2024 (6) TMI 669 - AT - FEMA

Contravention of Section 9 (1) (a) of FERA 1973 - Appellant Company was charged for making payments to a person resident outside India without general or special permission from RBI - payments were made through bank drafts purchased from Punjab Sindh Bank and State Bank of India - Contravention of Section 64(2) of FERA 1973 for abetment in contravention of Section 8(1) of FERA 1973 - HELD THAT - It is not disputed that payment in contravention of the provisions of FERA 1973 and without the permission of the RBI was effected by the Appellants to ESL which was a company located in United Kingdom. The officials of the Appellant Company had met the Managing Director of ESL who was a foreign national. They complied with the instructions of his while choosing the mode of payment with resulted in conversion of non-convertible resident rupee account to convertible non-resident rupee account. To take the defense that they were not responsible for such conversion which was done by SCB Bombay is not convincing particularly as there is evidence on record that how they purchased bank drafts in New Delhi making them payable in Madras and for the purpose used the services of Shri Ravi Singhal to carry such drafts. Their conduct thus left scope for the drafts to be paid on collection from the SCB Manchester. In fact the Judgment cited by Appellants viz. Union of India Another Vs. Shri Kanti Oil Mills 1979 (10) TMI 236 - BOMBAY HIGH COURT brings out their contumacious conduct in contrast to the steps taken by the Mills in the facts of the cited Judgment so as not to contravene the provisions of FERA 1973. In the facts and circumstances of a case the intention is to be ascertained. The facts of the present case speak for themselves whereby the obligations arising from the extant statutory framework were completely ignored by the Appellants. FERA 1973 provided for a regulatory mechanism for certain payments dealings in foreign exchange and security transactions indirectly affecting foreign exchange and the import and export of currency for the conservation of the foreign exchange resources of the country and the proper utilization thereof in the interest of the economic development of the country. Section 59 of FERA 1973 provided for presumption of culpable mental state in any prosecution for any offence under the Act which requires a culpable mental state on the part of the accused unless the accused proved the fact that he had no such mental state with respect to the charge against a particular offence. Sub-Section 3 of that Section makes such presumption applicable to proceeding before an Adjudicating Officer. The circumstances and the evidence in the present case reverse the burden on to the Appellants which they have failed to discharge. Thus we hold that the contravention of Section 9 (1) (a) of FERA 1973 for an amount charged under SCN I and SCN II respectively stands established against the Appellant Company and the contravention of Section 9 (1) (a) of FERA 1973 r/w Section 68 (1) ibid stands established against the three individual Appellants. Contravention of Section 9 (1) (c) of FERA 1973 for an amount charged under SCN XII stands established against the Appellant Company and the contravention of Section 9 (1) (c) of FERA 1973 r/w Section 68 (1) ibid stands established against the three individual Appellants. We uphold the impugned order in so far as the penalties which have been imposed therein on the four Appellants with respect to SCN I SCN II SCN XII. Imposition of Penalty - We intervene with the impugned order to the extent of the penalties imposed on the four Appellants for contravention of Section 8(1) charged under SCN III and SCN IV and are set aside. Therefore the total penalty on the Appellant Company would be of Rs. 32, 00, 000/- and on each of the three individual Appellants would be of Rs. 8, 00, 000/-. The pre-deposit made by each of the four Appellants in compliance to the order . 2014 (3) TMI 1225 - DELHI HIGH COURT shall be adjusted towards the penalty imposed under this order.

Summary

Issues Involved:
1. Contravention of Section 9(1)(a) of FERA 1973.
2. Contravention of Section 64(2) of FERA 1973.
3. Contravention of Section 9(1)(c) of FERA 1973.
4. Liability of individual Appellants under Section 68(1) of FERA 1973.

Summary:

Contravention of Section 9(1)(a) of FERA 1973:
The Appellant Company, M/s UK Paints (India) Ltd., was charged u/s 9(1)(a) of FERA 1973 for making payments of Rs. 36,96,443/- and Rs. 47,38,500/- to a person resident outside India without general or special permission from RBI. The Tribunal found that the Appellant Company effected the payment to M/s Eastern Suburbs Ltd. (ESL) in contravention of Section 9(1)(a) of FERA 1973 by purchasing bank drafts and handing them over to Shri Ravi Singhal, which were later credited to the non-resident convertible rupee account of ESL.

Contravention of Section 64(2) of FERA 1973:
The Appellant Company was charged u/s 64(2) of FERA 1973 for abetment in contravention of Section 8(1) of FERA 1973. The Tribunal held that the Appellant Company and its officials were directly involved in making payments to ESL in contravention of Section 9(1)(a) of FERA 1973, leading to the acquisition of foreign exchange by ESL. Thus, the charge of abetment under Section 64(2) for contravention of Section 8(1) could not hold good.

Contravention of Section 9(1)(c) of FERA 1973:
The Appellant Company was further charged u/s 9(1)(c) of FERA 1973 for acknowledging a debt of Rs. 1,15,58,232/- to ESL without general or special exemption from RBI. The Tribunal found that the acknowledgment of debt by the Appellants, evident from the settlement of accounts for two bills, amounted to contravention of Section 9(1)(c) of FERA 1973. The charge under Section 9(1)(c) stood proved against the Appellant Company and its officials.

Liability of Individual Appellants under Section 68(1) of FERA 1973:
The three individual Appellants, being President, Sr. Vice-President, and Director of the Company, were charged u/s 68(1) of FERA 1973 for the contraventions committed by the Company. The Tribunal held that the individual Appellants had significant roles in the contraventions and failed to prove that they exercised due diligence to prevent such contraventions. Therefore, they were held liable for the contraventions u/s 68(1) of FERA 1973.

Conclusion:
The Tribunal upheld the penalties imposed on the Appellants for contraventions of Section 9(1)(a) and Section 9(1)(c) of FERA 1973, while setting aside the penalties for contraventions of Section 8(1). The total penalty on the Appellant Company was fixed at Rs. 32,00,000/- and Rs. 8,00,000/- on each of the three individual Appellants. The pre-deposit made by the Appellants was adjusted towards the penalty. The Appeals were partly allowed and disposed of accordingly.