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TMI Blog2024 (6) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter was taken up with the Appellant by Grindlays Bank and RBI, there is nothing on record to show that any enquiry was taken up by the Appellant. Its response was to deny its responsibility. Such conduct on the part of the Appellant not only reveals instigation but that too intentionally so as to engage with the ADs to indulge in transactions which were prohibited under the Agreement and Arrangements, resulting in contraventions of the provisions of FERA 1973. It is from the facts and circumstances of a case that the intention, instigation and engagement are to be ascertained. The facts of the present case speak for themselves whereby the obligations arising from the Agreement and Arrangements were completely ignored by the Appellant. FERA 1973 provided for a regulatory mechanism for certain payments, dealings in foreign exchange and security, transactions indirectly affecting foreign exchange and the import and export of currency for the conservation of the foreign exchange resources of the country and the proper utilization thereof in the interest of the economic development of the country. Section 59 of FERA1973 provided for presumption of culpable mental state in any pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions by the Enforcement Directorate and other noticees, the Hon ble Supreme Court stayed further proceedings of adjudications and prosecutions. The Hon ble Supreme Court finally allowed the Directorate to proceed with the adjudication proceedings vide its Order dated 24.02.2006 in Civil Appeal No. 1748 of 1998. This Tribunal directed the Appellant on 01.07.2009 to furnish unconditional bank guarantee of total penalty amount in the favor of Enforcement Directorate to meet the statutory requirement under Section 52 (2) of FERA 1973 of waiver of the pre-deposit of the penalty amount. The Appellant furnished the said bank guarantee and renewed it from time to time of which the last one was done on 04.03.2024 with expiry date of 26.08.2025. 2. Briefly the facts of the case relate to transactions as listed in the Impugned Order wherein M/s. Bank of Foreign Economics Affairs (Appellant herein) were charged in the 22 SCNs for abetting the banks in India, the Authorised Dealers (AD), in the contravention of Sections 6 (4) and 6 (5) read with Section 49 (i) (a) of FERA 1973. In eleven transactions the Bank of Foreign Economics Affairs (BFEA) which was also earlier known as Bank of Foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd its employees. The ANZ Grindlays Bank was subsequently taken over by the Standard Chartered Bank. The Adjudication Orders dated 29.05.2007, 04.06.2007, 15.06.2007 04.07.2007 passed by the Special Director of Mumbai, against which the said appeals had been filed, were set aside. Moreover this Tribunal (Single Bench) disposed vide another order dated 20.09.2019,12 Appeals bearing Nos. FPA-FE-10-13 50-57/MUM/2008 filed by Canara Bank and its employees by setting aside the Adjudication Order dated 30.11.2007. The argument ran that for the very same transactions for which the ANZ Grindlays Bank Ltd. and its employees were penalized in the Adjudication proceedings were the transactions for which the BFEA was charged for abetment under the provisions of FERA 1973. Even the Appeals filed by the Canara Bank and its employees were against the imposition of penalty for their abetment in those very transactions. Therefore, in view of the two orders dated 20.09.2019 of this Tribunal, the Impugned Order cannot stand against the Appellant. 4. Ld. Counsel for the Appellant further argued that a Banking Agreement was entered into between BFEA, USSR and RBI, Bombay on 18.08.1981 for the implement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refuse to undertake such transactions. The diligence required under the Exchange Control Manual, to use A1 and A2 forms so as to validly authorize transfer of Rupees to non-resident convertible rupee account was the responsibility of the AD Banks. Thus, no such liability could be fastened upon BFEA which is a Foreign Central Bank. 6. Ld. Counsel for the Appellant stated that the Agency Agreements with the AD Banks were in unequivocal terms, the transaction between BFEA and the concerned Indian bank had to be in non-convertible rupees. The Agreement did not cast any duty on the Appellant to verify the instructions as conveyed by their Russian Client or to enquire about the Indian Client to whom the payment was to be made or to verify as to which type of account was being credited by the Indian bank. 7. Ld. Counsel for the Appellant argued that since abetment is not defined under FERA 1973, the General Clauses Act 1977 was being relied upon to state that abet has the same meaning as given under Section 107 of the Indian Penal Code. He contended that the Ld. Adjudicating Authority had at best regarded the liability of BFEA as failure of due diligence and not of criminal nature. In any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted that serious contraventions happened and therefore did not press for refund of the amount of penalty already deposited, closure was brought to the case. 9. Ld. Counsel for the Respondent argued that the abetment occurred because of certain obvious omissions on the part of the Appellant. They failed to verify the correctness of the instructions of their clients in USSR as to why payments were to be made from the Vostro Account to the accounts of those who were not located either in India or in Russia, when in fact the goods (the medical equipments) had been supplied from India. Ld. Counsel pointed out that no contract of the transactions in question was produced by the Appellant even when asked by the Ld. Adjudicating Authority The facts and circumstances of the case herein speak for themselves as to the intention on the part of the Appellant. The Appellant issued instructions to the Indian Banks for crediting accounts which were of non-residents. 10. Ld. Counsel for the Respondent referred to certain instances from the records as to bring out the contraventions by the Appellant. The Agency Agreement between the Appellant and Standard Chartered Bank Bombay at paragraph 4b req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent drew attention to paragraph 40 of the Impugned Order wherein one Kuldeep Singh Sood stated that a Russian company conveyed to Eastern Suburbs Ltd. UK to obtain payment for supplies made from UK from ANZ Grindlays Bank Bombay. It appears that Shri Sood was in consultancy service business and represented Eastern Suburbs Ltd. UK in whose convertible rupee accounts many of the transfers happened from the non-convertible rupee accounts of the Appellant. The relevant portion of the paragraph is reproduced below: that the three drafts mentioned in his letters dated 31/8/91 and 29/8/91 were sent to them by some Russian company with the instructions that these funds are payable to Eastern Suburbs Ltd. for buying some materials from UK; that they were told that these are legal Russian business and the three cheques are meant for the credit of Eastern Suburbs Ltd; that the same should be deposited with ANZ Grindlays Bank, Bombay with whom their bankers Girobank London is holding an account; that he do not remember the full particulars of the Russian Company who sent the three drafts; but the drafts were sent from Russia by a Russian company; that the cheques were received by post fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the transactions as listed in the Impugned Order for which 22 SCNs were issued entailed credit of sums of money in the non-resident convertible rupee account by debiting the non- convertible Indian Rupees Accounts held by the Appellant. These transfers to non-resident convertible rupee accounts enabled payments to be made in Foreign Exchange to a person resident outside India. The debiting and the crediting were done by those banks in India in which the Appellant Bank held its accounts. It is also not disputed that such transfers and payments were made on the instructions of the Appellant Bank. These instructions were conveyed either through telex or through cheques drawn by the Appellant bank in favour of non-resident persons holding convertible rupee accounts. 16. The defense of the Appellant has been that they were carrying out the instructions of their clients in Russia and had no duty either under the Agreement between BFEA and RBI or under the Agency Arrangement signed with the Indian banks, which maintained their non-convertible rupee account. It is an admitted fact that the special arrangement to effect the payment of commercial and non-commercial nature was to made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents before effecting such payments . It therefore appears that the Appellant failed to produce a copy of the contract underlying the payments made in convertible Indian rupees to the accounts abroad (neither in India nor in Russia) which could have clarified its position that it was merely carrying out the instructions of the clients. While they may not have had responsibility as to verify the type of account which was being credited they cannot escape their duty/obligation to ensure adherence to the terms of the Agreements which they had entered into. 18. A copy of summary of the meeting filed by the Appellant as Annexure to the affidavit dated 22.06.2000 reveals that the meeting was held between the officials of the Appellant and those of ANZ Grindlays Banks on 16.03.1993. In this regard following is being reproduced from the summary of the meeting: Such payments, in the opinion of representative of ANZ Grindlays Bank, contradict both foreign exchange regulations of India and the Russian- Indian Trade and Payments Agreement since funds in non-convertible Indian Rupees were transferred to the account of an English bank Giro Bank PLC with ANZ Grindlays Bank, Bombay maintaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions on your part since the transactions were executed by you in conformity with the Indo-Soviet Trade Agreement. 3. In this connection, we may mention that our investigations have indicated that your bank had authorised a number of payments in favour of foreign entities such as M/s Eastern Suburbs Ltd. (subsequently renamed as M/s Indo International Corporation Ltd.) of UK, M/s Impulse Trading Inc. of USA and Mr. Augustin Gomez de Segura, as detailed in Annexure I. In some of these cases, your cheques/payment instructions clearly instructed concerned Indian banks to credit the Vostro account of the Giro Bank, London maintained with ANZ Grindlays Bank, Bombay. Although the instruments were drawn in Indian rupees and were payable in India, they were drawn in favour of foreign entities which had no operations in India and hence possibility of executing any export contracts from India by them for the Russian parties (importers) was ruled out .. You will agree that no payments were permitted under Indo-USSR Trade Agreement even in Indian rupees for exports to USSR from any country other than India or to any non- resident Indians except those living in USSR and having income/ earnings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Impugned transactions were to be covered by clause b of Article 5, bare reading of the clause clearly shows that the payments even permitted under the USSR Foreign Exchange Control Laws were to the physical and juridical persons residing in India. It is matter of record that the impugned transactions resulted in payments to persons who were not residents in India. The Ld. Adjudicating Authority in paragraph 85 of the Impugned Order has held that any transaction which takes place in India irrespective of whether it is indulged-in by a citizen of India or a foreign citizen the same is covered under Section 1 of FERA 1973 whereby the Act extends to whole of India. He has further observed that since BFEA opened accounts with the banks in India and was operating such accounts it was covered under the provisions of the Act of 1973. It is observed that the operations within the framework of FERA to give effect to the terms of the Agreements cannot give scope to escape responsibility for the contraventions of the said framework. In fact, the Article 5 of the Inter-Bank Agreement explicitly shows that the mechanisms created to facilitate trade by providing a mode of payment could not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of that thing. Explanation 1.- A person who, by wilful misrepresentation, or by wilful concealment of a material fact which he is bound to disclose, voluntarily causes or procures, or attempts to cause or procure, a thing to be done, is said to instigate the doing of that thing. Illustration A, a public officer, is authorized by a warrant from a Court of Justice to apprehend Z. B, knowing that fact and also that C is not Z, wilfully represents to A that C is Z, and thereby intentionally causes A to apprehend C. Here B abets by instigation the apprehension of C. Explanation 2.- Whoever, either prior to or at the time of the commission of an act, does anything in order to facilitate the commission of that act, and thereby facilitate the commission thereof, is said to aid the doing of that act. 22. Ld. Adjudicating Authority recorded finding that the Appellant did not disclose that the Eastern Suburbs Limited is an entity located in UK. Further, four cheques which are listed in paragraph 91 of the Impugned Order, were issued by the Appellant bearing name of GirobankPlc,.In two cheques issued by the Canara Bank under the instructions of the Appellant only Grindlays Bank was named a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be with reference to the thing that was done and not to the thing that was likely to have been done by the person who is instigated. It is only if this condition is fulfilled that a person can be guilty of abetment by instigation. 54. The law does not permit the abettor to escape punishment for abetment even if the actual player who commits the offence is not criminally liable for the actual act which results in the commission of an offence (See in this regard, the situation contemplated in illustrations in Explanation III of Section 108 of the IPC). Equally, there need not be meeting of minds between all the persons involved in a conspiracy and it is sufficient if a person is engaged in the conspiracy following which the offence is committed (Explanation V to Section 108 of the IPC). This means that it is not even necessary that the persons who are engaged in the conspiracy, to even know the identity, leave alone physically meet the other players. There can be any number of persons depending on their guilty mind and acts or omissions which may render them liable. 24. The Appellant repeatedly instructed the ADs to transfer the funds from its non-convertible Indian rupees accounts t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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