2009 (6) TMI 1029 - AT - FEMA

Delay in issuing the show-cause notice - Non -maintenance of old records after expiry of 8 years as per provisions of Banking Regulations Act, 1949, and Rules - Requirement of Currency Declaration Forms (CDFs) - guilty on not taking reasonable care while depositing foreign currency in an NRE account - Validity of adjudication proceedings - deposits on overlapping dates coupled with high number of deposits - word 'abetment' - HELD THAT - The appellant-bank has allowed 9 different deposits of foreign currency totalling to US dollars 72,800 within 9 days. This act of overlap-ping deposits in continuation is nothing less than aiding and abetting the second appellant in contravention of section 8(1) of FER Act, 1973. This is more so when CDF is not called for by the appellant-bank from second appellant. As FER Act, 1973, has not defined the word 'abetment', so we are required to go to the definition contained in Indian Penal Code where section 107 has stated. It is well-settled that in order to constitute the offence of abetment the abettor must be shown to have done acts or omissions of (1) intentional aiding or (2) instigating someone to do prohibited acts or (3) engaging in a conspiracy in the commission of the crime. Mere association or general advice or mere advancing of loans is not insufficient. The second appellant has taken a plea that SCN or notice of hearing is served on him by affixation under rule 10(c), Adjudication Proceedings and Appeal Rules, 1974, and he has brought the deposited foreign currency in a lawful manner from USA where he is residing. Firstly, the SCN is required to be served and there is no illegality if the same is served by affixation when appellant is not ready to face the adjudication. His address given of C-108, South Extension, Part II, New Delhi, is served by affixation which is permitted under the Adjudication Proceedings and Appeal Rules, 1974. Moreover, he has not brought out any CDF through which he has brought the deposited foreign currency in India. The burden under section 71, FER Act, 1973, lies on him. Moreover, the factum of bringing foreign currency into India through CDF is within his special knowledge. This fact also casts a burden on second appellant to prove by logical evidence, i.e., production of CDF, that he has brought foreign currency in India in a lawful manner. As the burden under section 106, Indian Evidence Act, 1882, has not been discharged so he has been correctly held guilty and the impugned order cannot be termed as bad in law. Nor the impugned order contains any other error so is required to be affirmed. This Appeal No. 1109/2004 contains no merit so is required to be dismissed. Therefore, these appeals do not contain any merit and are required to be dismissed. The appellant-bank has not performed the expected duty of due care and attention while making 9 different deposits in NRE account of same person on overlapping dates within a short period of 9 days. There is no other error pointed out in the impugned order which is required to be affirmed. Thus, these appeals are dismissed having no merits. The impugned order is sustained and maintained. An order is passed accordingly.

Issues Involved:
1. Delay in issuing the show-cause notice.
2. Compliance with Banking Regulations and RBI instructions.
3. Requirement of Currency Declaration Forms (CDFs).
4. Standard of care and caution by the authorized dealer.
5. Abetment under section 8(1) of FER Act, 1973.
6. Validity of adjudication proceedings.

Detailed Analysis:

1. Delay in Issuing the Show-Cause Notice:
The appellant argued that the show-cause notice was issued after a considerable delay, specifically after 8 years, making it difficult for the appellant-bank to produce old records. The Tribunal clarified that the show-cause notice dated 4-4-2002 was within the permissible period as the Foreign Exchange Regulation Act, 1973, was repealed on 31-5-2000. The Tribunal emphasized that "taking notice of" by the adjudicating officer refers to the date when the show-cause notice is signed, not when it is served. Thus, the argument of the notice being time-barred under section 49(3) of the Foreign Exchange Management Act, 1999, was rejected.

2. Compliance with Banking Regulations and RBI Instructions:
The appellant-bank contended that it followed the instructions issued by RBI and could not be asked to produce CDFs after 8 years as they are not preserved beyond that period per the Banking Regulations Act, 1949. The Tribunal, however, noted that the appellant-bank failed to act with due care and caution, as required under sections 6(4) and 6(5) of the FER Act, 1973. The Tribunal highlighted that the bank had a legal duty to act in good faith and ensure that transactions did not involve any contravention or evasion of the Act.

3. Requirement of Currency Declaration Forms (CDFs):
The appellant argued that CDFs were not obligatory for deposits below US dollars 10,000. However, the Tribunal observed that the deposits were made on overlapping dates, which should have prompted the bank to inquire further. The Tribunal emphasized that the bank's failure to call for CDFs in such circumstances indicated a lack of due care and attention.

4. Standard of Care and Caution by the Authorized Dealer:
The Tribunal reiterated that the authorized dealer, in this case, the appellant-bank, was expected to adhere to a high standard of care and caution due to its authorization from RBI. The Tribunal cited various legal precedents to illustrate that the standard of care must be judged according to the capacity and intelligence of the person whose conduct is in question. The bank's actions were found to be lacking in good faith as it failed to investigate the repeated deposits of foreign currency on overlapping dates.

5. Abetment under Section 8(1) of FER Act, 1973:
The Tribunal found that the appellant-bank's actions amounted to aiding and abetting the second appellant in contravention of section 8(1) of the FER Act, 1973. The Tribunal referred to the definition of abetment under section 107 of the Indian Penal Code, which includes intentional aiding or instigating someone to do prohibited acts. The bank's failure to call for CDFs and allowing multiple deposits within a short period was seen as facilitating the contravention.

6. Validity of Adjudication Proceedings:
The appellant argued that the adjudication officer did not pass a specific order for conducting the hearing. The Tribunal dismissed this argument, stating that once a reply to the show-cause notice is received and the adjudication officer issues a notice of hearing, it is assumed that the officer has formed an opinion to conduct adjudication proceedings. The Tribunal emphasized that the process should not be unnecessarily prolonged, as it would defeat the purpose of the statute.

Conclusion:
The appeals were dismissed as they lacked merit. The Tribunal upheld the penalties imposed on the appellants, affirming that the appellant-bank failed to perform its duty of due care and attention while making multiple deposits in the NRE account on overlapping dates. The impugned order was sustained and maintained.

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