2008 (11) TMI 53 - HC - FEMA

Application for waiver of pre-deposit - appellants have not made out a prima facie case for the grant of waiver of pre-deposit - appellant, does not bring out any case of undue hardship - mere fact that over a decade ago the Tribunal had waived the pre-deposit in some of the appellants appeals can hardly suffice to grant similar relief in the present case - Tribunal for Foreign Exchange was right in rejecting the applications made by the Appellants for waiver of the pre-deposit of penalty

Summary

Issues Involved:
1. Legality of the waiver of pre-deposit of penalty.
2. Alleged violation of Section 8(1) of the Foreign Exchange Regulation Act, 1973 (FERA).
3. Denial of the right to cross-examine witnesses.
4. Financial hardship claimed by the appellants.

Detailed Analysis:

1. Legality of the waiver of pre-deposit of penalty:
The appeals were directed against the orders dated 24th April 2006 by the learned Single Judge dismissing the appellants' writ petitions. These writ petitions challenged the Appellate Tribunal for Foreign Exchange's order rejecting the applications for waiver of the pre-deposit of penalty. The Tribunal found no justifiable ground for waiver, stating that the appellants had not established a prima facie case and had not demonstrated financial constraints or undue hardship convincingly. The learned Single Judge concurred, emphasizing that the appellants failed to establish a strong prima facie case or show extreme financial hardship.

2. Alleged violation of Section 8(1) of the Foreign Exchange Regulation Act, 1973 (FERA):
The Directorate of Enforcement initiated proceedings against the appellants for violating Section 8(1) of FERA. The case involved the withdrawal of US $ 1,49,000 from an NRE account under suspicious circumstances. The Deputy Director's adjudication order detailed that the deposits in the NRE account were not made by the account holder, Veerjee, but were arranged by others, including the appellants. The order concluded that the appellants acquired foreign exchange without RBI's permission and imposed penalties accordingly.

3. Denial of the right to cross-examine witnesses:
The appellants contended that their right to cross-examine Veerjee was denied, which they argued was a grave infraction of the principles of natural justice. However, the Deputy Director declined this request, stating that the appellants failed to provide cogent reasons for the necessity of cross-examination or show the prejudice caused by its denial.

4. Financial hardship claimed by the appellants:
The appellants claimed financial hardship, presenting affidavits showing "nil" income tax returns. They argued that as a sanyasi, one appellant had no resources to make the pre-deposit. However, the Tribunal and the learned Single Judge found these assertions insufficient. The Supreme Court's guidance in Monotosh Saha v. Special Director, Enforcement Directorate emphasized that hardship must be "undue" or "excessive," which the appellants failed to demonstrate convincingly.

Conclusion:
The High Court upheld the concurrent findings of the Tribunal and the learned Single Judge, concluding that the appellants did not make out a prima facie case for waiver of pre-deposit. The claims of financial hardship were not substantiated to the required legal standard. Consequently, the appeals were dismissed, and no grounds were found to interfere with the impugned orders.