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TMI Blog2024 (6) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... Department. Rule 4(1) of the Compounding Proceeding Rules specifies the powers of the first respondent to compound contraventions, stating that if any person contravenes any provisions of FEMA, 1999, except clause (a) of Section 3 of that Act. Section 3 (a) deals with contraventions which are suspected of Money Laundering. Thus, Rule 4(1) clearly empowers the first respondent to compound all contravention, except for those that might be suspected of money laundering. In addition to the that, a proviso has been added to Rule 8(2) of the FEMA (Compounding Proceedings) Rules, 2000 vide Gazette Notification dated 20.02.2017, which states that provided that with respect to any proceeding initiated under Rule 4, if the Enforcement Directorate is of the view that the said proceeding relates to a serious contravention suspected of terror financing, or affecting the sovereignty and integrity of the nation, the compounding authority shall not proceed with the matter and shall remit the case to the appropriate Adjudicating Authority for adjudicating contravention u/s 13. Compounding application was returned to the petitioner on account of the Proviso to Rule 8(2) of the FEMA (Compounding Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner as well as the Directors residence. Consequently, the Income Tax Department also conducted survey under Section 133A of the Income Tax Act in the office premises of the petitioner. 4. In the meanwhile, the petitioner also challenged the search conducted by the second respondent in W.P.No.40240 of 2015 and the same was dismissed by this Court by an order dated 05.01.2017. Aggrieved by the same, the petitioner filed writ appeal before this Court in W.A.Nos. 493 494 of 2017. Thereafter, the second respondent lodged a complaint under Section 16(3) of FEMA, 1999 before the Special Director, Directorate of Enforcement, Chennai. Pursuant to the same, the petitioner and its Directors were issued show cause notice as to why adjudicating proceedings as contemplated under Section 16 of FEMA, 1999, should not be held against them, in the manner provided under Rule 4 of the FEMA (Adjudicating Proceedings and Appeal) Rules, 2000 for the contraventions of FEMA, 1999 and the Regulations issued thereunder. The allegation is that the petitioner received the sale consideration from Sequoia as a deferred payment to the tune of Rs. 22,50,00,502/- for the sale of 30,000 shares of M/s.Vasan Heal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. Accordingly, the penalty amount will be imposed on the petitioner for delayed filing of FC-TRS to the tune of Rs. 1,00,000/-. Therefore, the first respondent ought not to have returned the application for compounding the contraventions. In fact, the first respondent without even issuing any show cause notice to the petitioner, before remitting the contraventions before the adjudicating authority is a clear violation of Principles of natural justice. The first respondent with a malafide intention referred before the adjudicating authority under political pressure. 7. A perusal of the counter filed by the respondents and the submissions made by the learned counsel for the respondents 1 to 3 revealed that in the course of investigation by the second respondent under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA, 2002) in File ECIR/05/DZ/2012 noticed relating to contravention of FEMA, 1999 by M/s Vasan Health Care Private Limited and the petitioner. Further, the second respondent found so many contraventions that the petitioner had entered into capital account transactions from time to time and was found to have entered into a profit sharing agreement with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (PC Act) (CBI)09, (MPs/MLAs ccases), RADC, New Delhi. 10. Further, the FEMA (Compounding Proceedings) Rules, 2000 have been made under the provisions of Section 15(1) of FEMA, 1999. Rule 8(1) of the Rules states that the Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. Under the process established to operationalize this Rule, the applicant, while filing the Compounding Application, is required to submit an undertaking, whether it is under the investigation by an investigative agency. The petitioner submitted a compounding application on 11.05.2017 which was received by the first respondent on 15.05.2017 for compounding of contravention of delayed filing of Form FC-TRS for transfer of shares from Resident to Non-Resident. The petitioner along with the compounding application, submitted an undertaking that they had received a show cause notice on 17.04.2017 from the respondent. 11. Rule 8(2) of the Compounding Proceeding Rules states that The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all concerned as expeditiously as possible and not later than 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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