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TMI Blog2012 (2) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... jani i/b. M/s.Wadia Ghandy Co., Mr.Rajeev Pandey with Ms.Prachi Mhatre i/b. M.S.Bodhanwalla Co., Mr.Rajeev Pandey with Mr.Sanjiv Punalekar i/b. PRS Legal, Ms.Dohita Lewis with Ms.Sneha Mhatre i/b. Vigil Juris for Respondent. ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J) : 1. These Appeals by the Union of India arise out of an order passed by the Appellate Tribunal for Foreign Exchange on 12 October 2009. The Tribunal initially heard a batch of Appeals which arose out of an order of adjudication passed by the Special Director in the Enforcement Directorate. The Adjudicating Officer held that there was a violation of the provisions of Sections 8(3) and 8(4) of the Foreign Exchange Regulation Act,1973 by four companies. The Adjudicating Officer imposed penalties on the companies and also on their concerned officers who were held to be guilty of the contravention under Section 68(1). The order of adjudication held seven Banks guilty of having contravened the provisions of the FERA, 1973 upon whom penalties were imposed together with their concerned officials who had been proceeded against. In a batch of Appeals which arose before the Tribunal, there was a difference of opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Smelting Ltd. made a total remittance of US $ 11.80 Crores and D.M. 20,036 and received back a total amount of US $ 5.69 Crores as purported insurance claims and that the company had fabricated documentary evidence showing Merchanting Trade, remitting foreign exchange worth US $ 7.56 Crores without the actual shipment of goods. In the second show cause notice it was alleged that Dravya Industrial Chemicals Ltd. obtained a remittance of US $ 3.48 crores for the import of goods but failed to make any import. Instead of importing the goods a purported insurance claim of US $ 1.29 crores was received. It was alleged that the company had fabricated documentary evidence showing Merchanting Trade and that it remitted foreign exchange worth US $ 21.58 lacs without actual shipment of goods. In the third notice to show cause dated 29 Mach 2000 it was alleged that Nariman Point Chemical Industries Ltd. obtained foreign exchange of US $ 54.80 lacs for the import of goods but failed to make any import. A purported insurance claim of US $ 17.32 lacs was received. In the fourth notice to show cause it was alleged that Hindustan Industrial Chemicals Ltd. obtained a remittance of US $ 33.83 lacs f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imports either under the guise of insurance claims or otherwise. The Adjudicating Officer held that the suspicion of the officials should have been aroused and they ought to have exercised care and caution while dealing with the noticee companies. Had the documents been carefully scrutinised before making remittances, the bankers would have noticed the fact that the Bills of Lading did not contain the container numbers. By omitting to scrutinise the documents submitted and by allowing the noticee companies to make huge remittances overseas, the noticee banks and their officers were alleged to have aided and abetted contravention of the provisions of the FERA. The Bank officials, it was found, ignored the failure on the part of the noticees to file Bills of Entry for which remittances had been effected while at the same time allowing them to open fresh Letters of Credit in favour of the very same parties to whom remittances were made under earlier Letters of Credit for which Bills of Entry had not been filed. In other words, it was evident that the officials of the banks who authorised the opening of the LCs ought to have exercised proper care and vigilance in the opening of fresh L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Section 8(3) read with Section 8(4) of the FERA, 1973. Following this, the Appeals have been allowed by the Tribunal by its decision dated 12 October 2009. 9. Counsel appearing on behalf of the Union of India submits that, (1) The Charge against the respondents to this batch of appeals was of abettingt the contravention of the provisions of Section 8(3) and 8(4) within the meaning of Section 64(2) of the FERA, 1973; (2) The Special Director in the Enforcement Directorate had held the banks and their officials guilty of an act of abetment within the meaning of Section 64(2) on the basis of a detailed consideration of the facts and circumstances; (3) On a difference of opinion arising between the two Members of the Appellate tribunal, a Third Member was called upon to decide the points of difference; (4) Ex facie, the order of the third Member dated 7 October 2009 would indicate that the material on record has not been considered. The third Member has erroneously proceeded on the basis as if a criminal offence had to be established on a charge of abetting the commission of an offence within the meaning of Section 107 of the Penal Code. Moreover, it has been submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1998 the Banks had opened and effected remittances against Letters of Credit for transactions involving the import of goods in favour of overseas parties, even though the noticee companies failed to submit relevant Bills of Entry indicating import of goods into India; (2) Even when the noticee companies did not submit the Bills of Entry in respect of the remittances which were made in the year 1995, some of the banks continued to approve of remittances to the same overseas parties again and again until the fraud was investigated into in 1998; (3) Had the Bankers carefully scrutinised the documents submitted by the noticee companies for making the remittances, they would have noticed the fact that the Bills of Lading did not contain the container numbers as required. A Bill of Lading is a receipt for cargo and unless the cargo can be sufficiently and precisely identified, the bill as a document of title would be without consequence; (4) Though in a large number of cases the Bills of Entry remained to be submitted by the remitter of funds, the banks continued to open fresh LCs and kept on remitting further amounts abroad without checking the veracity of the claims made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the import of goods into India. Further foreign exchange was received in the guise of insurance claims which were credited to the accounts of the noticee companies. The claims were dealt with directly by the group of companies and the correspondence was not routed through the authorised dealer. The Second Member held that while the banks were bound to honour the Letters of Credit, this obligation did not extend to a situation where the documents contained material mis-statements or omissions. 13. The third Member of the Tribunal before whom the difference of opinion between the two Members was placed for hearing, was required to consider the material and evidence on record in its entirety before proceeding to decide the question referred. The principal difference of opinion was whether the charge against the banks and their officials of abetment under the provisions of the FERA, 1973 had been established. The third Member has held that, (1) The receipt of a Bill of Entry can only happen after the remittance of foreign currency and not before; (2) The insurance claims were received after the remittances took place and not earlier. Since both the acts allegedly took place after th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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