9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 1543 - AT - FEMAApplicability of provisions of FERA to the appellant who is not a citizen of India u/s 1(3) of the Act - HELD THAT - The bare reading of sub clause (III) covers the person other than citizen of India who come and stay in India for taking employment or carrying a business or vocation in India. It can be when he is staying with his or her spouse and spouse being a resident of India etc. The definition of person resident of India thus covers a person not citizen of India but would fall in the definition in a given circumstances narrated under clause (III). We are unable to accept the first argument raised by the appellant because under section 1 (3) word also has been used to indicate that the act of 1973 would apply to the citizen of India outside India also and branches outside India etc. Section 1(3) does not indicate that it would apply to citizen of India only. The word only does not exist under the provisions referred to above. Thus first argument raised by the appellant is summarily rejected. Applicability of section 8(1) - The restriction on dealing in foreign exchange has been imposed without previous general or special permission of RBI on all the persons other than the authorized dealer in India. No person resident in India other than authorized dealer shall outside India purchase or otherwise acquire or borrow or sale the land with any person not being authorized dealer. In the instant case the appellants are not falling in the definition of person resident of India for the reason that no evidence was led by the respondent to prove that during the relevant period involved in this case the appellant came and stayed for the purpose given under clause (iii) of section 2(p) of the Act of 1973. Accordingly the counsel for the respondent could not clarify as to how section 8 (1) of the Act of 1973 can apply to the appellant. The issue aforesaid has not been dealt with by the Special Director DOE though it has been recorded that on account of the transfer of money by the Standard Chartered Bank there was a contravention of section 8 (1) of the Act of 1973 but in this case it could not be proved that appellant was falling in the definition of person resident of India . Thus how section 8 (1) would apply to him.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were: (a) Whether the provisions of the Foreign Exchange Regulation Act, 1973 (FERA) apply to the appellant, who is not a citizen of India, under section 1(3) of the Act. (b) Whether the appellant falls within the definition of "person resident in India" under section 2(p) of FERA, and consequently, whether section 8(1) of the Act is applicable to him. (c) Whether the penalty imposed for contravention of section 8(1) read with sections 64(2) and 68(1) of FERA was legally sustainable given the appellant's status and the facts of the case. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a): Applicability of FERA to a Non-Citizen under Section 1(3) Relevant legal framework and precedents: Section 1(3) of FERA states that the Act applies "also to all citizens of India outside India and to branches and agencies outside India of companies or bodies corporate, registered or incorporated in India." The appellant contended that the Act applies only to citizens of India, and since he is not a citizen, the Act does not apply to him. Court's interpretation and reasoning: The Tribunal noted that the provision uses the word "also," indicating an extension of the Act's applicability to citizens outside India and certain branches/agencies, but does not restrict the Act's applicability exclusively to citizens. The absence of the word "only" in section 1(3) was emphasized. The Tribunal reasoned that if the appellant's interpretation were accepted, the definition of "person resident in India" under section 2(p) would become redundant, which is not the legislative intent. Key evidence and findings: The Tribunal found no express exclusion of non-citizens from the Act's ambit in section 1(3). Rather, the provision extends the Act's reach but does not limit it. Application of law to facts: The appellant's argument that the Act applies only to citizens was rejected as inconsistent with the statutory language and structure. Treatment of competing arguments: The respondents argued that section 1(3) does not restrict applicability to citizens only and that the appellant's status as a "person resident in India" would subject him to the Act. The Tribunal agreed with the respondents on this point. Conclusion: The Tribunal rejected the appellant's contention that the Act does not apply to him because he is not a citizen of India. Issue (b): Whether the Appellant is a "Person Resident in India" under Section 2(p) Relevant legal framework and precedents: Section 2(p) defines "person resident in India" to include:
The appellant argued that he does not fall within this definition as no evidence was led to prove that he came to or stayed in India for any of the purposes specified in clause (iii). Court's interpretation and reasoning: The Tribunal observed that clause (iii) explicitly includes non-citizens who come to or stay in India for employment, business, or other specified purposes. The definition thus covers non-citizens under certain circumstances. Key evidence and findings: The respondents failed to provide evidence that the appellant came to or stayed in India for any of the purposes enumerated in section 2(p)(iii). The Special Director, Enforcement Directorate (DOE) had not addressed this issue in the impugned orders. Application of law to facts: Since no proof was led to establish that the appellant was a "person resident in India" as defined, section 8(1) could not be applied to him. Treatment of competing arguments: The respondents contended that the appellant was resident in India and thus liable under section 8(1). However, the Tribunal found this contention unsupported by evidence. Conclusion: The Tribunal held that the appellant did not fall within the definition of "person resident in India" and therefore section 8(1) of FERA was not applicable to him. Issue (c): Legality of Penalty Imposed under Sections 8(1), 64(2), and 68(1) of FERA Relevant legal framework and precedents: Section 8(1) prohibits dealing in foreign exchange without prior permission of the Reserve Bank of India (RBI). Sections 64(2) and 68(1) prescribe penalties for contraventions of the Act. Court's interpretation and reasoning: The Tribunal noted that the penalty orders were based on the finding that unauthorized credits were made to non-resident accounts and that the appellant was the recipient of such amounts. However, since the appellant was not a "person resident in India," the essential jurisdictional prerequisite for applying section 8(1) was missing. Key evidence and findings: The facts revealed that the Standard Chartered Bank transferred Rs. 15 lakhs to a non-resident account in London, which was not in conformity with Exchange Control Regulations. The appellant was the recipient of this amount in a non-convertible account. Despite this, the enforcement authority did not prove that the appellant was resident in India during the relevant period. Application of law to facts: The penalty could not be sustained as the Act's provisions did not apply to the appellant in the absence of residency status. Treatment of competing arguments: The respondents urged that the contravention occurred and the penalty was justified. The Tribunal emphasized the necessity of jurisdictional facts for imposing penalties under FERA. Conclusion: The impugned penalty orders were set aside in respect of the appellant for lack of jurisdiction under the Act. 3. SIGNIFICANT HOLDINGS The Tribunal held that: "Section 1(3) does not indicate that the provisions would apply only to the citizen of India and the branches or agency registered or incorporated in India. Therefore, the jurisdictional issue raised by the appellant is not tenable." However, the Tribunal further observed that: "The appellants are not falling in the definition of 'person resident of India' for the reason that no evidence was led by the respondent to prove that during the relevant period involved in this case, the appellant came and stayed for the purpose given under clause (iii) of section 2(p) of the Act of 1973." Accordingly, the Tribunal concluded: "The impugned order is set aside qua the appellant and with the aforesaid, the appeals are disposed of." Core principles established include:
|
