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TMI Blog2015 (10) TMI 2684X X X X Extracts X X X X X X X X Extracts X X X X ..... a Raju, Managing Director r/w Section 42(1) of FEMA is made out. Since the amount of penalty imposed against the company as well as against the appellant G. Rama Raju, Managing Director has been imposed without assigning any reason for determination of the amount, therefore considering the long gap of the alleged contravention in our opinion the ends of justice will be met if the penalty of ₹ 40 lakhs imposed against the company M/s. Siris Ltd. is reduced to ₹ 30 lakhs while the penalty of ₹ 5 lakhs imposed against G. Rama Raju is reduced to ₹ 3 lakhs and the order of the Adjudicating Officer regarding imposition of penalty against appellant G. Subha Raju, Executive Director appellant is set aside. - 284-286/2009 - - - Dated:- 9-10-2015 - Vinay Kumar Mathur, Chairperson and Dr. H.K. Mudgil, Member Ms. Pooja Saigal, Advocate, for the Appellant. Ms. Natasha Sarkar, Legal Consultant, for the Respondent. ORDER [Order per : Justice V.K. Mathur, Chairperson]. - We have heard Ms. Pooja Saigal, advocate for the appellants and Ms. Natasha Sarkar, Legal Consultant for the respondent and have also carefully perused the records. The instant appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice was sent to the appellant M/s. Siris Ltd. for the alleged contravention of Sections 7 and 8 of FEMA, 1999 read with Regulations 3, 8, 9 and 13 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000 involving export value of US $ 8,67,275.20. Show cause notices to the appellant G. Rama Raju and G. Subha Raju were also issued under the said provisions read with Section 42(1) of FEMA, 1999. 4. Opportunity for personal hearing was also afforded. During the course of hearing it was informed that in one GRI the proceeds had been realised and the authorized dealer M/s. Indus Ind. Bank and M/s. State Bank of India had been approached for write off on the ground that due to quality dispute in the exported drugs and drug formulation, they had failed to realize the export proceeds in 7 consignments. The Adjudicating Officer was informed that the amount of GR form No. AT 0127134 of US $ 66,384.20 and GR form No. AT 128198 of US $ 61,000 were directed to be written off subject to obtaining no objection for write off from Enforcement Directorate and in respect of GRI form No. AT 109825 amounting to US $ 220633, GRI form No. AT 416139 for US $ 210633, GRI for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant company the no objection required to be obtained from the ED was only a procedural formality and ought to have been granted in the matter of course. Further submission is that the Special Director has erred in presuming that the authorized dealer (bank) was required to directly approach the ED. The permission of the RBI was placed before the Special Director who ought to have endorsed it to the Directorate. Further the Special Director adopted a mechanical and pedantic approach and rejected the write off. Submission is that the impugned order is self-contradictory as the Special Director on the one hand has rejected the write off himself and on the other hand has held that State Bank of Mauritius ought to have approached the Directorate for obtaining no objection and since the bank had not approached the Directorate no relief can be granted. The Special Director had no authority to reject the request himself. The rejection is incompetent. Ld. Counsel for the appellant has submitted that the determination of amount of penalty upon the appellants is illegal, arbitrary and excessive and no reasons have been assigned for imposition of such high penalties. It is also co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority to refuse grant of no objection on behalf of ED. No objection certificate had to be obtained from the ED and not from Special Director acting in the capacity of Adjudicating Officer who was not authorized or competent to grant no objection. She has further submitted that the impugned order is a reasoned and speaking order and is perfectly legal. The State Bank of Mauritius, despite persuasion by the appellant did not approach the ED for obtaining no objection. This shows that the bank was not satisfied with the efforts and the reasons put forward by the appellant company for grant of write off in respect of the two GRI forms. She has further submitted that though the Special Director has rejected the plea of granting no objection has also held that the State Bank of Mauritius had to approach the ED for grant of no objection and since the bank had not approached, therefore, write off was not allowed. There is no illegality or infirmity in the order and the same is sustainable. The alleged contraventions are established. Reliance has also been placed on the judgment of the Hon ble Supreme Court of India in LIC v. Escorts Ltd. and Others - MANU/SC/0015/1985. 8. We have co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied that the efforts made being sufficient and bona fide on the part of the appellant, therefore, it advised the authorized dealer to grant write off, subject to obtaining no objection from the ED. Thus it was for the authorized dealer to have approached the ED and the appellant company had no right or authority to apply to the Special Director/Adjudicating Officer to grant write off. 9. We are of the view that the arguments advanced by the ld. Counsel for the appellants that the appellant could also have made a plea for grant of no objection from the ED through Special Director/Adjudicating Officer, and he was bound to forward the request to the ED, has no merit. In view of the decision of Hon ble Supreme Court in LIC v. Escorts Ltd. and Ors. wherein it has been held in para 86 of the judgment that there is no provision of Act which enables individual or authority functioning outside the Act to determine for his own or its own purpose, whether the RBI was right or wrong in granting permission under Section 29(1) of the Act. Undersaid provision it is the RBI which constituted and entrusted with the task of regulating and conserving the foreign exchange. The Hon ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 of FEMA, 1999 provides that every exporter of goods shall furnish to the RBI or other authority a declaration containing true and correct material particulars showing the full export value and in case the full value is not ascertainable the value which he expects to receive on the sale of goods in the market outside India. Clause (b) of sub-section (i) of Section 7 of Regulations furnishing to the RBI the information required by the bank for the purpose of realization of export proceeds by the exporter. Sub-section (ii) of Section 7 provides that the RBI may direct any exporter to comply with information regarding export value of the goods as it deems fit and sub-section (iii) of Section 7 prescribes that the declaration shall contain the true and correct material particulars in relation to payment of such services to the Reserve Bank or such other authority by the exporter. We do not find specific allegation of violation of any of the clauses of Section 7 by the appellants. The Adjudicating Officer has also not analysed as to which clause of Section 7 has been contravened by the appellants. Since in the impugned order it has not been specified as to what breach has been committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 320-336/2010, dated 15-2-2010 and also judgments of Hon ble Delhi High Court in the matter of Kavita Dogra v. Director of Enforcement in Criminal Appeal No. 44/2008, dated 15-2-2014, and also judgment of Hon ble Delhi High Court in Umesh K. Mody v. Deputy Director of Enforcement in Criminal Appeal No. 368/2008, dated 31-7-2014 in which Section 68 of FERA which is similar to Section 42 of FEMA regarding fixation of liability of the persons involved in the affairs of the company it has been held that a mere statement is not sufficient to the effect that such and such person was incharge of, and cannot be made vicariously liable. The averments should state that the person who was liable for the commission of offence of the company was both incharge and responsible for the conduct of the business of the company. In view of the above, we are of the view that appellant G. Subha Raju of Appeal No. 286/2009 against whom no specific role or involvement has been alleged is entitled to benefit of and cannot be held guilty and penalized with the help of Section 42(1) of FEMA. Though no specific allegation against appellant G. Rama Raju, Managing Director has been made regarding his role or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances and taking a holistic view, we are of the view that since a period of almost 15 years has passed since the transactions took place and the RBI permitted authorized dealer to allow write off in respect of the two disputed GRI forms also subject to obtaining no objection however the authorized dealer did not approach the Enforcement Directorate. In our estimation there must have been some degree of satisfaction that is why approval to the authorized dealer to grant write off subject to certain conditions was allowed, the situation remains that the write off in respect of the two transactions through two disputed GRI forms has not been finally allowed. The contravention of Section 8 of FEMA, 1999 against the appellant company and the appellant G. Rama Raju, Managing Director r/w Section 42(1) of FEMA is made out. Since the amount of penalty imposed against the company as well as against the appellant G. Rama Raju, Managing Director has been imposed without assigning any reason for determination of the amount, therefore considering the long gap of the alleged contravention in our opinion the ends of justice will be met if the penalty of ₹ 40 lakhs imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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