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TMI Blog2020 (3) TMI 1102X X X X Extracts X X X X X X X X Extracts X X X X ..... fied time as provided in Regulation 6 of the Foreign Exchange Management (Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 (for short, the FEMA Regulations ) issued by the Reserve Bank of India Contravention referred to in Section 10(6) of the FEMA Act is a continuing actionable offence. If so, the Company and the persons managing the affairs of the Company remain liable to take corrective measures in right earnest. Considering the admitted fact that the appellant took over the management of the Company on 22.10.2001 and was fully alive to the default committed by the Company, yet failed to take corrective steps in right earnest. Notably, being conscious of such contravention, the appellant had sought indulgence of the authorities for more time. Appellant cannot now be heard to contend that no liability could be fastened on him individually. Indeed, regulation 6 of the FEMA Regulations provides for the period within which the foreign exchange ought to be surrendered if the Company was not wanting to take delivery of the goods imported. That, however, does not mean that the contravention ceased to exist beyond the specified period. On the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Account Transaction) of the Foreign Exchange Manual 200304 in the complaint filed against the company named M/s. Zoom Enterprises Limited (for short, the Company ) of which, the appellant was the Managing Director. The appellant filed his reply to the said show-cause notice on 10.6.2004, inter alia, contending that the Company had purchased 2 Nos. of Water Cooled Screw Chiller Unit Model and other accessories for a cost of 374000 FRF from Carrier S.A. of France and Air Handling and Fan Coil Unit for US$ 35766 from Carrier Corporation, Syracuse, New York. The import was done under Export Promotion Capital Goods (EPCG) Licence under Open General Licence (OGL). The goods were imported, but kept in warehouse, as the Company, which at the relevant time was under Mr. Aniruddha Roy Chowdhury and others, failed to take steps to get the goods released. The appellant took over the project only in July, 2002 and afterwards, he spent nearly 5 crores of rupees for the project work. Due to financial constraints, in February, 2003, a request was made to Tourism Finance Corporation of India Limited (TFCI) for sanction of a bank guarantee of ₹ 40,00,000/( Rupees forty lakhs only) to get th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Chief Enforcement Officer (Admn.), 3rd M.S.O. Building, 6th floor, C D Wing, Salt Take, Calcutta 700064 within 45 days from the date of receipt of this order. 4. The Company, as well as, the appellant carried the matter in appeal before the Special Director (Appeals), FEMA Commissioner of Income Tax, Delhi being Appeal Nos. SD(A)/Kol/04/05/112 and SD(A)/Kol/04/05/113. The appellate authority vide order dated 13.6.2005 dismissed both the appeals and was pleased to uphold the decision of the adjudicating authority. After adverting to the admitted facts, the appellate authority proceeded to consider the requirements of the relevant provisions necessitating submission of Bill of Entry to effectuate the remittance and complete the import of the goods for which the remittance was made. The appellate authority observed as follows: 7. As per the provisions of Section 10(6) of FEMA, the foreign exchange acquired from an authorized dealer has to be utilized for the purpose it was released or otherwise it should have been surrendered to the authorized dealer. The Regulation 6(1) in the FEMA (Realisation, Repatriation Surrender of Foreign Exchange) Regulation 2000 issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is seen from the MOU dt. 22.10.2001 that the appellant company was transferred from the old management to the new management after the shares were transferred for about six crores of rupees. From the annual report for the year 200304, it is seen that loans of ₹ 7.33 crores were taken and invested a capital workinprogress shown at ₹ 13.07 crores. The company also advanced ₹ 1.20 crores Substantial investment was made in the capital work including air conditioners, furniture and electrical installation, etc, etc. In spite of availability of sufficient funds during this period the appellant company did not take any step to take delivery of the imported goods which are lying in the warehouse since 2000. Note was given in Schedule 11 to the annual accounts that the liability against bank guarantee and customs duty in respect of import of air conditioning plant was not provided in the accounts. The sequence of such events clearly show that the appellant company and its Managing Director responsible for running the company did not take reasonable steps of delivery of the imported goods so warehoused and thereafter to submit bill of entry to the authorized dealer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Company, as well as the appellant carried the matter before the High Court at Calcutta (for short, the High Court ) by way of FEA Nos. 17/2007 and 18/2007. Both appeals were dismissed by the High Court vide judgment and order dated 17.9.2008. It noted the rival submissions and observed thus: After hearing the learned Counsel for the parties and after going through the materials on record placed before us, we are of the opinion that the violation which has been done by the appellant/petitioner, cannot be stated to be a technical violation and it is well-settled law that contravention of the said Act or Foreign Exchange Regulation Act, 1973 has created a strict liability. The violation of these two Acts would come within the meaning of economic offence and cannot be treated as technical offence. Hence, in our considered opinion, after initial committal and/or contravention of Section 10(6) of the said Act, the violation continues till the time, compliance is made. Therefore, we hold that taking over the charge of the appellate company in the year 2002, cannot absolve the appellant from the liability and, in our considered opinion, the appellant company correctly h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . That cannot be reopened muchless at the instance of the present appellant. This is reinforced by the order issuing notice on the special leave petition filed by the present appellant, dated 30.3.2009. It is indicative of the fact that the contentions specific to absolve the appellant from the complaint action could be examined. 8. In other words, the core issue that needs to be considered in the present appeal is limited to the defence of the appellant that he could not be made responsible for the stated contravention. For, he became the Managing Director of the Company much later i.e. on 22.10.2001. For examining that argument, we may have to advert to Sections 10(5) and 10(6) of the FEMA Act. The same read thus: 10. Authorised person. xxx xxx xxx (5) An authorised person shall, 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 partner in the firm. A fair reading of Section 10(5) envisages that the authorised person before undertaking any transaction in foreign exchange on behalf of any person, must require that person to make a declaration and to give such information as will reasonably satisfy the authorised person that the transaction will not involve, and is not designated for the purpose of any contravention or evasion of the provisions of the FEMA Act or of any rule, regulation, notification, direction or order made thereunder. If such satisfaction is not reached, the authorised person need not proceed with the proposed transaction and must report about the same to the Reserve Bank. 9. The real provision which needs to be reckoned for answering the controversy brought before this Court is Section 10(6) of the FEMA Act. This provision is a deeming provision pointing towards the specified circumstances, which would re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rised person is for the purpose of foreign travel, then, the unspent balance of such foreign exchange shall, save as otherwise provided in the regulations made under the Act, be surrendered to an authorised person- (i). within ninety days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of currency notes and coins; and (ii). within one hundred eighty days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of travellers cheques. The appellant has placed reliance on the text of Section 42 of the FEMA Act to bolster his argument that only such person who was in charge of the Company at the time the contravention was committed, would be responsible for the action. 11. The High Court has opined that the contravention referred to in Section 10(6) by its very nature is a continuing offence. We agree with that view. It is indisputable that the penalty provided for such contravention is on account of civil obligation under the FEMA Act or the rules or regulations or direction or order made thereunder. If the delinquency is a civil obligation, the defaulter is obligated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uasi-criminal. The relevant considerations being the nature of the functions being discharged by the authority and the determination of the liability of the contravenor and the delinquency. (D) Mens rea is not essential element for imposing penalty for breach of civil obligations or liabilities. (E) There can be two distinct liabilities, civil and criminal, under the same Act. As aforementioned, the contravention referred to in Section 10(6) of the FEMA Act is a continuing actionable offence. If so, the Company and the persons managing the affairs of the Company remain liable to take corrective measures in right earnest. Considering the admitted fact that the appellant took over the management of the Company on 22.10.2001 and was fully alive to the default committed by the Company, yet failed to take corrective steps in right earnest. Notably, being conscious of such contravention, the appellant had sought indulgence of the authorities for more time. It must follow that the appellant cannot now be heard to contend that no liability could be fastened on him individually. Indeed, regulation 6 of the FEMA Regulations provides for the period within which the foreign e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted judgment, which reads thus: 34. The Tribunal has erroneously relied on the judgment in Hindustan Steel Ltd. v. State of Orissa, (1969) 2 SCC 627 which pertained to criminal/quasicriminal proceedings. That Section 25 of the Orissa Sales Tax Act which was in question in the said case imposed a punishment of imprisonment up to six months and fine for the offences under the Act. The said case has no application in the present case which relates to imposition of civil liabilities under the SEBI Act and the Regulations and is not a criminal/quasicriminal proceeding. We are in agreement with the view so expressed. 15. To sum up, we hold that no error has been committed by the adjudicating authority in finding that the appellant was also liable to be proceeded with for the contravention by the Company of which he became the Managing Director and for penalty therefor as prescribed for the contravention of Section 10(6) read with Sections 46 and 47 of the FEMA Act read with paragraphs A-10 and A-11 (Current Account Transaction) of the Foreign Exchange Manual 200304. The first appellate authority and the High Court justly affirmed the view so taken by the adjudicating au ..... X X X X Extracts X X X X X X X X Extracts X X X X
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