2021 (1) TMI 1035 - AT - Money Laundering

Acquisition of foreign exchange - not bringing into India the goods of the value quantity and quality for which foreign exchange was acquired by the parties through the appellant bank by seeking remittance on the basis of import documents which are allegedly later found to be not genuine - contravention of Section 8(1) of Foreign Exchange Regulation Act (FERA) 1973 and Section 8(2) and 8(4) of FERA 1973 - delay of more than two years in passing the impugned order - HELD THAT - Without going into the merit of the case and without opining on merit on the short question of delay in delivering the order the appeal filed by M/s. South Indian Bank Ltd. is allowed - The impugned order dated 09.03.2009 passed on Show Cause Notice bearing no. T-4/1-B/SDE/AKB/2002-SCN-I dated 04.01.2002 read with corrigendum dated 13.02.2002 limited to the present appellant is set-aside and the case is remanded to the Adjudicating Authority for deciding it afresh in accordance with law preferably within a period of six months from the date of appearance of the parties before the Adjudicating Authority. The Adjudicating Authority shall decide the case relating to the present appellant on all legal and factual issues after affording opportunities to both the parties i.e. M/s. South Indian Bank Ltd. and the Enforcement Directorate. Appeal allowed by way of remand.

Issues Involved:
1. Delay in delivering the impugned order.
2. Applicability of Sections 8(1), 8(3), and 8(4) of FERA, 1973 to authorized dealers.
3. Imposition of penalty for infraction of para 7A.21 of the Exchange Control Manual.
4. The concept of "due care and caution" in handling import documents.
5. The legal status of a bank branch as a "person" under FERA, 1973.
6. The validity of the corrigendum/addendum issued by the Adjudicating Authority.
7. The role of bank officials in the alleged contraventions.
8. The right to cross-examination.
9. The impact of delay on the legality of the impugned order.

Detailed Analysis:

1. Delay in Delivering the Impugned Order:
The appellant argued that the delay of more than two years in delivering the impugned order prejudiced their case. The last hearing occurred on 13.12.2006, but the order was passed on 09.03.2009. The appellant cited Supreme Court judgments in *Bhagwandas Fatechand Daswani & Ors. v. H.P. International & Ors.* and *Kanahaiyalal & Ors. v. Anoop Kumar & Ors.*, which held that significant delays could justify setting aside a judgment. The Tribunal agreed, finding that the delay caused material irregularity and prejudice to the appellant, and thus set aside the impugned order on this ground alone.

2. Applicability of Sections 8(1), 8(3), and 8(4) of FERA, 1973 to Authorized Dealers:
The appellant contended that as an authorized dealer, SIBL should not be subject to allegations under Sections 8(1), 8(3), and 8(4) of FERA, 1973. They argued that these sections do not apply to authorized dealers, making the adjudication order illegal. The respondent, however, maintained that the bank's actions constituted abetment of the contraventions, thus making them liable under these sections.

3. Imposition of Penalty for Infraction of Para 7A.21 of the Exchange Control Manual:
The appellant argued that the penalty imposed for the alleged infraction of para 7A.21 of the Exchange Control Manual was beyond the scope of FERA, 1973. They cited the Supreme Court's decision in *LIC v. Escorts Ltd.*, which held that violations of the Exchange Control Manual should be dealt with by the Reserve Bank of India, not through FERA adjudication proceedings.

4. The Concept of "Due Care and Caution" in Handling Import Documents:
The appellant asserted that "due care and caution" is not an ingredient of the offenses under Sections 8(3) and 8(4) of FERA, 1973. They argued that the bank officials acted in good faith and had no means to detect forgery at the time of handling the documents.

5. The Legal Status of a Bank Branch as a "Person" Under FERA, 1973:
The appellant contended that the Nariman Point branch of SIBL is not a "person" as defined under FERA, 1973, and thus cannot be subjected to adjudication proceedings. They cited definitions from the Indian Penal Code and the General Clauses Act to support their argument that only a human person or a legally incorporated entity can be proceeded against.

6. The Validity of the Corrigendum/Addendum Issued by the Adjudicating Authority:
The appellant challenged the legality of the corrigendum/addendum issued on 13.02.2002, which added the bank as a noticee. They argued that such an addition is not permissible under FERA, 1973, and that the corrigendum could only correct clerical errors, not substantively alter the notice.

7. The Role of Bank Officials in the Alleged Contraventions:
The appellant argued that the bank officials' actions were individual acts and not representative of the bank's official stance. They contended that the bank could not be held liable for the illegal acts of its employees, especially when these acts were not committed under the color of their office.

8. The Right to Cross-Examination:
The appellant raised the issue of the right to cross-examination, citing a Delhi High Court judgment that allowed cross-examination during adjudication proceedings. However, the respondent countered that the Supreme Court had stayed this judgment and that cross-examination was not a right in such proceedings.

9. The Impact of Delay on the Legality of the Impugned Order:
The Tribunal found that the delay in pronouncing the judgment by the Adjudicating Authority caused material irregularity and prejudice to the appellant. The Tribunal set aside the impugned order on this ground and remanded the case to the Adjudicating Authority for fresh consideration.

Conclusion:
The Tribunal allowed the appeal filed by SIBL, setting aside the impugned order dated 09.03.2009 and remanding the case to the Adjudicating Authority for a fresh decision within six months. The Tribunal directed the parties to appear before the Adjudicating Authority on or before 26th February 2021. The appeal was disposed of along with any connected miscellaneous applications, with no order as to costs.

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