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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 ..... 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, Madras and one draft of Rs. 47,38,500/- from State Bank of India (SBI) branch at New Delhi drawn on SBI Madras. These five bank drafts were sent to Mr. Keith Fair brother Managing Director of M/s Eastern Suburbs Ltd. UK through Shri Ravi Singhal, a resident of Vasant Vihar New Delhi. The said drafts were received from the Standard Chartered Bank (SCB), Manchester UK by the designated branches in Madras of the two banks.The drafts were cleared by the designated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a (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 permit rather adopt the alleged methodology to make such payment. 7. Ld. Counsel for the Appellant further argued that the contravention of FERA occurred due to the fault of the banks. Merely handing over the bank drafts did not result in payment to ESL in contravention of FERA. It was the crediting by the SCB Bombay to convertible account of SCB London that the amount got transferred to the credit of a non-resident company viz., ESL which wrongly repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 22.02.2007 opined that the Appellant Company in collusion with ESL and SCB contravened the provisions of FERA 1973. Ld. Counsel argued that the Appellant Company along with its officials were well aware about ESL being situated in UK and that it had no office in India. There was no mention of any address of ESL in India. He argued that in spite of blanket permit,the Appellant Company chose to make payment to ES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rafts 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. 36,94,443/- and Rs. 47,36,900/- less banking charges. It is also on record that no permission for effecting transfer of the two amounts from resident non-convertible accounts to non-resident convertible account was obtained from RBI. It is thus obvious that the payment from the Appellant Company to ESL in the aforementioned manner is what was effected. The Appellant Company did not use its entitlements, if any, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contravention. Therefore, the three individual Appellants are also liable for the contravention indulged-in by the Company by virtue of Section 68 (1) of FERA 1973. The two citations given by the Ld. Counsel for the Appellant viz., Shailendra Swarup Vs. Directorate of Enforcement (2020) 16 SCC 561 and S.M.S. Pharmaceuticals Ltd. Vs. Neeta Bhalla & Anr. (2005) 8 SCC 89 support the inference against the three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 paragraph 8 of the Judgement : "Now, the most significant feature is that the Mills were mindful and cautious enough not to accept this proposal and they came out with a clear defence at this stage itself that in no event, they will agree to that proposal and insisted that the payment would be made only in Indian currency, to a person residing in India, by way of deposit, and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant 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 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 dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble 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 established against the three individual Appellants. We further hold that the contravention of Section 9 (1) (c) of FERA 1973 for an amount of Rs. 84,34,943/- charged under SCN XII stands established against the Appellant Company and the contravention of Section 9 (1) (c) of FERA 1973 r/w Section 68 (1) ibid stands established against the three individ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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