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2018 (6) TMI 1491 - AT - FEMAOffence under FEMA - Person deemed to be guilty of contravention alleged against AEL. - Sh. Rajesh S. Adani resposibility for the conduct of business of AEL - Held that - Letters and conduct goes to show that Sh. Rajesh S. Adani is covered u/s 42 of FEMA, 1999 being responsible for day to day affairs business activities of AEL as Managing Director. All the aforesaid actions of Sh. Rajesh S. Adani justified the findings in the impugned order therefore it is held that the Adjudicating Authority is correct in holding that Sh. Rajesh S. Adani is the person incharge and responsible for the conduct of business of AEL and shall be deemed to be guilty of contravention alleged against AEL. Question of retrospective operation of section 13 of FEMA, 1999. Admittedly the present proceeding has been initiated after coming into force of FEMA, 1999 and various regulations there under. If the violations are proved then penal provisions have been provided under section 13 of FEMA, 1999. Therefore, question of retrospective operation of section 13 of FEMA, 1999 does not arise. Hence, we do not subscribe to the said contention of the appellants. Accordingly, this contention of the appellants are not legally valid hence rejected. The Adjudicating Authority in exercise of power u/s 13 of FEMA, 1999 has imposed consolidated penalty of ₹ 4, 00,00,000/- (Rupees Four Crore only) on AEL and a penalty of Rs, 1,00,00,000/- ( Rupees One Crore only) on Sh. Rajesh S. Adani in respect of the contraventions of the provisions section 6(3)(a) r/w the relevant Regulations. Further A sum of ₹ 10,00,000/- (Rs. Ten Lakhs only) has been imposed on AEL and a Penalty of ₹ 2, 50,000/- (Two Lakh Fifty thousand only) on Sh. Rajesh S. Adani for violation of provisions of Section 8 of FEMA,1999 r/w with relevant Regulations for non- repatriation of USD 2,71,293/-. Adjudicating Authority has imposed consolidated penalty on the ground stated in second para of the last but one page of the impugned order. The impugned judgment of the Securities appellate Tribunal has set a serious wrong precedent and the powers of the SENBI to impose penalty under Chapter VIA are severely curtailed against the plain language of the statute which mandatorily imposes penalties on the contravention of the Act/Regulations without any requirement of the contravention having been deliberated or contumacious. The impugned order sets the stage for various market players to violate statutory regulations with impunity and subsequently plead ignorance of law or lack of mens-rea to escape the imposition of penalty. The imputing mens rea into the provisions of Chapter VI A is against the plain language of the statute and frustrates entire purpose and object of introducing Chapter VI A to give teeth to the SEBI to secure strict compliance of the Act and the Regulation. The materials placed before us are very much clear that the AEL started the setting up of AGL, Mauritius, WOS of AEL with the permission of the RBI to carry on trading business in marine products, Agro based products, Plastics, PVC goods, Shoe polish etc. by virtue of RBI approval dt. 07.08.1996. The WOS at Mauritius started its operation in 1997 but instead of doing trading business as aforesaid it started investment by way of setting up of step down subsidiaries at Dubai and Singapore and in setting up a Joint Venture Company. The AEL had mis-declared about the non-pendency of investigation in the ODA form and also has not repatriated a sum of USD 2,71,293/- accrued to its WOS, Mauritius on liquidation of joint venture company namely Adani-Wilmar (Singapore) Pvt. Ltd. The intention of AEL was clear and deliberate leading to contravention of various provisions of law under FEMA,1999 and Regulations their under as held in earlier paragraphs. Taking into consideration the amount involved in the contravention, the consolidated penalties imposed on the appellants are confirmed even though it is on the lower side as there is no appeal filed by the ED challenging the quantum of penalties.
Issues Involved:
1. Contravention of Section 6(3)(a) of FEMA read with Regulation 5, 6, and 13(1)(a) of FEM (Transfer or Issue of any Foreign Security) Regulation 2000. 2. False declaration in ODA form regarding the activity of WOS. 3. False declaration in ODA form regarding investigation by the Enforcement Directorate. 4. Non-repatriation of liquidation proceeds of US $ 2,71,293. Detailed Analysis: 1. Contravention of Section 6(3)(a) of FEMA read with Regulation 5, 6, and 13(1)(a): The appellants were found to have violated Section 6(3)(a) of FEMA read with Regulation 5, 6, and 13(1)(a) by remitting US $ 10 million to a Wholly Owned Subsidiary (WOS) in Mauritius, which did not engage in the trading activities as per the RBI's approval. The WOS, instead of trading, functioned as an investment company, which was contrary to the approval granted by RBI. The Tribunal confirmed the findings of the Adjudicating Authority, stating that the WOS was engaged in investment and financing, not trading, and thus the remittance was in violation of the provisions. 2. False Declaration in ODA Form Regarding the Activity of WOS: The appellants made a false declaration in the ODA form submitted to RBI, stating that the WOS in Mauritius was engaged in trading activities, whereas it was engaged in investment and financing. This false declaration was contrary to the Directors' Report and Financial Statements of the WOS. The Tribunal upheld the Adjudicating Authority's finding that the appellants violated Section 6(3)(a) of FEMA read with Regulation 5 and 6 by making a false declaration. 3. False Declaration in ODA Form Regarding Investigation by the Enforcement Directorate: The appellants declared in the ODA form that there were no investigations pending against them by the Enforcement Directorate, despite being aware of an ongoing investigation initiated in October 2001. The Tribunal agreed with the Adjudicating Authority's conclusion that the appellants made a false declaration, violating Regulation 6(v) of the FEM (Transfer or Issue of any Foreign Security) Regulation, 2000, amounting to a violation of Section 6(3)(a) of FEMA. 4. Non-Repatriation of Liquidation Proceeds of US $ 2,71,293: The appellants failed to repatriate the proceeds of liquidation amounting to US $ 2,71,293, which were due to the WOS in Mauritius. The Tribunal held that the appellants, being the ultimate holding company, were responsible for repatriating the amount to India. The failure to do so constituted a violation of Section 8 of FEMA read with Regulation 3 of the FEM (Realization, Repatriation, and Surrender of Foreign Exchange) Regulation, 2000. Penalty: The Adjudicating Authority imposed a consolidated penalty of ? 4,10,00,000 on AEL and ? 1,02,50,000 on Sh. Rajesh S. Adani for the contraventions. The Tribunal confirmed the penalties, stating that the appellants' actions were deliberate and in clear violation of the provisions of FEMA and its regulations. The appeals were dismissed as devoid of merits.
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