2017 (1) TMI 1166 - HC - FEMA

Penalty for contraventions of the provisions of Sections 8(1), 9(1)(a) and 14 of FERA - legal status of the appellant independently - Held that - As seen from the records that the appellant claimed not a citizen before the Division Bench of this Court in the Habeas Corpus Petition. In the election petition filed by him, he claimed as an Indian citizen. But before the Foreign Exchange Regulation authorities, he claimed as if he is a non-resident Indian. Thus, the appellant has taken different stands, which are not permissible under law. In such view of the matter, this Court deems it fit only to hold that the order passed by the appellate authority that the appellant was a resident within India in this respect does not require any interference. Accordingly the first question of law is answered against the appellant. Whether the appellate authority, having found that on evidence, the charges held to be not proved, can exercise the suo motu powers under Section 52 and re-frame the charges sitting in appeal and whether new evidence can be accepted by the appellate authority? - Held that - In the present case, the appellate authority has rightly considered only the evidence that was considered by the adjudicating authority and no new material was placed or considered. It is also not the case of the appellant that the appellate authority has based its findings on some evidence, alien to the adjudication proceedings, without granting any opportunity. In the case on hand, the appellate authority had to proceed with the examination of the evidence in accordance with Section 52, as the findings and conclusions arrived at by the adjudicating authority did not logically follow. The appellate authority has also held that the primary burden of the findings rendered by the adjudicating authority would appear to be to deal with the points taken in defence and not to examine the evidence so as to find out as to how the charges can be substantiated on that evidence, and that the adjudicating officer assumed the allegations in the show-cause notice as self-evident of the charges. Hence, on that score, it became necessitated for the appellate authority to deal with the evidence for corroborating the same with the points taken in defence. It is also evident from Page-96 of the order of the appellate authority that the learned counsel for the appellant also rightly admitted that the Board has the authority to consider the matter afresh based on the evidence already collected. Therefore, the appellant cannot now question the authority, which even otherwise, is well protected under Section 52(3) and (4). Whether the order of the adjudicating authority is vitiated on account of bias, violations of principles of natural justice and fair play as he was a part of the investigating team and a witness in the criminal case initiated by the Department? - Held that - There is nothing on record to show that the adjudicating officer was prejudiced on the subject matter, which reflected in the adjudication process or in the decision. Upon perusal of the records, we find that the appellant was given a fair opportunity. As found by the appellate authority, the guilt of the appellant was culled out only from the documentary evidence, and the entire statements of the other witnesses were discarded. Thus the plea of bias put forth by the learned senior counsel appearing for the appellant, will not hold any water. Though the principles enunciated in the other judgments relied on by the learned senior counsel for the appellant, in respect of bias, are not in dispute, the same will not apply to the case on hand. Further, the plea of bias looses its significance in the present case, since the appellate authority had independently examined the issues based on evidence on record, afresh. Thus, the third question of law is answered against the appellant. Whether Section 3(1) of the Companies Act, which confers a separate legal entity to the company, absolutely dissolves the liability of the Director of a company under every circumstances? - Held that - The protection given to a company is not an absolute bar to proceed against the directors and it is to be decided on the facts of the each case put to test. In this regard, the appellate authority, after analysing the matter in detail, and also considering the evidence placed on record, came to the conclusion that the name of the company Dipper Investments Limited was used for obtaining the bank drafts, opening an account in Barclays Bank, and for crediting the amount of drafts in that account and transferring the funds so credited to the accounts of Meer Care & Desai, Westback Ltd., and Bank of Ireland. There is also a clear finding that none of these acts could be attributed to the company and that there is no evidence that these were done in the course of company s business.Even though the show-cause notice does not spell out as to how the charges can be made out on the basis of the evidence as narrated, that has been done in the inquiry during the adjudication proceedings. In view of the clear finding given by the appellate authority that the various acts done in the name of the company could not be attributed to the company and that there is no evidence that these were done in the course of company s business, it is clear that the appellant is legally liable for those acts. Accordingly, the fourth and final question of law is answered against the appellant. Appeal decided in favour of revenue

Issues Involved:
1. Legal status of the appellant as a resident in India.
2. Authority of the appellate tribunal to reframe charges and accept new evidence.
3. Allegations of bias and violation of natural justice principles.
4. Liability of a company director under the Companies Act.

Detailed Analysis:

1. Legal Status of the Appellant as a Resident in India:
The appellant challenged the order imposing penalties for contraventions of the Foreign Exchange Regulation Act (FERA). The adjudicating authority and the appellate authority both concluded that the appellant was a resident in India during the relevant period. The appellant had taken different stands in various proceedings, claiming to be a non-resident Indian before the Foreign Exchange Regulation authorities but an Indian citizen in other contexts. The court held that the appellate authority's reliance on the judgment in HCP No.240 of 1996 to conclude that the appellant was a resident within India was correct and did not require interference. Thus, the first question of law was answered against the appellant.

2. Authority of the Appellate Tribunal to Reframe Charges and Accept New Evidence:
The appellate authority has powers under Section 52(4) of FERA to examine the legality, propriety, or correctness of any order made by the adjudicating officer. The appellate authority can modify or set aside the order appealed against after making further inquiries. In this case, the appellate authority considered the evidence already collected by the adjudicating authority and did not introduce any new material. The court found that the appellate authority acted within its powers and answered the second question of law against the appellant.

3. Allegations of Bias and Violation of Natural Justice Principles:
The appellant argued that the adjudicating authority was biased as he was part of the investigating team and a witness in the criminal case initiated by the Department. The court noted that the adjudicating officer had not issued any summons, recorded any statements, or participated in any searches. The adjudicating officer only monitored the investigation and exchanged correspondences. The appellate authority independently examined the issues based on the evidence on record. The court concluded that the appellant was given a fair opportunity and that the plea of bias was not substantiated. Thus, the third question of law was answered against the appellant.

4. Liability of a Company Director Under the Companies Act:
The court discussed the doctrine of lifting the corporate veil, which allows authorities to look beyond the company's facade to identify the individuals responsible for illegal acts. The appellate authority found that the appellant used the name of the company, Dipper Investments Limited, for obtaining bank drafts, opening an account, and transferring funds. There was no evidence that these acts were done in the course of the company's business. The court held that the appellant was legally liable for these acts and that the protection given to a company does not absolve the director of liability under all circumstances. Thus, the fourth and final question of law was answered against the appellant.

Conclusion:
All questions of law were answered against the appellant, and the court confirmed the impugned order passed by the Foreign Exchange Regulation Appellate Board. The appeal was dismissed, and the appellant was directed to pay the total penalty amount of ?28 crores within 45 days, failing which the respondent was given liberty to recover the same in accordance with the law.

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