2011 (12) TMI 699 - HC - FEMA

Summary

Issues involved: Appeal against order of Appellate Tribunal for Foreign Exchange imposing penalties for violation of provisions of Foreign Exchange Management Act, 1999 and Regulations.

Question of Law:
1. Whether permission granted under FERA, 1973 remains valid after enactment of FEMA in 1999?
2. Validity of permission issued by RBI under old regulations after repeal of FERA.
3. Whether permission issued under old Act is saved u/s 49 of FEMA?
4. Whether repatriation is necessary?
5. Validity of certificate issued by KPMG.

Summary:
The case involved an appeal against an order imposing penalties for violations of the Foreign Exchange Management Act, 1999 and related Regulations. The Adjudicating Officer found violations of Section 6(3)(a) of FEMA read with relevant clauses of the Regulations, and imposed penalties on the Company and its Director. The Tribunal set aside the decision, prompting the Revenue to raise questions of law regarding the validity of permissions granted under the old FERA, the necessity of repatriation, and the acceptance of a certificate from KPMG.

Upon hearing arguments, the Court found that the Tribunal failed to consider the findings of the Adjudicating Officer on each charge independently. As the First Appellate Authority, the Tribunal should have exhaustively considered these findings before making a determination. The Reserve Bank had granted permission for setting up a subsidiary in Mauritius, leading to subsequent investments in other countries. The Adjudicating Officer found most charges proved, except for one, and imposed penalties accordingly.

The Tribunal's decision focused on the continued validity of the RBI permission post-FEMA enactment, neglecting other charges. The Court noted the lack of consideration for the Adjudicating Officer's findings and remanded the case for a fresh decision. The Court refrained from expressing opinions on the questions of law raised, leaving them to be decided by the Appellate Tribunal. The case was disposed of without costs, with one charge excluded from further proceedings.