2008 (10) TMI 737 - AT - FEMA

Issues Involved:
1. Contravention of sections 8(1), 9(1)(a), 8(1) read with section 64(2) of FERA, 1973.
2. Contravention of sections 6(4), 6(5) read with sections 73(3), 49 of FERA, 1973.
3. Delay in the issuance of show-cause notices.
4. Applicability of the sunset clause under section 49(3) of FEMA, 1999.
5. Vagueness of the show-cause notices.
6. Doctrine of Issue Estoppel.
7. Proportionality of the penalty imposed.
8. Definition and scope of abetment under FERA, 1973.
9. Jurisdiction of the adjudicating authority versus RBI under section 73A of FERA, 1973.

Detailed Analysis:

1. Contravention of sections 8(1), 9(1)(a), 8(1) read with section 64(2) of FERA, 1973:
The individual appellant contended that he acted merely as an agent for an NRI, Deepak Bahari, and deposited money in Bahari's NRE accounts as per his instructions. He argued that in the absence of mens rea, he could not be held guilty. The Tribunal, however, noted that the individual appellant admitted to making several deposits in the NRE accounts while Bahari was not in India, thus establishing contravention of sections 9(1)(b) and 9(1)(d) of FERA, 1973.

2. Contravention of sections 6(4), 6(5) read with sections 73(3), 49 of FERA, 1973:
The appellant bank was found to have accepted large foreign currency deposits in NRE accounts without verifying the presence of the account holder in India, violating RBI guidelines. The Tribunal held that the bank's actions contravened sections 6(4), 6(5), and 8(1) of FERA, 1973, as the bank failed to act with due diligence and care.

3. Delay in the issuance of show-cause notices:
The appellant bank argued that the delay in issuing show-cause notices vitiated the proceedings. However, the Tribunal noted that FERA, 1973, does not prescribe a specific period for initiating prosecution and that what constitutes a "reasonable" period depends on the facts of each case. The Tribunal found no evidence of acquiescence or waiver by the Enforcement Directorate and rejected the argument.

4. Applicability of the sunset clause under section 49(3) of FEMA, 1999:
The appellant bank contended that the proceedings were initiated after the expiry of the sunset period mentioned in section 49(3) of FEMA, 1999. The Tribunal rejected this argument, stating that the show-cause notices were issued before the sunset period expired, and the commencement of adjudication proceedings was valid.

5. Vagueness of the show-cause notices:
The appellant bank argued that the show-cause notices were vague and did not disclose any lapses on its part. The Tribunal found this argument to be fallacious and held that the notices were sufficiently clear in stating the contraventions.

6. Doctrine of Issue Estoppel:
The appellant bank argued that the proceedings were barred by the doctrine of Issue Estoppel, as it had been exonerated in earlier proceedings involving similar charges. The Tribunal rejected this argument, noting that the principle of Issue Estoppel requires the same issue to have been distinctly raised and decided in earlier proceedings, which was not the case here.

7. Proportionality of the penalty imposed:
The individual appellant contended that the penalty was disproportionate. The Tribunal, however, held that the penalties imposed were not excessive or harsh when compared to the amounts involved in the contraventions.

8. Definition and scope of abetment under FERA, 1973:
The Tribunal referred to section 107 of the Indian Penal Code to define abetment, which includes instigation, conspiracy, or intentional aid. The Tribunal found that the appellant bank's actions constituted abetment, as it accepted large foreign currency deposits without verifying the presence of the NRE account holder, thereby facilitating the contravention of FERA, 1973.

9. Jurisdiction of the adjudicating authority versus RBI under section 73A of FERA, 1973:
The appellant bank argued that only the RBI could impose penalties for violations of sections 6(4) and 6(5) under section 73A of FERA, 1973. The Tribunal rejected this argument, stating that section 73A is an additional power granted to RBI and does not affect the adjudicating authority's power to take action under sections 50 and 51.

Conclusion:
The Tribunal dismissed the appeals, affirming the adjudication orders and the penalties imposed. The pre-deposit amounts, if any, were to be appropriated towards the penalty, and the appellants were permitted to deposit the penalty amounts as per the adjudication orders.

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