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TMI Blog2014 (12) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... that were issued subsequently to CCL and its directors. In fact the whole idea of a post facto approval was that the failure to obtain prior permission as emphasised in various provisions of the FERA was condoned and therefore regularized. Therefore, this Court fails to understand how despite noticing the above aspect of the aforementioned two letters of the RBI, the SD proceeded to impose penalties as far as SCNs VI-VII are concerned. Only because prior permission was not obtained, this Court has no hesitation in holding that the findings under SCNs VI-VII and the consequent penalties imposed are misconceived and cannot be sustained in law. Turning to SCN No. VIII, the bone of contention appears to be that there is no specific permission for payment of commission to the individual directors whereas the post facto permission was granted for the payment of the salaries. Admittedly, the word 'salaries' is not defined in the FERA. There is no rational explanation as to why the definition of salary under the Income Tax Act, 1961 could not be adopted for the purposes of determining whether the payment of such commission was also regularized by the RBI. In these circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goes without saying that any consequential allotment of bonus shares would also stand regularized. In respect of each of the directors explanation is available on record as to how they have been allotted bonus shares. This Court is, therefore, unable to accept the reasoning given in the AO order as regards SCN Nos. XI to XVII and the consequent finding regarding violation of Section 29(1)(b) and 19(1)(d) FERA. As a result the AO order dated 15th October 1990 is hereby set aside. The consequent order dated 30th May 2008 of the Appellate Tribunal is also hereby set aside. The appeals are at-lowed in above terms. - Criminal Appeal Nos. 773, 774, 775, 776, 777, 778, 779, 780 And 781 of 2008 - - - Dated:- 4-12-2014 - Dr. S. Muralidhar, J. For the Appellant : Pawan Narang and K.R. Dogra, Advocates For the Respondent : Rajdipa Behura, Advocate ORDER Dr. S. Muralidhar, J. 1. These appeals are directed against the impugned common order dated 30th May 2008 passed by the Appellate Tribunal for Foreign Exchange ('AT'), dismissing the appeals filed by the Appellants against the common adjudication order ('AO') dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the current account to the call deposit account. By the second letter dated 11th April 1989, RBI granted post facto approval regularizing the allotment of 35,90,000 shares of ₹ 10 each as on 31st December 1986 to the non-residents of Indian nationality/origin on non-repatriation basis. The conditions for the approval granted were also spelt out in the said letter. The said permission was to be treated as permission accorded under Section 29(1)(b) of the Foreign Exchange Regulation Act, 1973 ('FERA') for the purchase of shares; under Section 19(1)(a) FERA for the export of the shares issued to the country of the residence of the non-resident investors as well as under Section 29(1)(a) FERA for non-resident participation in CCL exceeding 40%. 3. Thereafter, twelve SCNs all dated 25th October 1989 were issued by the ED. to CCL and its Directors. These were replied to and thereafter the common AO dated 15th October 1990 was passed by SD. 4. The AO noted that post facto approval had duly been granted by the RBI to CCL. Dealing with SCN No. VI, the AO held that the amount involved in respect of the call deposit account was US$ 28,19,74,586. 'Although p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and ₹ 50,000 each on CCL and its directors was imposed. In respect of SCN XIV, penalty of ₹ 2.5 lakhs on Mr. K.S. Basi and ₹ 25,000 each on CCL and its directors was imposed. In respect of SCN XVII, the penalty of ₹ 5 lakhs on Mr. M.K. Verma and ₹ 1 lakhs each on CCL and its directors was imposed. No penalty was imposed in respect of SCNs XV and XVI. 10. The appeals were dismissed by the AT by holding that no error was committed by the AO in finding contravention of FERA notwithstanding the RBI approval dated 11th April 1989. 11. This Court has heard the submissions of Mr. Pawan Narang, learned counsel for the Appellants and Ms. Rajdipa Behura, learned counsel for the Respondent. 12. As 'explained by the Supreme Court in Life Insurance Corporation of India v. Escorts Ltd. (1986) 1 SCC 264, the discretion is with the RBI whether to grant permission or not; whether it is an ex post facto or any other permission. The wisdom of the RBI in granting post facto approval is not to be interfered with. 13. The effect of granting post facto approval is as if the infraction did not occur in the first place and it stands re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) of the letter dated 11th April 1989. The condition for grant of the approval was that the dividends accruals had to be deposited to the investor's ordinary non-resident account and since that was not shown to have been the case, there was violation of Section 9(1)(a) FERA. A careful perusal of SCN No. IX would show that no such allegation has been made and that the notice having not been put on notice on whether or not they have deposited dividends in the ordinary non-residents account, it was not justified to find violation on that basis. As pointed out by Mr. Narang, learned counsel for the Appellant that the Appellants on having been put to notice on such violation could have produced material to explain that they had in fact complied with such condition. In that view of the matter the finding on SCN No. X cannot be sustained and the penalties imposed therein are also hereby set aside. 18. The issue as far as SCN Nos. XI to XVII is concerned is about the value of the shares allotted to the directors. The SD proceeded' on the basis that the letter dated 11th April 1989 approved the allotment of 5,50,000 shares of ₹ 10 each, and any value in excess of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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