2024 (9) TMI 1036 - HC - FEMA

Violation of the provisions of the FEMA - petitioner is a citizen of United States of America and Overseas Citizen of India OCI Cardholder, and evidently, he purchased vast tracks of agricultural property located in India without RBI permission violating FEMA regulations - compounding proceedings were initiated - Penalty Computation - petitioner has urged that the respondent/RBI failed to appreciate that the petitioner bonafidely purchased the said agricultural property and despite complying with the directions of the respondent/RBI thereby selling the properties an Indian Citizen, the petitioner has been levied an exorbitant penalty without any basis. HELD THAT - It appears that the computation method has not been shared with the petitioner as such, however the gist of the same is exemplified in the impugned order dated 19.08.2024. The bottom line is that the computation has been done in accordance with the prescribed Master Directions. There is nothing pointed out by learned counsel for the petitioner so as to challenge the manner in which the computation has been done. As a matter of fact, considering the cash component of the sale consideration in contravention of the provisions of FEMA,1999, unhesitatingly the petitioner has been dealt with quite fairly and has been imposed with a fine not exceeding 300% of the amount of contravention. There is no denial that before passing the impugned order, an opportunity of hearing was afforded but not availed. Thus, the decision by the respondent cannot be faulted on any legally sustained grounds. The present writ petition is dismissed. The pending application also stands disposed of.

Summary

Issues:
Violation of FEMA provisions, Quashing of compounding order, Computation of penalty, Fairness of penalty imposition, Opportunity of being heard.

Violation of FEMA provisions:
The petitioner, a US citizen and OCI cardholder, purchased agricultural property in India without RBI permission, violating FEMA regulations. RBI directed transfer to an Indian citizen within six months, which was complied with. Subsequently, a compounding fee of Rs. 41,04,675 was imposed by RBI.

Quashing of compounding order:
The petitioner challenged the compounding order, arguing he acted in good faith and complied with RBI directives. However, RBI justified the penalty citing FEMA guidelines and computation matrix, calculating the penalty based on contraventions related to property purchase and payment mode.

Computation of penalty:
The penalty computation considered the period of contravention, value of property paid, unfair advantage gained, and contraventions A and B. The penalty was calculated as Rs. 1,49,50,723.38 but limited to Rs. 41,04,675, not exceeding 300% of the contravention amount, as per Master Directions.

Fairness of penalty imposition:
The court found the penalty imposition fair, as the computation was in line with prescribed guidelines. The petitioner was given an opportunity of being heard but did not opt for a personal hearing. The court upheld the penalty imposition within legal limits and noted the petitioner was dealt with fairly.

Opportunity of being heard:
The petitioner was granted an opportunity of being heard but chose not to avail it. The court emphasized that the decision was made after considering the application and documents submitted. The petitioner was informed about the Master Directions and Guidance Note during the hearing.

In conclusion, the court dismissed the writ petition, upholding the penalty imposition as per FEMA guidelines and finding no legal grounds to challenge the computation or fairness of the penalty.