2008 (2) TMI 973 - AT - FEMA

Issues Involved:
1. Contravention of Section 18(2) read with Section 18(3) of the Foreign Exchange Regulation Act, 1973.
2. Contravention of Section 9(1)(c) of the Foreign Exchange Regulation Act, 1973.
3. Contravention of Section 16(1)(a) of the Foreign Exchange Regulation Act, 1973.

Detailed Analysis:

Issue 1: Contravention of Section 18(2) read with Section 18(3) of the Foreign Exchange Regulation Act, 1973
The appellants were penalized for failing to take reasonable steps for the repatriation of export proceeds amounting to UK Pound 422071.10. The Tribunal noted that the appellants had made exports through 18 GRIs from November 1995 to March 1996, with the last payment received in September 1996. The appellants filed a recovery suit in London for UK Pound 287519.76, which was less than the total export proceeds. No satisfactory explanation was provided for this discrepancy. The Tribunal found that the appellants agreed to a settlement of UK Pound 60,000, received only UK Pound 15,000, and failed to take further effective steps to recover the remaining amount. The Tribunal emphasized that mere filing of a recovery suit without vigorous efforts does not constitute taking reasonable steps. The appellants failed to displace the legal presumption under Section 18(3) that they had not taken reasonable steps for repatriation.

Issue 2: Contravention of Section 9(1)(c) of the Foreign Exchange Regulation Act, 1973
The appellants were penalized for acknowledging a debt of UK Pound 22000 in favor of a non-resident person without RBI's permission. The Tribunal noted that the appellants admitted the claim of reduction of price due to late shipment or quality issues, which amounted to an acknowledgment of debt. The Tribunal referred to the provisions of Section 9(1)(c), which prohibit acknowledging any debt in favor of a non-resident without RBI's permission. The Tribunal found that the appellants had acknowledged and settled the debt without obtaining the necessary permission from RBI, thereby violating the provisions of Section 9(1)(c).

Issue 3: Contravention of Section 16(1)(a) of the Foreign Exchange Regulation Act, 1973
The appellants were penalized for not receiving US dollars 7500 paid to M/s Wellbred Asset Management (Bahamas) Ltd. for the placement of preferential shares, which never occurred. The Tribunal noted that the appellants sent letters requesting a refund but failed to take further steps to recover the amount. The Tribunal referred to Section 16(1)(a), which obligates individuals to refrain from any act or omission that delays or prevents the receipt of foreign exchange. The Tribunal found that the appellants' failure to take further action to recover the amount constituted an omission in violation of Section 16(1)(a).

Conclusion:
The Tribunal dismissed the appeals, sustaining the impugned order and maintaining the penalties imposed. The appellants were directed to deposit the remaining penalty amounts within seven days from the receipt of the order, failing which the respondent may recover the same in accordance with the law. The Tribunal found no merit in the appellants' arguments and concluded that the penalties were neither excessive nor harsh considering the high amounts involved in the contraventions.

← Previous Next →