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TMI Blog2018 (6) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... ect and is upheld. Not complied with the RBI notification requiring them to file the report within the stipulated period of 30 days - Held that:- There is a foot note in the letter which states from RBI that “this acknowledgment shall not be deemed or construed in any way as approval by the Reserve Bank for investment in the company, nor does it certify the correctness or completeness of Form FC GPR from the company. This acknowledgment is only for the purpose of having received Form FC GPR from the company. Reserve Bank reserves its rights to call for any further detail from the company including any documents it may deem fit as well as to return the Form FC GPR to the company in view of any discrepancies found therein”. The appellants have not been able to produce any final decision in this regard so far. It is therefore apparent that the RBI has still not given them the clearance/permission. Accordingly, the charge against the appellants stands Mr. Leonid Beyzer had not taken prior approval of the Government of India inspite of having investment in another company in the same sector - Held that:- In the present case, it has not been alleged that Mr. Leonid Beyzer is either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Leonid Beyzer and the balance through direct receipt in to the company account. The RBI had intimated to the ED that investment made into the company account by debiting the NRO account of Mr. Leonid Beyzer is not a permissible mode of foreign direct investment as per the prevailing regulations regarding foreign investment in India as per Notification No. 20/2000-RB dated 03.05.2000 issued under the Foreign Exchange Management (Transfer or issue of Security by a person resident outside India) Regulations 2000 as amended. As per the master circular No. 2/2006-07 dated 01.07.2006 a company issuing shares to a person resident outside India have to comply with the following: a. Payment for purchase of shares and debentures should be by way of inward remittances in foreign exchange through the normal banking channel, b. After issue of shares the Indian company has to file a report in form FC-GPR not later than 30 days from the date of issue of shares to the regional office of RBI under whose jurisdiction the company is registered. 3. In the present case, with regard to the 1 (one) share of Mr. Leonid Beyzer it was held that there was contravention of the RBI instructions, in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned Order has also confiscated the lands purchased by them on the ground that the same were agricultural lands and that the FDI could not be used to purchase the agricultural land as the same is prohibited under the relevant FEMA Regulations. (ii) The Appellant is an Indian Company which was set up on 18.03.2005, whose Directors are foreign nationals and whose shareholding is entirely held by foreign nationals. One Mr. Valiulin Rashid and Mr. Leonid Beyzer being citizens of Russia acquired the Appellant Company by foreign direct investment under the automatic route. The shares of the Appellant Company were purchased by Mr. Valiulin Rashid for a total payment of ₹ 2,29,27,811/-; out of which ₹ 33,10,000/- (US $ 77471) made from the NRO account of Mr. Leonid Beyzer and the balance of ₹ 1,96,17,811/- (US $ 449881) through direct receipt into the Company s account. (iii) It is submitted that there is no dispute as regards the payment of ₹ 1,96,17,811/- as the above FDI came through the proper banking channel. The dispute is only in respect of ₹ 33,10,000/- which came from abroad, but it came to the NRO a/c of Mr. Beyzer. Mr. Beyzer then transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould clearly show that the above amount has come from abroad, but it did not come directly to the account of the company as the company account had not been opened and the money of ₹ 25 lacs was transferred on 19.03.2005 itself and the remaining amount came on later dates upto December, 2005. The above money came first to the NRO account of Mr. Leonid Beyzer and thereafter, it was transferred to the company account. It did not come to the NRE account (Non Resident External Rupee account) or FCNR [Foreign Currency (Non Resident) Account]. The purpose of the above rule is to only ensure that the funds which are being used come from abroad and that it is not the money which is lying in the NRO account. It is stated that the above object is satisfied as it is clearly established that the above money has come from abroad and therefore, the essential condition that only the FDI should be used has been satisfied and therefore, no penalty should be imposed on this ground. (vi) The other charge is that the appellants have not filed that FC-GPR report within the stipulated period of 30 days from the date of receipt of the amount of consideration. It is submitted that there has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Survey No. 22/3-B admeasuring 2725 sq.m alongwith the residential house. This was purchased in auction from the greater Bombay Coop Bank on 24.03.2005 for ₹ 23 lacs. Before the purchase itself, the land use had been changed to Settlement in 1997 itself from agricultural land. The conversion letter dated 20.05.1996 issued by the Town and Country Planning Department, Govt. of Goa clearly shows that the land use is settlement and the application for the same, the Electricity Bills for the same were enclosed. NOC dated 11.10.2005 for the re- construction given by the Town and Country Planning Department, Govt. of Goa was also enclosed alongwith the Occupancy Certificate for the above property and the Completion Certificate. From the above, it is very clear that the above property is settlement and the above land use had been changed in 1996 itself and this land cannot be called as agricultural land at all and various constructions and renovations have been done on this property after the due approvals from the various govt. bodies and the approval of the designs and drawings for the same. (b) Survey No. 22-4 (565 sq. m) and Survey No. 18-3 (435 sq. m) purchased on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property, then only the same would be applicable to the present case as there is no contravention in respect to the properties involved in the present case. Annexure A to Schedule I of FEMA Notification No. 20/2000-RB dated 03.06.2000 reads as under: (A) List of Activities for which Automatic Route of RBI for investment by person resident outside India is not available (B) List of activities or items for which FDI is prohibited. (C) Retail Trading (D) Atomic Energy (E) Lottery Business (F) Gambling and betting (G) Housing and real estate business (H) Agriculture (excluding Floriculture, Horticulture, development of seeds, animal husbandry, pisciculture and cultivation of vegetables, mushrooms etc., and Plantations.) From a perusal of the above notification, it is clear that what is prohibited is carrying out only the activity of agriculture and mere purchase of agriculture land is not prohibited, even assuming the land to be agriculture land. There is no finding in the impugned order that the appellants were carrying out the activity of agriculture on the land purchased by them. It may be kept in mind that the object of setting up of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act that ₹ 33,10,000/- remittance was not made from the above account but from the NRO account of Mr. Leonid Beyzer. (b) That it is a fact that they had not complied with the RBI Circular/notification requiring them to file the report within the stipulated period of 30 days from the date of receipt of the amount of consideration and even now they have not been able to produce any such permission or compounding order in their favour issued by the RBI. Accordingly, their investment has not been treated as investment through the legal channels as that is a mandatory requirement. (c) Mr. Leonid Beyzer even though has only one share had not taken prior approval of the Government of India inspite of having investment in another company in the same sector. This has contravened the provision of the Foreign Exchange Management (Transfer or issue of Security by a person resident outside India) Regulations 2000. As per Regulation 5 para 1 (2) of Schedule 1 which read as under: if the person purchases the share under this scheme proposes to be collaborator or proposes to acquire the entire share holding of a new company, he should obtain a prior permission of Central Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification requiring them to file the report within the stipulated period of 30 days, it is seen that the Reserve Bank of India vide its letter dated 30.03.2015 have acknowledged the filing of the applications in Form FC-GPR for issue of shares on repatriation basis in the current case and have allotted the registration number FC 2015-PJR 1045 subject to the condition that the company may ensure that all issues of shares/convertible debentures to non resident investors have been reported to RBI under the extant provisions of FEMA. There is a foot note in the said letter which states that this acknowledgment shall not be deemed or construed in any way as approval by the Reserve Bank for investment in the company, nor does it certify the correctness or completeness of Form FC GPR from the company. This acknowledgment is only for the purpose of having received Form FC GPR from the company. Reserve Bank reserves its rights to call for any further detail from the company including any documents it may deem fit as well as to return the Form FC GPR to the company in view of any discrepancies found therein . The appellants have not been able to produce any final decision in this regard so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultural land is not within the scope of the Notification 20/2000 dated 03.05.2000. To that extent, I do not find any contravention with regard to the properties in question in so far as it relates to this particular Notification. Accordingly, I hold so. However, for use of agricultural land or any land/property for that matter, the relevant law including the local laws like the land revenue code etc. will have to be seen which the Competent Authority under those laws are mandated to examine and take further necessary action. That is not a matter under FEMA and hence cannot be dealt in this order. On the basis of above discussions, I find that there has been a violation by the company in as much as it does not have the permission of the RBI, and, one of its shareholders and one of the appellants in the present case, Mr. Leonid Beyzer has also contravened the provisions of not bringing in investment through the stipulated channel. I accordingly uphold the impugned order in as much as the levy of penalty is concerned. I, however, hold that confiscation of the properties itself is too harsh and therefore set it aside. This will however be subject to, as mentioned above, the other la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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