1992 (6) TMI 193 - AT - FEMA

Summary

Issues Involved:
1. Dispensation of pre-deposit of penalty.
2. Interpretation of 'undue hardship'.
3. Financial position of the appellants.
4. Existence of a prima facie case.
5. Balance of convenience, irreparable injury, and public interest.

Detailed Analysis:

1. Dispensation of Pre-Deposit of Penalty:
The appellants sought dispensation of pre-deposit of penalties imposed by the Adjudicating Officer. The penalties were Rs. 15 lakhs on M.J. Exports (P.) Ltd. and Rs. 25,000 on each of the five directors for contraventions under sections 8(1) and 49 of the Foreign Exchange Regulation Act, 1973, read with section 68. Under section 52(2) of the Act, no appeal is maintainable unless the penalty is deposited or the Board dispenses with such deposit if it causes undue hardship to the appellant.

2. Interpretation of 'Undue Hardship':
The term 'undue hardship' was debated, with the appellants arguing it includes more than financial hardship, relying on precedents like Jayashree Insulators Ltd. and Uptron Powertronics v. CCE. Conversely, the respondent argued that 'undue hardship' means financial hardship alone, referencing Asstt. CCE v. Dunlop India Ltd. and U.P. Lamination v. Union of India.

3. Financial Position of the Appellants:
The financial documents of M.J. Exports (P.) Ltd. indicated a sound financial position, with significant fixed assets and profits. Individual directors did not provide substantial evidence of financial hardship. The Board noted that the company and its directors did not demonstrate undue hardship from a financial perspective, as they could mobilize resources to deposit the penalty.

4. Existence of a Prima Facie Case:
The appellants argued that having a prima facie case should justify the waiver of pre-deposit. However, the Board emphasized that a prima facie case alone is insufficient without showing undue hardship. It was noted that the Reserve Bank of India's permit did not explicitly allow the payment method used by the appellants, making their prima facie case arguable both ways.

5. Balance of Convenience, Irreparable Injury, and Public Interest:
The Board considered several factors beyond the prima facie case, such as balance of convenience, irreparable injury, and public interest. The Supreme Court's guidelines in Dunlop India Ltd. were applied, stressing that these factors are crucial in deciding dispensation of pre-deposit. The appellants failed to demonstrate that they would suffer irreparable injury or that public interest favored waiving the deposit.

Conclusion:
The Board concluded that the appellants did not establish undue hardship from a financial standpoint and that the existence of a prima facie case alone was insufficient for waiving the pre-deposit requirement. Consequently, the applications for dispensation of pre-deposit were rejected, and the appellants were directed to deposit the penalties within 90 days, failing which the appeals would be dismissed.