalty against the appellants - HELD THAT - The appellant has no case on merit, however, it is admitted by the counsel for the respondent that in para-9 of the impugned order, the findings are beyond the charge made in the show cause notice. A perusal of para 9 of impugned order under heading ORDER shows that the penalties on the appellants have been imposed without referring to the provisions of sub paras of para 4 of Schedule 1 of which the appellants have been held guilty of contravention of the provisions of each and every sub paras of para 4 of Schedule 1 to Regulation 5(1) in violation of principles of natural justice even if the appellant has no case of merit in this regard. The amount imposed towards penalty against the appellants are not commensurate with the contravention alleged against the appellants whereas the contraventions are technical in nature warranting a lesser penalty of ₹ 2 lakhs. While deciding the stay application, the appellants were directed to deposit ₹ 4 lakhs with the respondent as a penalty amount and the said amount has already been deposited by the appellants. The impugned order is passed contrary to the provision of section 13(1) of the Act and thus it is modified. The penalty already deposited under the said provision be appropriated by the respondent (as counsel for the appellant is agreeable for the same). The Revision Petition filed by the respondent is become infractuous.

Issues Involved:
1. Validity of the monetary penalty imposed on the appellant.
2. Compliance with regulatory requirements for the issue of Global Depository Receipts (GDRs).
3. Timeliness and adequacy of the investigation conducted by the Directorate.
4. Admissibility and reliability of statements made during the investigation.
5. Appropriateness of the charges framed in the Show Cause Notice (SCN).
6. Whether the adjudicating authority acted beyond the scope of the SCN.
7. Proportionality of the penalty imposed.

Issue-wise Detailed Analysis:

1. Validity of the monetary penalty imposed on the appellant:
The adjudicating authority imposed a monetary penalty of ?10,00,000 on the appellant and ?25,00,000 on M/s Morepen Laboratories Ltd. (MLL) for contravention of Regulation 4 of Schedule 1 of FEMA Notification No. 20/2000-RB dated 03.05.2000. The appellant contested the penalty, arguing that the investigation was delayed and the charges were not adequately substantiated. The Tribunal found that the penalties were not commensurate with the contraventions, which were technical in nature, and reduced the penalty to ?2,00,000.

2. Compliance with regulatory requirements for the issue of Global Depository Receipts (GDRs):
MLL issued 50,000,000 GDRs in compliance with regulatory requirements, and the shares were handed over to the custodian ICICI Bank. The issue was made in accordance with the laid down rules, regulations, and procedures. However, the SCN alleged that MLL had contravened Regulation 4 of Schedule 1 of FEMA Notification No. 20/2000-RB by not filing the return in Form FC-GPR within 30 days from the date of closing of the GDR issue.

3. Timeliness and adequacy of the investigation conducted by the Directorate:
The investigation commenced six years after the issue of GDRs, and the SCN was issued five years later, totaling an 11-year delay. The appellant argued that this delay was impermissible and cited judicial precedents to support this claim. However, the adjudicating authority rejected these submissions, stating that the delay did not invalidate the proceedings.

4. Admissibility and reliability of statements made during the investigation:
The appellant argued that the statements of Shri Ajay Sharma, General Manager (Finance and Account) of MLL, recorded during the investigation were inadmissible as he was not warned under section 164 of Cr.PC. The adjudicating authority dismissed this argument, stating that FEMA is a special statute with specific powers to investigate under section 37 of FEMA.

5. Appropriateness of the charges framed in the Show Cause Notice (SCN):
The SCN alleged contravention of Regulation 4 of Schedule 1 of FEMA Notification No. 20/2000-RB. The appellant argued that the SCN should have specified which sub-paragraph of para 4 was contravened. The adjudicating authority found the appellant guilty of contravention of both sub-paras (2) and (3) of para 4, although the SCN only mentioned sub-para (2).

6. Whether the adjudicating authority acted beyond the scope of the SCN:
The adjudicating authority was found to have acted beyond the scope of the SCN by adding contravention of sub-para (3) of para 4, which was not mentioned in the SCN. This was deemed impermissible and a violation of the principles of natural justice.

7. Proportionality of the penalty imposed:
The Tribunal found that the penalties imposed were not commensurate with the technical nature of the contraventions. The penalty was reduced to ?2,00,000, and the amount already deposited by the appellants was appropriated.

Conclusion:
The Tribunal modified the impugned order, reducing the penalty and appropriating the amount already deposited by the appellants. The Revision Petition filed by the respondent was deemed infructuous, and all three petitions were disposed of accordingly. No costs were awarded.

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