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FEMA - Case Laws
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2024 (10) TMI 397
Contravention of Section 3(a) of FEMA, 1999 - Appellant acquired and sold various foreign currencies to various persons resident in India - validity of the search and seizure conducted by the Respondent Directorate - Reliance on recorded statements with the independent corroborative evidence in the form of seized documents recovered from the residential premises of the Appellant
HELD THAT:- The Appellant has not furnished any evidence to the contrary so as to disprove the statements recorded under oath under Section 37 of FEMA, 1999. The recorded statements with the independent corroborative evidence in the form of seized documents recovered from the residential premises of the Appellant make him liable for the contravention of the provision of FEMA, 1999 for operating unauthorised business of selling/buying foreign exchange without the general/special permission of the RBI.
The plea taken by the Appellant that cross-examination was denied since Shri Ramchandra Khedekar, the other Panch witness and the handwriting expert were not examined on oath by the Respondent Directorate as material witnesses. However, we note that the plea to conduct the cross-examination is not dependent on examination on oath of witnesses. It is not on record that the Appellant asked for such cross-examination during the course of the adjudication proceedings. In any case, denial of such cross examination does not appear to have caused prejudice to the interest of the Appellant in view of independent corroborative evidence.
Thus we agree with the finding that the Appellant acquired and sold various foreign currencies to various persons resident in India during the period from 09.07.2002 to 24.07.2002 in contravention of the provisions of Section 3(a) of FEMA, 1999. The Appellant has taken the plea to reduce the penalty since he made all out efforts to keep the licensed money changer business M/s Griffin Forex Pvt. Ltd. clean of any illegality which is evident from nothing incriminatory having been recovered from the search of his business premises. We therefore reduce the penalty to Rs. 8,50,000/- on the Appellant which will meet the ends of justice.
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2024 (10) TMI 396
Imposition of penalty finding Contravention of Section 18(2) of FERA - export only against 06 GR by M/s. Universal Traders and 05 GR by Zen Series though in both cases 10 GR were issued by the Custom Department - HELD THAT:- GRs are issued by the Customs Department when export has to commence and thereby the export material is brought in the bonded area. It results in exports other than in the case of withdrawal of the export so is GR but there is nothing on record to prove it. The Adjudicating Authority has referred to the statement of KVS Ram Mohan, Manager of the Bank recorded on 30.04.2002.
As per his statement M/s. Universal Traders failed to realize export proceeds to the tune of Rs. 4,09,90,925/- while in the case of M/s. Zen Series, it was Rs. 3,15,50,668/-. He was asked to confirm physical exports against all the GR to which it was replied that he cannot confirm the same being not the relevant person. The fact remains that the Customs Department has endorsed for issuance of 10 GR each for both the firms and there is nothing on record to prove withdrawal of export from bounded area.
Appellant has failed to prove the case in his favour. It is also a fact that the Appellant even failed to make recovery of the export proceeds against the export admitted by him other than 05 GR exports of M/s. Universal Traders. No material is placed on record to show his reasonable efforts to make recovery and therefore we do not find any error in the impugned order for recording the Contravention of Section 18(2) of the Act, 1973 in the hands of the Appellant. We are unable to accept the arguments raised by the Appellant. The Appeal accordingly fails and is dismissed.
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2024 (10) TMI 395
Offence under FEMA - Allegation of illegal purchase and sell of foreign currency - Confiscation of seized foreign exchange and Indian currency - Penalty imposed - HELD THAT:- The two Respondents were indulging in illegal business of buying foreign exchange from the local market so as to sell the same to the passengers who were travelling abroad. These passengers would not only buy the tickets from them but also the foreign exchange against Indian currency. It was well organized network since these passengers used to be identified by Shri T. Abdulla under whose instructions the foreign currency used to be handed over to them. Moreover, Shri Mohd. Salim had made arrangement with one Shri Birbal for purchase of required foreign currency. It has also come out during the investigation that the seized Indian currency of Rs. 10,57,000/-was sale proceed arising from foreign exchange transactions.
Adjudicating Authority while imposing penalty of Rs. 24,00,000/- on Shri Abbas Mohd. Poyyail and Rs. 12,00,000/- on Shri Shaikh Mohd. Salim, ordered the confiscation of the seized foreign exchange of US$. 6, 370, US$. TCs 100/0, Euro 280. Stg. €. 160, Qatar Rls. 300, UAE Dhm. 2300, BD 40, OR 154, O. Baisa 200, SR 2571 and KD 1619.50 recovered from the premises of M/s. Safar International Tour and Travels, Mumbai and Shri Shaikh Mohamed Salim under section 13 (2) of FEMA. He further ordered that since no direct evidence was found to link between the seized Indian Currency of Rs. 10,57,000/- with the contraventions, he refrained from passing any order of confiscation for the same.
We intervene with the impugned order with respect to the seized Indian currency of Rs. 10,57,000/-. We order the confiscation of the said Indian currency of Rs. 10,57,000/- under section 13(2) of FEMA.
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2024 (10) TMI 394
Contravention of Section 3(c) of FEMA - allegations have been made against the appellant for receipt of the payments from various persons as per the instruction of one Abdulla of Abu Dhabi, a person residing outside India without general or special permission of RBI - main argument of the appellant is in reference to the retracted statement relied by the Adjudicating Authority in passing the order - HELD THAT:- We do not find that the impugned order has been passed solely based on the retraced statement. The printout of the mobile owned by the appellant was corroborative evidence to show that appellant was not only having relation with Abdulla but was having frequent conversation with him. It was also that no books of accounts of gold business were found during the search thus the statement of the appellant about his gold business remained without substance.
Finding overall evidence on the record, the Special Director (Appeals), while maintaining the finding on contravention of section 3(c) of FEMA, the amount of penalty was reduced from Rs. 7,00,000/- to Rs. 5,00,000/-.
After going through the record, we find, evidence to prove contravention of Section 3(c) of FEMA. The appellant could not prove his gold business and reason to call Abdulla of Abu Dhabi frequently and other material however we intend to reduce the amount of penalty from Rs. 5,00,000/-to Rs. 1,50,000/-. The appellant has already deposited Rs. 1,00,000/- towards pre deposit and Rs. 50,000/- are still lying with the ED after the confiscation of sum Rs. 4,00,000/-out of Rs. 4,50,000/-thus the amount lying with the ED should be taken towards the deposition of penalty amount and with the aforesaid appeal is partly allowed.
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2024 (10) TMI 393
Forfeiture of property under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act - Ownership and tenancy rights over the disputed property - alleged that the property in question was acquired out of the illegal earning by Dawood Ibrahim Sheikh - appellant, submitted that the property in question is a rented premises in her hands thus not liable to be forfeited.
HELD THAT:- The assessment order reflects as to how the property was occupied by Dawood Ibrahim Sheikh and thereupon huge amount was invested on it. They could not disclose the sources to invest huge amount of Rs.80 lakhs and in absence of which the Income Tax Department added entire investment in the hands of Dawood Ibrahim Sheikh and accordingly seizure of the property was ordered.
The appellant has shown the property to be under the ownership of K.M. Pardawala. Even if it is assumed for the sake of argument that the property belongs to him, he or his legal heirs could have challenged the order of forfeiture of property. However, neither he nor his legal heirs ever challenged the seizure of property, rather challenge is made by the deceased appellant who claims herself to be not the owner but the tenant.
The logical consequence of the above would be that while the alleged owner has not challenged the order of forfeiture of the property, the person having no ownership right is challenging it despite the fact that the property is rented out and the forfeiture may not affect because the tenant can be evicted by the means of law. The property in question was acquired by Dawood Ibrahim Sheikh by taking possession somewhere in the year 1990 and thereupon given to his sister and Rs.80 lakhs were invested on the property. Dawood Ibrahim Sheikh was subjected to assessment by the Income Tax Department and the amount spent on the property was added. Thus, argument of the appellant cannot be accepted.
We have otherwise analysed the rent receipts recently submitted by the appellant to show regular payment of rent to K.M. Pardawala and now his legal heirs. The payments therein are not through cheques but seems to be in cash. The rent receipts further shows that at many places the receiver has not signed the receipt and even the signature of landlord differs.
We are not commenting the way the receipts have been generated. The prayer was made by the respondents to allow them to lodge the prosecution against the appellant and now the legal heirs for production of receipts which are not trustworthy. The permission was sought to lodge the criminal case against them. Since certain receipts were produced even at the final stage of arguments, we would not preclude the respondents to take up the matter in reference to those receipts produced before the Tribunal. The Registry is directed to preserve the receipts produced by the respondents and if it is called upon for the investigation, if a criminal case is lodged by the respondents, then give it to the police.
The conduct of the party should be such where one can depose confidence and not where the platform of Court/Tribunal is misused. We are not precluding the respondents to take the action in reference to the rent receipts produced before us at the time of hearing. We would not comment on the conduct of the legal heirs who produced the rent receipts but we are unable to depose our confidence therein.
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2024 (10) TMI 392
Violation of Section 6(3)(b) of FEMA and Regulation 5(1) of Regulation of 2000 - delay of 24 days occurred in reporting FDI remittance - Penalty imposed on the appellant company and on the Director individually - HELD THAT:- It is not in dispute that the appellant company failed to make a report of the receipt of the amount of USD 3,09,00,000 within a period of 30 days thereby committed violation of the provisions of FEMA and Regulations.
As we refer to the facts of the case pertaining to the amendment in the Act and the excuse taken by the appellant for the delay. It was submitted that online reporting was made effective since 08.02.2016 by RBI and otherwise reporting of FDI on the forms (ARF) was to be made manually. The appellant said to have faced teething problem in making report online. The respondents have demonstrated that online system for reporting was introduced on 12.02.2015 itself though with liberty to make reporting manually.
In view of the above, we are unable to accept the excuse taken by the appellant in reference to teething problems. Teething problem, if substantiated, may remain initially but not in deplorable form under operation for a year before making it compulsory. Thus, the lame excuse taken by the appellant cannot be accepted to justify the delay. It is more so when there is no material placed on record to prove any teething problem in reporting. The appellant had not placed on record that even other Company also faced the difficulties which the appellant faced to substantiate their plea/excuse.
The appellants no doubt have made reference of the letter sent to the RBI to seek excuse for delay in reporting and issuance of UIN. The RBI is not the authority to take up the matter of delay rather if reporting is made even with delay, UIN can be issued. It is not that for delayed reporting, UIN cannot be issued by the RBI. Thus, the letters sent to the RBI cannot fill the gap and prove the case in favour of the appellant which otherwise has not substantiated with material. In view of the above, we are unable to accept the case of the appellant on facts to find justification in delay in making report of the FDI. It is more so when appellant Company committed default in reporting in previous years also and for that an application for compounding was filed and for it learned counsel for the respondent has submitted documents to show an application by the appellant for compounding for the delay caused in reporting of FDI. It was not that for the first time but on several occasions, appellant caused delay in making report of FDI. The facts are relevant to analyse the bonafide of the appellant company and even in reference to justification for imposition of the penalty of the nature imposed herein.
Whether delay in reporting should be considered only as a technical default so that no penalty be imposed? - If the plea raised by the appellant is accepted and no penalty on delay in making report is imposed, then there would be no sanctity to mandate for reporting of FDI within a period of 30 days and to make compliance of the provisions. Nobody would make a report within time or comply the mandate of law if the penalty for the delay in making report cannot be imposed on the pretext of technical delay. In fact, technical delay needs to be defined properly and in a given case technical delay may not require imposition of penalty but when it is not offending any statutory provision. If any provisions of law have not been complied, then violation may result in penal consequences, if provided. In view of the above, we are not in a position to subscribe the argument of the appellant to give immunity from imposition of penalty taking it to be a technical delay and to cause interference in the impugned order.
Reference to the provisions of Section 6(3)(b) and Regulation of 2000 superseded by the Regulation of 2017 followed by the Regulation of 2019 - repeal or express omission and substitution of any provision unless a different intention appears, the repeal/omission shall not affect the continuance of such enactment by the enactment so repealed and in operation at the time of such repeal. The detailed discussion on the issue has been made to show that words "repeal" and "omission" are interchangeable and even there is express omission of the provision it would remain in operation in a given case detailed out by the Apex Court in the case of Fibre Boards Pvt. Ltd. [2015 (8) TMI 482 - SUPREME COURT]
It is necessary to clarify that so far as the regulations are concerned, it has not been framed by the Central Government and thereby the Regulations framed by the RBI remain in operation pursuant to Section 47(3) of the Act of 1999 as amended and when it was in continuity, the appellant cannot take excuse regarding repeal/omission of the provision in the light of operation of Section 6 and 6A of the General Clauses Act read with Section 24. The issue is squarely covered by the judgment in the case of Fibre Boards Pvt. Ltd. [2015 (8) TMI 482 - SUPREME COURT]. In the light of the discussion made above, we do not find even any legal ground to assail the order of the Adjudicating Authority.
Quantum of penalty imposed on the appellant - We find reasons to interfere in the amount of penalty. It is true that the FDI for a sum of more than Rs. 204 crores was received by the appellant and it was required to be reported within a period of 30 days. The delay is of 24 days but for it the penalty of Rs. 20 crores on the Company and Rs. 5 crores on the Director is excessive in our opinion.
Reasonableness in imposition of penalty needs to be shown and accordingly we cause interference in the quantum of penalty and substitute it by imposition of penalty of Rs. 2 cores on the Company while on Director it would be of Rs. 5 lakhs. With the substitution of the penalty, we cause interference in the impugned order to that extent while maintaining it on the legal and factual issues dealt with by the Adjudicating Authority and elaborately discussed by us on all the issues raised before the Tribunal.
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2024 (10) TMI 391
Validity of proceedings under FERA - Violation of Section 9(1)(f)(i) of FERA 1973 - failure to permit the Appellant to cross-examine - HELD THAT:- Suffice it to say that there is sufficient evidence on record for the Ld. Adjudicating Authority to hold that the Appellant was indeed guilty of violating Section 9(1)(f)(i) of FERA 1973 that called for imposition of penalty on him.
Adjudicating Authority has recorded a finding that clinching evidence is there to impose penalty on Shri Keshav Bangur and the Appellant. He observed that corroboratory statements of the version of Shri Keshav Bangur were available in the depositions of the Appellant and of Shri Prakash Khaitan. Ld. Adjudicating Authority has further observed that while the Appellant stayed away from giving a clean statement he did admit making payment to Shri Keshav Bangur for payment of duties in his statements dated 19.02.1998 and 20.02.1998. Hence, Ld. Adjudicating Authority could not absolve the Appellant on the basis of his denial about the fact of arranging foreign exchange transaction overseas yet having admitted other transactions. He found that the whole case was based on seized documents and its explanation offered by the concerned persons and contemporaneous evidences.
The plea of the Appellant that in his statement u/s 40 of FERA 1973, he did not admit arranging for foreign exchange transaction on payment of Indian Rupees by Shri Keshav Bangur does not cut much ice in face of seizure of crucial documents from the residence of Shri Bangur and his explanation thereof which have been corroborated by the statements of Shri Prakash Khaitan and Shri AK Jain on certain material facts. The findings of the Ld. Adjudicating Authority in the impugned Order cannot be disturbed.
Appellant expired on 28.03.2008 and his widow has substituted the Appellant as legal heir. We further note that 20% of the amount of penalty has been pre-deposited. The Appeal was filed on 28.01.2005 and has remained pending for almost 19 years even though having been reserved for orders thrice on 08.10.2014, 13.08.2015 and 21.04.2016. In view of these attenuating factors and in the interest of justice the penalty amount is reduced to Rs. 10,00,000/- which is the pre-deposit already made by the Appellant.
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2024 (10) TMI 291
Contravention of FEMA - unauthorized direct investment outside India - direct investment in an overseas JV which was not engaged in a bona fide business activity - Contravention of the provisions of Section 6(3) (a) of FEMA read with Regulation 6(2)(ii) of the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004 - as submitted that in the instant case, the appellants adopted the third accepted mode of investment, namely purchase of existing shares of a foreign entity, although on "deferred payment basis"
HELD THAT:- The appellants have raised several pertinent issues during their arguments that the learned adjudicating authority has not at all considered the third mode of "Direct investment outside India" as defined under Regulation 2(e) of FEMA 120/2004, namely, investment by way of purchase of existing shares of a foreign entity.
Secondly, as submitted on behalf of the appellants that since the above-mentioned mode of investment was a valid mode under the Regulation, no specific permission from the RBI was necessitated as the investment was covered under automatic route. It is contended that neither the host country laws nor even the laws in India prohibit subscription to shares on deferred-payment basis - also submitted that the term "bona fide business activity" not having been defined either under the FEMA, 1999 or the relevant Regulations framed thereunder, it could not be said that credit facilities amounting to USD 52 million from ICICI Bank UK PLC to RLL Cyprus was not for any „bona fide business activity‟, especially in view of the fact that the very purpose of setting up the JV, RLL Cyprus was to explore global opportunities in steel and textile sectors and M/s Welspun Power & Steel Ltd. was an established company with a presence in the steel sector both in India and abroad.
Thus we find the impugned order does not throw clear light on the above aspects which were relevant to arriving at a reasoned decision as regards contravention, if any, of FEMA, 1999 and the relevant Regulations framed thereunder and the culpability of the appellants herein, thus in the interest of justice the matters deserve to be remanded back for fresh adjudication.
Accordingly, the impugned order is hereby set a side, and the matters are remanded back to the learned adjudicating authority for fresh adjudication and passing of a reasoned order.
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2024 (10) TMI 229
Priority of secured creditors under SARFAESI Act - attachment by virtue of Section 26 (E) of the SARFAESI Act - respondent No. 3 had mortgaged the subject property in favour of the petitioner in the year 2013-14 much prior to the search conducted by the respondent Nos. 1 & 2 under Section 132 of the Income Tax Act - HELD THAT:- The claim of the petitioner as against the subject property mortgaged by respondent No. 3 in favour of the petitioner is as long back as in year 2013 would have an over riding effect in respect of all subsequent claims including the alleged claims of respondent Nos. 1 & 2 which was only in the year 2017 as held by the Madras High Court in the case of State Bank of India Vs. Tax Recovery Officer [2022 (12) TMI 557 - MADRAS HIGH COURT]
The orders of attachment passed by the Tax Recovery Officer/Income Tax Department were subsequent to the mortgage created in favour of the secured creditors and hence, the same will have no legs to stand.
Debts due to any secured creditor shall be paid in priority over all other debts, dues and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or other local authority; it follows therefrom that the provisions of the SARFAESI Act would prevail over the provisions of other earlier enactments, under which, amounts are allegedly due to the Central Government; it is well settled that if there are two special Acts / enactments, it is the later enactment that shall prevail; in the instant case, it cannot be gainsaid that the FEMA (a special law / Act) is an earlier enactment, while the SARFAESI Act (a special law / Act) is a later / subsequent enactment which would prevail over FEMA in the light of the principles laid down by the Apex Court in several judgments including Solidaire India’s case [2001 (2) TMI 968 - SUPREME COURT]
Also, in SBICAP’s case [2023 (3) TMI 1509 - BOMBAY HIGH COURT] Division Bench of the Bombay High Court held that the provisions of the Prevention of Money Laundering Act, 2002 (for short ‘the PMLA’) would be subservient to the rights of a secured creditor under the SARFAESI Act which would prevail and override the provisions of the PMLA.
Thus by virtue of the provisions contained in Section 26E of the SARFAESI Act, coupled with the undisputed fact that mortgage of the subject property by the respondent No. 3 in favour of the petitioner in 2013 was earlier/prior in point of time to the search conducted by respondents No. 1 & 2 in the year 2017, I am of the considered opinion that the mortgage in favour of the petitioner over ride and prevail over the proceedings initiated by respondents No. 1 & 2 and consequently, the impugned order of attachment deserves to be quashed.
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2024 (9) TMI 1552
Depositing 50% amount, as a pre-condition for entertaining the Application for Condonation of Delay - scope of of statutory provisions under the Maharashtra Co-operative Societies Act and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
HELD THAT:- The main proceedings before the DRT u/s 17 would have been registered and the DRT would have then commenced the hearing on the merits of the application filed u/s 17. DRAT only had to consider whether the order of the DRT can be construed to be perverse and erroneous so as to cause interference.
In view thereof and considering the law as is settled by this Court in Dilawar Hakim [2005 (10) TMI 617 - BOMBAY HIGH COURT] DRAT could not have directed the Petitioner to deposit 50% of the amount due from him keeping in view that an auction sale had already occurred and the DRT had not determined any amount to be recovered from the Petitioner. Moreover, the Petitioner has deposited Rs. 50,00,000/- with the DRAT.
We, therefore, conclude that in the matters of condonation of delay, unless the delay is condoned, the main proceedings would not be taken up for hearing. Hence the stage of depositing the amount as may be prescribed / engrafted in any statute as a pre-condition for entertaining a substantive proceeding, would not be applicable for dealing with applications for condonation of delay.
Writ Petition is allowed. The impugned order of the learned DRAT dated 17.10.2022, to the extent of directing the Petitioners to deposit 50% of the amount, stands quashed and set aside. The proceedings are remitted to the learned DRAT.
DRAT would consider whether the impugned order of the DRT, refusing to condone delay, is sustainable or not. All contentions to this extent, are kept open.
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2024 (9) TMI 1036
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.
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2024 (9) TMI 1035
Contravention of Sections 9(1)(b) & 9(1)(d) - receiving payments from persons resident in India by order of person resident outside India and by making payments to persons resident in India by order of person resident outside India, without the general or special exemption of RBI - Alleged breach of principles of natural justice in the adjudication process.
HELD THAT:- Adjudicating Authority has considered the subsequent retraction and recorded its opinion before accepting the statements. We also find that the confessional statements have been corroborated by other independent and cogent evidence as have been brought out in the paragraphs from the impugned Order which have been cited afore while dealing with the arguments of the Ld. Counsel for the Respondent.
After service of the Show Cause Notice and having furnished the relied upon documents, even so during the proceedings of adjudication, there does not appear to be any prejudice caused to the interest of the Appellants by the denial of cross examination. A number of hearings were given to the Appellants during the course of the Adjudication proceedings. In the Appeals before us we find that the Ld. Adjudicating Authority has taken note of the statements of persons who were named in the seized documents and diaries as well as of documents recovered from them
Contraventions by the two Appellants are established. Ld. Counsel for the Appellants has pleaded for reduction in penalties due to economic status of the two Appellants.
In the order dated 01.08.2008, this Tribunal reduced the pre deposit to 10% of the penalty which have already been deposited by the two Appellants in 2011 and 2012. We find that the ends of justice will be met if the penalties are reduced to the amounts of pre deposit made. Therefore, the penalty on the Appellant Shri Mustaq Mohd. Patel is reduced to Rs. 13,50,000/- and the penalty on the Appellant Shri Mohammed Rafiq Ali Patel is reduced to Rs. 1,35,000/-.
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2024 (9) TMI 1034
Order passed u/s 19(1) of FEMA imposing penalty for contravention of Section 42(1) of FEMA - transactions were carried out in violation of various provisions of FEMA - liability of person who, at the time of contravention, was in-charge of, and responsible to the company for conduct of business of the Company - HELD THAT:- There is a deeming Clause to hold in-charge to conduct the business of the Company liable for the punishment. The Proviso, however, exclude those who submit that the contravention was without their knowledge and due diligence to prevent such contravention was taken.
The case of the Appellant is that he was not Incharge for compliances rather it was Mohendar Ahuja. It was submitted that due safeguard was put in place for compliances and even comprehensive policy was prepared. It was to show that due diligence was exercised and otherwise contravention was not in his knowledge.
We find the order of the Adjudicating Authority is silent on the issue rather the cryptic order has been passed in reference to the role of the Appellant and none of the argument has been dealt with while recording finding and imposing penalty.
Adjudicating Authority should have dealt with the plea raised by the Appellant to the fact that contravention was not in his knowledge and otherwise he exercised due diligence to prevent the contravention. We find aforesaid to have been proved. Accordingly, we find the case in favour of the Appellant and thereby set aside the impugned order and with the aforesaid Appeal is allowed.
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2024 (9) TMI 1033
Confiscation of Foreign and Indian Currency recovered from the business premises - Imposition of penalties for contravention of FEMA, 1999 - Allegations of illegal dealings in foreign exchange - FFMC failed to apply with the conditions laid down by RBI in terms of Section 10&47 of FEMA, 1999 - penalty of Rs.5 lakhs was imposed on appellant Sumesh Duggal and Rs.15 lakhs on M/s Duggal Forex Pvt. Ltd
HELD THAT:- As far as cash of Rs. 11,00,000/- is concerned, the same is duly explained by the appellants by way of tendering the statement of account of M/s Duggal Forex Pvt Ltd. which shows drawal of Rs. 5,00,000/- by way of cheque no. 343741 for sum of Rs. 8,00,000/- by way of cheque no. 343746. The sum of Rs. 11,00,000/- is stated to be out of the said drawn amount of Rs. 13,00,000/-. Accordingly, the said cash of Rs. 11,00,000/- is not an unaccounted money in any manner and is wrongly seized and ordered to be confiscated.
Coming to the various foreign currency notes found in the premises of M/s Duggal Forex Pvt Ltd. and not tallying with the record, appellant has stated that the said amount is duly accounted for and produced the record in support of his contention (as referred by him in para no. 3 above), which reflects that there is no contravention on the part of M/s Duggal Forex Pvt Ltd. Perusal of the impugned order reflects that the Adjudicating Authority has not considered the said record and is silent on this aspect. Therefore, on the basis of record submitted by M/s Duggal Forex Pvt Ltd., the said company has not committed any contravention, as there is no irregularity in the account of the said company.
Now, coming to Sumesh Duggal, the evidence on record clearly reflects that he used to sell US $ on premium rate to the officials/officers of Nigerian High Commission.
In sequel to my findings in the preceding para, the appeal filed by M/s Duggal Forex Pvt Ltd is hereby allowed and the appeal filed by Sumesh Duggal is hereby dismissed. The Indian and foreign currency seized from the premises of M/s Duggal Forex Pvt. Ltd. is hereby directed to be released. Appellant Sumesh Duggal has already deposited the penalty of Rs. 5,00,000/- as pre-deposit of penalty for admitting his appeal. Hence, appellant Sumesh Duggal is not liable to pay any additional amount.
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2024 (9) TMI 1032
Applicability of FERA provision to not resident in India - transfers to non-resident convertible rupee accounts enabled payments to be made in Foreign Exchange to a person resident outside India - Appellant Bank has been charged for contravention of Section 64 (2) read with Section 6 (4), Section 6 (5) and Section 49& 73 (3) of FERA - Contraventions in terms of Section 64 (2) of FERA for having abetted the Standard Chartered Bank, Mumbai.
HELD THAT:- Section 6 (4) and 6 (5) and 49 & 73 (3) of FERA require that the banks which are ADs shall not engage in any transaction involving any foreign exchange which is not in conformity with the terms of its authorization as AD and to obtain necessary declarations in this regard from the person on whose behalf it undertakes such transactions as well as shall comply with the conditions of such permission.
It is on 20 different occasions that the non-resident convertible rupee accounts of the Appellant Bank were credited. 19 transactions of credit occurred in its account with the ANZ Grindlays Bank between 24.07.1991 and 22.08.1991 and 1 transaction of credit happened in its account with the Standard Chartered Bank on 28.02.1991. The credits which happened in the ANZ Grindlays Bank were in a short period of about a month.
The record reveals that there were telex messages from the Appellant Bank to the ANZ Grindlays Bank for ensuring that the impugned credits were made to its account with the ANZ Grindlays Bank. One of such specific instance has been brought out by the Ld. Adjudicating Authority in the paragraphs cited earlier. It is from the facts and circumstances of a case that the intention, instigation and engagement are to be ascertained. The facts of the present case speak for themselves.
The plea that the Appellant Bank was not part of the Bilateral Group but was included in External Group does not help its case. In fact, the Appellants should have been more careful in facilitating credits in their accounts with the ANZ Grindlays Bank and with the Standard Chartered Bank by virtue of not being part of the Bilateral Group. Repeatedly credits were being facilitated in non-resident convertible rupee account by the Appellant Bank.
The circumstances and the evidence in the present case reverse the burden on to the Appellant which it has failed to discharge. Therefore, the charge of the abetment against the Appellant Bank stands established as it contravened Section 64 (2) read with Section 6 (4), Section 6 (5) and Section 49 and Section 73 (3) of FERA.
Charge against the individual Appellant/CEO - Adjudicating Authority has observed in the Impugned Order that no evidence was placed before him that the contraventions by the Appellant Bank had taken place without the knowledge of the CEO or that he exercised all due diligence to prevent such contravention. Mr. John Baden, then CEO of the Appellant Bank paid penalty of Rs. 500 imposed on him in the Impugned Order dated 11.02.2010 and has not filed Appeal against the said Order. We therefore find that the charge against the individual Appellant for the aforementioned contraventions in terms of Section 68 (1) of FERA is established in so far as his Appeal No. FPA-FE-195/MUM/2008 is concerned.
Quantum of penalty imposed on the Appellant - In the facts and the circumstances of the case we do find that that amount of penalty is disproportionate to the allegation made against the Appellants. We accordingly reduce the penalties of Rs. 13,28,82,000/- on the Appellant Bank and Rs. 6,64,41,000/- on the individual Appellant in the Impugned Order dated 09.07.2008 to Rs. 1,00,00,000/- (Rupees One Crore Only) on the Appellant Bank and to Rs. 5,00,000/- (Rupees Five Lakhs Only) on the individual Appellant, which would meet the ends of justice.
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2024 (9) TMI 1031
Contravention of Sections 8 (3) r/w 8(4) and 9(1) (b) of FERA - illegal foreign exchange remittance abroad in the garb of charges being paid for the imports of the goods which never occurred - Composite penalty for contraventions.
HELD THAT:- We find that Sections 8(3) and 8(4) of FERA are worded in terms of a ‘person’ and there is no usage of ‘importer’. Similarly, Section 9(1)(b) is also worded in terms of a ‘person’.
In the present case the Respondent Directorate had various statements before it, which conveyed that more than one concern was being controlled and owned by the Appellant Shri R.K. Verma. The investigations evoked suspicions as to fraud having been committed in filing of forged bills of entry with the bank. Hence, it became imperative to unearth the truth. It is, therefore, important for us to determine whether the remittances which were actually released were by Shri Verma, either directly or indirectly, and whether he was the ‘person’ as has been referred to in the aforementioned Sections.
Whether the bills of entry to demonstrate that the goods had actually been imported against the remittances made, were deposited or not with the bank? - Appellants have claimed that these bills were in fact deposited with the bank but went missing. The Appellants have also maintained that the bills were not available since the prescribed period for its retention was over and in any case the bills had already been audited. However, the bank lodged a FIR with the Police for the missing import documents. The counter allegation is that the theft of the missing import documents was caused so to prevent detection of forgery. The Police failed to bring the case to conclusion. In fact, to raise this issue so as to contend that the bills of entry could have demonstrated that the imports of the goods occurred is to deviate from the correct evaluation of evidence on record. The documents from the bank clearly demonstrate that the amounts were remitted in the name of M/s. MICO Enterprises and M/s. Diamount. The reports from the Customs Department show that no diamonds were imported against the impugned remittances. Hence the question about the availability of the bills of entry is not germane to determine whether imports occurred against the impugned remittances.
From the statements of Shri Vinod A. Shah it is clear that Shri R.K. Verma met him in Antwerp in the last quarter of 1990 and requested him to open a Company for him. He therefore opened a firm by name M/s. Diamblue in which major shareholder was Shri Rajesh Verma, a person introduced by Shri R.K. Verma. It therefore appears that M/s. Diamblue which received the remittances made by M/s. Diamount was in fact under the control of the Appellant Shri R.K. Verma. The inference that follows is about the key role that the Appellant Shri R.K. Verma played in the entire modus operandi to illegally remit the foreign exchange abroad in the garb of charges being paid for the imports of the goods which never occurred.
Thus, we find that the contraventions of Sections 8 (3) read with 8(4) and 9(1) (b) of FERA are established against the Appellant Shri R.K. Verma and contraventions of Sections 8 (3) read with 8(4), 9(1) (b) and 64(2) of FERA are established against Shri R.A. Soni. We therefore, find no merit in the two Appeals.
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2024 (9) TMI 1030
Imposition of penalties under FEMA - Foreign currency confiscation as seized from the premises of the Appellant - Tribunal directed the Appellant to deposit 15% of the amount of penalty imposed and furnish bank guarantee for the remaining 85% as pre deposit - Appellant argued that the principles of natural justice have been violated in as much as cross examination of the Departmental Officers and witnesses was not permitted
HELD THAT:- During the search of the residential premises a deposit slip of an overseas account along with a blank cheque book of HSBC Bank, Hongkong were seized. The seized deposit slip showed a deposit of US$ 100 in the said account. The Appellant deposed in his statement that he had not taken permission from RBI to open the account. However, he had subsequently produced a letter requesting the HSBC Bank to close the account.
Notebook marked B seized from the resident of the Appellant on which there was an entry relating to one Jazer, the Ld. Adjudicating Authority inferred that it revealed illicit purchase of foreign currency of US$ 16000 by the Appellant. He in his statement on 07.03.2005 attributed this entry to the transaction of 160 optical frames sold by him at the price of Rs. 48.60 per piece to the said Jazer. In view of this statement tendered by the Appellant under Section 37 of FEMA, we are inclined not to accept the finding of Ld. Adjudicating Authority that the contravention of Section 3(a) of FEMA has happened for the said transaction.
Therefore, we are inclined to uphold the finding of the Ld. Adjudicating Authority that the Appellant indulged in contravention of Section 3(a) of FEMA but for a reduced amount of US$ 99,770 & not US$ 1,15,770 as the charge for the contravention of US$ 16000 is not found sustainable. 17. Ld. Adjudicating Authority found no contravention of FEMA for the seized Indian currency of Rs. 9.29 Lakh which has not been confiscated.
We set aside the confiscation of the foreign currencyWe order the release thereof to the Appellant.
We also order, as prayed by the Appellant, to release the seized Indian currency of Rs. 9.29 Lakh which was not confiscated. We find that the contravention of Section 3(a) of FEMA for an amount of US$ 99,770 by the Appellant is established. We also find that the contravention of Sections 3(a) & 3(d) of FEMA for amounts US$ 5,95,738.4 and RMB 5,78,079.8 by the Appellant are established.
Penalties imposed on the Appellant and for the aforementioned contraventions are disproportionately higher. We therefore reduce the consolidated penalty for the aforementioned contraventions to Rs. 15,00,000/- (Rupees Fifteen Lakh Only) on the Appellant.
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2024 (9) TMI 939
Contravention of Section 8(1) and 9(1)(f)(i) of the Foreign Exchange Regulation Act, 1973 - receiving payments in foreign exchange during 1996-97 through fake export documents and without any export of goods to overseas parties - Adjudicating Authority finding contravention in the hands of the appellant imposed the penalty of Rs.2 lakhs for contravention of Section 8(1) and Rs.3 lakhs for contravention of Section 9(1)(f)(i) of the Act of 1973.
HELD THAT:- Show Cause Notice was given in the year 2002 alleging contravention of the provisions of the Act of 1973. A period of more than 22 years has already passed from the date of Show Cause Notice and otherwise the appellant has deposited Rs.2 lakhs as against the total penalty of Rs.5 lakhs. Taking into consideration the peculiarity of the case and also that total penalty amount is of Rs.5 lakhs for which prayer is made to reduce it to Rs.2 lakhs, we find the prayer to be appropriate for which the counsel for the respondent left it open for the Tribunal to pass an appropriate order.
We find it appropriate to reduce the penalty to Rs.2 lakhs out of which Rs.1 lakh each would be for the contravention of Section 8(1) and 9(1)(f)(i) of the Act of 1973. The amount aforesaid has already been deposited to satisfy the condition of pre-deposit thus on reduction of the penalty amount, the appellant would not be required to deposit the amount of Rs.2 lakhs, rather the amount deposited towards the pre-deposit be treated in satisfaction to the reduced penalty amount. Accordingly, we reduce the penalty from Rs.5 lakhs to Rs.2 lakhs.
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2024 (9) TMI 938
Contraventions of FERA - request for separate hearing due to non-membership in Kamani family - Violation of natural justice in passing the order - Denial of opportunity of hearing to A.P. Parekh - HELD THAT:- The perusal of the record does not show that the appellant was ever given an opportunity of hearing subsequently. It is in a given case where his case was separated thus we find that the plea taken by the appellant in his appeal is partly corroborated by the impugned order.
A case is made out to remand the matter back to the Adjudicating Officer/Authority for hearing of the case afresh so that the appellant may get appropriate opportunity of hearing.
It is necessary to clarify that the Show Cause Notice was in reference to FERA 1947 and FERA 1973 which have been repealed by FEMA 1999 thus the issue would be that who can provide an opportunity of hearing. It is required to be clarified to avoid any complications and accordingly while remanding the case back after quashing the order dated 20.09.2000 in regard to the appellant A.P. Parekh, the Department is directed to place the matter of the appellant before the appropriate authority of equivalent rank either under FERA or FEMA for providing him an opportunity of hearing which may be even the Adjudicating Authority under FEMA for which Notification has been issued by the Government of India.
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2024 (9) TMI 707
Validity of detention order of the detenu - Detenu was engaged in illegal transactions by way of purchase and sale of illegally collected foreign currencies from NRIs and other foreign exchange dealers - as argued the material against the detenu could not have led any reasonable person to come to the conclusion that there was a case made out against the detenu to detain him AND Detaining Authority has not applied his/her mind to the material in proper perspective resulting in an unsustainable order of preventive detention.
Whether non-supply of the statements of Ms. Preetha Pradeep has affected the right of the detenu to make an effective representation under Article 22(5) of the Constitution of India? - HELD THAT:-There can be no doubt that it is not necessary to furnish copies of each and every document to which a casual or passing reference may be made in the narration of facts and which are not relied upon by the Detaining Authority in making the order of detention. Failure to furnish copies of such document/documents as is/are relied on by the Detaining Authority which would deprive the detenu to make an effective representation would certainly amount to violation of the fundamental right guaranteed under Article 22(5) of the Constitution of India.
This Court reiterated that, primarily, the copies which form the ground for detention are to be supplied and non-supply thereof would prejudice the detenu. It has been further held that the documents which are merely referred to for the purpose of narration of facts in that sense cannot be termed to be documents without the supply of which the detenu is prejudiced.
It is thus a settled position that though it may not be necessary to furnish copies of each and every document to which a casual or passing reference has been made, it is imperative that every such document which has been relied on by the Detaining Authority and which affects the right of the detenu to make an effective representation under Article 22(5) of the Constitution has to be supplied to the detenu.
No doubt, as has been reiterated time and again by this Court, it may not be necessary to supply each and every document to which a passing or casual reference is made. However, all such material which has been relied on by the Detaining Authority while arriving at its subjective satisfaction will imperatively have to be supplied to the detenu.
In our view, the documents relied on by the Detaining Authority which form the basis of the material facts which have been taken into consideration to form a chain of events could not be severed and the High Court was not justified in coming to a finding that despite eschewing of certain material taken into consideration by the Detaining Authority, the detention order can be sustained by holding that the Detaining Authority would have arrived at such a subjective satisfaction even without such material.
In that view of the matter, we have come to a considered conclusion that non-supply of the statements of Preetha Pradeep has affected the right of the detenu to make an effective representation under Article 22(5) of the Constitution of India and as such, the detention is vitiated on the said ground.
Whether non-receipt of the representation and the delay in deciding the representation by the Detaining Authority and the Central Government would also affect the right of the detenu under Article 22(5) of the Constitution? - We find that the Superintendent of the Central Prison & Correctional Home has acted in a thoroughly callous and casual manner. In spite of there being catena of judgments by this Court that it is the duty of the transmitting authorities to transmit the representation of the detenu promptly and it is the corresponding duty of the concerned authorities to consider the said representation and to decide it swiftly, the same has been followed only in breach in the present matter.
In the present case, it has been casually stated that though the Jail Authorities had informed that the representations of the detenu were sent through ordinary post, the same were neither received by the Detaining Authority nor the Central Government. We deprecate the practice of the Prison Authorities in dealing with the valuable right of the detenu in such a casual manner.
In spite of this Court clearly observing in the case of Vijay Kumar (supra) that the State Government must gear up its own machinery to ensure that the representation is transmitted quickly; it reaches the Central Government as quickly as possible and is decided expeditiously. In the present case, the law laid down by this Court has been given a go-bye.
Jail Authorities ought to have ensured that the representation of the detenu reaches the concerned Authorities at the earliest. In the present era of technological advancement, the Jail Authorities could have very well sent the copies of the representation to the Detaining/Appropriate Authority either by email or at least a physical copy could have been sent by Speed Post (acknowledgment due) so that there could have been some evidence of the said being sent to the competent authority and could have been tracked.
Merely because there has been a casual or callous and, in fact, negligent approach on the part of the Jail Authorities in ensuring that the representation of the detenu is communicated at the earliest, the valuable right available to the detenu to have his representation decided expeditiously cannot be denied.
There has been a delay of almost about 9 months in deciding the representations made by the detenu. Even otherwise, from the Memoranda dated 12th June 2024, as already discussed herein above, there would be at least 27/20 days’ delay on the part of the Central Government and the Detaining Authority in deciding the representation of the detenu after it reached them subsequent to the filing of the present appeal.
In the present era of technological development, the said representation can be sent through email within a day. It is further needless to reiterate that the Competent Authority should decide such representation with utmost expedition so that the valuable right guaranteed to the detenu under Article 22(5) of the Constitution is not denied. In the matters pertaining to personal liberty of the citizens, the Authorities are enjoined with a constitutional obligation to decide the representation with utmost expedition. Each day’s delay matters in such a case.
In the present matter, we find that on account of casual, callous and negligent approach of the Prison Authorities, the representation of the detenu could not reach to the Detaining Authority and the Central Government within a reasonable period. There has been about 9 months’ delay in deciding the representation. Even otherwise, accepting the stand of the respondents as made in the counter affidavit, there has been a delay of 27/20 days on the part of the Central Government and the Detaining Authority in deciding the representation when it was called from the Prison Authorities after notice was issued in the present matter. We further find that the detention order is liable to be quashed and set aside on this ground also.
Thus, order passed by the Joint Secretary (COFEPOSA) to the Government of India directing the detention of the detenu is quashed and set aside.
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