2009 (9) TMI 1082 - AT - FEMA

Summary

Issues:
1. Whether the appellants can be held guilty for contravention of section 9(1)(c) FER Act 1973 or the appeals are required to be allowed?
2. Whether certain background facts not part of the Show Cause Notice can be considered for holding the appellants guilty?
3. Whether anything outside the Show Cause Notice can be brought into the impugned order to hold the appellants guilty?

Analysis:

1. The case involves a dispute where an amount of Rs. 10570000/- was accepted by the appellant firm as deposits from 7 NRIs, leading to the issuance of a Show Cause Notice alleging contravention of section 9(1)(c) FER Act. The RBI had allowed the appellants to accept deposits with certain conditions. The impugned order discussed the manner in which the deposits were generated in the name of 7 NRIs.

2. The Senior counsel for the appellant argued that the RBI permission and Exchange Control Manual provisions allowed deposits from NRIs for a limited period, contending that no contravention of section 9(1)(e) occurred. It was emphasized that the allegations in the SCN must be specific and not vague, citing legal precedents to support the argument.

3. The Enforcement Directorate argued that the deposited amount did not originate from NRIs, supporting the impugned order. The legal principle was discussed that adjudication proceedings require a proper Show Cause Notice to be served, and the adjudicating officer cannot go beyond the allegations in the SCN without violating principles of natural justice.

4. The judgment highlighted the importance of adhering to the contents of the Show Cause Notice during adjudication proceedings. It was noted that the RBI permission exempted the appellants from contravention of section 9(1)(e) FER Act, as permitted transactions are not subject to the restrictions outlined in the Act.

5. The conclusion favored the appellants on the first issue, stating that the contravention of section 9(1)(e) did not occur due to RBI permission. It was emphasized that anything not alleged in the SCN cannot be considered in the adjudication order, ensuring adherence to procedural fairness and the principles of natural justice.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the reasoning behind the decision rendered by the Appellate Tribunal for Foreign Exchange in New Delhi.