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TMI Blog2019 (5) TMI 1466X X X X Extracts X X X X X X X X Extracts X X X X ..... 18(Stay), MP-FE-214/MUM/2018(Exem.), MP-FE-215/MUM/2018(Exem.), MP-FE-216/MUM/2018(Misc.), MP-FE-217/MUM/2018(Stay), MP-FE-218/MUM/2018(Exem.), MP-FE-257/MUM/2018(Stay), MP-FE-193/MUM/2018(Stay), MP-FE-194/MUM/2018(Stay), MP-FE-195/MUM/2018(Exem.), MP-FE-258/MUM/2018(Stay), FPA-FE-61/MUM/2018, FPA-FE-48-57/MUM/2018 For the Appellant no. 1: Mr. Pradeep Sancheti, Sr. Advocate, Mr. Vikas Kumar Jha, Advocate, Ms. Nikitha Shenoy, Advocate For the Appellant no. 2: Mr. Mahesh Jethmalani, Senior Advocate, Mr. Amol Chitale, Advocate, Ms. Pragya Bagital, Advocate For the Appellant no. 3: Mr. Amit Sibal, Senior Advocate, Mr. Sohan, Advocate, Mr. Manik, Advocate, Mr. Ambav, Advocate For the Appellant nos. 4 to 9: Mr. Abhishek Singh, Advocate, Mr. Shreshth Arya, Advocate For the Appellant nos. 10 & 11: Mr. Ashok K. Gupta, Sr. Advocate, Mr. L.S. Shetty, Advocate, Mr. Abhishek Gupta, Advocate, Mr. Harshil Gupta, Advocate, Ms. Mamta Bhattacharya, Advocate For the Respondent: Mr. Rajeev Awasthi, Advocate JUDGEMENT 1. By this order, I propose to decide interim applications filed by the appellants for dispensation to deposit the penalty amount imposed by the Adjudicating Authority. The detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- (Rupees Seven Crores only) imposed on State Bank of Travancore (now merged with State Bank of India) Jaipur Branch and (vi) the penalty of Rs. 10,00,000/- (Rupees Ten Lakhs only) imposed on Shri A.K. Nazeer Khan, the then Chief Manger, State Bank of Travancore, Jaipur should be deposited at the office of the Joint Director, Directorate of Enforcement, Kaisar-I-Hind Building, 4th Floor, Currimbhay Road, Ballard Estate, Mumbai-400 001, by means of a Demand Draft/Pay order drawn in favour of "DDO A/c Directorate of Enforcement, Mumbai' within 45 days from the date of receipt of this Order. While depositing the penalty, the Adjudication order No. And date as mentioned in the first page of this order should be quoted clearly." 2. The admitted facts are that the inaugural session of IPL was held in April - May, 2008. Letter dated 13.03.2009, addressed by Ministry of Home Affairs ("MHA") to BCCI, informing them that due to the coinciding general elections, State Governments would be unable to provide security for the second season of the IPL in 2009 ("IPL-2"). 2.1 Emergency Working Committee meeting held on 22.03.2009 where it was discussed that- (a) BCCI could not reschedule IPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply") was filed on 28.02.2012. 5. By letter dated 13.04.2015, ED informed BCCI that the Special Director, ED is of the opinion that adjudication proceedings be held against BCCI. Call Notice for personal hearings was sent to BCCI who received. 6. When the hearing was held on 29.04.2015. BCCI's filed an application under Rule 4(3) & 4(5) of Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 seeking reasons accompanying the opinion dated 13th April, 2015. Arguments were advanced on the same at the hearing. Advocates for BCCI filed a note on arguments/written submission pursuant to liberty granted by the ED at the personal hearing on 29th July, 2015. The Adjudicating Authority passed an Order dated 19.11.2015 on the Application dated 29th July, 2015. In the order, the Adjudicating Authority given the reasons for the Opinion and reconfirmed the Opinion. 7. In the meanwhile, Judgment passed by Hon'ble Bombay High Court in Writ Petition No. 2803 of 2015 (Lalit Kumar Modi v Special Director, Directorate of Enforcement, Western Region, Mumbai ("ED") &Anr.) ("LKM Judgment"), inter alia holding and directing as follows: "46. (ii) We direct respondent no. 1 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of BCCI, for the conduct of IPL Tournament in South Africa. These remittances were made against an agreement titled 'heads of Agreement' dated 30.3.2009 executed between BCCI and CSA. These remittances were made by BCCI from their bank account maintained with State Bank of Travancore (Since merged with SBI), Jaipur Branch, covered under 8 separate remittances , out of which, amounts totalling US$ 3,55,00,000 were made under 6 remittances during the period 31.3.2009 to 23.5.2009 and the remaining two remittances of US$ 40,00,000 & US$ 1,03,62,799.42 were made on 10.8.2009 and 27.8.2010 respectively. The requisite instructions for the transfer of funds for first two remittances were given by BCCI to their bank on 28.3.2009, which was prior to the signing of the agreement with CSA. Similarly, the last two remittances were made after the conclusion of the tournament, out of which, the last remittance of US $ 1,03,62,799.42 was effected, as late as 15 months after the conclusion of the Tournament. c) The BCCI, while seeking the transfer of funds to CSA from their bank, did not furnish any supporting documents to justify the purpose of the remittances, so sought and made. Even, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he BCCI guilty of the charge, resulting in the imposition of penalty, is given under Para 17.1 to 17.16 of the Adj. Order) f) Out of the remaining noticees in this SCN, charges were found established against (i) Shri Lalit Kumar Modi, the then Chairman of IPL (ii) Shri N. Srinivasan, the then Hon' Secretary of BCCI and (iii) Shri M.P. Pandove, the then Hon. Treasurer of BCCI. The role played by Shri M.P. Pandove At the relevant time, Shri M.P. Pandove was working as the Hon. Treasurer of BCCI.) The declaration under Form A-2, corresponding to the transfer of funds to CSA, were all signed by Shri M.P Pandove, in his capacity as the Treasurer of BCCI. While submitting the A-2 Forms, no documentary proof was furnished by Shri M.P. Pandove to the bank to confirm the specific purposes, for which, these remittances were sought to be made to CSA. In respect of the last remittance of US$ 1,03,62,799.42 made on 27.8.2010, the purpose of remittance was shown as "Operational Fee & Cost of hosting IPL 2009" in the A-2 form, whereas, the transfer instruction and also the swift message for the said transfer, had shown the purpose as "Towards balance and final payment of expenses in IPL-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplaint filed u/s 16(3) of FEMA 1999, it was stated that an amount of ZAR 2,90,550,000 was credited into the bank A/c No 420948619 maintained with Standard Bank of South Africa. The transcript of this A/c had also confirmed the credits of these amount in the said A/c by way of transfer from the bank A/c of CSA. Also, the credits in this A/c were funded, out of the remittances made by BCCI to CSA, for meeting the expenses IPL -2 in South Africa. e) There was no dispute regarding the existence A/c No 420948619 maintained with Standard Bank of South Africa. It is thus apparent that, the said account was managed and controlled through a proxy entity, by BCCI. The funds credited in the said account had also emanated from the coffers of BCCI. Having confirmed the beneficial ownership of this account by BCCI, it was essential for BCCI, to obtain permission from RBI, for opening and operating such an account, and crediting the sums in the said account, which were utilized for the sole purpose of BCCI. Thus, the charge against BCCI was proved and established leading to the imposition of penalty. f) Out of the remaining noticees in this SCN, charges were found established against (i) Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice bearers/officials of BCCI were charged in terms of section 42(1) & (2) of FEMA 1999. b) The aforesaid amount, represented the excess amount transferred by CSA from their A/c to the dedicated bank A/c no. 420948619. It was the contention of BCCI that these transfers had taken place between CSA and its associate entity, and therefore, the charge does not sustain. As per the findings given under SCN-V, the dedicated A/c was nothing other than an account controlled and operated by BCCI through Proxy. The transcript of the dedicated bank account revealed that the amount of US$ 60,00,143 credited in this account was not backed up by transfer from the A/c of CSA, thereby, suggesting that this credit did not represent the remittance sent by BCCI, but represented the amount borrowed from CSA. It was stipulated under Clause 4(e) of the heads of agreement that the money transferred by CSA from their A/c, to the dedicated A/c, would be funded out of the remittances sent by BCCI to CSA's A/c. Thus, the amount, which was not backed up by remittance from BCCI, assumed the color of funds borrowed by BCCI from CSA, as the funds credited in the dedicated A/c was strictly utilized to meet the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining noticees in this SCN, charges were found established against (i) Shri Lalit Kumar Modi (ii) Shri N.Srinivasan and (iii) Shri M.P.Pandove. The role played by Shri M.P. Pandove The findings made under SCN-I in respect of the role of Shri M.P. Pandove also holds good in this SCN as well, as the amount of US$1,03,62,799.42 remitted, which form the basis for the charge in this SCN, also formed part of the amount involved in SCN-I .The fund transfer of this amount was processed by Shri M.P Pandove, in his capacity as the treasurer of BCCI and the A-2 Form, corresponding the said remittance was also signed by Shri M.P.Pandove. vii) IX. SCN. No. T-4/16-B/SDE/R/2011 (SCN-IX) a) In this SCN, BCCI was charged u/s 8 of FEMA 1999 and section 10(6) of FEMA 1999 r.w clause (b) of Reg.3 of FEM(Realization, Repatriation and Surrender of Foreign Exchange) Reg. 2000, for failing to repatriate the proceeds from the sale of tickets amounting to ZAR 3,82,85,677 (Equiv. Rs. 26,79,99,739/-) and instead, crediting the said amount, in the dedicated account, and utilizing the same, for making payments to various persons/entities in South Africa, in connection with the IPL-2 held in South Afric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stadia owners on this count. Shri N. Srinivasan in his statement had admitted that two types of revenues were available to BCCI directly viz. revenue from the sale of tickets and revenue from the" pouring rights". In the debit note raised by CSA under the title "Income earned till 15.8.2009" the amount of ZAR 9,31,567 was shown against 'pouring rights' earned by CSA for BCCI. Thus, the right to receive the pouring rights was well recorded by CSA and BCCI in their respective records. The reported dispute with the stadia owners on the ownership of the pouring rights, were not supported by any documents, produced by BCCI. Thus, the charge against BCCI was proved, leading to the imposition of penalty on BCCI, in terms of section 13(1) of FEMA 1999. c) Out of the remaining noticees in this SCN, charges were found established against (i) Shri Lalit Kumar Modi (ii) Shri N.Srinivasan and (iii) Shri M.P. Pandove. The role played by Shri M.P. Pandove The fact of non-receipt of the pouring rights, was well known to Shri Pandove, in his capacity as the treasurer of BCCI. Being the Treasurer of BCCI, handling its financial matters, it was his responsibility to take effective steps to en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in terms of section 13(1) of FEMA 1999. x) XII. SCN. No. T-4/16-B/SDE/R/2011 (SCN-XII) a) In this SCN, State Bank of Travancore, Jaipur was charged u/s 10 (4) of FEMA 1999 r.w AD ( MA Series) Circular No. 11 dated 16.5.2000 and also section 10(5) of FEMA 1999 to the extent of (i) US$ 4,98,62,799.42( Equiv Rs. 243,45,20,781) (ii) US$ 1,03,62,799.42( Equiv. Rs. 46,63,25,973/-) & (iii) US$ 89,34,040 (Equivalent to Rs. 41,72,19,671/-), for engaging in transaction involving these amounts, on behalf of BCCI , which were not in conformity with the terms of Authorization under section 10(4) of FEMA 1999 and thereby failing to satisfy themselves about the genuineness of these transactions. b) The nature of involvement of the aforesaid transactions is given as under:- (i) US$ 4,98,62,799.42 (Equiv Rs. 243,45,20,781)- Amounts transferred by BCCI to the A/c of CSA (Transaction covered under SCN-I) (ii) US$ 1,03,62,799.42 (Equiv. Rs. 46,63,25,973/-)- The last remittance sent by BCCI to CSA on 27.8.2010 under the heads of agreement (Transaction covered under SCN- IV and also SCN-I) (iii) US$ 89,34,040 (Equivalent to Rs. 41,72,19,671/-)- Credit of US$ 89,34,040 into the EEFC A/c of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a principle charge alleged in most of the SCNs and yet the Order proceeds on the same very basis. (iv) The Order records the Appellant's position that the account by the name CSA Pty Ltd - IPL SA was opened and operated by CSA (through its designated officials), however, the Order proceeds on a contrary basis. (v) The Order gives a finding that the transactions in question were capital account transactions though there is no such allegation in the SCN. (vi) The Order proceeds on a patently erroneous basis that the liability of BCCI was a contingent liability. No such allegation is found in the SCNs/ Complaint. (vii) There is complete non application of mind inasmuch as to meet the expenses for IPL-2, if the funds are remitted by BCCI from India they are treated as lending transactions and if the funds are brought in by CSA to the given CSA Pty Ltd- IPL SA account they are treated as borrowing. (viii) The amount realised out of ticket sales in South Africa which were remitted by CSA and received by BCCI in India in foreign exchange were treated as impermissible credits to the EEFC account in India. 15. BCCI, thereafter, filed an Appeal No. 61 of 2018 under Section 19 of F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CSA. The Applicant submits that the Adjudicating Authority has failed to appreciate that FEMA does not prohibit cost plus fee arrangements, such as the CSA Hosting Agreement, which create mutual rights and obligations between parties. In this regard, the Applicant submits that a cost plus fee arrangement does not violate the provisions of FEMA and such arrangements are in fact quite common in India. e) The Adjudicating Authority has failed to appreciate that transactions which are carried out by an entity in the regular course of its business are Current Account Transactions, as defined under Section 2(j) of FEMA, which is an inclusive and wide definition. Such transactions are permitted under Section 5 of FEMA read with the Foreign Exchange Management (Current Account Transactions) Rules, 2000. The Applicant submits that the Adjudicating Authority has failed to appreciate that holding tournaments including Twenty20 matches such as IPL-2, is one of the main objects of the Applicant, as stated in its then applicable Memorandum and Rules and Regulations. Thus, organizing IPL-2 in South Africa by entering into the CSA Hosting Agreement and remittances made there under for the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught in by CSA to the given CSA Pty Ltd - IPL SA account, they are treated as a borrowing. The Adjudicating Authority has also erred in holding that the amount of INR 4,40,01,581/- shown in the books of the Applicant was the final amount that was due and payable to CSA under the CSA Hosting Agreement. The Applicant submits that the amount shown as 'amount payable to CSA' as on 31st March, 2010, in Schedule 3 to the Annual Report 2010-11 of the Applicant, was the net amount payable to CSA i.e. netted off against the amounts receivable from CSA on account of revenue from sale of tickets. The Applicant submits that the actual amount due to CSA was INR 48,56,00,781/-, which was duly repatriated to CSA. Thus all the impugned transactions are in fact Current Account Transactions. 17.3 Show Cause Notice No. IX: The Applicant submits that the Adjudicating Authority has travelled beyond the scope of Show Cause Notice No. IX and the Complaint while passing the Impugned Order. The Complaint/ Show Cause Notice No. IX do not contain any allegations to the effect that the Applicant has delayed repatriation of revenue from sale of tickets under the CSA Hosting Agreement. The said allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 82,66,54,000/- imposed on the BCCI. It is stated that the provisions of section 42(1) of the FEMA cannot be invoked in case of BCCI. Section 42 deals with contravention by companies. "Company" has been defined in the explanation to the said section, to mean any "body corporate" and to include a "firm" or other "association of individuals". As per clause 3 of the Memorandum and Rules and Regulations of the BCCI, prevalent at the time of the alleged contravention, the BCCI is not an "association of individuals" but an "association of associations." Various cricket associations are either the full members, associate members or affiliate members of the BCCI. No individual is a member of the BCCI. Thus, BCCI is neither a firm nor a body corporate. Hence it is submitted that the BCCI does not fall within the definition of "company" as defined in section 42 of the FEMA and hence the provisions of vicarious liability prescribed in section 42(1) are not applicable against the appellant. Therefore, it is a fit case for waiver of pre deposit in view of the law laid down by the Hon'ble Supreme Court in the case of Benara Valves Ltd. v. CCE, (2006) 13 SCC 347. Appeal no. 57/2018 - case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proceedings. 21.4 The Impugned Order has been passed in violation of Rule 4(9) of the Adjudication Rules as the Adjudicating Authority summarily rejected the Applicant's application dated 7th May, 2018 (wherein the Applicant had requested an opportunity for inspection of the original Complaint and for copies of the documents referred to and/ or relied upon in the Complaint but not annexed thereto or otherwise provided to the Applicant) & falsely claimed that these documents have already been provided to the Appellant. The Adjudicating Authority also rejected the application since it was purportedly made at a belated stage. 21.5 The penalty of Rs. 9.72 Crores is excessive, the appellant is suffering undue hardship including financial hardship, if the requirement to pre-deposit is not waived:- a) It is submitted that the Applicant is 73 years of age and is a senior citizen, and also a pensioner of the Government of Punjab. Further, he is a former first class cricketer and a retired Punjab Government Officer, and has served as the Chairman of the Punjab Public Service Commission. It is submitted that the Applicant was the Honorary Treasurer of the BCCI at the relevant time and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rers of BCCI cannot be proceeded against under section 42 of FEMA because BCCI is neither a body corporate nor a firm nor an association of individuals. A perusal of the judgment in case of Shashank Manohar reported as 2014(1) Mh.L.J 838 in para 7 of the judgment would show that the submission before the Hon'ble Bombay High Court was that the complaint against BCCI may not be maintainable as it is not a company or firm or an association of person but it is an association of societies. It is not the submission of the appellant that a complaint against BCCI may not be maintainable and/or BCCI cannot be proceeded against under FEMA in case of any breach of contraventions of any provision or BCCI may be a person within the definition of person as defined in FEMA, however, the office bearers of BCCI cannot be saddled with vicarious liability under section 42 of FEMA because BCCI is neither a body corporate nor an association of individuals. 22.3 The appellant was neither an office bearer of the BCCI nor part of the working committee of BCCI, thus, there is no question of Appellant being responsible to the BCCI for the conduct of the business of the BCCI. Therefore, appellant cannot al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during cross-examination had interalia admitted that: firstly, Appellant was not an office bearer of BCCI and was not responsible for the financial affairs of the BCCI, this is obvious from the record of cross-examination of Mr. Shashank Manohar, Mr. Ratnakar Shetty, Mr. Chirayu Amin and Mr M.P Pandove; secondly, concerned official of the Bank i.e the Authorised Dealer had stated in so many words that all the remittances were made after the same were approved by the foreign exchange department of the bank and the same were permissible remittances and therefore there was no infraction of FEMA. Apart from the above, the bank has specifically argued that all foreign exchange remittances are reported by the bank to the RBI and the RBI had never flagged any remittances this fact in itself establishes that there was no infraction of FEMA. 22.8 The appellant has brought on record his ITR returns which clearly show that the appellant is not in a position to make the pre-deposit and requiring the appellant to make such pre-deposit would cause undue financial hardship to the appellant. 22.9 BCCI is the national sporting body/Federation, in its usual course of business it had organised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he continued in the said post at the said place upto 26.05.2011. The State Bank of Travancore, ("SBT", for short) which was also a Public Sector Bank till its merger with SBI, an Authorized Person in Foreign Exchange within the meaning of Clause (c) of Section 2 of FEMA and used to conduct its Banking business, including dealing in acts of transfer of Foreign Exchange to places outside India on behalf of its customers. 23.1 It is common case of both appellants that the Board of Control for Cricket in India (for short, 'BCCI') is the National Level Cricket Sports Body of India. The BCCI had been a valued customer of State Bank of Travancore. In the year 2009, in view of the General Elections and unavailability of the security forces etc., BCCI decided to conduct the Indian Premier League - II (IPL-II) in South Africa and for that purpose, entered into an Agreement on 30.03.2009 with the Cricket South Africa (for short 'CSA'). Under the said Agreement, the BCCI agreed to pay to the CSA the expenses which were to be incurred by it (CSA) for rendering all the services for conducting IPL-II. The BCCI approached SBT's Jaipur Branch seeking in all 8 remittances of foreign exchange tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er such lawful and legal remittance having being made whether it is legally permissible to allege that the Appellants have contravened the provisions of the law cited and alleged on their part and to hold the Appellants legally liable and responsible to answer the alleged contravention on their part. It is submitted that there is no allegation made in the Show Cause Notice dated 25.11.2011 that at the time or before permitting the relevant remittances of Foreign Exchange, the Appellants had committed any contravention of the provisions of law alleged on their part. Further submission is that the concerned remittances fall under the category of Current Account Transactions, as provided under Section 5 of FEMA. It falls in Entry No.9 of Schedule II to the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and not falling under the Capital Account Transactions. 23.3 The Bank has been charged for the violations of sub-sections (4) and (5) of Section 10 of FEMA, which imposes certain restrictions on the Authorized Person (Bank) who is licensed by the Reserve Bank of India to deal in foreign exchange transactions. Section 10(4) precisely mandates that in all the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made thereunder, and where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorized person shall refuse in writing to undertake the transaction and shall, if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to the Reserve Bank." 23.4 From perusing the provisions of Section 10(6) of FEMA, it is clear that if any Bank Customer who acquires the foreign exchange through the Bank for any elicit purpose by submitting all the requisite clarifications and documents, as mandated under the law, misuses such foreign exchange drawn by him from the Authorized Person (Bank) subsequently, i.e. after acquiring the foreign exchange from the Bank by the Customer, in such a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mandated under the law and the RBI was fully apprised of the remittance and purpose thereof etc. Had there been any irregularity or illegality in the transaction, the statute confers very wide powers on the RBI to take action against an erring bank. No such action was initiated for the reason that the remittance was fully legal and as per the circulars and order of the RBI. The appellant shall crave leave to refer and rely upon Sections 11 and 12 of FEMA. Section 11 and 12 of FEMA empower RBI to issue directions with respect to compliance. The RBI found nothing wrong or objectionable with the conduct of the appellant bank. 23.8 The Respondent - Adjudicating Officer ought to have granted the opportunity to cross examine the various witnesses by the Appellant in view of the serious discrepancies pointed out by the latter in their replies to the Show Cause Notice. However, the Adjudicating Authority failed to afford any opportunity to cross-examine all those witnesses excepting the lone Investigating Officer. 23.9 It is the common case of both appellants that the adjudicating authority cannot rely upon the retracted statement of Shri Nazeer Khan. Counsel appearing on behalf of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e voluntary and free from pressure, can be accepted. A confession purported to have been made before an authority would require a closer scrutiny. It is furthermore now well settled that the court must seek corroboration of the purported confession from independent sources." 23.10 It is stated that the complainant before the Adjudicating Authority has failed to prove the charges beyond reasonable doubt that the appellant contravened the provisions of FEMA. It is a well settled legal proposition that an admission or confession cannot be relied upon without ensuring that the same is voluntary and obtained without any pressure or coercion. Even in face of rebuttal by the Appellant by citing the correct provision of law contained in Item No. 9 of Schedule II of the Current Account Transaction Rules, 2000 and further demonstrating as to how Item No. 15 of Schedule III thereof is totally not Applicable to the Remittances effected by the BCCI in this case, the object being Staging the IPL - II and not for obtaining any Consultancy Services towards any Infrastructural Projects from abroad, the Respondent totally failed to answer this aspect in his findings recorded in the Impugned Order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - BCCI. Hence there was no question of rejecting the remittance, for it was totally legal Banking Transaction, without tainted with any illegality whatsoever. 26. Let me now deal with submission of the appellants as well as the respondent. It is not denied that the complainant has to prove the case beyond all reasonable doubts. The Hon'ble Supreme Court in the case of Shantiprasad Jain vs. Director of Enforcement (AIR 1962 SC 1764) which pertained to the same subject of foreign exchange law decided under the Foreign Exchange Regulation Act, 1947 which was repealed by its successor Act - FERA, 1973, held as follows:- "35.the proceedings under the Act are Quasi-criminal in character and it is the duty of the respondents as prosecutors to make out beyond all reasonable doubt that there has been a violation of the law" It is the case of all the Appellants that the Department as the Adjudicating Authority had failed to prove the charges beyond reasonable doubt that the Appellant contravened the provisions of FERA, 1947. It was unequivocally ruled that though the provisions of the Indian Evidence Act, 1872 is not applicable to the Adjudication proceedings, the Director of Enforcemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the members in the council used to be briefed about various activities and new areas of business strategies of IPL by the then Chairman ie. Shri Lalit Modi, and that, whatever proposed by Shri Lalit Modi used to get the approval by the Governing Council of IPL. b) Shri Shashank Manohar- The then Hon. President of BCCI. Role Played: The charges alleged against Shri Shashank Manohar were dropped in the Adj. order. (Refer Para 18.1 of the Adj.Order). c) Shri N. Srinivasan- The then Hon. Secretary of BCCI. Role Played: Shri N. Srinivasan was the Hon. Secretary of BCCI at the relevant point of time. The agreement with CSA termed as the 'heads of agreement 'was signed by Shri N. Srinivasan in his capacity as the then Hon. Secretary of BCCI. All the remittances were made by BCCI to CSA in terms of this agreement. Shri Prasanna Kannan, the then Manager, Business Commercial IPL and Shri Sunder Raman, the then COO of IPL, in their respective statements given before the Deptt had stated that all the invoices/bills/ vouchers etc for the payment to different vendors and other individuals in South Africa were finally verified and approved by Shri N. Srinivasan, which were then sent by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Advocate of State Bank of Travancore, Jaipur Branch on 30.07.2015 29. Direction by the Hon'ble Bombay High Court for conclusion of the Adjudication proceedings: It is submitted on behalf of respondent that the Hon'ble High Court of Bombay vide order dated 30.01.2018, passed in Writ Petition No. 2803 of 2015 filed by Shri Lalit Kumar Modi for cross-examination of the witnesses, had granted the cross-examination sought by the petitioner, and further directed that the Adjudication proceedings should be concluded expeditiously as possible and in any event by 31st of May 2018. It was also observed by the Hon'ble Court that no extension would be granted in any circumstances. The Adjudication Authority in due compliance of the above direction given by the Hon'ble High Court of Bombay, had allowed the cross-examination of the witnesses as per details given above and also concluded the Adjudication proceedings by passing the Adjudication Order bearing No. Adj/04-15/B/SDE(VA) /WR /2018/FEMA dated 31.05.2018. 30. As per the order dated 30.01.2018 passed by the Hon'ble Bombay High Court, Cross-examination of the following co-noticees were conducted by the Advocates of Shri Lalit Mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tten and oral submissions. (ix) The frequent requests for adjournment of the personal hearing made by the noticees coupled with the filing of the Writ Petition by Shri Lalit Modi had prolonged the adjudication proceeding which eventually concluded on the basis of the Order dated 30.01.2018 passed by the Hon'ble Bombay High Court, wherein, it was observed by the Hon'ble Court that due to pendency of the Writ Petition filed by Shri Lalit Modi, the adjudication proceedings were pending from more than two years since August 2015 and hence, direction was given by the Hon'ble High Court in the said Order to conclude the adjudication proceedings by 31.05.2018. Discussion and findings 32. Whether Adjudicating Authority can ignore to issue Show Cause Notice about inquiry under Rule-4 of FEM (Adjudication Proceedings and Appeal) Rules, 2000 Rule 4 of Foreign Exchange Management (Adjudication Proceedings and Appeals) Rules, 2000 mandates that for the purpose of adjudication, whether any person has committed any contravention, the Adjudicating Authority is to issue a Notice in terms of Rule 4 to such person requiring clear from a bare reading of the Rule. Show Cause Notice to be issued is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use Notice, then a notice for personal hearing is required to be given to the party in terms of Rule 4 of the Adjudication Proceedings Rules. However, if on receipt of the notice for personal hearing, the recorded reasons are sought for by the noticee, the same should be given.......This would only result in fair procedure which would be in consonance not only with Rule 4 of the Adjudication Rules but with principles of natural justice." 34. Shri Amit Sibal, Senior Advocate (who appeared for Mr. Pandove) submits that the impugned order suffers from fatal procedural irregularities and has been passed in violation of the basic principles of natural justice as the Applicant was not given a reasonable opportunity to be heard, as envisaged under Section 16(1) of FEMA. His client Mr. Pandove was given only two working days to prepare his defence as the Call Notice dated 24th April, 2018 (which called for a 'last and final' hearing in the matter on 7th May, 2018) was received by the Applicant only on 2nd May, 2018. It was also the 'first' personal hearing post the Rule 4(3) stage. It appears from record that the ED's Call Notice dated 24th April, 2018 received on 2nd May 2018). His clien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Pandove. It is stated by him that the details of the opportunities granted to Shri Pandove and his responses to such opportunities are given in detail in Para 11.1 to 11.19 of the Impugned Order. 38. It is stated ample opportunities were granted to Shri Pandove to defend his case and he had availed these opportunities by filing various written and oral submissions through his advocates in the course of adjudication proceedings. Therefore, the submission made by the Advocates of Pandove that no sufficient time or opportunities were given to him in contesting his case, is devoid of merit and also factually incorrect. The Adjudication proceedings were concluded and the Adjudication Order was passed on 31.05.2018, to comply with the direction given by the Hon'ble Bombay High Court. 39. In view of submission made by Mr. Sibal, this Tribunal is of the view that the Adjudicating Authority prima facie as a principle of equity and parity in the conduct of the Adjudication Proceedings since the Applicant was not provided the opportunity to cross-examine the Complainant and/or individuals whose statements have been referred to and/ or relied upon in the Complaint, which opportunity was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May, 2018, but at the same time, it was observed that Rules be followed. Section-42 of FEMA 41. The appellant has been saddled with the vicarious liability under section 42 (1) of FEMA. In case of Shashank Manohar reported as 2014(1) Mh.L.J 838. and N. Srinvasan reported as 2018 SCC Online Mad 4828 the Hon'ble Bombay High Court and Madras High Court respectively had dealt with the definition of a person as defined in section 2 (u) of FEMA and have concluded that BCCI is a person within the above definition. 42. The word person in section 2 (u) of FEMA has been defined as under: - Section 2 (u) "person" includes- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and (vii) any agency, office or branch owned or controlled by such person; 43. The appellants are not disputing with the proposition that BCCI is a person within the meaning of the above definition. However, section 42 of FEMA provides for vicarious liability in case of contraventions by co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , cannot once again agitate the same issue before this Court. Therefore, this Court, being bound by the judgments, finding no merits whatsoever in the Writ Petition, is not inclined to interfere with the impugned proceedings. Accordingly, this writ petition stands dismissed. No costs". He referred Para 6 of the order. 47. Therefore, it is submitted by Mr. Awasthi that the issue regarding the status of BCCI as a 'Company' is settled through the aforesaid judgments passed by the Division Bench of the Hon'ble Bombay High Court in the matter related to the Writ Petition No. 5305 of 2013 dated 07.08.2013 filed by the Shri Shahshank Manohar and also in the matter related to the Writ Petition 2815 of 2016 filed by Shri N. Shrinivasan before the Hon'ble Madras High Court. 48. It is also submitted by Mr. Awasthi that the penalties imposed on the officials / office bearers of BCCI, correspond to the charges alleged against them individually in the respective SCNs. 49. Therefore, the financial liability for the payment of penalty rests with the individual noticees concerned, irrespective of their official position held in BCCI. However, any payment of penalty by BCCI on behalf of their emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conduct of the business of the company and in addition is also in charge of the business of the company. There may be many Directors and secretaries who are not in charge of the business of the company at all. The meaning of the words "person in charge of the business of the company" was considered by this Court in GirdhariLal Gupta v. D.H. Mehta [(1971) 3 SCC 189 : 1971 SCC (Cri) 279] followed in State of Karnataka v. Pratap Chand [(1981) 2 SCC 335 : 1981 SCC (Cri) 453] and Katta Sujatha v. Fertilizers & Chemicals Travancore Ltd. [(2002) 7 SCC 655 : 2003 SCC (Cri) 151] This Court held that the words refer to a person who is in overall control of the day-to-day business of the company. This Court pointed out that a person may be a Director and thus belongs to the group of persons making the policy followed by the company, but yet may not be in charge of the business of the company; that a person may be a manager who is in charge of the business but may not be in overall charge of the business; and that a person may be an officer who may be in charge of only some part of the business. 23. Therefore, if a person does not meet the first requirement, that is, being a person who is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the director simpliciter as such cannot be said to be the person who was in charge of and was responsible to the company for the conduct of its business. The Supreme Court came to that conclusion having regard to the provisions of the Act, especially in view of sub-sec. (2) of S.23-C of the Act. [FERA 1947) Having regard to the averments made in this case, which I have set out hereinbefore, and in view of the said decision of the Supreme Court, it must be held that the petitioner as such, on the allegations made in the show cause notice, cannot be proceeded against by the impugned notice." b) In the case of J.R. Grover vs. Assistant Director of Enforcement Directorate, Ministry of Finance, Jullundur City. reported in 1987 (31) ELT 682 (P&H), the Punjab and Haryana High Court has held as follows :- "2. The precise submission of Mr. Kuldip Singh, the learned Senior Advocate for the Petitioner, is that it has nowhere been alleged in the complaint Annexure p. 1 that the Petitioner or any of the directors was a person in charge and was responsible for the conduct of the affairs of the company. In the absence of such an allegation, according to the learned counsel, neither the N, comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulation Act, 1973 (pari materia with Section 42 of the Act) is a highly penal Section since it makes a person vicariously liable for an offence committed by the person and therefore, it must be strictly construed. Paras 5, 6, 7 and 9 are reproduced hereinbelow: "5. It seems to us quite clear that S.23C (1) is a highly penal section as it makes a person who was in -charge and responsible to the company for the conduct of its business vicariously liable for an offence committed by the company. Therefore in accordance with well-settled principles this section should be construed strictly. 6. What then does the expression "a person in charge and responsible for the conduct of the affairs of a company mean" ? It will be noticed that the word 'company' includes a firm or other association, and the same test must apply to a directorin- charge and a partner of a firm in-charge of a business. It seems to us that in the context a person 'in-charge' must mean that the person should be in over all control of the day to day business of the company or firm. This inference follows from the wording of S. 23C (2). [FERA 1947]. 7. It mentions director, who may be a party t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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." The Explanation to Section 42 provides that: "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 partner in the firm." 57. The attention were drawn on the observation made by the Hon'ble High Court of Bombay in the order dated 7.8.2013 passed in the Writ Petition No 5305 0f 2013 filed by Shri Shashank Manohar on the contentious issue related to the status of BCCI as a 'company' in Para No 7 of the order of the Bombay High Court. The Hon'ble Bombay High Court in the said order had observed that "As regards the contention advanced by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government" has framed "The Foreign Exchange Management (Current Account Transactions) Rules 2000" in this regard. It is not the case of the respondent or of the "Adjudicating Authority" that any of the remittances or transactions made by BCCI to CSA were prohibited or restricted by "The Foreign Exchange Management (Current Account Transactions) Rules 2000". It is argued on behalf of appellants that none of the remittances were prohibited by the above said rules and the remittances made by BCCI to CSA were permissible current account transactions. Counsel for respondent does not dispute that if the transactions fall under current account, the permission of RBI is not necessary. This issue at this stage cannot be finally concluded at this interim stage, however, prima facie, I find force in argument of the appellant. 62. Prima facie, at this stage, I am of the view that the penalties imposed by the Adjudication Authorities, they are dispensed with to deposit the same with the respondent in the light of important issue to be argued at the final hearing of the appeals. 63. It is submitted by all the appellants that the remittances made by BCCI to CSA were not "Capital Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d absolutely by BCCI. Necessary clauses were incorporated in the agreement to ensure that BCCI would exercise and enjoy absolute control in the operation of this dedicated bank account. Therefore, instead of opening a bank account their own name in South Africa with due permission of RBI, BCCI had chosen an alternate option of getting a dedicated bank account opened through CSA, which was under their absolute control. This arrangement of opening a bank account through CSA was intended to avoid any audit or scrutiny by Indian authorities including RBI. Mr. Awasthi has referred Para 28.3 of the Impugned Order. 65 It is stated that the fund transferred by BCCI to the CSA Account was in the nature of 'Capital Account Transaction' and hence, these transactions required specific permission of RBI. However, no permission was obtained by BCCI from RBI before undertaking these transactions, by creating a false impression that these are current account transactions. By making a remittances to CSA, BCCI had created a contingent liability in South Africa in favour of CSA, which falls into the category of 'Capital Account Transaction' (Refer Para 17.13 of the Adjudication Order). Thus, the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect matter of charge in the SCNs. It is also an admitted fact that the said account was the dedicated bank account opened by CSA for and on behalf of BCCI in terms of the clauses stipulated under the Heads of Agreement dated 30.03.2009 between BCCI and CSA. It was also revealed from records that, it was the BCCI, who in their letters dated 25.06.2010 and 21.01.2011(which are part of the relied upon documents) had mentioned about IPL (SA) Pty Ltd as a subsidiary of CSA. The Heads of Agreement dated 30.03.2009 mentioned the opening of dedicated bank account in the name of IPL South Africa towards meeting the anticipated expenses. In view of the above facts, any minor difference in the title of account, as made out by the advocates of Shri Lalit Kumar Modi and also BCCI, would not undo the existence of account No. 420948619 or any of the transactions associated with this account, which are covered in the SCNs as mentioned in Para 25.2 & 28.1 of the impugned order. 67. The distinction between vested interest and contingent interest in the context of the Transfer of Property Act has been dealt with by the Hon'ble Apex court in judgment reported as (1996) 5 SCC 201 in the following man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner prescribed by the statute." 70. a) The Hon'ble Privy Council in the case of Nazeer Ahmad vs. Emperor reported in AIR 1936 Privy Council 253 has held as follows:- ".....Where a power is given to do certain thing in a certain way, the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden." b) The Hon'ble Supreme court has followed this principle in the case of Ramchandra Keshav Adke & Others Vs. Govind Joti Chavare & Others, reported in 1973 (1) SCC 559 and Hukum Chand ShyamLal Vs. Union of India & Others, reported in 1976 (2) SCC 128. c) This principle has been reiterated by the Hon'ble Supreme Court in the case of Bharjatiya Steel Industries vs. CST reported in (2008) 11 SCC 617 and Cement Marketing Co. of India Ltd. v. Assistant Commissioner of Sales Tax, Indore & Ors.-(1980) 1 SCC 71. d) The Hon'ble Madras High Court has also followed the said principle in the case of Union of India Vs. Marcel Navens, (1978) 11 MLJ 122 (DB) (Mad) and (ii) P. Ramalingam Vs. Deputy Director,(1987) 12 ECC 249 (Mad)(DB) and has held that basic principle to be followed in quasi-judicial matters are that speculations should be avoided, parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was a possibility that the contemplated lease might never come into existence. It may be here observed that the provisions of Section 18(1) are penal in nature and it is a well-settled rule of construction of penal statutes that if two possible and reasonable constructions can be put upon a penal provision, the court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty. It is not competent to the court to stretch the meaning of an expression used by the legislature in order to carry out the intention of the legislature. As pointed out by Lord Macmillan in London and North Eastern Railway Co. v. Berriman [1946 AC 278, 295] "where penalties for infringement are imposed it is not legitimate to stretch the language of a rule, however, beneficient its intention, beyond the fair and ordinary meaning of its language". (Emphasis supplied) 72. The Adjudicating Authority at the stage of formation of opinion itself had exonerated Mr. Manohar, once Mr. Manohar has been exonerated on "principles of parity" no vicarious liability could have been fastened on any other individual Noticee. The Honourable Apex Court in judgment rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not served to appellant no. 3. iii) Mr. Shashank Manohar was exonerated of all liabilities, however, the penalty was imposed to other officials as vicarious liability. It has come on record that in the working committee of BCCI and its meeting dated 22.3.2009 to take the decision to hold IPL-2 outside India, the working committee left it to Mr. Shashank Manohar to decide the venue. iv) The principle of natural justice under Rule 4(3), 4(4) and 4(9) have not been followed/applied in the case of appellant who filed by the appellant no.2. v) BCCI is admittedly not a Company but only an Association of associations registered as a society. BCCI is a person which is covered under the definition of Section 2(u) read with Section 42. The office bearers are defined in the BCCI Rules and Regulations. It is the case of office bearers of BCCI that they cannot be penalised under Section 42 of FEMA because BCCI is neither a body corporate or an association of individuals. The said issue is an important issue raised by appellant nos. 2 to 9, the same is to be decided at the final stage of the hearing, however, prima facie, it seems that there is a force in the submission of appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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