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FEMA - Case Laws
Showing 201 to 220 of 1378 Records
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2019 (10) TMI 672
Violation of provisions under FCRA, 1976 - foreign contribution received by the respondent-petitioner - HC quashed the FIR - HELD THAT:- The impugned order passed by the High Court is not sustainable. In a petition filed under Section 482 Cr.P.C., the High Court has recorded findings on several disputed facts and allowed the petition. Defence of the accused is to be tested after appreciating the evidence during trial. The very fact that the High Court, in this case, went into the most minute details, on the allegtions made by the appellant-C.B.I., and the defence put-forth by the respondent, led us to a conclusion that the High Court has exceeded its power, while exercising its inherent jurisdiction under Section 482 Cr.P.C.
The assessment made by the High Court at this stage, when the matter has been taken cognizance by the Competent Court, is completely incorrect and uncalled for.
The High Court has proceeded on the premise that the appellant has admitted the receipt of foreign contribution from his father Mr. Vipin Khanna, who is an Indian passport holder. Infact, it is not so. It is a case of the appellant-CBI, that the foreign contributions were received by the respondent from different entities in the foreign country, without permission from the Government. On the other hand, the case of the respondent, in defence, is that he has received such funds from his father Mr. Vipin Khanna.
Appeal allowed.
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2019 (10) TMI 175
Sh. P. Chidambaram seeks bail - proposal for downstream investment - Petitioner, the then Finance Minister, Sh. P. Chidambaram approved the downstream proposal of INX News on 30.10.2008 - FIR alleging commission against Sh. Karti P. Chidambaram [arraigned as accused No. 3 in the said FIR under Section 120-B read with Section 420 of Indian Penal Code, 1860, Section 8 of the Prevention of Corruption Act, 1988 (hereinafter referred to ‘PC Act’) and Section 13(2) read with Section 13(1)(d) of the PC Act.]
HELD THAT:- As petitioner instead of joining the investigation approached this Court seeking anticipatory bail and this Court was pleased to pass an interim order protecting the petitioner from arrest. Pursuant thereto, when the petitioner was called for interrogation under the protective umbrella of a pre-arrest bail reducing the said interrogation into a mere ritual and farce, therefore, the investigation agency contested the said anticipatory bail application and same was considered by this Court .
It cannot be disputed that if case is proved against the petitioner, the offence is on the society, economy, financial stability and integrity of the country. The economic offences constitute a class apart and a class by itself, as it cuts the very root of probity and purity of public administration and results in eroding the public confidence which it reposes on the Government elected by it.
It is fact that the entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book as such offences affects the very fabric of democratic governance and probity in public life. A murder may be committed in the heat of moment upon passing being aroused. However, an economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the community can be manifested only at the cost of forfeiting the trust and faith of the community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the national economy and national interest….” as observed by the Hon’ble Supreme Court in the State of Gujarat vs. Mohanlal Jitamalji Porwal [1987 (3) TMI 111 - SUPREME COURT]
Thus, order of remand, for judicial custody, of the Trial Court is justified.
As argued by learned Solicitor General, (which is part of ‘Sealed Cover’, two material witnesses (accused) have been approached for not to disclose any information regarding the petitioner and his son (co-accused).
This Court cannot dispute the fact that petitioner has been a strong Finance Minister and Home Minister and presently, Member of Indian Parliament. He is respectable member of the Bar Association of Supreme Court of India. He has long standing in BAR as a Senior Advocate. He has deep root in the Indian Society and may be some connection in abroad. But, the fact that he will not influence the witnesses directly or indirectly, cannot be ruled out in view of above facts. Moreover, the investigation is at advance stage, therefore, this Court is not inclined to grant bail.
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2019 (10) TMI 174
Canara Bank abetted in the illegal and unauthorized dealing of foreign exchange - penalties against the appellants for the contravention of Sections 6(4), 6(5) r/w Sections 49, 8(1), 9(1)(a) and 9(1)(e) along with Para 10.3 (ii) - HELD THAT:- It is stated that from a conjoint reading of the facts and the definitions that there was neither any commission nor any omission on the part of the Appellant. Cheques issued by BFEA on an account maintained with Canara Bank were presented in the normal course of clearing and these cheques were honoured by Canara Bank. Canara Bank did not know at that point of time that the proceeds of those cheques would be remitted abroad after being credited to a convertible rupee account maintained at the ANZ Grindlays Bank.
In any event the Canara Bank had nothing whatsoever to do with the crediting of money to the convertible rupee account of GIRO bank maintained at ANZ Grindlays Bank. It is settled law that to constitute abetment it must be established that there was active complicity and intentional aiding. Counsel has referred the reported case of Shri Ram vs. State of U.P. AIR 1975 SC 175 paragraph 6. It is alleged that it is not sufficient that an act on the part of the alleged abettor happens to facilitate the commission of the offence. Therefore no case of abetment is sustainable against the Appellants. The Adjudicating Authority has failed to show that the ingredients of abetment have been fulfilled in order to hold the Appellant guilty of abetment.
As further submitted that as far as the Appellant is concerned the money was transferred from an account in India to another account maintained in India. The fact that the said money was later on transferred abroad was not within the knowledge of the Appellants. The same was not a part of the transaction over which the Appellant had any control. It is not the case of the respondents that the Canara Bank had cleared the cheque which was to be credited to a convertible account.
It is pointed out that the ANZ Grindlays Bank presented the drafts to the Appellant for payment in normal clearance without being accompanied by the required form A3 and in the circumstances the Appellant had no reason whatsoever to believe or to apprehend that the proceeds of the said draft were to have been remitted outside India or to be credited to the Vostro account of Girobank Plc. by ANZ Grindlays Bank.
The finding reached by the Special Director in his order dated 30.11.2007 in Para 30 clearly shows that at the most the only allegation that can stand against the appellants is that of negligence and not of abetment. Negligence can under no stretch of imagination be raised to a case of abetment.
As stated on behalf of appellant that in any event since ANZ Grindlays Bank had brought the foreign exchange back to India the offence had,, if at all, been mitigated and therefore punishment should have been commensurate with the gravity of economic loss to the country. Since there was no economic loss in the instant case, penalty, if any should have been of a token amount.
As advised by the RBI, the Appellant has surrendered to TBI USD 5,196,506 by purchasing from the markets at the value on 29.10.2003 i.e. ₹ 31.37 per USD and have paid ₹ 16,30,14,393/-; whereas the Appellant had received only ₹ 13,09,07,900/-; at the prevailing exchange rate in the Year 1991 and has incurred a loss of ₹ 3,21,06,493/- and hence the appellant has already been penalized.
The Adjudicating Authority has without considering the role of the officers of Canara Bank imposed penalty on them. S.A. Laxmi, one of the notices was not even concerned with the Vostro section of Canara Bank and was therefore not a person concerned with the transaction and could therefore not have been punished at all. The abovesaid appeals were heard after the hearing of appeals filed by Standard Chartered Bank and other. Many of the issues in both set of appeals are common. The decision passed would have impact in the present set of appeals.
The detailed order has been passed allowing all appeals which may also be read in the present set of appeals.
As the main issues are decided in favour of Standard Chartered Bank Ltd. and Ors. including the issue of abetment of any offence does not arise. The appeals are accordingly allowed.
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2019 (10) TMI 173
Sum acquired/possessed/held/owned outside India with LGT Bank without any General or Special permission of RBI - contravention alleged by invoking presumption under section 39 of FEMA, 99 - presumption of documents. - Penalty enhanced - Power of special director in the absence of appeal from Revenue side - HELD THAT:- It is stated on behalf of appellants that before the Special Director, the Appellants reiterated their contentions, in addition to submitting that the conclusion of guilt against the appellant is based on no material and that the order passed is perfunctory without application of mind and even contrary to show cause notice where the theory of 1/4th of amount was not even alleged, but the Special Director affirmed the order of the Adjudication Authority on his self-innovated and imaginary reasoning, neither based on any evidence nor based on any material but based on assumptions and presumptions arrived at by indulging in an intellectual flight of imagination. While arriving at the guilt the Special Director devised his own fresh reasoning, contrary to material on record and without complying with the law of evidence and in derogation of the principles of natural justice un-confronted tried to justify the order by creating an imaginary basis for attributing the name of the trust to the first alphabet of the names of the appellants but in this exercise also he could not find anything to refer to the alphabet “u” in “Ruvisha”.
Special Director without recording the main contentions of the Appellant and without any cross-appeal, then proceeded to enhance the penalty and imposed a penalty of ₹ 1,60,98,308/- against each of the appellants instead of the original imposed penalty of ₹ 5 lakhs.
Before this Tribunal the Appellants have filed their sworn affidavit stating on oath that appellants have nothing whatsoever to do with the alleged trust and have never opened and maintained any account or have any title in respect of any amount of such Trust.
It appears from is a letter dated 11th June 2013 wherein the Deputy Director of the ED made some queries to the Income Tax Department, seeking to know whether the documents sent by the Income Tax to ED are authenticated and if there is any document about the opening of the account of trust etc. There was no response to this letter. The SCN is issued thereafter on 5 February 2015.
This document clearly shows that the respondent itself had entertained doubts as to the credibility, reliability and authenticity of the relied upon material but without any response from Income Tax to this letter, have proceeded to initiate serious proceedings against the appellants and charged the appellants on the same non-credible and inadmissible material and conduct perfunctory proceedings.
The respondent has not discharged its burden about the predicament of the non-availability of the evidence has tried to overcome the same by invoking Section 39 of FEMA which is relating to presumption of documents. It is humbly submitted that Section 39 has been misread by the respondent, as the documents received from abroad in any proceedings need to be duly authenticated under FEMA (Authentication of documents) Rules, 2000 which require authentication of the documents received from abroad by way of seal and signature of any person who is authorised by the Diplomatic and Consular Officers (Oaths & Fees), Act, 1998. Similar provision was available under FERA and is also available under Customs Act.
The Special Director has enhanced the penalty arbitrarily without any Appeal filed by the Department, as if the Special Director is himself the aggrieved party, which renders the order void ab initio. In the absence of appeal by aggrieved person the Special Director had no authority to enhance the penalty which renders the order void ab initio.
In view of different law and issues of hand all the appeals are accordingly allowed.
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2019 (9) TMI 940
Contravention of Regulation 7 of Foreign Exchange Management (Acquisition and Transfer of Immovable property in India) Regulations, 2000 - Confiscation of 8 flats and five car parking - penalty under section 13(2) of the FEMA Act - HELD THAT:- National of the countries specified under Regulation 7 of the Regulations can acquire or transfer immovable properties in India, provided that such a person obtains the requisite permission from the Reserve Bank of India. If the national so fails to apply for such a permission, the Reserve Bank of India has the power to accord an ex post facto permission with regards to the said transaction.
The transaction in question is not a commercial transaction; as a matter of fact the Appellant still resides in the Flats.
The Flats were purchased by Indian Rupees, out of monies earned in India on which Income Tax has been paid, as well as monies loaned from India banks. The loans have been duly repaid. The Appellant pursuant to purchase of the Flats had also applied to the Government of India for grant of Citizenship and as stated above was granted a certificate of naturalization on 01.01.2016.
It is stated that Sami is residing in five flats out of the said eight flats with his wife and their two years old daughter. The interse dispute between the Appellant and the appellant in Appeal No. 17/2011 is outside the purview of the present appeal.
The impugned order is set-aside as far as exercise of discretion under Section 13(2) of the Act. The finding arrived under section 13(1) shall remain intact. Mr. Sami shall deposit the remaining ₹ 40 Lakhs with the respondent with three months from today. As no case of under section 13(2) (about confiscation of eight flats and five parking space), the said findings and part of the order is quashed. However, the penalty amount under the said provision of Section 13(1) is enhance to ₹ 50 Lakhs from ₹ 20 Lakhs. In view of changing his stand from time to time. This tribunal is empowered to increase the penalty amount under section 19(6) of the Act.
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2019 (9) TMI 666
Purchase of property in India - Individual arrived in India on Business Visa - “Person resident in India” as contemplated under Section 2(v) of the Foreign Exchange Management Act, 1999 - THAT:- Appellants residing in India for more than 182 days in the previous financial year at the time of setting up of business and purchase of property in India.
Thus, they satisfied the definition of the term “Person resident in India” as contemplated under Section 2(v) of the Foreign Exchange Management Act, 1999 and therefore there was no impediment to purchase and hold property in India nor did they require any permission from the Reserve Bank of India to purchase immovable property or to set up any business in India. The property was purchased on 01.09.2009 more than a year after they entered India under a valid Visa. It is specifically alleged that the documents/allegations as made out in the complaint/ Impugned order are vague as nothing was placed on record to show that ₹ 2,15,21,972/- was brought in India in violation of FEMA.
The appellants issued a valid Business Visa by the Embassy of India, Seoul which Business Visa was valid from 28.07.2008 to 27.07.2009 and thereafter from 17.08.2009 to 16.08.2010 and on subsequent dates. Both entered India on 08th August 2008 and continuously stated in India till 17.07.2009 when they left India and came back after obtaining a fresh Business Visa for the period 17.08.2009 to 16.08.2010. It is further confirmed in the impugned order.
Copy of passport of the Appellants with the relevant Business Visa and stamp of the Immigration Department for arrival and departure on the respective dates have been filed alongwith written submissions as Document no. 1. They purchased the immovable property on 01.09.2009, they had fulfilled the requirement of “Person Resident in India” as defined under section 2(v) of the Foreign Exchange Management Act, 1999 by continuously residing in India from 08th August, 2008 till 31.03.2009 for more than 182 days during the preceding Financial Year i.e. 2008-2009.
Before they purchased the immovable property, had written a letter to the Reserve Bank of India on 06.08.2009 requesting for permission to purchase the property and for constructing a building thereon. The Reserve Bank of India vide their letter dated 26.08.2009 bearing no. FE.CO.FID/5396/10.51.000/2009-10 had confirmed under Section 2(v) of the FEMA, 1999 that the Appellants do not require the approval from the RBI from the FEMA angle and that they would have only to prove his/her residential status if required, by any Authority.
Therefore, before purchase of the immovable property, the appellants had approached the RBI seeking permission. In view fo the reply of the RBI vide the afre said letter, the Appelalnt had only to satisfy Section 2(v) of FEMA, 1999, and no prior approval was required on the date when they ahd purchased the immovable property. Copy of the RBI letter is enclosed Documents no.2.
This fact has been noted by the Adjudicating Authority (internal page 6, paragraph No. 18 (6)) while passing the impugned order.
The test as contemplated under Section 3(c) of FEMA has not been met. The Respondents failed to establish all the three (3) necessary ingredients to show any violation, the ingredients being that there was a receipt of payment; the receipt was otherwise than through an authorized person and the receipt was by Order or on behalf of any person resident outside India. In the impugned order contentions and documents referred by the appellants have not been dealt with. It has come on record that the Trust was setup by the Appellants for a charitable purpose of providing shelter and education to children belong to backward and poor class irrespective of caste, creed or religion and Appellants have agreed to hand over the property to a Trust which has been set up comprising of Indian trustees who have given their consent to act as trustees and carry on with the objectives of the trust.
Thus, there is no violation of FEMA - Appeal allowed.
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2019 (9) TMI 180
Fastening liability on a director of a company for contravention of the FERA - Offences by companies - ‘Opportunity Notice’ - HELD THAT:- The adjudication proceedings are being pursued by the ED on the basis that each of the present Appellants was at the relevant time, “in charge of”, and “responsible to” NIL for the conduct of its business. There can be no doubt that the above standard for fastening liability on a director of a company for contravention of the FERA, applies to both criminal proceedings that would result following an ‘Opportunity Notice’ as well as the adjudication proceedings that would follow an SCN/MFA issued under Section 51 FERA.
The foundational fact that requires to be shown to exist for proceeding against a person under Section 51 of the FERA read with Section 68 (1) thereof is that such a person was at the relevant time, when the contravention occurred, “in-charge of” and “responsible to” NIL for the conduct of its business. A perusal of the adjudication notice in the present case reveals that the allegations in this regard are of a broad general nature without specifically indicating whether in fact the person was in-charge of and responsible to the company for the conduct of its business at the relevant time and was, therefore, liable for such contravention.
Both the Opportunity Notice as well as the SCN are identical in this respect. While ED decided not to proceed against these Appellants on criminal side, pursuant to the Opportunity Notice issued to them, thereby implicitly accepting their explanation that they fell outside the scope of Section 68 (1) of the FERA, it seemingly adopted a different standard as far as the adjudication proceedings are concerned. The Court sees no justification for applying a different standard for fastening liability on the Appellants whether the criminal liability consequent upon the Opportunity Notice or civil liability following the SCN. There appears to be no scope for adopting a different yardstick in this regard. Judgments of the learned Single Judge are unsustainable in law.
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2019 (9) TMI 162
CBI investigation for violation of provisions of FCRA - Cancellation of registration under FCRA - diversion of the funds for personal benefit of the office bearers or any other individuals - Constitutional validity of Section 43 of the Foreign Contribution (Regulation) Act, 2010 (‘FCRA’) and Rule 22 of Foreign Contribution (Regulation) Rules, 2011 (FCRR) - whether they are arbitrary, unreasonable, ultra vires and violative of Articles 14 and 21 of the Constitution of India?
HELD THAT:- It is equally well settled principle of law that laws are not to be declared unconstitutional on the fanciful theory that power would be exercised in an unrealistic fashion or in a vacuum or on the ground that there is a remote possibility of abuse of power. In fact, it must be presumed, unless the contrary is proved, that administration and application of a particular law would be done “not with an evil eye and unequal hand”.
There is a principle and/or policy for guidance of exercise of discretion by the Government in the matter of selection of an investigative agency and there is no arbitrary, vague and uncontrolled power with the Government so as to enable it to discriminate between persons or things similarly situated. Accordingly, this Court is of the view that Petitioner’s reliance upon State of Punjab vs. Khan Chand [1973 (12) TMI 91 - SUPREME COURT] is misconceived.
Also as the Notification dated 27th October, 2011 is neither an interpretation nor an understanding of Section 43 of FCRA but a convention/practice/policy to be followed by the Union of India while implementing Section 43, this Court is of the view that judgment of the Apex Court Bhuwalka Steel Industries Ltd. vs. Bombay Iron and Steel Labour Board & Anr. [2009 (12) TMI 697 - SUPREME COURT] is inapplicable to the present case.
Consequently, the Notification dated 27th October, 2011 as well as the consistent practice followed by the Central Government lay down a principle and/or policy in the matter of appointment/selection of an investigative agency under Section 43 of FCRA and saves it from attack on the ground that it violates Articles 14 and 21 of the Constitution.
Just because out of thirteen thousand NGOs, whose licences had been cancelled under FCRA, only thirty two had been referred to CBI for investigation, this Court is of the view that the petitioner cannot claim negative equality and that too without disclosing the nature of violations by the thirteen thousand NGOs.
Authorisation letter dated 07th February, 2017 issued under Section 23 of FCRA, the officer appointed in the present cases had been authorised to exercise power under Sections 23 to 26 and 42 of FCRA only. No power to investigate offences under Section 43 had been conferred upon the said officer.
Just because the inspecting authority has been empowered to seize the account or record and produce the same before the Court, does not mean that it has to mandatorily carry out investigation under Section 43 of FCRA also.
Additionally, the proceedings under Chapter V of FCRA cannot be termed as “investigation” as the provisions under the said Chapter pertain to inspection and seizure of accounts/records only. Under Chapter V of FCRA, no procedure for filing of a complaint/charge-sheet has been mentioned.
There is also nothing to suggest either in the FCRA or in the letter dated 7th February, 2017 that investigation under Chapter VIII of FCRA had to be carried out by the Inquiry Officer.
Even in the letter dated 04th August, 2017 while referring the matter for investigation to CBI, the Ministry of Home Affairs had opined that its inquiry had ‘prima facie’ and not ‘conclusively’ revealed violation of various provisions of FCRA.
Since the officer authorized under Section 23 FCRA did not have any power to investigate offences under Chapter VIII, the judgment in Directorate of Enforcement vs. Deepak Mahajan & Anr. [1994 (1) TMI 87 - SUPREME COURT] does not apply to the present cases.
The officer authorised to carry out inspection of records and accounts under Section 23 of FCRA in the present cases was authorised and had carried out inspection and enquiry only under Chapter V of FCRA.
Departmental inquiry report concluding that an officer has committed malfeasance or violations to benefit himself personally can lead to subsequent criminal investigation and prosecution by the police. Similarly a sexual harassment committee report can lead to subsequent investigation by police into allegation of rape or outraging modesty of a woman.
Even under FCRA for instance, it is possible that an inspection ordered by Central Government may reveal that foreign funds received by an organisation certified by the Central Government had been used to fund terror activities in the country and in such circumstances, no one can say that investigation under Chapter VIII offences as well as IPC and other terror acts cannot be transferred to specialised agencies like CBI ‘midstream’. In fact, the officer appointed by the Central Government under Section 23 of FCRA would neither have the wherewithal nor the expertise to carry out such an investigation.
Consequently, to submit that once the Central Government has chosen the route of empowering and authorising a particular officer/authority to conduct inquiry under Sections 23 to 26 and 42 of the FCRA, then it is only that authority which can investigate and file a criminal complaint, if so warranted, is untenable in law.
The argument that the power of arrest has been given to officers under Customs Act, Central Excise Act, PMLA etc. and not under FCRA is fallacious as in Customs Act, Central Excise Act, PMLA Acts, the power is given to the officer conducting investigation in the said Acts who is not a police officer. In the present cases, the power to investigate has been given to the CBI which has all the powers which an officer in charge of a police station has while making an investigation into a cognizable offence. This Court has no doubt that the investigative agency and the Trial Courts shall keep in mind the maxim that ‘bail is the rule and jail is an exception’.
In any event, absence of power to arrest, if any, cannot be a ground either for seeking declaration that Section 43 of FCRA is ultra vires or for quashing of the impugned FIR.
In the present cases, all the offences which are mentioned in the RC 36/2017 are not non-cognizable by virtue of Part-II of First Schedule of Cr.P.C, as contended by the learned counsel for the petitioners, because as per Schedule II of Cr.P.C., if any offence is punishable with imprisonment for less than three years or with fine, then only it shall be classified as non-cognizable. In the present cases, the impugned RC 36/2017 had been registered even under Section 35 of FCRA which provides for imprisonment upto five years or fine or both.
Further not all offences punishable with imprisonment or with fine or both are non-cognizable. For instance, Section 429 IPC which prescribes imprisonment for five years or fine or both is cognizable.
In any event, as this Court is of the opinion that Section 43 of FCRA is constitutionally valid, the offences punishable under FCRA will have to be investigated as cognizable offences irrespective of anything contained in the Cr.P.C.
The argument of the petitioners that Sections 33, 35 and 37 of FCRA encompass and imbibe the substance and spirit of penal provisions and hence, external penal provisions like Sections 199, 468, 471 and 511 IPC cannot be invoked is untenable in law. This Court is of the view that offences mentioned in FCRA essentially relate to mis-utilisation of the Foreign Contribution and giving false information, whereas the offences in IPC like Section 468 relate to forging of the documents for purpose of cheating. Consequently, IPC offences are not subsumed in offences under FCRA.
Even if it is assumed that some of the IPC offences mentioned in the FIR overlap with the offences under FCRA, yet the same will not render the registration of the impugned FIR illegal. In any event, the said plea will have to be decided after the investigation is over and that too by the appropriate court. Further, this cannot be a ground to challenge the constitutional validity of the provisions of FCRA.
Upon perusal of RC 9/2013, ECIR 10/2017 and RC 36/2017, this Court is of the opinion that while RC 9/2013 and ECIR 10/2017 have been registered in relation to undue pecuniary advantage given to Airbus Industry which has caused corresponding loss to the Government, impugned RC 36/2017 relates to violation of FCRA provisions as well as the offences committed under IPC in the process of committing violations under FCRA by the petitioners. In fact, the primary allegation in RC 9/2013 and ECIR 10/2017 is that the concessions obtained by the Empowered Group of Ministers (for short ‘EGOM’) regarding setting up of training centre for US$ 75 million and creation of Maintenance, Repair and Overall facility (for short ‘MRO’) for US$ 100 million were deliberately not made part of the final agreement signed by Indian Airlines with Airbus Industries. Accordingly, RC 36/2017 has nothing to do with pecuniary advantage given to Airbus Industry by the public servants by abusing their official positions. This Court is of the view that present batch of writ petitions are without any merit.
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2019 (9) TMI 161
Guilty of contravention of the provisions of Section 26(7)(i)(ii) of FERA 1973 - Penalty imposed on directors - dealing between a FERA Company and ‘a Person resident in India’ (which could only be an individual) - arrangement between two bodies corporate - whether amount given by LIL to HLL can neither be treated as a ‘loan’ or ‘deposit’? - HELD THAT:- Scope of “person resident in India”, it cannot be held that the amount given by LIL to HLL in the aforesaid circumstances was not ‘bonafide’ and that the Company did not act under an ‘honest and genuine belief’ that it was permissible to do so. Nor can it be said that the company ‘acted deliberately in defiance of law’ or were ‘guilty of conduct contumacious or dishonest’ or ‘acted in conscious disregard of its obligation’. Assuming without admitting that there is a technical or venial breach, there is no justification for imposition of Penalty.
Apart from the bonafide belief of the Appellant that in the facts and circumstances of the case and on proper appreciation of the aforesaid entry read with the explanatory note and the letter dated 13.2.1987 sent by LIL to the Dy. Director, ED, as well as the interpretation of Section 2(p) of FERA dealing with ‘person resident in India’, the Appellant also sought opinion from Shri M. Hidayatullah (Hon'ble Chief Justice of India- Retd.) annexed to the Additional Affidavit dated 29.3.2010 as Annexure D. At pg. 81 onwards, it is opined that in the facts and circumstances of the case referred to therein, the amount given by LIL to HLL can neither be treated as a ‘loan’ or ‘deposit’.
As such, Section 26(7) cannot be invoked and where it is opined that since the arrangement in the present case is between two bodies corporate and the two clauses of sub-section (7) of Section 26 contemplates dealing between a FERA Company and ‘a Person resident in India’ (which could only be an individual), the said sub-section would not apply.
The impugned order is also not sustainable with regard to the penalty imposed on directors as it is settled law that in order to invoke Section 68 to proceed vicariously against the Directors of the Company for an offence committed by the Company, it is not enough to merely allege & set out the contents of Section 68 in the Show Cause Notice /Memorandum. It is necessary to make specific factual averments against the particular director as to how he is alleged to be incharge of and responsible to the Company for the conduct of business of the Company. In the absence of any such factual averments, no action can be taken with reference to Section 68 against any Director. In the present case, apart from merely repeating the language of Section 68, no factual averment is made against any director as to how he is incharge of and was responsible to the Company for the conduct of its export business and was responsible for the recovery of the export proceeds in question. In the absence of any such factual averments, the Show Cause Notice /Memorandum is bad and the proceedings stand vitiated.
One of the Directors Mr. N. Vaghul joined the Board of Directors of the Appellant Company only in 1987 and prior thereto he was working with ICICI. Since the entry relating to the amount given by LIL to HLL, on the basis of which proceedings were initiated in the present case relates to the year 1985-86 before he joined the Appellant Company, in any event he cannot be held vicariously liable under Section 68 in respect of the alleged contravention by the Appellant Company.
Dr. A.S Ganguly, who was the Chairman of the Board of Directors was in any event not concerned with the day-to-day functioning of the Appellant Company and was not concerned with the transaction in question and as such he could not be held vicariously responsible under Section 68.
All other Directors were ‘Non-executive Directors’ and not ‘Whole-time Directors’ and as such were not responsible or concerned with the day-to-day functioning of the Appellant Company and as such Section 68 could, in any event, not be invoked in respect of such Non-executive Directors. The penalty imposed against all the Directors is liable to be set aside.
The view of an eminent Jurist also establishes the bonafide of the Appellant. Keeping in view the principles laid down in the aforesaid decision of Hindustan Steels, there could be no case for imposition of penalty.
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2019 (8) TMI 971
Non-compliance with the direction for pre-deposit - Offence under FEMA - HELD THAT:- The learned counsel for the respondent had earlier taken exception to the maintainability of these appeals at the outset, his submissions having been recorded in the proceedings on 11.07.2019 to the effect that the appellants are belated with reference to the order dated 15.11.2018 which, even otherwise, had not been challenged, the orders sought to be impugned by these appeals being only consequential.
At the hearing, the counsel for the appellants was asked if they are now willing to make the pre-deposits as was directed by the appellate tribunal by its order dated 15.11.2018. The counsel answered in the negative taking the position that the appeals at hand raise questions of law.
The order dated 15.11.2018 having attained finality, the appellate tribunal had no option left but to dismiss the appeals on account of non-compliance with the condition of pre-deposit. The impugned order dated 08.05.2019 does not give rise to any question of law.
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2019 (8) TMI 683
Hawala transactions - Contravention of provisions of Section 3(b) and Section 3(c) of FEMA, 1999 - allegation based on statement of various persons - submission of the appellant was that the appellant has been wrongly implicated in the case and nothing was seized or recovered from his possession - HELD THAT:- The impugned order has alleged that he received money (Indian currencies) from some other people some of whose name are Poonam, Getha, Raja Ram, Devidoss, Jaloor etc. who in turn has arranged this money from people from abroad. Thus, it appears that the impugned order has not established the appellant receiving the money directly from abroad. Moreover, there is no restriction on circulation of Indian money within the country, at least under FEMA - the department has not investigated those people who are Indians and who have delivered the money to him in India although the details of some of them like their mobile numbers etc. was available to the investigating authority. Moreover, the analysis of phone calls has also not been done in a complete manner as it does not show the details of the conversations.
It is appropriate to remand the case back to the original authority to do a thorough investigation both on the issues raised above as well as any other issues which they may like to investigate and pass a speaking order establishing the link as required under Section 3(b) and 3(c) of FEMA, 1999 - appeal allowed by way of remand.
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2019 (8) TMI 682
Acquiring and transferring foreign exchange equivalent to ₹ 208 crores without the prior general or special permission of the RBI - Section 8(1) of FERA, 1973 - allegation is made that M/s. THL have not provided any documents to prove the source of funds which they have invested/remitted to M/s. Sterlite Industries (India) Limited etc. in India and because some of the Directors are common to both the companies, it has been held that this money has actually been funded by M/s. Sterlite Industries (India) Limited to M/s. THL and then back to M/s. Sterlite Industries (India) Limited.
HELD THAT:- There is no prima facie evidence, documentary or otherwise on which the adjudicating authority has relied upon to conclusively prove the above charges. Whether there is a round tripping of funds, the interests of the common Directors in each of these companies, the actual source of funds, are matters of detail which will be gone into at the final hearing stage. Prima facie, it is found that the appellants have a strong case on merits and accordingly stay the pre-deposit. They have not pleaded for any undue hardship and hence no orders are passed on the same.
List the matter for final hearing on 14th October, 2019.
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2019 (8) TMI 681
Restoration of appeal - appeal was dismissed on time limitation as well as for non-compliance with the pre-deposit - HELD THAT:- That Delhi High Court’s order, clearly mentions only two appeals i.e. 475 and 543 of 2004 of having being remanded to the AT. There is no such order with regard to the other two appeals i.e. 473 and 488 of 2003 and hence it was legally required for the appellants to have filed, if they so desired, a proper restoration of appeal applications with valid grounds and reasons. As discussed above, they have failed to do so either in their applications or during the hearing - the restoration of appeals applications in appeal No. 473 & 488 of 2003 is dismissed as rejected as is without any grounds and substance.
Other two appeals i.e. 475 & 543 of 2004 which has been remanded by the Hon’ble Delhi High Court - HELD THAT:- The final hearing was commenced on 11.04.2019, adjourned and treated as part heard to 11.07.2019 at the request of one of the appellants and again adjourned and treated as part heard to 26.07.2019 at the request of the other appellant. However, again on 26.07.2019, there was a request for adjournment by one of the appellants - appeals were released from part heard and is now listed to be heard afresh on 25th October, 2019.
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2019 (8) TMI 266
Imposition of penalty by Special Director - contravention of Sections 8(1) & 9(1)(a) of FERA, 1973 and Sections 9(1)(f)(i), 8(1) & 9(1)(a) of FERA, 1973 - unlawful detention - initiation of adjudication proceedings as contemplated under Section 51 FERA, 1973.
HELD THAT:- The Adjudicating Authority has not been taken into account in the Impugned Order that prior to the Notification dated 31.07.1995, the position was that foreign currency could be deposited in NRE Accounts by power of attorney holders of NRIs. That being the case the necessary ingredients to make out the violations under Sections 8(1), 9(1)(a) and 9(1)(f) of FERA are not made out - It is rightly stated that in the Impugned Order proceeds on the erroneous premise that the foreign exchange deposited in the NRE Accounts of Mr. V.D. Jaiswal were deposited by the Appellant, whereas in fact the deposits of foreign exchange in the said Accounts were made by Mr. V.D. Jaiswal from his earnings abroad.
The Impugned Order all the material facts were not taken into account the fact that the Adjudicating Authority has in 52 cases against the Appellant, quashed penalty imposed against him and the same have till date not been challenged by the Respondent before the Appellate authorities. The present proceedings, which are based on factually parallel route, atleast all the said orders and facts ought to have been considered in the impugned at the time of passing the order.
In the present case, it is the case of the appellant that apart from the retracted confessional statement of the Appellant, there is no independent evidence on record to corroborate the retracted confessional statement of the Appellant - the said statement cannot be relied upon to impose any penalty upon the Appellant.
Appeal allowed - decided in favor of appellant.
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2019 (8) TMI 265
Maintainability of the appeal - Section 19 of the Foreign Exchange Management Act, 1999 - appeals were fixed for orders when there is a difference of opinion - HELD THAT:- There is no dispute that the impugned orders are interlocutory orders and these orders are passed during the course of inquiry proceedings as provided under the Act and Rules thereto. The object of Section 19 (1) is to give a right to appeal to a party aggrieved by an order which affects the party’s right or liability. If the present type of orders are allowed to be agitated than there will be no end to litigation and the very purpose of the relevant provisions and intention of the legislature would be defeated.
The scope of the words “an order” of Adjudicating Authority is not as wide as “any order” or “every decision or order” in the context of Sections 19 (1), 19 (6) & Section 35 respectively of FEMA, 1999 - As held by Hon’ble Supreme Court, in many judgments, only those orders which affect the rights and liabilities of the parties can only be appealable.
After considering the materials on record, oral and written submissions of learned counsels and the relevant judgments in the present appeals, I do not find any materials to support that the present impugned orders in any way affects the rights and liabilities of the parties, hence in view of the discussions made in the preceding paras, it is held that these impugned orders are not covered within the scope of the words “an order” occurring in Section 19 (1) of FEMA, 1999 for the purpose of filing an appeal as required under the said section. Therefore, these appeals are not maintainable.
Appeal not maintainable.
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2019 (8) TMI 247
Summary: The Supreme Court of India, in a case with citation 2019 (8) TMI 247 - SC, ordered that the counsel for the appellants must file an affidavit with proof of dasti service upon the sole respondent within two weeks in C.A. No. 4228-4261/2011. Ms. Indu Malhotra was the judge presiding over the case.
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2019 (8) TMI 216
Remedy of instituting an appeal to the Special Director (Appeals) - impugned order was served upon Petitioners by pasting on the premises sometime on 23rd February, 2019 and this Petition was lodged in the first week of May, 2019 - time limitation - HELD THAT:- If any issue of limitation arises, we are sure that the Appellate Authority will give due regard to all these circumstances. However, since the Petitioners haves alternate and efficacious remedy available under the FEMA itself, we are not inclined to entertain this Writ Petition.
This Petition is disposed of by granting liberty to the Petitioners to institute an appeal against the impugned order, in case the Petitioners so choose. All contentions of the Petitioners are expressly kept open, since we have not examined the merits of the matter.
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2019 (8) TMI 215
Maintainability of petition - Petition by a person who refuses to subject himself to Indian Laws - whether the Writ Court should exercise its jurisdiction in case of a Petitioner who has been issued a non-bailable warrant by the Special Court under the Prevention of Money Laundering Act, 2002 (PMLA) - HELD THAT;- This Court by its [2018 (2) TMI 762 - BOMBAY HIGH COURT] rejected the above contention and entertained the Petition by this very petitioner. We are informed that the status and condition of the Petitioner viz-a-viz Indian Law continues to remain what it was on 30th January, 2018 i.e. no red corner notice has yet been issued in respect of the Petitioner. These facts are not disputed and distinguished by the Revenue. Thus, this issue having already been considered by a coordinate bench of this Court and no new facts have thereafter have been brought to our notice which would warrant a different view.
Rejection of Petitioner's application for copy of the reply filed by BCCI - permission for joint hearing of all the noticee - denial of cross-examination - HELD THAT:- The compliant/ show cause notice relies upon the statement of persons of whose cross examination is sought. Thus, the basic rules of natural justice would require grant of the same, in case, the statements are being relied upon by the Respondent No.1 - the Respondent No.1 would grant cross examination of the five persons in case it seeks to rely upon the same.
Permission for joint hearing of all the noticee - HELD THAT:- It gives no reason for refusing the same. It rejects the requirement only by stating that it would cause prejudice. Therefore, the aforesaid directions in the impugned communication dated 8th January, 2018 is set aside and the Respondent No.1 would deal with the above request afresh and dispose of the same in accordance with law.
Rejection of the request for a copy of the reply filed by BCCI by only stating it would cause prejudice - HELD THAT:- No reasons in support thereof are indicated therein. Thus, the above communication dated 21st August, 2017 is set aside to the above extent and restored to Respondent No.1 for fresh decision.
Petition disposed off.
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2019 (8) TMI 214
Maintainability of petition - initiation of proceedings u/s 7(3) of the Foreign Exchange Management Act, 1999 - availability of alternative and efficacious remedy of appeal - HELD THAT:- It is not in dispute that the proceedings are initiated by the Adjudicating Authority under Section 7(3) of the FEMA and the impugned order passed by the Adjudicating Authority on 31.8.2017 exercising the powers under Section 13(1) of the FEMA. Therefore, the petitioners have got an alternative and efficacious remedy of appeal before the Appellate Authority under Section 17 of the FEMA - Section 17(4) clearly depicts that on receipt of an appeal under sub-section (1), the Special Director (Appeals) may after giving the parties to the appeal an opportunity of being heard, pass such order thereon as he thinks fit, confirming, modifying or setting aside the order appealed against.
The contention of the learned counsel for the petitioners that the Appellate Authority cannot expunge the adverse remarks passed by the Adjudicating Authority, cannot be accepted. The Appellate Authority has got every right to confirm, modify or set aside the order appealed against.
The writ petitions are disposed of as not maintainable with liberty to the petitioners to avail the alternative remedy of appeal under the provisions of Section 17 of the FEMA within a period of three weeks from the date of receipt of copy of the order.
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2019 (8) TMI 213
Imposition of penalty by Special Director - contravention of Sections 6(4), 6(5), 49, 73(3) of FERA, 1973 r/w NRE Account Rules 1970 - initiation of adjudication proceedings as contemplated under Section 51 FERA, 1973 within 30 days - HELD THAT:- In the Impugned Order the factum of prior to the Notification dated 31.07.1995, the position was that foreign currency could be deposited in NRE Accounts by power of attorney holders of NRIs. The same was requisite requirement to make out the violations under Sections 8(1), 9(1)(a) and 9(1)(f) of FERA are not made out - In the Impugned Order, the Adjudicating Authority has not taken into account the fact that the Adjudicating Authority has in 52 cases against the Appellant, quashed penalty imposed against him and the same have till date not been challenged by the Respondent before the Appellate authorities. The present proceedings, which are based on factually parallel route, atleast all the said orders and facts ought to have been considered in the impugned at the time of passing the order.
Repatriation of statement after two days - HELD THAT:- It is well settled law that a retracted confession can never be the basis of any penalty to be imposed upon a person, unless substantially corroborated by independent sources.
In the present case, apart from the retracted confessional statement of the Appellant, there is no independent evidence on record to corroborate the retracted confessional statement of the Appellant - Therefore, the said statement cannot be relied upon to impose any penalty upon the Appellant.
Appeal allowed.
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