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2023 (12) TMI 786 - HC - FEMAOffence under FEMA - bidding process for the IPL franchise organised by the BCCI - arrangement of the flow of funds by Respondents was made to route the investments through Mauritius as the funds flowing into India from UK was not permissible - maximum penalty imposed - Special Director indicates that although satisfaction in respect of contravention of the provisions of the FEMA has been recorded, there is no explanation or any discussion in respect of the basis on which maximum penalty has been imposed - Tribunal has recorded a that an exorbitant penalty has been imposed upon the individuals arrayed without recording any findings on the specific roles of said individuals - Whether interference by the Tribunal in the order of the Special Director is justified on the touchstone of the doctrine of proportionality? HELD THAT - Overall, the Tribunal has found that firstly, no loss has been caused to exchequer; secondly, the remittances have come into India and remained in India. This is not a case where any foreign exchange has gone out of India; thirdly, the remittances were utilised for the purposes for which they were intended and there is not even an allegation of utilization of the money for extraneous purposes; fourthly the entities have not gained any benefit whatsoever and in fact suffered considerable financial detriment as shares having beneficial transferable interest have not been issued against remittances to the said entities for the past 11 years; and fifthly, 'Rajasthan Royals' franchise has participated in the IPL since 2008 with no other allegation of contravening any FEMA provisions or regulations made thereunder. Thus, the Tribunal found no justification in the order passed by the Special Director for imposing maximum penalty on Respondents and contraventions are categorized at best as technical and venial. In the instant case, there is a finding of fact by the Tribunal and all the relevant facts have been considered in a proper light. The Tribunal has arrived at its conclusion on the basis of evidence to support and after analysing the said evidence. The findings are far from being perverse. Thus, no question of law arises in the case. The question raised by Appellant relating to justification of the reduction of penalty imposed by the Special Director is purely based on facts and no question of law even remotely, arises from the same. We find that in fact no justification has been recorded by the Special Director to impose maximum penalty as opposed to the Tribunal having considered relevant material has interfered and reduced the penalty. We do not find it proper to transgress the limits of this Court's jurisdiction, preferring the view of the Tribunal or that of the Special Director, one way or the other, in regard to factual appreciation of the finding of facts in the matter. We find that the Special Director has completely failed to apply the doctrine of proportionality as interpreted and elucidated by the Apex Court in its various decisions, while choosing to impose maximum penalty on Respondents. Having gone through the impugned order, this Court does not find anything perverse in the findings, reasoning and conclusion of the Tribunal. We are in agreement with the finding of the Tribunal that in the absence of any discussion or justification pertaining to the basis for imposing the maximum penalty and juxtaposing this with the alleged acts attributed to each individual, the order of the Special Director is unsustainable. No error in the impugned judgment of the Tribunal.
Issues Involved:
1. Legality of the penalties imposed under FEMA. 2. Justification for reducing the penalty amounts. 3. Role and responsibility of individual respondents. 4. Application of the doctrine of proportionality. Summary: Legality of the Penalties Imposed under FEMA: The Appeals under Section 35 of the Foreign Exchange Management Act, 1999 (FEMA) challenge the order dated 11th July 2019 by the Appellate Tribunal for SAFEMA, FEMA, NDPS, PMLA & PBPT Act, which modified the penalty imposed by the Special Director of Enforcement. The original penalty of Rs. 98.35 Crores was reduced to Rs. 15 Crores. The Tribunal found the penalty already deposited by the Appellants to be reasonable and sufficient for the contravention of the Act. Justification for Reducing the Penalty Amounts: The Tribunal noted that the Special Director's order lacked reasoning and justification for imposing the maximum penalty. The Tribunal found no evidence of mens rea or mala fides on the part of the respondents. It concluded that the imposition of exorbitant penalties was not justified as the contraventions were technical and venial. The Tribunal also considered that no loss was caused to the exchequer, the remittances remained in India, and the funds were used for their intended purposes. Role and Responsibility of Individual Respondents: The Tribunal reappreciated the evidence and found that many respondents were not involved in the day-to-day management of the entities and were unaware of the remittances. Specific findings included: - Ranjit Barthakur: Not responsible for regulatory compliance on a daily basis. - Fraiser Castellino: Ceased to be a Director before the alleged contraventions. - Raghuram Iyer: His role was limited to sales and marketing, and he resigned before the remittances. - Bishwarnath Bachun: Not involved in daily operations during the remittances. - Samila Sivaramen: No role in daily operations and unaware of the remittances. - Barbara Haldi: Nominee Director with no operational role. - Suresh Chellaram: Acted under a bona fide belief that remittances were legal. - Manoj Badale: Although responsible for arranging payments, acted under a bona fide belief of legality. Application of the Doctrine of Proportionality: The Tribunal applied the doctrine of proportionality, holding that the penalties imposed were disproportionate to the acts attributed to each respondent. The Special Director failed to justify the maximum penalty, and the Tribunal found the penalties to be excessive given the circumstances. The High Court agreed with the Tribunal's findings, noting that the Special Director's order lacked justification for the maximum penalty and that the Tribunal's decision was based on proper appreciation of evidence. The Appeals were dismissed, and no substantial questions of law were found to warrant interference with the Tribunal's order.
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