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FEMA - Case Laws

Showing 101 to 120 of 1440 Records

2024 (7) TMI 1407

Non-affording of personal hearing to the petitioner - Suspension of registration under the Foreign Contribution (Regulation) Act, 2010 - allegation that there has been mis-management of funds of foreign contributors - whether the petitioner should have been afforded a personal hearing in terms of sub-section (2) of Section 14 of the Act prior to passing of the order dated 04-09-2023?

HELD THAT:- The words “reasonable opportunity of being heard” cannot be read in isolation. They have to be read along with sub-section (3) of Section 14 of the Act, the consequences of passing of an order of cancellation.

Sub-section (2) of Section 14 of the Act permits cancellation of registration. The consequence thereof is found in sub-section (3) which permits no registration under the Act for an entity which suffered cancellation for a period of three years. This is the dire civil and economic consequence that would ensue. Therefore, it cannot be said that sub-(2) of Section 14 of the Act is restricted only to hearing, hearing would mean only issuance of a show cause notice. Therefore, the contention of the learned Central Government Counsel is to be repelled and is accordingly repelled. I am in respectful agreement with what the learned single Judge of the High Court of Madhya Pradesh has held, interpreting sub-section (2) of Section 14 of the Act. Principles of natural justice, is trite cannot be stretched to unlimited extent. But, it is equally trite that when consequences thereof are grave, it should be complied with in its entirety even stretching in a little further.

Therefore, the words depicted in the Act ‘reasonable opportunity of being heard’ cannot be restricted to issuance of a show cause notice but a personal hearing in the peculiar facts of the case owing to the peculiarity of sub-section (3) of Section 14 of the Act must have been afforded to the petitioner. Non-affording of personal hearing to the petitioner has rendered the order unsustainable and the unsustainability of it, would lead to its obliteration. Let there be no confusion that there can always be a fusion between hearing and personal hearing.
2024 (7) TMI 1360

Validity of the notice of hearing - Adherence to Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - HELD THAT:- The adjudicating authority is duty bound to explain to the person proceeded against or his legal practitioners about the contraventions alleged to have been committed. Communicating the formation of opinion and the reasons will be informed to the person or his legal representative by the adjudicating authority under Rule 4(4) of the Rule. On receipt of such materials from the adjudicating authority on the hearing date the person concerned is at liberty to defend their case by following the procedures as contemplated under Rule 4(5) to 4(12) of the Rules.

When Rule 4(4) unambiguously contemplates that the reason for proceeding with the adjudication must be informed to the persons or to the legal practitioners or to the Chartered Accountants, and the such information should be provided along with the allegations and the provisions of the Act and Rules. The said rules contemplates providing of information to the persons and therefore, Rule 4(3) cannot be construed as violating the Rules of Natural Justice or contravening any of the provisions of law.

Rule 4(3) and Rule 4(4) should be read constructively so as to understand that a fair opportunity has been provided. Communicating the opinion of the adjudicating authority under Rule 4(3) may not be required since the adjudicating authority is bound to provide all such information along with the provisions under Rule 4(4) of the Rules. Therefore, Rule 4(3) cannot be read in isolation and it is to be read along with Rule 4(4) for constructively interpreting the procedures so as ensure that fair opportunity has been provided under the Rules and the Rules of Natural Justice has been complied with.

Though this Court had an opportunity to consider the Bombay High Court Judgement, relied on by the Delhi High Court and the Kolkata High Court, the later judgement of the Division Bench of the Madras High Court is more relevant with reference to the spirit of Rule 4 in entirety including Rule 4(3). The scope of rules/procedures cannot be expanded by the High Court in exercise of the powers of the judicial review under Article 226 of the Constitution of India. The procedures, as contemplated under the Rules, are to be read as it is and any expansion providing additional opportunity, would undoubtedly cause prejudice to any one of the parties and would provide further cause for the purpose of prolonging and protracting the proceedings.

The practice of prolonging and protracting the enquiry proceedings by approaching the High Court at each stage cannot be appreciated. Once the proceedings are commenced, the adjudicating authorities are expected to follow the procedures scrupulously and the persons concerned are bound to cooperate and defend their case by availing the opportunities to be provided in accordance with the Rules in force.

In view of the fact that the judgement of the Division Bench of the Madras High Court, in the case of India Cements Limited [2018 (6) TMI 389 - MADRAS HIGH COURT] is the latest judgement wherein the interpretation of Rule 4(3) offered by the Bombay High Court was considered, this Court is bound by the decision of the Division Bench of High Court of Madras. WP dismissed.
2024 (7) TMI 1319

Violations committed under FEMA Act - Personal hearing notice issued by the Assistant Director (SRO), directing the petitioner to appear before the adjudicating authority, i.e., the Additional Director, Directorate of Enforcement - Jurisdictional authority of the Additional Director of Enforcement - enhancement of pecuniary jurisdiction by way of notification dated 27.09.2018 to obstruct the proceedings already instituted by the Special Director (adjudicating authority) under the FEMA - HELD THAT:- Once the power to appoint an adjudicating authority is conferred on the Central Government and the Central Government, in exercise of power, issued a notification, no doubt the said notification is to be effected with prospective effect. While giving prospective effect, the cases which all are pending before the other authorities must be transferred to the appropriate authority with prospective effect for the purpose of continuance of further adjudication in the manner known to law. In the present case, such a transfer was effected from the file of the Special Director to the Additional Director of Enforcement.

The present case has been transferred from Special Director to the Additional Director in view of the enhancement of pecuniary jurisdiction by the Ministry of Finance, Department of Revenue, vide notification dated 27.09.2018. Thus, this Court do not find any jurisdictional error or otherwise in the matter of continuation of further proceedings under the FEMA Act, by the Additional Director of Enforcement who is empowered to deal with the cases involving amount up to Rupees Twenty Five Crores, but not less than Rupees Ten Crores. In the case of the petitioner, the allegation is for a sum of Rs.11.27 Crores (Rupees Eleven Crores Twenty Sevel Lakhs) and therefore, the transfer of the case from the Special Director to the Additional Director of Enforcement is well within the provisions of the FEMA Act and the grounds raised by the petitioner fails.

No writ against a Show Cause Notice is entertainable. A writ against a Show Cause Notice can be entertained only if the notice has been issued by an incompetent authority having no jurisdiction or allegations of malafides are raised. In the present case, the learned Senior Counsel made an attempt to establish that there is a jurisdictional error which would disentitle the Additional Director (adjudicating authority) to continue the adjudication. This Court is of the opinion that the ground raised is untenable and respondents have transferred the case to the Additional Director of Enforcement in view of the notification issued by the Government of India in exercise of the powers under Section 16(1) of the FEMA Act and thus, this Court has come to an irresistible conclusion that the petitioners are not entitled to the relief as such sought for in the present writ petitions.

Writ petitions stand dismissed.
2024 (7) TMI 1259

Maintainability of the writ petition - Contravention of the FEMA laws - Declaring Petitioner guilty of contravention of the provisions u/s 10(6) of the Foreign Exchange Management Act - penalty imposed - HELD THAT:- In respect of preliminary objection as to the maintainability of the writ petition, the learned Senior Panel Counsel appearing for the first respondent relied upon the judgment of the Hon'ble Supreme Court of India reported in the case of Raj Kumar Shivhare Vs. Assistant Director [2010 (4) TMI 432 - SUPREME COURT] - Therefore, the writ petition itself is not maintainable since, there is alternative remedy provided u/s 16(1), 19(1) and 35 of the FEMA.

That apart, the petitioner was not granted any immunity from the adjudication proceedings initiated under the provisions of FEMA. Whereas as per the order passed by the NCLT, the company had immunity from regulatory or administrative proceedings but not adjudicating proceedings as per Section 43 of FEMA. Further the proceedings arising in relation to the provisions of Section 13 of FEMA shall not abate by the reason of insolvency of the person liable under that Section. Further, the adjudication proceedings were initiated by way of issuing show cause notice dated 31.03.2017. It is much before the corporate insolvency resolution process.

Though the learned Senior Counsel appearing for the petitioner relied upon the judgment of M/s. Commercial Steel Limited [2021 (9) TMI 480 - SUPREME COURT] in respect of maintainability of the writ petition, which held that when the existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the Constitution of India. But the writ petition can be entertained in exceptional circumstances where there is a breach of fundamental rights, a violation of principles of natural justice, an excess of jurisdiction or a challenge to the vires of the statute of delegated legislation. But none of the exceptions as stated above is applicable to the petitioner herein, since there is no breach of fundamental right and the petitioner was duly served with show cause notice and given opportunity of hearing. Further the first respondent has power to impose the penalty.

Second respondent submitted that the recovery of penalty amount by the proceeding dated 28.02.2020 was challenged before this Court in [2024 (1) TMI 1305 - MADRAS HIGHT COURT]. Subsequently, the recovery of penalty proceeding was withdrawn and therefore, the writ petition was also dismissed as withdrawn by this Court, by an order. However, insofar as the penalty imposed on the petitioner has not been withdrawn so far. Therefore, this Court finds no infirmity or illegality in the order passed by the first respondent. This writ petition is devoid of merits and liable to be dismissed. WP dismissed.
2024 (7) TMI 1118

Claim of interest on refund of Amount deposited - Penalty was Imposed under FEMA - refund of confiscated amount - Interest accrued on deposited amount by the respondents in the Nationalized Bank - legitimate right of the petitioner to receive interest on the amount that were lying with the Department for almost for 21 years - HELD THAT:- As there is no justification in the stand of the respondents in denying the interest, as Section 42 of the Foreign Exchange Regulation Act, 1973, makes it clear that in all other cases, such proceeds shall be paid to such person as may appear to other cases, such proceeds shall be paid to such person as may appear to the officer or the Court, who or which made the direction under subsection (1) to be entitled thereto in such currency and in such manner as he or it deems just together with interest at the rate of six per cent. per annum from the date on which such draft, cheque (including traveller's cheque) or other instrument came into his or its custody till the date of payment.

By confiscating the amount, the respondents have made no favour to the petitioner. By returning the amount belatedly pursuant to the directions of this Court, the respondents have done no favour to the petitioner. The petitioner cannot be rubbed of the interest, which the petitioner would have earned, had the petitioner invested the amount in Fixed Deposit. All that the respondents have done is to comply with the order by refunding the amount that was illegally confiscated from the petitioner. There has to be a restitution and therefore, the interest is to be paid to the petitioner.

Writ Petition is disposed of by directing the respondents to pay the interest to the petitioner on the confiscated amount from the date of confiscation up to the date of refund at the prevailing bank interest within a period of 3 months from the date of receipt of a copy of this order. No costs.
2024 (7) TMI 867

Offence under FERA - contravention of section 18(2) and 18(3) read with section 64(2) of FERA, 1973 - company failed to recover the amount of export dues - investigation in the matter was conducted where it was revealed that without the permission of RBI or an extension order for recovering of the export dues, the noticee firm failed to recover the amount and even did not seek further extension for its recovery - appellant has virtually admitted his failure for contravention of 18(3) but it is only in reference to one consignment therefore questions the imposition of heavy penalty of Rs 50 lacs while on the main defaulter Smt Venita, it is only 45 lacs.

HELD THAT:- We find contravention of section 18(2) and 18(3) of FERA, 1973 because Shri V.K. Singh and Shri Dilip Nihalani colluded and were instrumental in making the exports and they received incentive from the custom authorities in respect of the shipment.

The appellant had admitted for preparation of the documents though attended only one shipment. Taking into consideration the overall circumstances and while we find a case for contravention of section 18(2) and 18(3) read with section 64(2) of FERA, find penalty of Rs. 50 lacs to be disproportionate. The penalty of Rs. 45 lacs has been imposed on Smt Venita, proprietrix of M/s Sai International while Rs 50 lacs on the appellant who said to have received Rs. 14 lacs towards work and out of drawback. Thus, to make the penalty rational, we reduce it to Rs. 14 lacs and out of which Rs. 6 lacs have already been deposited to satisfy the condition of pre-deposit. We partly allow the appeal while finding a case for contravention of section 18(2) and 18(3) of FERA, 1973, but penalty of Rs. 50 lac is reduced to Rs. 14 lacs and with the aforesaid, the appeal is disposed of.
2024 (7) TMI 425

Offences under FEMA - Liability of the person-in-charge of the company - investment in Forex Trading Bitcoins were traded in terms of USD - seized Indian Currency to Rs. 1,97,03,000/- seized from the possession of the appellants was also confiscated to Central Govt. Account in terms of Section 13(2) of the FEMA, 1999.

HELD THAT:- We are not satisfied with the contention of Ld. Counsel for the appellant ED to remand back the case for initiating fresh proceedings against the present respondents, along with M/s Ambidant Marketing Pvt. Ltd.due to following reasons:

(1) As per record, show cause notice was issued to respondents, but no notice was issued to M/s Ambidant Marketing Pvt. Ltd. by the Enforcement Directorate for the purpose of adjudication and the said show cause notice is not challenged till date, for not impleading the said company as noticee. Similarly, no Complaint is filed by Deputy Director ED, before the Adjudicating Authority, by impleading M/s Ambidant Marketing Pvt. Ltd. as necessary notice/defendant no.3. The present revision petitions are not maintainable, in absence of any SCN and complaint against the said company.

Hence, it was the duty of the appellant ED to file the revision at the initial stage when no complaint is filed against the said company and thereafter, when the show cause notice was issued only to the directors of the said company, but not to their company M/s Ambidant Marketing Pvt. Ltd. After adjudication by the Adjudicating Authority and the passing of the impugned order, appellant ED is not empowered to agitate this issue at belated stage.

(2) Even otherwise, appellant ED has not impleaded M/s Ambidant as necessary party/contesting respondent in the present Revision Petition. Hence, no adverse order can be passed in absence of impleading the said company as respondent.

(3) Moreover, from the impugned order, it appears that the said M/s Ambidant Marketing Pvt Ltd is incorporated at Dubai, and thus, Appellant ED and Adjudicating Authority cannot exercise its territorial jurisdiction over the said company. Even otherwise, the alleged contravention was committed by the present respondents in individual capacity.

(4) Moreover, the Indian Currency seized by the Officers of ED from the residential premises of Shri Sayed Fareed Ahmed, is already stands confiscated to the Central Government u/s 13(2) of FEMA, 1999. The question of remanding back the case for imposing penalty on M/s AmbidantMarketing Pvt. Ltd. does not arise.

(5) There is nothing on record that ED is able to recover the penalty amount from the present respondents till date, as per impugned order. The present whereabouts of respondents is not traceable and it will be a futile exercise to impose additional penalty on the company.

(6) Further, appellant ED has not disclosed whether the said company incorporated in Dubai is still working or stands liquidated. Appellant ED has also not disclosed the registered address in the record of Registrar of Companies at Dubai, if the said company is still working.

(7) It is pertinent to mention here that this type of Revisions and Appeals for enhancement, without realising the penalty as per impugned order, in absence of operation of any stay of the impugned order, appears to be an indirect attempt to favour the noticees’ to gain time to deposit penalty after second round of litigation, and/or to deplete the chances of recovery in future. Hence, such type of litigation by appellant ED needs to be deprecated and focus be made for realisation of the penalty amount.

(8) Even otherwise, the impugned order was passed on 27.03.2018, whereas SCN was issued on 26.02.2018, but the present revision petition is filed on 04.02.2019, i.e. after more than ten months, without any reasonable explanation of delay. Hence, this revision petition also needs to be dismissed being time barred.
2024 (7) TMI 424

Utilization of foreign exchange otherwise than for the purpose for which it was acquired - Contravention of provisions of section 8(3) r.w.s. 49& 68 of FERA, 1973 - Liability of the appellant/clerk with the said company for the contravention committed by the company - penalty imposed on the appellant - as per DR appellant has admitted that he was director in the company for a brief period of 13 months -as argued Adjudicating Authority failed to appreciate the fact that penalty cannot be imposed upon him just because he was director of the company for a brief period between 20.06.2000 to 19.07.2001, whereas, the machinery was imported by the company during the year 1994-1995.

HELD THAT:- Admittedly, appellant was working as clerk with the said company during the year 1994-1995. There is nothing on record that being clerk, he was instrumental in conducting the business of the company and was thereby responsible for import of machineries, thereafter, for installation and initiating the manufacturing activity at SP-272-A, Matsya Industrial Area, Alwar, Rajasthan.

There is nothing on record to show that present appellant was instrumental for not starting the manufacturing of the goods and thereafter making the export for M/s. Grapco Industries Ltd. to fulfil the export obligation. Learned Counsel for the respondent-ED failed to show any single document signed by the present appellant which may point out his role that he was instrumental in conducting the business of M/s. Grapco Industries Ltd. and further he intentionally failed to take any steps for the same and thereby he has vicariously liable for the contravention of provision under FERA.

Simply because when the company was going through financial crisis, the then Managing Director R.P. Jhunjhunwala inducted him as Director, does not make him liable for the past act of the company committed during the year 1994-1995.

We also find that the appellant’s case is well supported by the decision of Satish Kumar Bhalla [2009 (2) TMI 929 - DELHI HIGH COURT] as been cited on behalf of the appellant wherein it was held that Section 68 of FERA, 1973 is parimateria with Section 141 of the Negotiable Instruments Act, 1881 in reference to which the Hon’ble Supreme Court held in S.M.S. Pharmaceuticals [2005 (9) TMI 304 - SUPREME COURT] an averment must be made to the effect that the person was in charge of and responsible for the conduct of the business of the company “at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in the company.” It was further held that the petitioner could not be held responsible for conduct of business of the company only on account of his being a Director.

The case for holding the appellant responsible is even weaker in the present case as the appellant only held the post of Director for a short while, many years after the alleged contravention. Therefore, the present appeal needs to be allowed by this Tribunal seeing the fact that present appellant has no role in commission of any contravention being inducted as Director at very late stage when there was no manufacturing activity and import-export business of the company.

The present appeal is hereby allowed and thereby, impugned order passed by the Adjudicating Authority is hereby set aside. Any pre-deposit tendered by the appellant be returned within two months from the date of expiry of period of limitation, failing which respondent ED will be liable to pay interest @ 9% per annum from the said date. The bank guarantee or security tendered by appellant in lieu of pre-deposit, if any, stands discharged.
2024 (7) TMI 191

Proceedings of FERA against juristic person - proceedings pending before the Metropolitan Magistrate under Sections 56 and 68 of FERA challenged - show cause memorandum is a replica or verbatim/representation of the allegations in the complaint filed in the criminal proceeding which is under challenge - revisional application was initially preferred on the grounds that M/s. ITC Ltd being a juristic person cannot be subjected to any punishment for imprisonment and so cannot be proceeded with under Section 4 of Foreign Exchange Regulation Act, 1973 - criminal complaint against the petitioner according to the complainant/opposite party is based on the statement of Shri N. Lakshminarayan

HELD THAT:- In the present case adjudicating authority decided the issue relating to the Show Cause on merits, including the statement and the materials placed before the adjudicating authority.

The exception enumerated in paragraph 38 (vi) of Radheshyam Kejriwal [2011 (2) TMI 154 - SUPREME COURT] is not application to the facts of the present case, rather the case of the petitioner falls within the ambit of paragraph 38(vii) of Radheshyam Kejriwal (supra) case which states as follows:

“38. (vii) In case of exoneration, however, on merits where the allegation is found to be not sustainable at all and the person held innocent, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue, the underlying principle being the higher standard of proof in criminal cases.”

It is of the opinion that further continuance of the complaint case being Case No. C-2482/2002 pending before the learned Metropolitan Magistrate, 9th Court, Calcutta would be an abuse of the process of the Court and as such the same is hereby quashed.
2024 (7) TMI 116

Offence FERA - confiscation of US$ 8200 seized from Canara Bank - Penalty imposed - charge of under invoicing of the imports - seven SCNs issued - As argued SCNs were vague and baseless since these advert to seized documents without specifying the description and the contents of the documents - Appellant argued that the charge of under invoicing of the imports allegedly made against the Appellant has not been established - contention that the statements of the Appellant were recorded under duress and were retracted at the earliest opportunity - HELD THAT:- As already noted the contents of the statements made by the Appellant as well as the circumstances under which he tendered his statements in the preceding paragraph. We therefore agree with the Ld. Adjudicating Authority that the statements made by the Appellant were true and voluntary.

Validity of SCN(I) - We do not find that the SCNs were vague and baseless. We have perused all the SCNs and find that there is an Annexure to each of the SCN. Annexure list the documents which have been relied upon and include statements, documents seized specifying the premises from which recovery was made, bank draft, diary marked M with specific page therein, fax message and transcript of bank account. Since the documents recovered and seized were referred in the various statements which have been relied upon, we are unable to agree to the proposition that unless the documents are specifically pointed out in the Annexure to the SCN the same will be vague and baseless.

Appellant pleaded that the statements made by the co-noticees cannot be relied upon - We do not intend to rely upon the statements of the co-noticees. However, the evidential value of the documents seized from their premises will remain intact in so far as these have significance for the case against the Appellant and have been referred by him in his statements.

Request for the cross examination of various witnesses - We do not find that the denial of cross examination of the witnesses caused prejudice to the interest of the Appellant. The documents which were relied upon to establish charges against the Appellant were supplied to him as part of SCNs and for which he got opportunities to rebut and explain. We have already observed that we do not intend to rely upon the statements of the co-noticees. We thus note that the failure to permit the Appellant to cross-examine does not call for reversal of the Order and de novo enquiry.

Case of under invoicing - Where the goods have escaped the levy of customs duty and discovery thereof, is made subsequent to the customs clearance, the reliance on the valuation of contemporaneous imports may not be necessary in the face of other evidence. In the present case there are evidences on record which are documentary in nature and explained through the statements of the Appellant with respect to the under invoicing of the import of 32 consignments of Carbamezapine by M/s Centaur Chem which were handled by the Appellant. Moreover, from the documents which are part of the Appeal Paper Book as pointed out by the Ld. Counsel for the Respondent, there was a sharp decline in the CIF value of Carbamezapine imported by the Appellant in the years 1993 and 1994 in comparison to imports of years 1991 & 1992.No cogent explanation for the said decline has been given.

We therefore find that the charges of contravention of Sections 8 (1) and 9 (1) (a) of FERA invoked in SCN are proved against the Appellant to the extent of US$ 1, 14, 150. We also note that there is acknowledgment of debt by the Appellant to his sister abroad in contravention of Section 9 (1) (c) of FERA invoked in SCN V dated 11.08.1995.

Validity of SCN II - As categorically admitted having paid various amounts to different persons, mostly based in Kerala, on the instructions of his brother-in-law - We find that the Appellant referred in his statement to fax message from James Mathew, New York to his brother-in-law Shri Prakash C. Shah who was also resident abroad in his statement. The fax message was recovered during the search of his premises. The message was forwarded by his brother-in-law to the Appellant. It had instructions for making payment of specified amounts to certain parties. The Respondent Directorate obtained confirmation of such payments from the recipients. He also referred to a specific page of seized diary marked M.Therefore, the charge invoked in SCN II dated 11.08.1995 stand proved against the Appellant for contravention of Section 9 (1) (d) of FERA for an amount of Rs. 1, 80, 000/-.

SCN III relating to acquisition of US $ 19, 000 by the Appellant and placing the same to the credit in NRE account, of Shri Ritesh Shah, his cousin, who was a non-resident - We find from the Annexure to the SCN III dated 11.08.1995 that among the documents received from Canara Bank were transcript of the NRE Account No. 50459, Bank Account opening form, copy of power of attorney of Shri Shailesh V. Shah, credits slips and the letters of Shri Shailesh V. Shah. In his statement the Appellant refused to comment on letter written by him to Canara Bank for issuing draft of US$ 8200 to M/s Indukern Chemie AG, Switzerland. Ld. Adjudicating Authority made certain logical observation in this regards. In the absence of any explanation by the Appellant the charge against him of contravention of Sections 8 (1) and 9 (1) (e) of FERA invoked in SCN III dated 11.08.1995 stands established.

SCN IV wherein Appellant has been charged for attempting to make payment of US$ 8200 by issuing instructions to Canara Bank to make draft in the name of M/s IndukernChemie AG, Switzerland.Ld - In view of the documents received from Canara Bank and there being no explanation from the Appellant available on record, the charges invoked under SCN IV & VI stand established. The confiscation of US$ 8200 under Section 63 of FERA for contravention of Section 9 (1) (a) r/w 64 (2) of FERA is not intervened with.

Charges invoked in SCN VI for contravention of Sections 6 (4) &(5) r/w 68 (1) of FERA by the Canara Bank and its officials which have been confirmed by the Ld. Adjudicating Authority - The Appellant who was charged for the abetment of the aforementioned contraventions u/s 64 (2) of FERA has been held guilty by the Ld. Adjudicating Authority - we do not find the abetment charge to be proved against the Appellant as there is no evidence on record to establish that he aided and assisted the bank and its officials to indulge-in the said contraventions.

Penalty imposed - SCN I Adjudicating Authority imposed penalty of Rs. 40, 00, 000/- on the Appellant for contravention of Sections 8 (1) and 9 (1) (a) of FERA for an amount of US$ 462, 110 - However, since we have held that the charge is established to the extent of US $ 1, 14, 150 the amount of penalty imposed is not justified. We have also found that the charge of abetment against the Appellant invoked in SCN VII dated 11.08.1995 is not established.

Charges invoked against the Appellant in SCN II - There is no reason to doubt the veracity of the denials made by the Appellant in his statements, particularly so when his admissions have been accepted as true and voluntary. We therefore do not find that the charges invoked against the Appellant in SCN II dated 11.06.1996 are established.

With reference to the discussions, we note that the Appellant has expired and is represented by his legal heirs that ishis widow namely Ms. Lina Shah and his three daughters namely, Ms. Sunayana Sailesh Shah, Ms. Shaili Bimal Shah and Ms. Sulsa Shah. We reduce the consolidated penalty amount for SCNs I to VI dated 11.08.1995 which have been dealt with in the Impugned Order dated 30.03.1999 to Rs. 10, 00, 000/- (Rupees Ten Lakhs Only). The amount of pre-deposit of Rs. 10, 00, 000/- already made by the Appellant is to be adjusted against the reduced penalty amount. The confiscation of US$ 8200 under Section 63 of FERA for contravention of Section 9 (1) (a) r/w 64 (2) of FERA is not intervened with.

We set aside the Impugned Order with respect to the Appellant in so far as the charges have been invoked against him in SCN II dated 11.06.1996. The amount of pre-deposit of Rs. 1, 70, 000/- made on 14.05.2018 with the Respondent Directorate is to be refunded within three months.
2024 (6) TMI 669

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.
2024 (6) TMI 629

Contraventions of FERA - Appellant issued instructions to Indian Banks for crediting accounts of non-residents - Appellant, which had entered into various agency agreements with Authorized Dealer banks appointed by the RBI to open, maintain and effect transactions from the Vostro Accounts of the Appellant - Tribunal directed the Appellant to furnish unconditional bank guarantee of total penalty amount in the favor of Enforcement Directorate to meet the statutory requirement u/s 52 (2) of FERA 1973 of waiver of the pre-deposit of the penalty amount - HELD THAT:- Appellant cannot get away by an explanation that it was not its business or responsibility to do verification of any kind for such transactions because it was the instructions of the Appellant which initiated the transactions which were prohibited under the Agreement and Arrangements.

Even when the matter was taken up with the Appellant by Grindlays Bank and RBI, there is nothing on record to show that any enquiry was taken up by the Appellant. Its response was to deny its responsibility. Such conduct on the part of the Appellant not only reveals instigation but that too intentionally so as to engage with the ADs to indulge in transactions which were prohibited under the Agreement and Arrangements, resulting in contraventions of the provisions of FERA 1973.

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 whereby the obligations arising from the Agreement and Arrangements were completely ignored by the Appellant.

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 FERA1973 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 Appellant which it has failed to discharge. Therefore, the charge of the abetment against the Appellant stands established as it contravened Section 64 (2) read with Section 6 (4), Section 6 (5) and Section 49 (i) (a) of FERA, 1973.

We would consider the argument on the quantum of penalty imposed on the Appellant. It is submitted that the amount of penalty is disproportionately higher for the charge of abetment alleged against the Appellant.

Appellant has even argued against the allegation of abetment which however has not been accepted by the Tribunal. Appellant has prayed for making amount of penalty commensurate to the charge of contravention and abetment therein. The prayer has been opposed by Respondent. 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 Appellant. We accordingly substitute the penalty which would meet the ends of justice.
2024 (6) TMI 628

Violation of FEMA Act - bets accepted/placed on cricket matches on behalf of his clients - Connection of the raided premises with the appellant - Penalty imposed for contravention of Section 4 of FEMA and contravention of Section 3(d) of the Act of 1999 - specific information that the appellant and one Jaspal Singh Saluja were receiving and accepting bets on scores and outcome of cricket matches and other sporting events on behalf of their clients and bookies based locally, nationally and internationally and a search was conducted where documents of incriminating nature in terms of the mobile phones, computers, TV, recording systems, laptop, audio cassettes, etc. were found apart from Indian currency of Rs.80,000/- It was seized under the Panchnama - At the time of search, appellant Satpal Singh Vig was not present but one Jaspal Singh Saluja and some other persons were available

Whether appellant was not involved in any illegal activity taking place at the premises? - reliability of statements of Jaspal Singh Saluja, who had retracted his statements.

HELD THAT:- The noticee was indulging in accepting and placing bets on cricket matches on behalf of his clients that the investigations made revealed that the noticee Shri Satpal Singh Vig had 19 clients who were based overseas out of which accounts of 11 were retrieved from the seized computer which are annexed as `relied upon documents’. The net amount outstanding at the end of series of bets accepted/placed by a particular overseas client is arrived at in a manner explained in detail Complaint.

As seen that there were 25 outstanding accounts bifurcated into two groups of 15 and 10 being `received/receivable’ and `paid/payable’ respectively. It is also mentioned in the Complaint that one Shri Manojbhai based in Dubai is handling these accounts i.e. the dealings with overseas clients on behalf of Shri Satpal Singh Vig@Pali. Therefore section 3(d) of FEMA 1999 is invoked in respect of these amounts and it is appropriate given the nature of transactions involved. These amounts are bets accepted/placed and there is/can be a time difference between acceptance/placement of a bet and realisation of the same. However, as stated in the said section ` creation or transfer of a right to acquire any asset outside India by any person’ in this case is established the moment Shri Manojbhai accepts/places a bet on behalf of the noticee. The terms in question here in fact do not in any way affect the contravention committed by the noticee and appear to have been used to encompass the transactions which could have been at different stages of completion merely on account of time factor or physical delivery of amounts.

We find that apart from the statements of the appellant and Shri Saluja, the material produced was sufficient to substantiate the allegation against the appellant. This is to show that on instructions, Manojbhai from the account available was paid Dhirams 80,000/- on 27.6.2004 and Dhirams 1,39,346/- on 02.07.2004. Such other payments have been referred by the Special Director apart from the other material.

The case in hand is not such where the respondents could not prove the case by adducing the evidence otherwise if we enter into other facts and the evidence, it would be sufficient to show that substantial evidence was led by the respondents to prove the case, however, what has been referred by us would also be sufficient to find out the case against the appellant. Thus, we do not find any error in the findings recorded by the Special Director.

Penalty of Rs. 26 lakhs has been imposed for the contravention of Section 4 and Rs.98 lakhs for Section 3(d) of the Act of 1999 - We find the penalty amount to be in excess to the contravention of the amount involved therein. The appellant has already deposited Rs.50 lakhs towards the pre-deposit pursuant to the order of Bombay High Court though the Tribunal passed an order to deposit 60% of the amount to satisfy the condition of pre-deposit. In any case, to make the penalty amount proportionate to the contravention, we reduce it and accordingly for contravention of Section 4 of the Act of 1999, penalty of Rs.10 lakhs is imposed and thereby Rs.26 lakhs is substituted by Rs.10 lakhs and in the same manner penalty of Rs.98 lakhs is reduced to Rs.40 lakhs and is substituted accordingly. The total penalty of Rs.50 lakhs is imposed upon the respondents and with the aforesaid, appeal is partly allowed.
2024 (6) TMI 561

Recording of reasons for formation of opinion - Judicial Review of Show Cause Notices - scope of procedures contemplated under Rule 4 of FEMA Rules for “Holding of enquiry”- Non adhering to spirit of Rule 4(3) of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules 2000 - Enforceability of departmental circulars - HELD THAT:- Procedures are to be read as it is and the Court cannot expand the scope of the procedures so as to provide any additional opportunity or otherwise. In the absence of any challenge, scope of the procedures contemplated under the Rules are to be followed as it is and any expansion would result in derailing of the procedures, which is otherwise contemplated under the Rules. Inconsistency may also arise in such circumstances which exactly arose in the present case. The inconsistency in interpretation arose on account of the expansion of Rule 4(3) offered by the Bombay High Court. Bombay High Court, while interpreting Rule 4(3), expanded the scope by stating that the term “The adjudicating authority is of the opinion that an enquiry should be held, would mean that the opinion formed must be communicated to the person concerned, enabling them to defend the case”. Therefore, in the opinion of this Court, it amounts to an expansion, providing an additional opportunity to the person to get the copy of the opinion recorded in writing by the adjudicating authority in the file, which is not contemplated under Rule 4(3).

As we examine the spirit and intent of Rule 4(3), on issuance of show cause notice by the adjudicating authority along with the materials relating to contraventions and on receipt of the explanations from the persons/addressee, the adjudicating authority under Rule 4(3) has to consider the cause if any shown by such person.That would indicate that the explanation submitted is to be considered. On such consideration, if the adjudicating authority is of an opinion that an enquiry should be held, then he shall issue notice.

The show cause notice issued relating to contraventions explanations submitted by the addressee are considered together and an opinion is formed for the purpose of conducting an enquiry.

Mere forming of an opinion would be a ground to penalize a person or not? - The scope of Rule 4(3) cannot be expanded unnecessarily so as to provide an additional cause by intimating the opinion formed by the adjudicating authority to proceed with the personal hearing.

On forming of an opinion under Rule 4(3), the adjudicating authority shall issue a notice fixing a date for the appearance of the person, either personally or through his legal practitioner. Therefore, the opinion is the point, where the enquiry commences and such an opinion formed would not be a ground to penalize a person. The opinion is formed by the adjudicating authority to proceed with the personal hearing and not for any other purposes. Therefore, intimating such an opinion formed by the adjudicating authority to the persons are unnecessary and not contemplated under Rule 4(3). Therefore, Rule 4(3) cannot be interpreted beyond its scope and the procedures contemplated under Rule 4 in entirety are to be considered holistically to understand whether a fair opportunity has been provided to the persons or not.

No Writ against a show cause notice is entertainable in a routine manner. A writ against a show cause notice is entertainable only if it is issued by an incompetent authority, having no jurisdiction, or tainted with allegation of mala fides.

In the present case, the show cause notice has been issued under Rule 4(1) of the Rules. Therefore, the petitioners are bound to respond to the show cause notice by availing the opportunity. Thereafter, the adjudicating authority has to form an opinion under Rule 4(3) of the Rules, either to exonerate the person or proceed with the enquiry proceedings. If the adjudicating authority takes a decision to proceed with the enquiry then Rule 4(4) to 4(12) is to be followed scrupulously. When the adjudicating authority has not even formed an opinion under Rule 4(3) of the Rules, question of challenging the show cause notice issued under Rule 4(1) would not arise at all. Therefore, the grounds raised on merits in the writ petitions cannot be adjudicated by this Court at this stage and it is for the petitioner to respond to the show cause notice by submitting his explanations and if any opinion is formed to proceed with the enquiry proceedings thereafter, the petitioners have to defend their case in the manner contemplated under the Act and Rules. WP dismissed.
2024 (6) TMI 560

Contravention of Section 8(1) of FERA, 1973 - Denial of cross-examination of witnesses - violation of the principles of natural justice - whether a case of contravention of Section 8(1) of FERA, 1973 would be made out even if the appellants admitted receipt of the money from an NRE account because it was received by them in Indian currency? - HELD THAT:- The statement of deposits and withdrawals from the NRE account shows that foreign exchange came in the account of AkbarVeerji on its deposit and it was transferred to the account of the appellants, may be the Indian currency. It is not that NRE account was opened with deposit of Indian currency and transferred it in favour of the appellants so as to exclude from the purview of Section 8(1) of FERA, 1973.

The ingredients of Section 8(1) are satisfied in this case on transfer of the amount from NRE account where Foreign Exchange was deposited, thus the first legal argument raised by the appellant cannot be accepted. If the argument of the appellant is accepted, it would hit sub-section (2) of Section 8 of FERA, 1973. Though the appellants have not alleged for contravention of the aforesaid provision but reference of the said provision has been given to show the argument of the appellant, if accepted, then would offend other provisions of FERA, 1973. Thus, first ground raised by the appellant cannot be accepted.

Proceedings before the Adjudicating Authority are of quasi-judicial and otherwise summary in nature. Cross-examination in such proceedings cannot be claimed as a rule. It may be required in Courts dealing civil or criminal cases. This is apart from the fact that cross-examination can be allowed when statement is recorded. In this case, statement could not be recorded in absence of presence of Akbar Veerji. The cross-examination cannot be sought of a person who never deposed statement before the Court or the authority. It is a fact that AkbarVeerji could not be produced before the Adjudicating Authority and thereby there was no question of recording of his statement. He was, in fact, a non-resident Indian and despite the efforts of the respondents, they could not secure him rather received a reply to the letter. In those circumstances, when the witness was not available and otherwise could not be produced in the proceedings and his statement was not recorded even during the course of investigation, the question of cross-examination would not arise. The letter replied by him is nothing but reiteration of the documents collected by the respondents from the Banks to prove their case.

The respondents have given details of the account opened by AkbarVeerji coupled with the accounts of the appellants to show deposits and withdrawals of the amount and it is coupled with the fact that the account of AkbarVeerji was an NRE account. In such a case where the allegations are proved by the documents, the cross-examination of witness in summary proceedings cannot be claimed as a right when the person has not even been examined.

Denial of cross-examination has not affected the appellants otherwise because the respondents could prove their case based on the documents collected during the course of investigation. Thus, we do not find that denial of cross-examination in this case is fatal. Thus, the second ground raised by the appellant is also not sustainable.

Impact of Acquittal by the ACMM Court - The appellants argued that their acquittal by the ACMM Court should lead to the setting aside of the impugned order - ACMM Court has, however, recorded a finding that there is no material to prove transfer of an amount from NRE account whereas the respondents before us have submitted complete material to show and prove that an NRE account was opened by Akbar Veerji. The documents and the information received from Canara Bank produced before the authority was sufficient to prove transfer of Foreign Exchange in NRE account. The documents of two other Banks proved transfer of money in the account of the appellants. They even admitted it in their statement recorded under Section 40 of the Act and can be relied being judicial statement. The transfer of money in the account of the appellants was out of Foreign Exchange. Thus, the conclusion drawn by the ACMM Court cannot be made binding when the respondents have sufficiently proved their case before us.

It has been held that in all circumstances, it would not be necessary for the court to accept the finding recorded by the Adjudicating Authority and it would be vice-versa. It would all depend on the facts of the case and, therefore, rigidly it cannot be held that as and when prosecution case fails necessarily the adjudication case should also fail. It is when the standard of proof in two proceedings are different.
2024 (6) TMI 559

Contravention of the provisions of Sections 8(1), 48 and 49 r.w.s. 72(c) of the Foreign Exchange Regulation Act, 1973 ('FERA) - Imposition of Penalty by the Adjudicating Authority - culpability of the appellant company - delivery of the cargo to Dubai instead of Russia - formation gathered by the Directorate that certain exporters were abusing the policies governing exports from India to Russia against repayment of Rupee credits, thereby causing large-scale loss of foreign exchange to the exchequer - As alleged that the Russian buyers were non-existent.

HELD THAT:- Upon perusal, the letters in question appear to be authentic in all respects. As pointed out by the learned adjudicating authority, they are on the appellant company’s letterhead, mention all the essential details such as the shipment container number, voyage number, name of the like vessel etc. The charge of forgery is a serious one under law. No facts have been placed before us to indicate that any criminal complaint was filed by the appellant against the shipping company for the alleged forgery and if so, what was the fate of the same.

Adjudicating authority has also referred to the fact that delivery of the cargo to Dubai instead of Russia was in fact, against the commercial interest of the shipper as it would result in reduced freight charges, unless, of course, the shipping company, was in collusion with the exporter and benefitted by diverting the cargo to a hard currency area in order to generate hard foreign currency in Dubai on the one hand and at the same time also realised payment in rupees under the state credit scheme for export to Russia.

As also taken note of the observation of the learned adjudicating authority that in the event the exporter really intended that the goods should be delivered at Moscow only and the goods in fact did not reach Moscow but were delivered at Dubai, the logical course of action on the part of the exporter (the appellant company) or the importer (M/s Arina, Moscow) ought to have filed a case against the shipping company for claiming damages, but no such action was taken by either of them in this case. He has further observed that all the three parties involved, namely, the shipper/exporter, the shipping agent, and the consignee appear to have had no grievances or complaints against one another until the initiation of enquiries by the respondent Directorate. From all these facts, it cannot be ruled out in our view that all three parties were complicit in the entire episode.

Alternately, it is also possible that the Russian importers, whose very existence has been doubted by the respondent Directorate, are not even genuine parties and were mere paper entities. It is evident that the blame game between the exporter and the shipping agent started only after investigations were initiated into the alleged fraud. Therefore, not much credence can be given to the appellant’s submission laying all the blame at the shipping company’s door. We do not, however, wish to express any final view on the matter as the present case pertains only to the shipper/exporter company (and its Director) and the other two parties in the equation, namely, the shipping agent and the Russian importer are not before us in the present appeals.

As having completed all the paperwork for export to Russia and loaded the consignments for shipment, the appellant company itself superseded its earlier instructions by issuing fresh instructions by way of the letters in question to deliver the cargo at Dubai to M/s Indem General Trading (LLC), Dubai. In the above view of the matter, none of the other issues raised by the appellants holds any merit in our view since export to Russia, the key precondition under the RBI Circular for drawing funds under the state credit scheme, was not complete as against the appellant company.

The inability expressed by the appellant company vide its letter dated 29.12.2001 to furnish copies of the L/Cs, contract and correspondence with the foreign buyers, and other export documents on the pretext that the same could not be traced out because of shifting of the office premises further strengthens our view in the matter.

We are of the view that the culpability of the appellant company is adequately established on the preponderance of probabilities, rendering them liable for imposition of penalty under FERA, 1973.

The learned adjudicating authority was of the view that important export deals of such nature are normally decided in the Board meetings in the presence of all directors. Viewed in this perspective, the culpability for the transactions in question converge at the level of the directors of the company. Accordingly, he held the three directors of the company, namely, Shri Arun Kumar, Shri Prasanta Kumar Ray and Shri Amir Akbar Khan liable for the violations in terms of Section 68 of FERA, 1973 in relation to the appellant company, M/s S.S.K. Exports Ltd.

As already stated, in this order, we are only concerned with one of the three directors, namely, Shri Arun Kumar. We find that no separate arguments have been presented challenging the penalty imposed upon Shri Arun Kumar over and above the arguments and contentions raised on behalf of the company which we have already dealt with in detail in this order. Penalty imposed upon the director was a direct consequence of the penalty imposed upon the company. No material has been placed before us to indicate that Shri Arun Kumar, Director, was not in charge of, and was not responsible to the company for the conduct of business of the company at the relevant time.

Accordingly, we hold that Shri Arun Kumar, Director of M/s S.S.K. Exports Ltd., is also liable for imposition of penalty in view of the aforementioned Section 68 of FERA, 1973. Further, considering the nature of the contravention and the amount involved, we are of the view that the amount of penalty imposed is reasonable. Accordingly, we confirm the penalty of Rs. 20,00,000/- imposed upon the company which is the appellant before us as well as the penalty of Rs. 5,00,000/- imposed upon its Director Shri Anup Kumar, the appellant.
2024 (6) TMI 558

Contravention of section 9 (1) (f) (i) of FERA 1973 - Appellant argued lack of material and violation of natural justice, citing the need for cross-examination - appellant denied the allegations made against him and prayed for cross-examination of Sudhir Kapadia which was not acceded to - HELD THAT:- No part of the order pertains to the appellant to show his involvement for the contravention of the provision of the Act of 1973. In the statement recorded on 31.07.1996, Sudhir Kapadia stated about the details of the account at New York sent by Baghubhai to him. The payment of U.S. $ 38,000 is said to have been made on the instruction of the appellant who approached him on 16th or 17th July 1996. He required an amount of U.S. $ 38,000 outside India. He then contacted Baghubhai in London who asked him to hand over an amount of 14,82,000/- to Mahendrabhai which was collected from Amit Shah on 18th July.

The order does not contain a reference of statement of Mahendrabhai or anyone other than Sudhir Kapadia said to have retracted his statement. The fax message does not make a reference of the appellant. Thus, we do not find any material to show involvement of the appellant other than the statement of Sudhir Kapadia. When Sudhir Kapadia had retracted his statement and the appellant was denied an opportunity of cross-examination of the person whose statement was relied against him, it was not proper to draw conclusions against the appellant without any other evidence to prove his involvement. The order does not discuss any material against the appellant other than a reference of the statement of Sudhir Kapadia despite retraction.

We find reasons to cause interference in the impugned order qua the appellant which is set aside.
2024 (6) TMI 509

Application for compounding contravention under FEMA - petitioner filed Form FC-TRS belatedly, resulting in investigations and complaints under various Acts - HELD THAT:- Rule 8(2) of the Compounding Proceeding Rules states that “The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all concerned as expeditiously as possible and not later than 180 days from the date of application. Thus, the second respondent becomes a concerned party. In case the first respondent was advised by the letter dated 15.06.2017, since the investigations on charges of money laundering against the petitioner were ongoing, compounding proceedings ought not to be undertaken in the matter and the case has to be remitted to the respondent Department.

Rule 4(1) of the Compounding Proceeding Rules specifies the powers of the first respondent to compound contraventions, stating that if any person contravenes any provisions of FEMA, 1999, except clause (a) of Section 3 of that Act. Section 3 (a) deals with contraventions which are suspected of Money Laundering. Thus, Rule 4(1) clearly empowers the first respondent to compound all contravention, except for those that might be suspected of money laundering.

In addition to the that, a proviso has been added to Rule 8(2) of the FEMA (Compounding Proceedings) Rules, 2000 vide Gazette Notification dated 20.02.2017, which states that provided that with respect to any proceeding initiated under Rule 4, if the Enforcement Directorate is of the view that the said proceeding relates to a serious contravention suspected of terror financing, or affecting the sovereignty and integrity of the nation, the compounding authority shall not proceed with the matter and shall remit the case to the appropriate Adjudicating Authority for adjudicating contravention u/s 13. Compounding application was returned to the petitioner on account of the Proviso to Rule 8(2) of the FEMA (Compounding Proceedings) Rules, 2000 which does not empower the first respondent to compound contraventions suspected of money laundering.
2024 (6) TMI 195

Validity of Order passed u/s 17 of FEMA - specific ground raised by the petitioners is that the petitioners were not given opportunity of hearing after receipt of the letter from the respective banks

Whether the writ petition is maintainable or not when the statutory alternative remedy is available? - HELD THAT:- As against the order passed by the adjudicating authority i.e. the respondent, there is statutory appeal for any person aggrieved by the order passed by the adjudicating authority u/s 17 of the FEMA, 1999. But the existence of the alternative remedy is not an absolute bar to the maintainability of this writ petition under Article 226 of the Constitution of India. It can be entertained where there is a breach of fundamental rights, where there is violation of the principles of natural justice, where there is an excess of jurisdiction or where challenge to the vires of the statute or delegated legislation.

No materials gathered behind one's back can be relied on without giving opportunity to the said person to challenge the correctness and accuracy of the said information. That not having been done in the present case and as such, it is clear violation of principles of natural justice. Further, there is huge delay for imposing of penalty for contravention of Section 7(1)(a) of FEMA, 1999 r/w Regulations 9(1) and 13 of Regulations, 2000. Therefore, the writ petition is very much maintainable without exhausting the alternative remedy as provided u/s 17 of FEMA, 1999.

Failure to realize export proceeds from Brazil during 2004-2005 - The first petitioner is the indigenous manufacturer of various telecommunication and networking product. On complaint, the respondent alleged that the petitioners had realised export proceeds made by it to Brazil during the period between the years 2004 to 2005 valued at 10 million US dollars. Therefore, investigation was initiated against the first petitioner. During the investigation, letters were sent to the petitioners' bankers i.e. Axis Bank, Mylapore, Chennai, Canara Bank, Chennai and City Bank, Chennai. The Manager of the first petitioner was served with notice and statement was recorded under Section 37 of FEMA, 1999 on 09.01.2008 and 19.07.2013. During the period March 2003 to June 2008 by raising 39 bills had exported telecommunication and other allied products to various overseas importer to an extent of 10792473 US dollars equivalent to Rs. 46,77,54,277.44/- and failed to realise the export proceeds and thereby contravened Section 7(1)(a) of FEMA r/w Regulations 9(1) and 13 of Regulation, 2000. After filing of complaint, the petitioners were issued show cause notice dated 14.10.2015, and on receipt of the same, the petitioners had sent their reply dated 16.12.2015.

The issue is non recovery of portion of the exports done to multiple customers with whom the petitioners had ongoing export businesses then and permission sought for from the dealers for writing off a portion of the bills which were non commodity engineering technical exports in the interest of further export business. Their request for write off was neither rejected nor acceded to and after more than 12 years, the petitioners were served notices for such transactions. Therefore, the long delay of more than 10 years with regard to the transactions is unfair and deprived of the petitioners a reasonable opportunity to defend themselves in respect of the alleged contraventions. Further, the entire information received from the dealers / banks had been behind the petitioners' back and without an opportunity to the petitioners, it was adjudicated. Therefore the petitioners are not guilty of any non declaration in terms of Section 7(1)(a) of FEMA r/w Regulation 9(1) and 13 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000.

First petitioner is no longer in operation for more than a decade. The second petitioner is employed in other company. The first petitioner has no operation, no revenues and no staff or employees and it is facing liquidation proceedings. There is absolutely no explanation for the delay in issuance of notice, that too after period of 10 years. Therefore, the impugned order cannot be sustained and the same is liable to be quashed.

Accordingly, the impugned order and the demand notice are quashed and this writ petition is allowed.
2024 (6) TMI 49

Adjudication proceedings under FEMA 1999 - personal hearing notice was issued without providing reasoned opinion formed under Rule 4 (3) of the said Rules - HELD THAT:- Plain reading of the Rule reveals that there is no express provision or intention to communicate such reasons to the person against whom the proceedings are initiated by the Enforcement Directorate. Only through judicial interpretation by the Bombay High Court, the scope of the Rule has been expanded for the purpose of communicating the reasoned opinion to the person against whom proceedings are initiated.

Act and Rules contemplate check and balance to ensure that a person subjected to the proceedings get fair opportunity. However, expanding scope of the Rule under the guise of fair opportunity would defeat the purpose of the Rule and the procedures contemplated therein. Therefore, judicial expansion of scope of the Rule, if causes prejudice to the interest of the proceedings, the same need not be adopted.

The plain reading of the Rule would indicate that the Adjudicating Authority has to form an opinion for the purpose of issuing a show cause notice by fixing the date for appearance of the person either personally or through his legal practitioner or a Chartered Accountant. Such a plain procedure contemplated cannot be further interpreted for the purpose of providing a scope for the person to seek the reasons formed by the Authorities.

The Division Bench of the Madras High Court, in the case of India Cements vs. Union of India [2018 (6) TMI 389 - MADRAS HIGH COURT] considered the Bombay High Court Judgment as confirmed by the Hon'ble Supreme Court of India in the S.L.P., at the admission stage and the principles laid down by the learned Single Judge in the case of Ramakrishna Setty [2014 (8) TMI 1105 - MADRAS HIGH COURT] De horse the decisions, reading of the Rules would indicate that furnishing the reasons to the persons is not mandated nor expressly stated. Therefore, entertaining a writ petition during the intermittent stage would hamper the proceedings.

Therefore, this Court is not inclined to encourage such writ petitions filed. Contrarily, the petitioner have to defend their case by availing the opportunities to be provided by the respondent in consonance with the procedures as contemplated under the Rules.

A writ against a show cause notice or a personal hearing notice is normally not entertainable under Article 226 of Constitution of India, unless such notices are issued by an incompetent authority having no jurisdiction or tainted with the allegations of malafide. In the present case, the learned Senior Counsel raised a ground that Rule 4(3) has not been complied with. However, Rule 4(3) does not contemplate any such procedure and the Rule stipulates that the Adjudicating Authority has to form an opinion before issuing a notice fixing the date of appearance of the person. That being the scope of the Rule, further expansion is impermissible and the petitioner is at liberty to participate in the proceedings by availing the opportunities to be provided in the manner contemplated under the Act and Rules.