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TMI Blog2024 (6) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... the instructions of his while choosing the mode of payment with resulted in conversion of non-convertible resident rupee account to convertible non-resident rupee account. To take the defense that they were not responsible for such conversion which was done by SCB Bombay, is not convincing, particularly as there is evidence on record that how they purchased bank drafts in New Delhi, making them payable in Madras and for the purpose used the services of Shri Ravi Singhal to carry such drafts. Their conduct thus left scope for the drafts to be paid on collection from the SCB Manchester. In fact, the Judgment cited by Appellants viz., Union of India Another Vs. Shri Kanti Oil Mills [ 1979 (10) TMI 236 - BOMBAY HIGH COURT] brings out their contumacious conduct in contrast to the steps taken by the Mills in the facts of the cited Judgment so as not to contravene the provisions of FERA 1973. In the facts and circumstances of a case, the intention is to be ascertained. The facts of the present case speak for themselves whereby the obligations arising from the extant statutory framework were completely ignored by the Appellants. FERA 1973 provided for a regulatory mechanism for certain pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal Nos. FPA-FE-101 to 104/MUM/2010 filed by the Appellants against the Order No. ADJ/03-10/B/SDE/RAJ/2010/FERA dated 27.01.2010 passed by the Special Director, Enforcement Directorate, Mumbai. In the Impugned Order, penalty of Rs. 40,75,000/- was imposed on the Appellant M/s UK Paints (India) Ltd. for the contravention of provisions of The Foreign Exchange Regulation Act, 1973 (FERA 1973). Further, penalty of Rs. 11,25,000/- has been imposed on each of the three Appellants Sarv/ShriK.S. Dhingra, G. S. Dhingra and P.M. Kapoor. The Impugned Order has disposed of 5 Show Cause Notices (SCN) issued against the Appellants on 12.08.1993. In compliance toDelhi High Court Order dated 19.03.2014 in CRl.A.No. 918 to 921/2010 and CRl.MA.No. 13801,13811, 13813 13815/2010, the Appellant M/s UK Paints (India) Ltd. deposited Rs. 32,00,000/- and the other three Appellants deposited Rs. 8,00,000/- eachtotaling Rs. 56,00,000/- to satisfy the condition of pre-deposit. 2. Briefly the facts of the case are that M/s UK Paints (India) Ltd. purchased four drafts of total amount of Rs. 36,96,443/- on 12.10.1991 from Punjab Sindh Bank (PSB) branch at New Delhi drawn on their International Bank Division, Mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This was the only dealing which the Appellant Company had with ESL and he denied that the Appellant Company had any other dealings with ESL. He contended that the Appellant Company had the information that the ESL had offices in India and valid accounts in India to accept payment in Indian Rupees. 6. Ld. Counsel for the Appellant also argued that the Appellant Company was recognized for its export performances, by virtue of which the Reserve Bank of India (RBI) had issued a blanket permit to utilize foreign exchange upto certain monetary limits for certain purposes so as to promote and facilitate export trade. A copy of annexure to blanket permit issued by RBI has been enclosed to the Appeal. Ld. Counsel contended that clause (xiv) of the said blanket permit covered the service charges of ESL. Clause (xiv) of the said annexure states that Expenses towards performance of services abroad in connection with or incidental to the execution of contracts for export of goods or services from India. He therefore argued that the Appellant Company could have easily paid the foreign exchange in terms of the aforementioned permission and authorization already available to it under the blanket ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89 10. Per-contra Ld. Counsel for the Respondent argued that Shri K.S. Dhingra, the President of the Appellant Company had stated that Shri Ravi Singhal introduced him to Mr. Keith Fairbrother of ESL told him that Mr. Fairbrother would help in providing business in Russia at a commission of 2.25% payable to ESL on encashment of the L/C amount and before the export of the goods by means of bank drafts which were to be handed over to Shri Ravi Singhal. Shri G.S. Dhingra, Vice-President of the Appellant Company in a statement admitted having signed the cheques for purchasing demand drafts of Rs. 36,96,443/- from PSB Delhi. Ld. Counsel also stated that PSB Delhi vide its letter dated 12.02.1993 informed that initially it issued four demand drafts in favour of ANZ Grindlays Bank a/c of ESL. However, the same were cancelled at the request of the Appellant. Ld. Counsel argued that from this the malafide intention of the Appellants is clear. He also stated that Sh. P.M. Kapoor, Director of the Appellant Company vide his letter dated 22.02.1993 accepted the liability of Rs. 84,14,943/- for payment of service charges to ESL. Ld. Counsel further stated that PSB Chennai vide its letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also not on record that for payment to ESL, which was located in UK with no known address in India, the Appellant Company decided to get the bank drafts payable at Madras. It is also obvious that the Appellant Company complied with the instructions of Mr. Keith Fairbrother to get the payment effected,by handing over the drafts to Shri Ravi Singhal. 12. The perusal of the records reveals that the bank drafts were deposited with the SCB Manchester for collection. Shri Ravi Singhal in his statement dated 13.04.1993 stated that Mr. Keith Fairbrother, whom he had introduced to Shri K.S. Dhingra, hadcollected the said drafts from his residence during his subsequent visit to India. It thus paved the way for payment being effected by the Appellant Company to ESL in contravention of Section 9 (1) (a) of FERA 1973. SCB Manchester forwarded the bank drafts for collection to the respective branches of PSB and SBI in Madras. The statements of various bank officials of PSB, SBI and SCB Bombay and Statement of Account of SCB London maintained with SCB Bombay,bring forth the fact that US $ 1,42,799.73 and US $ 1,83,068.60 were credited to the said account being amount equivalent to Rs. 36,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in England. 14. The involvement and the participation of the three individual Appellants as President, Vice-President and Director of the Appellant Company have not only come out in their respective statements but also that of Shri Ravi Singhal. It was Shri K.S. Dhingra who had met Mr. Keith Fairbrother; Shri G.S. Dhingra had signed the cheque to get four bank drafts issued by PSB New Delhi; and Shri P.M. Kapoor informed that the five bank drafts were sent in a letter dated 12.10.1991 addressed to Shri Ravi Singhal.The three individual Appellants have failed to prove that the contravention took place without their knowledge and that they had exercised all due diligence to prevent such contravention. In fact, to the contrary, knowing that ESL is a company based in UK they agreed to effect payment for the service charges of this foreign company in the manner asked by Mr. Keith Fairbrother which led to the contravention of Section 9 (1) (a) of FERA 1973. By virtue of their positions in the Company the three individual Appellants were not only responsible and in charge of conduct of business of the Company but also they actually participated which resulted in the aforementioned contrav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, the payment effected by the Appellant Company to ESL arose out ofthis settlement between the two parties for rendering of services by ESL to the Appellant Company in procuring export orders of goods to Russia. The evidence already discussed reveals that the three individual Appellants had significant roles in the acknowledgment of debt and its settlement.The charge under Section 9(1) (c) of FERA 1973 stands proved against the Appellant Company and by virtue of Section 68 (1) of FERA 1973 against its three officials. 18. In this regard, the Judgement cited by the Ld. Counsel for the Appellant viz., Union of India Another Vs. Shri Kanti Oil Mills 1979 SCC Online Bom 176clearly brings out that M/s Shreekanti Oil Mills (Mills) had all along made strenuous effect to move the RBI for obtaining the permission to make payment to a foreign company. The permission was not granted. Therefore, a clear stipulation had been made in the said Agreement between the Mills and the foreign company that it was the responsibility of the foreign company to move the RBI. The relevant documents and correspondence were entrusted to the foreign company. Following observation is reproduced from paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service rendered by them in procuring export orders from Russia. The mode of such payment was without the permission of RBIand in contravention of Section 9 (1) (a) of FERA 1973. The other end of the monetary transaction was the recipient ESL located in United Kingdom whereby it acquired foreign exchange in contravention of Section 8 (1). Having held that the Appellant Company and its officials responsible for contravention of Section 9(1) (a) of FERA 1973, the charge of abetment under Section 64 (2) of FERA 1973 for contravention of Section 8(1) ibid against these four Appellants cannot hold good. In fact, the evidence reveals their direct participation in making payment to ESL in contravention of Section 9(1) (a) of FERA 1973 resulting in acquisition of foreign exchange by ESLand does not reveal that the Appellants merely aided and assisted ESL to acquire the foreign exchange unauthorizedly. 20. In regard to the imposition of penalty, Ld. Counsel for the Appellant has cited the Judgement in case ofHindustan Steel Ltd. Vs. State of Orissa (1969) 2 SCC 627:Relevant para is quoted hereunder: An order imposing penalty for failure to carry out a statutory obligation is the result of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 FERA 1973 provided for presumption of culpable mental state in any prosecution for any offence under the Act which requires a culpable mental state on the part of the accused, unless the accused proved the fact that he had no such mental state with respect to the charge against a particular offence. Sub-Section 3 of that Section makes such presumption applicable to proceeding before an Adjudicating Officer. The circumstances and the evidence in the present case reverse the burden on to the Appellants which they have failed to discharge. 23. In view of the aforementioned discussions, we hold that the contravention of Section 9 (1) (a) of FERA 1973 for an amount of Rs. 36,96,443/- and Rs. 47,38,500/- charged under SCN I and SCN II respectively stands established against the Appellant Company and the contravention of Section 9 (1) (a) of FERA 1973 r/w Section 68 (1) ibid stands e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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