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TMI Blog2023 (12) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... at an exorbitant penalty has been imposed upon the individuals arrayed without recording any findings on the specific roles of said individuals - Whether interference by the Tribunal in the order of the Special Director is justified on the touchstone of the doctrine of proportionality? HELD THAT:- Overall, the Tribunal has found that firstly, no loss has been caused to exchequer; secondly, the remittances have come into India and remained in India. This is not a case where any foreign exchange has gone out of India; thirdly, the remittances were utilised for the purposes for which they were intended and there is not even an allegation of utilization of the money for extraneous purposes; fourthly the entities have not gained any benefit whatsoever and in fact suffered considerable financial detriment as shares having beneficial transferable interest have not been issued against remittances to the said entities for the past 11 years; and fifthly, 'Rajasthan Royals' franchise has participated in the IPL since 2008 with no other allegation of contravening any FEMA provisions or regulations made thereunder. Thus, the Tribunal found no justification in the order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... APPEAL NO. 7 OF 2021 WITH FEMA APPEAL NO. 8 OF 2021 WITH INTERIM APPLICATION NO. 2060 OF 2020 IN FEMA APPEAL NO. 8 OF 2021 WITH FEMA APPEAL NO. 9 OF 2021 WITH INTERIM APPLICATION NO. 2061 OF 2020 IN FEMA APPEAL NO. 9 OF 2021 For the Appellants : Mr. Ashish Chavan, with Mr. Zishan Quazi, For the Respondents : Mr. Rohan P. Shah, with Mr. Roy Deep, Mr. Srisabari Rajan, Mr. Manish Rastogi Prajwal Tiwari, i/b Deep Roy. JUDGMENT (PER DR. NEELA GOKHALE, J.) 1. These Appeals under Section 35 of the Foreign Exchange Management Act, 1999 ( FEMA ) are directed against order dated 11th July 2019 passed by the Appellate Tribunal for SAFEMA, FEMA, NDPS, PMLA PBPT Act ( the Tribunal ), modifying the order passed by the Special Director of Enforcement to the extent of reducing the quantum of total penalty imposed upon the Appellants which totaled to Rs. 98.35 Crores to Rs. 15 Crores only. The Tribunal has thus held that the amount of Rs. 15 Crores already deposited by Appellants pursuant to the directions of this Court dated 21st January 2015 is reasonable and the same be treated as penalty for the contravention of the Act as held by the Tribunal. 2. The fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020) from UK on behalf of Emerging Media IPL Ltd. Subsequently, the franchise agreement was signed on 14th April 2008 and the balance deposit money, i.e., US$ 773,480.99 after the auction was paid by one EM Sporting Holdings Ltd., Mauritius ( EMSH ) (Respondent in FEMA Appeal No.7 of 2021) to BCCI. Thus, Manoj Badale and EMSH together paid a total amount of Rs. 23,49,27.410/-. The documents furnished by JIPL clearly showed that JIPL was a wholly owned subsidiary of EMSH. The date of incorporation of EMSH was 5th May 2008 and that of JIPL was 8th March 2008. The paid-up capital of the company at incorporation was Rs. 1 Crore having 10000 shares. Ranjit Barthakur (Respondent in FEMA Appeal No. 1 of 2021) and Fraiser Castellino, both Directors of JIPL owned 5000 shares each. Ranjit Barthakur sold 4990 shares to EMSH, Mauritius and Fraiser sold 5000 shares to EM Sporting Holdings, Mauritius. From the details of the foreign investments of JIPL, it was revealed that JIPL also received foreign investments through Axis Bank, Fort, Mumbai. The investments totaling Rs. 9,73,18,034/- were shown as Foreign Direct Investment ( FDI ) in India in equity. JIPL had filed an application seeking app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9,73,18,034/-. iv. Shri Ranjit Bharthakur, Shri Raghuram lyer, and Shri Fraiser Castelino have been charged for above contraventions in terms of Section 42(1) of FEMA, 1999. (ii) SCN II: Issued to EM Sporting Holdings Ltd., for contravention of: i. Section 6(2) of FEMA read with Regulation 5 of Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 and also read with para 8 of Schedule 1 to Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 issued under section 6(3)(b) of FEMA, 1999, to the extent of Rs. 23,49,27,410/- and Rs. 9,73,18,034/- totalling Rs. 33,22,45,444/-. ii. Shri Bishwarnath Bachun, Mrs. Samila Sivaramen, Mrs. Barbara Jacqueline Haldi, and Shri Manoj Badale, Director of M/s EM Sporting Holdings Ltd., and Shri Suresh Chellaram, Managing Director Chief Executive of M/s Chellarams PLC, Nigeria have been charged for above contraventions in terms of Section 42(1) of FEMA, 1999. (iii) SCN III: Issued to Shri Manoj Badale for contravention of Section (3)(b) of FEMA to the extent of Rs. 20,19,87,410/- and another amount of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Respondents guilty of having contravened the provisions of FEMA and the Regulations made thereunder and imposed penalty on individuals against the respective show cause notices. Total penalty of Rs. 98.35 Crores was directed to be paid in the office of the Directorate of Enforcement within 45 days from the date of receipt of the order. 7. Respondents assailed this order dated 30th January 2013 before the Tribunal. FEMA provides for a condition of pre-deposit of the penalty amount for preferring an Appeal. Respondents, therefore, made an application before the Tribunal seeking waiver of the condition of pre-deposit of the penalty amount and stay of the order dated 30th January 2013. On account of a difference of opinion amongst the members of the Tribunal, the matter was placed before the Chairman for decision and upon consideration of respective opinion of individual members of the Tribunal, the Chairman directed Respondents to deposit 40% of the penalty as a pre-deposit in addition to furnishing a bank guarantee for the remaining 60% amount of the Adjudication Order. The pre-deposit direction was assailed by Respondents in this Court by way of an Appeal. By its order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Penalty Imposed by the Special Director (Rs. In Crores) Penalty reduced by the Tribunal as in the Impugned Order (Rs. In Crores) 1/2020 JIPL 32.30 7.00 1/2021 Ranjit Bartakur 6.40 1.00 6/2021 Raghuram Iyer 5.10 Nil 8/2021 Fraiser Castellino 6.40 1.00 7/2021 EMSH, Mauritius 18.90 2.00 3/2021 Bishwarnath Bachun 2.45 Nil 9/2021 Samila Sivaramen 2.45 Nil 5/2021 Barbara Jacqueline Haldi 2.45 Nil 4/2021 Suresh Chellaram 3.70 Nil 2/2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the act attributed to each Respondent and thereby wholly unjustified. In fact, there is a categorical finding of perversity in the order passed by the Special Director. He has relied upon the following cases: Scope of judicial review under Section 35 of FEMA. (1) Mohtesham Mohd. Ismail v. Enforcement Directorate (2007) 8 SCC 254., (2) Union of India v. Amarjeet Singh 2009 SCC OnLine Del. 995. (3) SEBI v. Mega Corp. Ltd. 2022 SCC OnLine SC 361., (4) Sir Shadi Lal Sugar and Geeneral Mills Ltd. v. CIT (1987) 4 SCC 722,. Doctrine of proportionality Interference of Court when justified. (5) Excel Crop Care Ltd. v. CCI (2017) 8 SCC 47., (6) Hindustan Steel Ltd. v. State of Orissa (1969) 2 SCC 627. (7) Coimbatore District Central Coop. Bank v. Employees Assn. (2007) 4 SCC 669., Section 42(1)- a person in-charge and responsible for the conduct of the affairs of a company (8) Girdhari Lal Gupta v. D. H Mehta (1971) 3 SCC 189., (9) Katta Sujatha (Smt.) v. Fertilizers and Chemicals Travancore Ltd. Anr. (2002) 7 SCC 655. 11. We have perused the order passed by the Special Director as well as the impugned order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed any specific role of any individual Respondent to justify the invocation of the provisions of the FEMA and further calling for imposing of maximum penalty. 14. On the merits of the case, the Tribunal has observed that there was no other way for Respondents to participate in the bidding process for the IPL franchise organised by the BCCI except by making remittance directly to the BCCI, which essentially accounts for a major portion of the total remittances in question. (a) The Tribunal has found Ranjit Barthakur (Respondent in FEMA Appeal No. 1 of 2021), the Chairman and Director of JIPL to never have been responsible for regulatory compliance on day-to-day basis and neither was he a party to nor did he control or take any decision with regard to subject remittances. (b) Fraiser Castellino (Respondent in FEMA Appeal No. 8 of 2021) ceased to be a Director on 1st October 2008 and subsequently, he was not involved with the business or activities of JIPL. Thus, the Tribunal has vindicated him from any violation as alleged by the Enforcement Directorate. (c) Raghuram Iyer (Respondent in FEMA Appeal No. 6 of 2021) has also been absolved on the ground that his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd although the acts of Badale are held to be under bona fide belief that the remittances made by him were legal, Badale and ND Investments LLP are responsible for the transactions in which the contraventions have happened. However, the Tribunal did not find any justification for imposing maximum penalty and has reduced the same. 15. Overall, the Tribunal has found that firstly, no loss has been caused to exchequer; secondly, the remittances have come into India and remained in India. This is not a case where any foreign exchange has gone out of India; thirdly, the remittances were utilised for the purposes for which they were intended and there is not even an allegation of utilization of the money for extraneous purposes; fourthly the entities have not gained any benefit whatsoever and in fact suffered considerable financial detriment as shares having beneficial transferable interest have not been issued against remittances to the said entities for the past 11 years; and fifthly, 'Rajasthan Royals' franchise has participated in the IPL since 2008 with no other allegation of contravening any FEMA provisions or regulations made thereunder. Thus, the Tribunal found no ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o transgress the limits of this Court's jurisdiction, preferring the view of the Tribunal or that of the Special Director, one way or the other, in regard to factual appreciation of the finding of facts in the matter. 19. The parameters for imposition of penalty have also been considered by the Hon ble Supreme Court of India in Excel Crop Care Ltd. (supra) and it has been held as follows: 42. ........Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping relevant factors in mind........Penalty proceedings are not to be initiated, as has been noticed by the Wanchoo Committee, only to harass the Assessee. The approach of the Assessing Officer in this behalf must be fair and objective. 20. In Hindustan Steel Ltd. (supra), the Apex Court has held as follows: 8. ......An order imposing penalty for failure to carry out statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or di ..... 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