2023 (9) TMI 1558 - AT - FEMA

Penalty imposed for contravention under FEMA - appellant was a citizen of the Islamic Republic of Pakistan and purchased two immovable properties in India Dehradun w/o taking any permission from the Reserve Bank of India or any other government body as required u/Regulation 7 of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000. HELD THAT - Considering the background in which the appellant and his family arrived in India, grant of long-term visa to them by the Government of India followed eventually by grant of full citizenship as a naturalized citizen. The fact that there was no absolute bar on a Pakistani citizen acquiring property in India and the only requirement was to obtain permission. The fact that the amount of original penalty imposed upon him and his father was duly paid by the appellant, and the intended purpose of the legislation in question (FEMA, 1999) which was to consolidate and amended the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India, we are of the view that the appellant has made out a case for grant of relief. No doubt ignorance of the law is not a defence and every person is presumed to know the law to which he or she is subject. Nevertheless, we are of the view that the ends of justice have been met with the penalty of Rs. 3,00,000/- imposed upon the appellant and his father in the first instance which was duly paid, and levy of further penalty of Rs. 4,50,000/- was not justified in his case. Accordingly, the same is hereby set aside. The instant appeal stands allowed and the further penalty of Rs. 4,50,000/- imposed by the adjudicating authority, and upheld by the Learned Special Director of Enforcement (Appeals) through the impugned order, are set aside.

Summary

Issues:
Violation of Regulation 7 of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property In India) Regulations, 2000.
Imposition of penalties under FEMA, 1999.
Grant of citizenship and naturalization under the Citizenship Act, 1955.
Consideration of relief in the case based on legal intricacies and circumstances.
Applicability of penalties based on mens rea and intention.
Judicial discretion in imposing penalties for statutory obligations.

Analysis:
The judgment involves a case where the appellant, a citizen of Pakistan, purchased immovable properties in India without obtaining necessary permissions as required under Regulation 7 of the Foreign Exchange Management Regulations. The appeal arose from the imposition of penalties for contravention of FEMA regulations. The appellant's acquisition of properties without RBI approval led to a complaint and subsequent adjudication proceedings, resulting in penalties totaling Rs. 7,50,000. The appellant's appeal challenged the imposition of a further penalty of Rs. 4,50,000 by the Adjudicating Authority, which was upheld by the Special Director (Appeals).

The appellant argued that he and his family were granted Indian citizenship and naturalization, emphasizing their background of seeking asylum due to persecution in Pakistan. The appellant contended that the properties were purchased using funds earned in India and with the help of relatives, asserting no violation involving foreign exchange. Additionally, the appellant highlighted his compliance with the initial penalty and raised concerns regarding the imposition of additional penalties, citing legal principles and case laws supporting his case.

On the other hand, the respondent contested the appellant's contentions, emphasizing the appellant's citizenship status at the time of property acquisition and the Adjudicating Authority's reasonable decision to impose penalties. The respondent argued that ignorance of the law is not a defense and supported the penalty imposition upheld by the Special Director (Appeals).

The Tribunal, after considering the facts and arguments presented, granted relief to the appellant. The Tribunal acknowledged the appellant's circumstances, including the grant of citizenship and the absence of a complete prohibition on property acquisition by Pakistani citizens. While recognizing that ignorance of the law is not a defense, the Tribunal found that the penalties imposed were not justified based on the appellant's compliance with the initial penalty and the objectives of FEMA, 1999. Consequently, the Tribunal set aside the further penalty of Rs. 4,50,000, allowing the appeal and providing relief to the appellant.