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2024 (11) TMI 842
Maintainability of appeal - Approval of resolution plan - HELD THAT:- The appellants have preferred an appeal before the NCLAT on the ground that they were not aware about the Corporate Insolvency Resolution Process (CIRP). Therefore, the NCLAT is right in not entertaining the appeal.
Appeal dismissed.
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2024 (11) TMI 841
Rejection of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - no valid Board resolution in favour of the appellant - existing arbitration clause under the agreement - HELD THAT:- This aspect as to whether there was a bona fide pre-existing dispute or not has to be considered by the Tribunal and Appellate Tribunal which has not been dealt with nor the application under Section 9 of the IBC has been rejected on the above ground.
Both the impugned orders passed by the NCLAT as also by the NCLT are set aside and the application filed under Section 9 of the IBC needs to be considered afresh on its own merits after hearing learned counsel for the parties and the material on record - Appeal allowed.
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2024 (11) TMI 840
Permission to withdraw application filed u/s 9 of the Insolvency and Bankruptcy Code, 2016 - Appellant challenging the order contends that the Adjudicating Authority committed error in not granting liberty to the Appellant to file a fresh Application - it was held by NCLAT that 'no error has been committed by the Adjudicating Authority in permitting withdrawal of the Application, while denying liberty to file fresh Application, once again.'
HELD THAT:- There are no good ground and justification to interfere with the impugned judgment and, hence, the present appeal is dismissed.
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2024 (11) TMI 839
Non-compliance with sub-section 1 of Section 9 of the IB Code - HELD THAT:- Issue notice on the application for stay, returnable on 18th November, 2024.
By order dated 26th November, 2020, a company has been impleaded as Additional Corporate Debtor in the pending application under Section 9 (1) of the Insolvency and Bankruptcy Code, 2016 2016. Prima facie, the order is illegal as compliance with sub-section 1 of Section 9 of the IB Code has not been made.
The order dated 26th November, 2020 passed by the National Company Law Tribunal, Kochi Bench, Kerala is stayed - the main application under Section 9 of the IB Code can always proceed against the original Corporate Debtor.
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2024 (11) TMI 838
Maintainability of Application seeking reference to Arbitration - existence of debt and default or not - commencement of the Arbitration Proceeding by the Financial Creditor - HELD THAT:- In the present case, the Reply to Section 7 was filed in December 2023, whereas Application under Section 8 has been moved on 07.03.2024. There are substance in the submission of the Appellant that right to move Section 8 Application was forfeited since Corporate Debtor did not choose to file the Application.
Application under Section 7 was filed by the Financial Creditor in the Year 2023. The thrust of submission of the Appellant is that Financial Creditor itself has initiated Arbitration Proceeding by unilaterally appointed an Arbitrator on 26.07.2019, hence Section 7 Application ought not to have been proceeded and the Adjudicating Authority ought to have allowed the Application filed by the Corporate Debtor under Section 8 of the Arbitration Act. There is no dispute to the fact that Financial Creditor has unilaterally appointed a sole Arbitrator and sole Arbitrator, however, terminated the Arbitration Proceeding on 26.10.2021 holding that appointment of Arbitrator is contrary to the law laid down by the Hon’ble Supreme Court in `Perkins Eastman Architects DPC & Anr.’ Vs. `HSCC (India) Limited’ [2019 (11) TMI 1154 - SUPREME COURT] reported in Arbitration Application 32/2019.
From the law laid down by the Hon’ble Supreme Court, it is clear that if an Application under Section 8 of the Arbitration and Conciliation Act, 1996, is filed, the Adjudicating Authority is duty bound to proceed first to decide the Application under Section 7 by recording a satisfaction with regard to their being default or not. The fact that whether Arbitration Proceedings are pending on the date when Section 7 Application is filed or it is sought to be initiated subsequent to filing of Section 7 Application is immaterial. The remedy under Section 7 is a special remedy, keeping the object and purpose of the IBC Code. When it is brought in the notice of the Adjudicating Authority that a Corporate Debtor needs a resolution it having committed default in payment of debt, the Court is obliged to consider the Section 7 Application to find out as to whether there is a debt and default.
Allowing the Application under Section 8 filed by the Corporate Debtor amounts to asking the Adjudicating Authority to wait till Arbitration Proceedings are decided which is not in accord with the scheme of the IBC and shall defeat the entire purpose and object of the IBC. Adjudicating Authority in the Impugned Order has rightly rejected Application under Section 8 filed by the Corporate Debtor for referring to the dispute between the parties to the Arbitrator.
The Application under Section 8 was filed much subsequent to the filing of the Reply by the Corporate Debtor.
In the present case, debt and default is admitted by Corporate Debtor in its One Time Settlement offers issued twice in the Year 2019 and 2022 - no error has been committed by the Adjudicating Authority in rejecting the application filed by the Appellant.
There is no merit in the Appeal. The Appeal is dismissed.
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2024 (11) TMI 837
Condonation of delay of 3 days in filing the appeal - Computation of limitation period for filing the appeal - whether the date of limitation is to be counted from the date of e-filing or the date of presentation of appeal? - HELD THAT:- As per the provisions of Section 61 of IBC, any person who is aggrieved against the order passed by the Tribunal has a statutory right to file an appeal before the Appellate Tribunal. Section 61(2) provides statutory period of 30 days for filing such an appeal, however, if the proposed Appellant failed to file the appeal within a period of 30 days for some reason then Section 61(2) proviso gives another period of 15 days to file the appeal provided it satisfy the Appellate Tribunal that there was a sufficient cause for not filing the appeal in time. In no case, the period beyond 15 days can be extended.
Since, the appeal has been filed by the Appellant on 30.05.2022 through e-filing and the hard copy was filed on 20.06.2022 though before coming into force the SOP dated 21.10.2022 which has been made effective from 01.11.2022, the SOP dated 21.10.2022 has been withdrawn by SOP dated 24.12.2022 and it has been ordered that limitation is to be counted from the date of e-filing, therefore, in view of the decision of the Hon’ble Supreme Court in the case of Somdev Kappor [2013 (10) TMI 384 - SUPREME COURT] where it has been held that the rules which are prevalent on the date when the application is considered are to be applied and not the date when the application is made, the application having been filed by the Appellant has to be considered in terms of SOP dated 24.12.2022 which is in operation at the time when the application for condonation of delay is being considered.
The argument raised by Respondent No. 1 not agreed upon, that limitation is to be counted from the date of presentation of appeal at the counter because the issue of computation of limitation was first determined by way of SOP dated 21.10.2022 whereas the appeal was filed much earlier in both ways i.e. e-filing as well as by way of hard copy and the SOP dated 21.10.2022 was superseded/withdrawn by SOP dated 24.12.2022 as per which the limitation is to be counted from the date of e-filing.
The objection raised by the Respondent is hereby overruled and since there is a delay of only three days in filing the appeal which has also been duly explained in detail in the application which is supported by an affidavit and the power to condone the said delay in terms of Section 61(2) proviso is with this Tribunal, therefore, the same is hereby condoned on being satisfied that sufficient reason has been assigned by the Appellant.
The application is thus allowed.
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2024 (11) TMI 836
Service of notice - notice issued under Section 8 of the Code was not in accordance with law - appellant argued that the Tribunal has committed a patent error in dismissing the application on the ground that the notice was not given to the juristic person but has been addressed to the KMP of the CD - HELD THAT:- Undisputedly, the issue of notice under Section 8 that too on a printed proforma (Form 3) is a sine qua non for the purpose of invoking Section 9 of the Code for filing an application under Section 9 of the Code by the OC. In case, the notice is not issued then the cause of action is not complete and application under section 9 cannot be maintained. In the present case, though the notice has been issued on 31.03.2021 and it is also on Form 3 but the same has been addressed to Mr. Sameer Singh, Director, Bibhuti Bhushan Rath, Chief Financial Officer and Mr. S. Subudhi, Manager Commercial of the Corporate Debtor in their capacity of KMP of the CD but no notice has been addressed to the company (CD), namely, Mesco Kalinga Steel Ltd. through its managing director etc., therefore, the said notice cannot be termed to have been delivered to the CD and therefore, the same cannot be taken to be a notice issued under Section 8 of the Code.
In so far as the delivery of notice is concerned, Rule 5 of the Rules prescribes the procedure in which Rule 5(2)(a) provides that notice has to be sent to the Registered office for which various modes have been provided, namely, it can be sent by hand, registered post or speed post with acknowledgement but the notice has to be sent of the CD at its registered office. Rule 5(2)(b) provides for delivery of notice by electronic mail to the KMP of the CD but it does not apply to the present case because no electronic mail has been sent, therefore, it is not required to make any observation in this regard. Form-3 specifically provides for a notice to mention the name of the CD and delivered at the address of the registered office of the corporate debtor.
In so far as the decision in the case of Niraj Kumar [2023 (1) TMI 1147 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] is concerned, that was a case where the dispute was about the nomenclature of the Company because the name of the company was Lex Innova Digital Payments Pvt. Ltd. which was mentioned as LI Digital Payments Pvt. Ltd. and in this regard, the judgement is not on the issue which has been addressed before this Court, therefore, the said judgment is on its own facts and has settled the law which is not applicable to the present case.
There are no error in the impugned order which may require any interference by this Court. Hence, the present appeal fails and the same is dismissed.
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2024 (11) TMI 835
Recognition and enforcement of a foreign award - Common petition filed by the Petitioner seeking recognition/enforcement and execution - HELD THAT:- In the wake of the decision in the case of Vedanta Limited [2020 (9) TMI 1178 - SUPREME COURT] where it is clearly pronounced that there is no need to take two separate proceedings i.e. one for deciding the enforceability (recognition) of the award as a deemed decree and then separate proceeding for execution of the deemed decree thereafter, and it is open for the award holder to apply for recognition and execution of a foreign award by common petition. In stage 1, the Court would decide the enforceability of the award as a deemed decree, on satisfying the requirement of Section 47 and 48. Once the Court decides that a foreign award is enforceable as a decree of that Court, it shall proceed to take effective steps for its execution as a deemed decree and then would take recourse to the provision of Order 21 of the Code of Civil Procedure.
The reliefs sought in the present Petition has been bifurcated, as prayer clause (a), seek a declaration that the awards in favour of the petitioner are enforceable under part II of the Act of 1996 and a direction is sought to enforce and execute the awards as decree in its favour and against all the Respondents. Prayer clauses (c) and (d) are the reliefs sought under Order XXI of the Code and needless to state that while these reliefs are to be considered, it is open for the judgment debtors to raise the possible objections permissible, while executing the decree. In any case, the Execution Application which is filed will be decided subsequent to the declaration in the petition in terms of prayer clause (a) thereof, as prayers (b), (c) and (d) will be a part of the execution stage.
In the wake of the above, Issue No.A is answered by holding that a common petition seeking enforcement and execution as a deemed decree is maintainable in the wake of the law laid down in case of Vedanta Limited (supra) and the issue is answered in favour of the Petitioner, by holding that a common petition can be entertained for enforcement and execution of the three awards.
Scope of review u/s 48 of the Arbitration and Conciliation Act, 1996, and whether it is permissible to undertake the review on the merits of the Award - The “pro-enforcement bias” of the New York Convention, which has found its way in Section 48 has cast the burden on the party/parties objecting to the enforcement instead of party seeking enforcement and it is only when the proof is tendered to the effect, that the parties to the agreement being under some incapacity, or the agreement being invalid under the law to which the parties have subjected it, the enforcement can be refused.
The question as to whether a non-parties to the agreement can raise such an objection is also well settled in Gemini Bay Transcription Private Limited (supra). By a bare look at Section 47, which speaks of an arbitral award on differences between “persons” and specifically, since Section 48 (1) (a) refers only to the “parties” to the agreement referred to in Section 44 (a), it is concluded that to include non-parties to the agreement, by introducing the word “person” would run contrary to the express language of Section 48 (1) (a).
It is with this intention that the legislature has conferred the right to object to the enforcement of an award at the instance of the party against whom it is invoked and, since, the grounds on which the objection can be raised, are clearly stipulated by the legislature, and speak of incapacity of parties and the agreement to be invalid under the law to which the parties have subjected it, an attempt to bring non-parties within this ground has been described to be trying to fit a square peg in a round hole.
It is thus well settled, that Section 48, is hedged with pro-enforcement bias and unless the Respondent No. 1 is able to show that its case falls within Section 48 (1) or 48 (2), the foreign award must be enforced.
Arbitration Petition is filed beyond the period of limitation in the wake of the decision of the Apex Court in the case of Government of India Vs. Vedanta Limited [2020 (9) TMI 1178 - SUPREME COURT] - Since the awards, which are sought to be enforced through the present petition are dated 5/04/2006, 24/08/2007 and 27/03/2008, and as per the law laid down in Vedanta Limited (supra) the limitation period to file the petition for enforcement of the foreign award is held to be governed by Article 137 of Schedule to the Limitation Act, the petition filed under Section 48 of the Act of 1996 in March/ April 2018 is hit by the bar of limitation.
Since the period consumed from the day of passing of the last award on 27/03/2008, despite filing of petition under Section 34 of the Act of 1996 in India and since it did not amount to an automatic stay on the enforcement/ execution of the award, it was open to the petitioner to file the enforcement petition within time period of 3 years from the expiry of 28 days from each of the award, as under the English Arbitration Act, 1996, time period to challenge the award is 28 days, and the time to enforce the award began to run on expiry of 28 days from passing of the awards.
As a sequel to the above, the present petition in my view is barred by limitation and the argument of Mr. Seksaria on behalf of Respondent No. 1, and entertaining the petition would also be hit by the public policy of India, being not to entertain the proceedings barred by the law of limitation.
Whether the transaction contemplated under the Master Agreement is violative of public policy of India, making the Awards unenforceable under Section 48 (2) of the Arbitration and Conciliation Act, 1996? - When the admissions coming from the witness of E-City was not controverted by subjecting him to cross-examination, find that the Tribunal derived an inference contrary to what has been deposed by the witness, without affording a chance to explain or clarify the said statement, has definitely resulted into a loss of fair hearing as Mr. Chudasama had unequivocally stated that it was not possible for E-City to have made the remittances without prior approval of Reserve Bank of India, but without going for the cross-examination, the Tribunal has questioned this testimony, expressed doubt and derived at a finding that it was not a mandatory requirement and it was not refused, which definitely has resulted into perversity in its finding.
Award which is in violation of principal of natural justice, on the ground of “fairness”, is contrary to the public policy and hence cannot be enforced.
Whether the Petitioner can raise challenge to the de-merger scheme? - The Petitioner had a knowledge of the demerger of Respondent No. 1 when it approached the Supreme Court of New York as an authenticated true copy of the order passed by the Bombay High Court in Company Petition approving the scheme of demerger between Respondent Nos.1 and 3 was annexed alongwith the proceedings and the certified copy of the same was obtained by the Petitioner on 01/11/2007. Since the Petitioner continued to remain silent despite having knowledge of the demerger scheme from 2008, after a gross delay of 11 years, there cannot be an indirect challenge to the scheme of demerger as the orders have already attained finality.
Necessity of impleading Respondent Nos. 2 to 4 in the petition seeking enforcement and execution of the Arbitral Awards - Since the Respondent Nos. 2 to 4 who are not signatory to the arbitration agreement are sought to be roped into the present proceedings, which is the post arbitration stage, the burden of establishing the necessity to implead them as parties, is on the petitioner and it is an onerous burden, as they are the parties being proceeded in execution and never had the opportunity to make out a case before the Arbitral Tribunal. They had no opportunity to plead/contradict the pleadings, lead evidence, advance arguments, and therefore, impleading them at this stage, on a broad premise that they have participated in the fraud, so as to divest the Respondent No. 1, a party to the award, of its assets, with an intention to avoid its liability under the awards, is very difficult proposition to be accepted.
Respondent Nos. 2 to 4 were never party to the agreement, nor they were part of any transaction, nor they had any opportunity to meet the case against them during the arbitral proceedings. Merely alleging that they had played a fraud is insufficient, as fraud is not to be pleaded and in absence of any evidence tendered to that effect, the bare and unsubstantiated averment cannot be entertained and hence, according to me, no case is made out by the petitioner against the Respondent Nos. 2 to 4, in seeking the relief in the present petition. On the other hand, Chamber Summons taken out by Respondent Nos. 2 to 4 to delete them from the proceedings deserve to be made absolute.
Objection of E-City that IMAX Ltd. had merged into IMAX Corporation in January 2002 and, hence, invocation of arbitration by IMAX Ltd. was invalid under the laws of Singapore - As the subject contract entered between the Petitioner and the Respondent No. 1, was a contract contingent upon the approval of Reserve Bank of India and IMAX had acknowledged this fact and agreed for any reasonable restructuring, as long as it did not negatively impact it in a material fashion. Admittedly, no prior approval of Reserve Bank of India was received and the transaction could not be completed. The ICC has awarded the damages on the premise that RBI’s approval could have come, but the fact remains that it never came. Since, according to me, as held above, the necessity of RBI’s approval was imperative and obtaining such an approval was in tune with the FEMA, in not adhering to its requirement and acting in violation of it’s provision, is a matter of public policy, and since in the wake of the statutory provision u/s 48 (2)(b), the enforcement of the award, which is contrary to the public policy shall be refused by the Court, thus rejecting the relief sought in the Petition by the Petitioner, seeking enforcement of the awards.
In addition, since there is also violation of fair hearing rule, which is also a part of the fundamental policy of Indian law and the process followed by the Tribunal in arriving at the awards, being in violation of the same, we also express that it is in contravention of the fundamental policy of Indian law. We must clarify that the test for contravention of fundamental policy of Indian law, which is applied by me, in no way has touched the review of the matter on merits of the dispute between the parties.
Petition is barred by limitation, since in light of the law laid down by the Apex Court in Vedanta Ltd.(supra), the enforcement and execution of a foreign award shall be governed by Article 137 of the Limitation Act, 1963, and though it is permissible to condone the delay, but in absence of the Petitioner seeking condonation of delay, and rather assertively staking the claim that the Petition is within limitation, I am left with no option, but to dismiss the Petition.
Similarly,also expressed that the impleadment of Respondent Nos. 2 to 4 in the Petition is unwarranted and specifically when Mr. Chinoy has set out his intention clear and loud, that the Respondent Nos. 2 to 4 are impleaded, based on an assumption that the assets of E-City are diverted through them.
There could be definitely no challenge raised to the demerger schemes, which by this time are settled, with the sanction from the Company Court in the country and they cannot be re-opened.
Though it is sought to be argued on behalf of Respondent No. 1 that there was no valid invocation for the reference to the Arbitral Tribunal and an objection is also raised to the composition of the Tribunal, coupled with non-compliance of ICC rules and the ground that proper authority to file claim was not determined is also pressed into service on behalf of E-City, as some of the points on which, the enforcement of the awards is opposed by it, in the wake of the finding rendered above, I have already formed an opinion that the awards do not deserve enforcement and execution in light of the scheme contained in Part II, Chapter I of the Act of 1996 under the New York Convention awards, I have refrained myself from considering the said issues.
From the awards passed against Respondent No. 1 and in favour of IMAX, a foreign party, who has not even supplied the goods under the agreement, but which is held entitled for a huge sum of money under the awards and the money will be taken out of this country, without the stipulation of the agreement being complied with and since, this shock the conscious of the Court, the enforcement and execution of awards, as prayed by the Petitioner in the Petition, is declined.
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2024 (11) TMI 834
Penalty for the contravention of Section 3(b) of FEMA, 1999 - under-invoicing to evade customs duty - significance of a statement recorded under Customs Act as relied upon - goods worth Rs. 6,01,82,311 imported as against the declared value of Rs. 1,71,62,087 against 26 Bills of Entry and had paid the differential amount in cash to the supplier in Japan in Indian Rupees in contravention of Sec. 3(b) of FEMA, 1999
Applicability of Customs Act on FEMA Issues - Reliance placed by the respondent Directorate on the proceedings conducted by the DRI under the Customs Act, 1999 - as contended that the intent and purpose of the two enactments are vastly different from each other and the findings of investigation under the first Act cannot be applied to the other - HELD THAT:- Though the case under the FEMA, 1999 may have been based on the findings of the investigations conducted by the DRI under the Customs Act, 1962, having initiated the investigation, the Directorate of Enforcement (ED) has examined the case and concluded enquiries from the point of view of violations under FEMA, 1999, if any.
While the focus of investigation under the Customs Act, 1962 was under-invoicing of imports to evade Customs duty, the focus of investigation under FEMA, 1999 was payment of the differential amount between the invoiced value and actual value through illegal channels. The two are different, though related contraventions under the respective Acts.
The respondent Directorate independently recorded the statements of the appellant under FEMA, 1999 in which he confirmed his earlier statements before the DRI and explained in detail not only the modus operandi adopted by him for under-invoicing, but also payment of the price differential in cash to the representatives of the overseas suppliers. Other verifications were also carried out, including letters sent to and reply received from the Citibank, Surat confirming the remittances made against imports made by the Shree Laxmi Trading Company, though, admittedly, the investigations in this case primarily relied on the statements of the appellant.
No bar on the empowered agency under one Act utilizing the information and findings of the investigations conducted by another law-enforcement agency investigating the case from its own angle under another Act. In fact, it is considered good practice for law enforcement agencies to share information which may be relevance to each other so that appropriate investigation can be undertaken by the other agency on issues undue its domain. As such, no merit in these contentions of the appellant.
Competence of the DRI to conduct investigations under the Customs Act, 1962 - The order under challenge in this appeal is an order arising from proceedings which were initiated and concluded under the FEMA, 1999 and not under the Customs Act 1962. Even if there is any substance in the contention that the DRI was not competent to conduct the said investigation under the Custom Act, 1962, so long as the investigations made out a case of violation of FEMA, 1999, the ED would be well within its rights to initiate appropriate enquiries under FEMA, 1999 take the matter to its logical end. As already pointed out, no doubt the action of the ED under FEMA, 1999 was triggered by the information received from the DRI in respect of proceedings under the Customs Act, 1962. However, proceedings under FEMA 1999 were independent proceedings initiated and concluded under the said Act which did not suffer from any illegality for want of jurisdiction since the ED is the designated authority empowered to implement the provisions of FEMA, 1999. Accordingly, there is no reason for me in the current proceedings to enter into the issue of competence of the DRI to investigate violations under the Customs Act, 1962.
Reliance placed on statements of the appellant before the DRI and the respondent Directorate (ED) - Statements of the appellant under section 37 of the Act were recorded on 04.04.2011 wherein he confirmed the admissions made in his staements before the DRI. As has been pointed out by the learned adjudicating authority, the statements were recorded over a period of 9 months. Furthermore, they were recorded nearly four years after the DRI had recorded his statements and yet the appellant Shri Jariwala, confirmed the facts stated to the officers of the DRI during the investigation under Customs Act.
Adjudicating authority has further pointed out that the statements had not been retracted even upto the time of passing the adjudication order. Keeping in view the time horizon over which the statements were recorded the consistency in the admissions made before the two authorities, allegation of threat and duress are clearly an afterthought on the part of the appellant to escape liability under FEMA, 1999.
Show Cause Notice (SCN) was vague - There was no proposal in the SCN to impose penalty on the appellant under any section of FEMA, 1999 - SCN, the attached Complaint and the documents annexed thereto as “Annexure-A”, when read together as one, convey very specific allegations against the appellant as well as the material being relied upon in support of the said allegations. Nothing vague about the same as alleged by the appellant. Accordingly, reject these contentions of the appellants.
SCN was issued by the Special Director of Enforcement whereas the case was actually adjudicated upon by the Additional Director who is junior in the hierarchy to the Special Director - SCN in this case was issued on 28.12.2011 and the impugned order in pursuance thereof was passed on 30.01.2013. Thus, it is evident that there was a considerable time gap between the date of issue of the notice and the date of passing the adjudication order. As under Section 16 of FEMA, 1999 the Central Government is authorised to appoint as many officers as it may think fit as adjudicating authority. In all likelihood, in the interim period between the date of issue of the notice and the passing of the impugned order, the jurisdiction of the adjudicating authority changed.
Once a notice has been issued and the proceedings have commenced, the same shall not come to an abrupt end upon change of the incumbency in the post of the designated adjudicating officer and the proceedings can be continued by the new incumbent appointed as adjudicating authority and continuation of the proceedings already initiated and ongoing would not necessitate issue of a fresh SCN by the new incumbent. No doubt, in the interest of natural justice, the new incumbent would be expected to provide another opportunity of being heard to the affected person before passing an order based on the material already brought on record by his predecessor. But the law does not mandate that he should issue a fresh SCN and re- initiate the entire process. The process already initiated for adjudication can be continued until the final order is passed regardless of any change in incumbency. Nothing has been brought on record by the appellant to indicate how the passing of order by a different officer than the one who originally issued the SCN has caused any prejudice to the appellant.
Violation of Sub-rule (1) and (3) of Rule 4 of the said rules which vitiated the entire proceedings - As prior to the issue of SCN, the adjudicating authority had already discussed the factual background of the case and come to a prima facie conclusion that M/s Shree Lakshmi Trading Company had contravened the provisions of FEMA, 1999 for which it prima facie appeared to be liable for penalty under Section 13. Since nothing was heard from the side of the appellant in response to the SCN, no new light was thrown upon the subject from the appellant’s side. Therefore, there was no reason for any change in the opinion formed by the authority and the authority issued notices of hearing in the matter. Considering the above sequence of events, no illegality in the action of the learned adjudicating authority.
Determination of “sum involved” in the contravention which is the basis of imposition of penalty u/s 13 of FEMA, 1999 - A very specific admission was made in the present case by the appellant in his statements that value declared for import $ 5 to $ 8 per kg per metallic prevailing rate of $ 30 -37 per kg for metallic yarn $ 23-25 per kg for metallic film. The above statement was confirmed in subsequent statements before the DRI as well as ED, although, it is now denied by the appellant. The veracity of the statement has already been discussed in para 56-58 above. On the basis of the above differential in the declared rate and the actual rate, it was held that the appellants had actually imported goods of value Rs. 6,01,82,311/- as against the declared value of Rs. 1,71,62,087/- against 26 Bill of Entry. He further admitted in his statement that he had paid the differential which works out to Rs. 4, 30,20,224/- to the representatives of the suppliers in India in cash in Indian Rupees while imposing penalty, the Ld. Adjudicating Authority has held the said amount to be the “sum involved”. Having considered the above facts carefully, I do not find any discrepancies in the same. Nor has the appellant provided any alternate working of the “sum involved” backed by necessary evidence.
DRI received certain invoices showing the current value of goods supplied to that firm. The appellant, in the present case, has admitted that his firm was importing goods at the same prices. DRI also recovered insurance policy document disclosing the current value in respect of another importer. These facts, corroborate the facts stated by the appellant Sh. Jariwala in his statements.
No merit in the contentions of the appellant wherein he has questioned the imposition of the penalty on the ground that the “sum involved” has not been arrived at correctly by the respondent. Appeal dismissed.
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2024 (11) TMI 833
Money Laundering - attachment of property which were acquired prior to the scheduled offence - connection with the proceeds of crime or not - jurisdiction of impugned PAO on account of non-compliance of mandatory provisions of Section 5 (1) i.e. “reason to believe” - HELD THAT:- The concept of the property of equivalent value was introduced with respect to the aforementioned properties. The amendment enabled the authorities to go after any other property of a person of equivalent value. In 2019, the scope of the phrase ‘proceeds of crime’ was further expanded so as to include other properties which were not directly or indirectly the proceeds of crime, but were held abroad, to be liable to attachment. In 2019, the explanation has been added so as to give a wider scope to the authorities. From the objects and reasons of the ‘2002 Act’, it becomes evident that the money laundering posed a serious threat not only to the financial system of the countries but also to their integrity and sovereignty. The ‘2002 Act’ was enacted to prevent money laundering and connected activities. The act of money laundering is a multi-layered, complex and complicated diversion of the property, which is required to be prevented. Consequently, the definition of proceeds of crime has undergone transformative changes from time to time so as to include all the complex acts involved in the offence of money laundering.
It is not disputed that the Supreme Court in Vijay Madanlal Chaudhary’s case [2022 (7) TMI 1316 - SUPREME COURT] was examining the scope of the ‘2002 Act’ including definition of phrase ‘proceeds of crime’. The submission put forth by the learned counsel that the phrase ‘or the value of any such property’ is superfluous was rejected by the Court and it was held that the definition of ‘proceeds of crime’ is wide enough to not only include to the property derived or obtained as a result of criminal activity related to a schedule offence but also any other property of equivalent value.
While interpreting a statutory provision, it is the bounden buty of the Courts to interpret it in manner so that each word used by the statute conveys a meaning it was assigned by the Legislature. The words used in statute are of utmost significance. The Court cannot widen or restrict the provisions on its own whims and fancies. When a statute’s language is clear and unambiguous, the general rule of interpretation of statute is to read the provision as a whole and the Court must adhere strictly to the ordinary, plain meaning of the words used. The words in a statute are used precisely, not loosely, and efforts must be made to interpret them in a literal manner to give effect to the objective of the Act. This approach of interpretation is based on the idea that the legislature’s intent is best reflected in the exact words of the statute.
Alleged failure to record reasons to believe - HELD THAT:- In the considered opinion of the Court, the ‘PAO’ has fulfilled the mandatory requirement of recording the ‘reasons to believe’. This is only a provisional attachment order, which is subject to adjudication and confirmation within a period of 180 days by the competent authority in which opportunity has been provided to the petitioner. The reliance placed on para 287 of Vijay Madanlal Chaudhary’s case is not appropriate because it has been observed that the authorized officer can order provisional attachment only upon recording satisfaction regarding two requirements. Specifically, the officer has to form his opinion and provide written reasons for such belief, which must be based on material in his possession rather than on mere assumptions. In this case, the electronic record has been seized and there was sufficient material apart from fake e-Rawana bills to substantiate this satisfaction.
Evaluation of fulfillment of first proviso to section 5(1) in light of the challenge - HELD THAT:- It is evident that forwarding of a report to a Magistrate under Section 173 of Cr.P.C. is not sine qua non for ordering provisional attachment. Moreover, such report is required to be filed against a person who is in possession of ‘proceeds of crime’. The petitioner in CWP-22688-2024, is an accused in FIR No.21, dated 19.01.2024, registered under Section 120B, 420 IPC and Section 15 of the Environmental Protection Act, 1986. In the subsequent FIR that has been registered pursuant to the search carried out by the Enforcement Directorate substantial material has been found to prima facie establish not only the offence of money laundering but also large scale illegal mining of boulders, gravel, sand on the basis of fake, invalid e-Rawana invoices. There is material on record to show that the mined material has been transferred without e-Rawana invoices. There is a huge discrepancy in the minerals mined and sold. This FIR has been filed on the complaint filed by a person authorized to investigate the offences mentioned in the schedule. Hence, requirement of first proviso to Section 5 (1) stands fulfilled.
Significance of the expression 'immediately' and its interpretation - HELD THAT:- It is evident that in Rao Mahmood Ahmed Khan Vs. Ranbir Singh, [1995 (2) TMI 359 - SUPREME COURT], the word ‘immediately’ and ‘forthwith’ were treated as synonyms. Moreover, if failure to follow the statutory provision provides no express consequences, the procedural requirement shall be considered to be ‘directory’.
Disputed questins of fact - HELD THAT:- Vehicles carrying mined material have not been provided with the GPS system and mining has been carried out beyond the permissible depth and National Green Tribunal has imposed penalty of Rs. 2.5 crore, Rs. 4.2 crore and Rs. 12 crore on M/s Delhi Royalty Company, M/s Development Strategies India Pvt. Ltd. and M/s Mubarikpur Royalty Company, respectively. Moreover, it is stated that against the order dated 18.11.2022, the matter is pending before the Supreme Court. In this situation, it would not be appropriate to quash the ‘PAO’ particularly when an appropriate order after considering all aspects is yet to be passed by the adjudicating authority as provided under Section 8 of ‘2002 Act’.
Availability of an efficacious alternative remedy - HELD THAT:- The question of whether the writ petition can be entertained is one that the Court must consider based on the facts of each case. Availability of alternate statutory remedy is one of the grounds that dissuade the Constitutional Court to interfere. The petitioner has filed the writ petition based upon the interpretation given by a Division Bench in Seema Garg’s Case [2020 (3) TMI 460 - PUNJAB & HARYANA HIGH COURT] hence, this Court has considered it appropriate to entertain the writ petition and to adjudicate.
The writ petitions lack merit and hence dismissed.
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2024 (11) TMI 832
Penalty u/s 26 of the Prevention of Money Laundering Act, 2002 - It was alleged that the appellant bank failed to make a report of cash transactions of high value or there was delay in making report, the heavy penalty of Rs. 25,70,000/- has been imposed - violation of Section 12(1)(b) of the Act of 2002 read with Rule 3(1)(A), 3(1)(B), 7(2) and 7(4) of the Rules of 2005 - HELD THAT:- Section 12(1)(b) requires reporting entity to furnish information of transactions referred to in clause (a) of sub section (1) of Section 12 of PMLA to the Director FIU India within such time as may be prescribed. From plain reading and careful consideration of the language employed in section 12(1)(b), it becomes clear that the allegation made against the appellant was of delay in furnishing information of transactions referred to in Section 12(1)(a) of PMLA within such time as may be prescribed and it was even for non-reporting.
Rule 8 prescribes the time by which information in respect of transactions is to be furnished. Thus the appellant was enjoined to furnish the information in respect of transactions every 15th day of succeeding month to the respondent. Section 12(1)(b) read with rule 3,7 and 8 enjoined the appellant to furnish the information in respect of transactions otherwise it was to attract penalty. The penalty is for each failure and in our considered opinion, the phrase ‘each failure’ used in Section 13 refers to failure to furnish information or delay in furnishing the information in respect of each transaction which would be taken as “each failure” for imposition of penalty.
The argument of the learned counsel for the appellant cannot be accepted that despite contravention of the provisions of the Act and Rules, the penalty should not have been imposed on the appellant rather it should have been a warning. The argument aforesaid could not be accepted because if the contraventions are ignored and only warning given in a non-deserving case, then would be taken as a course and in that case there would be no sanctity of the provisions of the Act and nobody would make compliances. The imposition of the penalty is to ensure firm compliances of the provisions of the Act and the rules made thereunder.
If the facts of this case are taken into consideration, the appellants have admitted their error though said to be inadvertent. In the light of the judgment of the Apex Court in the case of Shriram Mutual Fund [2006 (5) TMI 191 - SUPREME COURT], the penalty for the failure of the appellant to make report of the CTRs or delay was rightly imposed. It is, however, urged that the minimum penalty is of Rs. 10,000/- as against 16 CTRs, penalty of Rs. 50,000/- has been imposed though for other 167 defaults, the minimum penalty of Rs. 10,000/- has been imposed. We do not find any substance in the argument for the reason that while adjudicating the appeal, this Tribunal has limited jurisdiction in causing interference on the imposition of penalty unless it is shown to be disproportionate. The case in hand is not of that nature because the appellant bank remained reckoned defaulter in making report of cash transaction for quite long and the report was made only when it was informed by the RBI to FIU. It was, however, urged that the appellant bank made the report but it was not accepted on computer.
There was continuous contravention of the provisions of the Act and the Rules. It was thus rightly taken for imposition of appropriate punishment which on the facts cannot be said to be disproportionate.
There are no merit in the appeal and accordingly the same is dismissed.
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2024 (11) TMI 831
Seeking lapse of the order of attachment in reference to Section 5(1) and (3) of the Act of 2002 - Legality of the attachment order under the Prevention of Money Laundering Act, 2002 - criminal conspiracy, cheating, and forgery in relation to the Slum Rehabilitation Scheme - Section 26 of the Prevention of Money Laundering Act, 2002 - HELD THAT:- The appellant has given reference of relevant dates which started with issuance of Provisional Attachment Order on 18.06.2021 followed by Show Cause Notice by the Adjudicating Authority on 04.08.2021. The reply to it was filed on 16.09.2021. The pleadings were then completed on 23.09.2021 and thereupon the matter was kept for final hearing.
It is true that the Adjudicating Authority needs to pass an order to terminate the proceedings within 180 days otherwise the attachment would lapse but there was extra-ordinary situation during the period Covid-19 and, therefore, the Apex Court in the case of Prakash Corporates v. Dee Vee Projects Limited [2022 (2) TMI 1268 - SUPREME COURT] has provided safeguard to the litigants and others for termination of proceedings and illustratively reference of few provisions like Arbitration Act was given. It was with clarity that it would apply to other statutes also - the argument of the appellant to lapse the proceedings despite the period for termination of proceedings which was excluded from 15.03.2020 till 20.08.2022, cannot be accepted. If the aforesaid period is excluded, left out period in this case is hardly of 26 days i.e. less than 180 days.
Thus, even the subsequent legal issue raised by the appellant is not worth acceptance and is rejected summarily. Accordingly, appeal fails and is dismissed.
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2024 (11) TMI 830
Recovery of CENVAT Credit erroneously refunded alongwith interest - penalty for ineligible availment of CENVAT Credit - HELD THAT:- It is stated at the bar pursuant to the direction issued by the High Court, the refund amount has been released to the respondent.
No reason to entertain this Special Leave Petition. Hence, the Special Leave Petition is dismissed.
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2024 (11) TMI 829
Order travelled far beyond the show cause notice - Service tax demand along with interest and equal amount as penalty u/s 78 of the Finance Act - there was no proposal to demand service tax under “works contract service" in the SCN and Demand was proposed under “commercial and industrial construction service"
HELD THAT:- The undisputed facts are that the appellant had entered into contracts for providing services along with the materials, and therefore all their contracts were in the nature of works contracts. This fact was also noted in the Tribunal's order in the first round of litigation.
The impugned order also does not dispute this fact. It is for this reason, that in the impugned order the Commissioner set aside the demand for the period prior to 1st June, 2007 following the judgement of the Supreme Court in Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT]
Commissioner confirmed the demand for the period after 1st June, 2007 under the head “works contract service". There was no proposal to demand tax in the SCN under this head, nor has the appellant been given an opportunity to defend itself against tax liability under this head. Therefore, as the impugned order clearly travelled beyond the SCN it needs to be set aside on this ground alone. It is a well-settled legal position that any order which travels beyond the scope of the show cause notice cannot be sustained. Appeal allowed.
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2024 (11) TMI 828
Area based exemption - condition of commencement of commercial production not later than 31-3-2010 - Benefit of Notification No. 50/2003-C.E., dated 10-6-2003 - It was held by CESTAT that 'The commercial production by the clinker plant by this new cement unit thus does not mean commercial production by the cement unit which is meant/required to commercially produce cement. Further commercial production of clinker by the clinker plant of this cement unit is not germane to the issue also because clinker figures in the negative list (Annexure-I referred to earlier) and therefore provisions of Notification No. 50/2003 do not even apply to the commercial production by clinker plant of new cement unit.' - HELD THAT:- It is not required to interfere in the matter.
The Civil Appeals are dismissed.
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2024 (11) TMI 827
Condonation of delay of 157 days in filing this Special Leave Petition - Disallowance of CENVAT Credit - capital goods on which the CENVAT credit was availed were used to manufacture only exempted goods (electricity) - Rule 6(4) of the CENVAT Credit Rules, 2004 - Suppression of facts or not - time limitation - Jurisdiction of the Revenue authority when the show cause notice was issued - it was held by High Court that 'The impugned order set aside' - HELD THAT:- Though there is a delay of 157 days in filing this Special Leave Petition, learned senior counsel for the petitioner is heard.
It is not required to interfere in the matter - The Special Leave Petition is hence, dismissed on the ground of delay as well as on merits.
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2024 (11) TMI 826
Application for modification/relaxation of the condition of deposit of 50% of the tax component - it was held by High Court that 'A perusal of para 11 of the judgment dated 24.03.2023, makes it very clear that the petitioner was directed to deposit 50% of the tax component of Rs. 23,79,26,090/-. In the judgment, specific amount has been mentioned of which 50% was directed to be deposited, the order is very clear.'
HELD THAT:- No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India. The Special Leave Petition is accordingly dismissed.
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2024 (11) TMI 825
Service of notice - Challenge to order under Section 73 of the Goods and Service Tax Act, 2017 whereby demand has been created against the petitioner - notices issued under Section 73 of the Act, were uploaded on 'Additional Notices and Orders' Tab of the G.S.T. Portal - petitioner being unaware of issuance of the notices as well as passing of the orders, could neither appear before the authority nor question the validity of the impugned orders within the period of limitation - HELD THAT:- In the case of OLA FLEET TECHNOLOGIES PRIVATE LIMITED VERSUS STATE OF UP AND 2 OTHERS [2024 (7) TMI 1543 - ALLAHABAD HIGH COURT] a co-oridiante Bench of this Court inter alia observed 'No material exist to reject the contention being advanced that the impugned order was not reflecting under the tab "view notices and orders". On merits, as noted in the earlier orders an other dispute exists whether all replies and annexures to the replies as filed by the assessee were displayed to the assessing officer and whether those have been considered. We find, no useful purpose may be served for keeping this petition pending or calling for a counter affidavit or even relegating the petitioner to the available statutory remedy. The entire disputed amount is lying in deposit with the State Government. Therefore, there is no outstanding demand. Accordingly, the writ petition is disposed of, with a direction, the assessee may treat the impugned order as the final notice and submit his written reply within a period of two weeks.'
In view of the submissions made and the judgement in the case of Ola Fleet Technologies Pvt. Ltd the writ petition filed by the petitioner is allowed. The orders impugned dated 27.12.2023 and 02.02.2023 passed by the Assistant Commissioner, State Tax, Sector- 3, Bareilly (Annexures-2 & 3 to the writ petition) are quashed and set aside - Petition allowed.
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2024 (11) TMI 824
Scope of SCN - final order is passed beyond the allegations mentioned in the show cause notice - Revenue supported the impugned order but could not dispute that the amount shown in the impugned Assessment order is more than the amount shown in the show cause notice - HELD THAT:- It is deemed proper to set aside the impugned Assessment Order dated 29.08.2024, in the light of mandate engrained in Sub-section (7) of Section 75 of the Act. Accordingly, the impugned Assessment Order dated 29.08.2024 is set aside. The competent authority shall re-hear the petitioner, consider all its objections and pass a fresh order in accordance with law.
The Writ Petition is disposed of without expressing any opinion on the merits of the case.
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2024 (11) TMI 823
Extension of time limits for filing annual returns under GST Acts - Validity of SCN - N/N. 56/2023-Central Tax dated 28.12.2023 - HELD THAT:- As the time limit for passing an Order under Section 73[9] of the CGST/AGST Act, 2017 for the Financial Year : 2017-2018, extended by the Notification no. 09/2023-Central Tax dated 31.03.2024, has been holding the field, this Court does not find any ground to interfere with the Order-in-Original dated 30.12.2023 passed by the Adjudicating Authority as the petitioner has an adequate, efficacious and statutory remedy of appeal under Section 107 of the CGST/AGST Act, 2017.
It has been settled by a long line of decisions including the decision in PHR INVENT EDUCATIONAL SOCIETY VERSUS UCO BANK AND OTHERS [2024 (4) TMI 466 - SUPREME COURT (LB)], to the effect that when an efficacious, alternative, adequate and statutory remedy of appeal is available, then a writ petition under Article 226 of the Constitution of India is not to be entertained, unless the petitioner has been able to make out any of the grounds :- [a] the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; [b] there has been a violation of the principles of natural justice; [c] the order or proceedings are wholly without jurisdiction; or [d] the vires of a legislation is challenged. The petitioner is at liberty to prefer an appeal against the Order-in-Original dated 30.12.2023 passed by the Adjudicating Authority for the Financial Year : 2017-2018 under Section 107 of the CGST/AGST Act, 2017.
This writ petition stands disposed of.
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