2005 (11) TMI 539 - AT - FEMA

Issues Involved:
1. Contravention of sections 9(1)(a), 9(1)(d), and 9(1)(e) of FERA, 1973.
2. Contravention of sections 19(1)(b) and 29(1)(b) of FERA, 1973.
3. Determination of "person resident in India" under section 2(p) of FERA, 1973.
4. Knowledge and intent of the appellant company regarding the residential status of the share transferees.
5. Presumption under section 114(g) of the Indian Evidence Act, 1872.

Detailed Analysis:

1. Contravention of sections 9(1)(a), 9(1)(d), and 9(1)(e) of FERA, 1973:
The appellants in appeal Nos. 704/2000, 705/2000, and 706/2000 were charged with contravention of these sections. The Tribunal noted that the transactions in question pertained to the period December 1995, and the appellants argued that the transactions were done in the names of the three Shroff daughters out of their earnings in India, with no part of the earnings in foreign currency. The Tribunal found that the appellants did not provide sufficient evidence to counter the charges, and thus the penalties imposed were upheld.

2. Contravention of sections 19(1)(b) and 29(1)(b) of FERA, 1973:
The appellants in appeal Nos. 778/2000, 779/2000, and 780/2000 were charged with transferring shares to persons resident outside India without the RBI's permission. The Tribunal examined whether the appellant company and its directors had knowledge of the non-resident status of the share transferees. The Tribunal concluded that there was no concrete evidence to show that the appellant company knew the transferees were non-residents. The Tribunal found the adjudicating officer's conclusions to be based on suspicion and conjecture and thus set aside the penalties imposed on the appellant company and its directors.

3. Determination of "person resident in India" under section 2(p) of FERA, 1973:
The core issue was whether the three Shroff daughters were "persons resident in India" within the meaning of section 2(p) of FERA, 1973. The Tribunal analyzed the definition, which includes citizens of India who have gone abroad for purposes that do not indicate an intention to stay outside India for an uncertain period. The Tribunal found that the three Shroff daughters had gone abroad for studies and subsequently stayed with their non-resident spouses, indicating an intention to stay outside India for an uncertain period. Thus, they were considered persons resident outside India.

4. Knowledge and intent of the appellant company regarding the residential status of the share transferees:
The Tribunal examined whether the appellant company had knowledge of the non-resident status of the three Shroff daughters. The Tribunal found that the statements of Shri Dipesh Sheth and Shri Parag Mehta did not provide concrete evidence of such knowledge. The Tribunal concluded that the appellant company could not be expected to conduct a deep inquiry into the residential status of the share applicants based on the available information.

5. Presumption under section 114(g) of the Indian Evidence Act, 1872:
The Tribunal applied the presumption under section 114(g) of the Indian Evidence Act, which allows the court to presume that evidence not produced would be unfavorable to the party withholding it. The Tribunal found that the appellants did not produce sufficient evidence to counter the presumption of their intention to stay abroad for an uncertain period. Thus, the legal presumption applied, and the appellants' arguments were not accepted.

Conclusion:
The Tribunal dismissed the appeals of the appellants in appeal Nos. 704/2000, 705/2000, 706/2000, 707/2000, 708/2000, and 709/2000, directing them to deposit their respective penalties. However, the appeals of the appellant company and its directors in appeal Nos. 778/2000, 779/2000, and 780/2000 were allowed, and the penalties imposed on them were set aside.

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