2006 (9) TMI 627 - AT - FEMA

Summary

Issues:
Violation of section 9(1)(a) and 9(1)(d) of FER Act, 1973 by M/s. Bank of Madurai Ltd. for transactions with a person resident outside India without RBI permission.

Detailed Analysis:

1. Allegations and Adjudication:
The appeal challenges an adjudication order imposing penalties on M/s. Bank of Madurai Ltd. for contravening FER Act, 1973 by making payments to a person outside India without RBI permission. The penalties were based on two charges under sections 9(1)(a) and 9(1)(d) of the Act.

2. Appellant's Defense:
The bank argued that it conducted due diligence before granting the loans, relying on the applicant's good reputation and income tax assessment orders showing him as a resident in India. It cited legal precedents emphasizing the need for proof beyond reasonable doubt and alleged violations of natural justice principles.

3. Respondent's Argument:
The respondent countered the bank's claims by presenting evidence of the applicant's businesses in Malaysia and India, highlighting his non-resident status. Statements and documents indicated the applicant's significant presence abroad, contradicting the bank's assessment based on income tax returns.

4. Residential Status Determination:
The judgment emphasized the distinction between determining residential status under the FER Act and the Income-tax Act. The criteria under FER Act focus on the individual's intention to stay in India, unlike the duration of physical presence considered in the Income-tax Act.

5. Legal Precedents and Decision:
Citing relevant legal precedents, the judgment concluded that the bank erred in assessing the applicant's residential status, leading to violations of FER Act provisions. While acknowledging no default in loan repayment, the penalty was reduced from Rs. 60,000 to Rs. 20,000 to align with the charges and ensure justice.

6. Final Decision:
The appeal was partly allowed, with the penalty reduced to Rs. 20,000. The balance amount was to be released to the appellant after the appeal period, considering the circumstances and evidence presented during the proceedings.