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TMI Blog2014 (4) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... al have been referred to which could constitute the basis of such an allegation. In para 9 of the SCN a reference is made to the statement of Mr. Narula that he was given the authority to open accounts and operate them. It is pointed out that Mr. Narula was permitted to hold accounts only for the needs of Club Med India and he was not otherwise in-charge of its affairs which were being directly controlled by Club Med Hong Kong. It is seen that for the purposes of Section 68 FERA, it was necessary for the ED to have laid a factual basis for alleging that Mr. Narula was in-charge of and responsible to Club Med Indiafor the conduct of its business. The reply of Mr. Narula to the SCN stated that the affairs of Club Med India were controlled by Club Med Hong Kong and in fact Club Med India was not a separate entity. Its accounts were also maintained under the supervision and control of Club Med Hong Kong. It is not possible, therefore, to accept the reasoning of the SD that Mr. Narula could be held liable for the activities of Club Med India under Section 68 FERA - case against Mr. Narula by the ED was not sustainable in law and that both the AO as well as the impugned order of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he name and style of Club Med Resorts at various places in South-East Asian countries like Malaysia, Thailand, Australia, Indonesia, Mauritius and Maldives. Club Med Hong Kong wanted to open a branch office in India to attract Indian tourists to the Club Med resorts. The branch was named Club Med India. On 25th June 1994, Club Med Hong Kong appointed Mr. Raman Narula as its Sales and Marketing Manager. On 3rdNovember 1994, it submitted an application to the Reserve Bank of India ( RBI ) for permission to open a branch office in India. On 22nd November 1994, the RBI granted Club Med Hong Kong permission to open its branch office. Among the activities that the RBI permitted Club Med India to carry out were:(i) To open offices in India to promote tourism in India and to provide services to the tourists (marketing of services) i.e. reservation of accommodation, booking of passage etc. and (ii) To support Club Med for technical and financial collaborations with prospective Indian partners for management and development of resorts in India.On 11th January 1995, the RBI granted approval to Club Med India, subject to the conditions stipulated therein, to collect foreign exchange or travell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had refrained from taking steps to recover the said amount from Club Med Hong Kong and, therefore, the said amount ceased to be receivable here.This was done without the general or special permission of the RBI. 7. The SCN also statedthat Club Med Hong Kong had raised debit notes to the value of USD 1,45,471.46 on Club Med India, out of which USD 17,486.2 was adjusted against the amounts payable by the former to the latter.By acknowledging the debt to the tune of USD 1,45,471.46, a right was created in favour of Club Med Hong Kong.Payments to the tune of USD 17,486.2 had been made to Club Med Hong Kong by way of adjustments in the respective credit notes. All of this was done without the general or special permission of the RBI. 8. On the basis of the above allegations, the SCN proceeded to require the noticees to show cause why they should not be held liable for contravention under Sections 8(1), 16(1), 9(1)(a) and 9(1)(c)of the Foreign Exchange Regulation Act, 1973 ( FERA ). Para 25 of the SCN stated, inter alia, that Mr. Narula and Mr. Sindhwani were in-charge of and responsible to Club Med India for the conduct of its business and, therefore, were liable to be proceeded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian branch and the question of seeking the permission under Section 16 of FERA did not arise. As regards the debit notes, it was pointed out that the amounts therein were never remitted by the Indian branch nor were they meant to be remitted. The debit notes did not also mean that the Indian branch acknowledged the amount therein as a debt. The amount was only by way of an adjustment in respect of the credit notes with the debit notes and this was reflected in the bank statement of July 1997. 12. The Special Director ( SD ) passed an adjudication order ( AO ) dated 4th February 2005. In the said order, the SD observed as under: 87. Having regard to the above, I hold that the charges in the SCN against Mr. Stephen John Michie and Mr. Ng. Choon Huat @ Jimmie Ng. in terms of Section 68 of the FERA, 1973 are held as established. However, the charges against S/Shri Raman Narula and Samir Sindhwani (noticee nos. 2 5) are not proved in the light of discussions hereinbefore. 13. However, in para 88 of the same order, after stating that the following penalties were imposed on noticee Nos.1, 3 and 4 as the charges against them in the SCN had been held as proved, the SD al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Respondent in both the appeals have been taken into consideration. 20. As far as the appeal of Mr. Narula is concerned, at the outset, it must be observed that the manner in which the SD has proceeded to issue a Corrigendum, deleting the entire para 87 of the original AO, is violative of Section 65 of FERA.As was noticed earlier, in the original para 87 of the AO, the SD pointedly held that a charge against Mr. Raman Narula and Mr. Sindhwani were not proved in the light of the discussions hereinbefore. By deleting the entire para 87 by way of the Corrigendum, the AO was clearly trying to substitute the above specific finding in favour of Mr. Narula by purporting to review the AO which was clearly not permissible in law. There is no provision in the FERA that authorises the adjudicating officer or the SD to review an AO, and in any event, suo moto. All that Section 65 FERA permits is correction of clerical errors. Section 65 FERA reads as under: 65. Correction of clerical errors, etc.- Clerical or arithmetical mistakes in any decision or order passed by the Appellate Board or the adjudicating officer under this Act, or errors arising therein from any accidental slip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub- section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention. (2) Notwithstanding anything contained in sub- section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. Explanation- For the purposes of this section- (i) company means any body corporate and includes a firm or other association of individuals; and (ii) director , in relation to a firm, means a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im completely on that basis. It is pointed out by Mr. Gulati that, on the same reasoning, Mr. Narula could not be held liable under Section 68 of FERA. 28. It is seen that for the purposes of Section 68 FERA, it was necessary for the ED to have laid a factual basis for alleging that Mr. Narula was in-charge of and responsible to Club Med Indiafor the conduct of its business. The reply of Mr. Narula to the SCN stated that the affairs of Club Med India were controlled by Club Med Hong Kong and in fact Club Med India was not a separate entity. Its accounts were also maintained under the supervision and control of Club Med Hong Kong. It is not possible, therefore, to accept the reasoning of the SD that Mr. Narula could be held liable for the activities of Club Med India under Section 68 FERA. 29. As far as the impugned order of the AT is concerned, the Court finds that in para 19 it is again stated that The employee appellants were senior persons who were in charge looking after the day to day business of the appellant company during the relevant period. Hence, they are certainly responsible for their acts to the appellant company. Therefore, the imposition of the penalty agains ..... X X X X Extracts X X X X X X X X Extracts X X X X
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