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TMI Blog2005 (11) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... A/99 (SCN-I) and (SCN-II) both dated 18-11-1999 (hereinafter referred to SCN-I and SCN-II. Under SCN-I the original appellant in appeal No. 704/2000 died during the pendency of the appeal and his wife Smt. Ranjan K. Shroff (appellant in appeal No. 705/2000) is substituted, appellant in appeal Nos. 705/2000 and 706/2000 have been charged for contravention of section 9(1)(a), 9(1)(d) and 9(1)(e). Under SCN-II the appellants in appeal Nos. 778/2000, 779/2000 and 780/2000 have been charged for contravention of section 19(1)(b) for transferring shares in favour of appellants in appeal Nos. 707/2000, 708/2000 and 709/2000 being the persons resident outside India without any general or special permission of the RBI while the appellants in appeal Nos. 707/2000, 708/2000 and 709/2000 were charged for contravention of section 19(1)(b) and 29(1)(b) of the Act. At the end of the adjudication proceedings all the appellants have been found guilty and separate penalties are imposed as mentioned above. The applications filed by the appellants for dispensation of pre-deposit of penalty were considered by this Tribunal. On 1-2-2005 full dispensation was granted in appeal Nos. 704/2000 to 709/2000. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocates and Solicitors for appellants in Appeal Nos. 704/2000 to 709/2000. 4. Similarly, another SCN No.T-4/80-B/SDE/99(SCN-II) 8542 (PKA) dated 18-11-1999 was issued alleging contravention of sections 19(1)(b) and 29(1)(b) to the appellants in Appeal Nos. 707/2000 to 709/2000 and 778/2000 to 779/2000 asking them to show cause why adjudication proceedings should not be held against them where reliance is placed on the documents mentioned in the Annexure A of the SCN-II which are the same as described in the Annexure A to SCN-I. 5. Shri Parag P. Tripathi , Sr. Advocate firstly contends that transactions in question pertain to the period December 1995. The appellants in appeal Nos. 707/2000, 708/2000 and 709/2000 are three daughters of Shri Kishore D. Shroff (original appellant in appeal No. 704/2000) and Smt. Ranjan K. Shroff (appellant in appeal No. 705/2000) had travelled out of India on different dates solely and entirely for educational purposes. In particular Ms. Kanan Shroff appellant in appeal No.709/2000 had travelled to USA along with her husband Shri Vijay Jayachandran for pursuing her higher studies in Architecture in August 1994 to 1996-97 on F-1 visa. Subsequently Ms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in law. 7. Shri Sarvesh Chandra, learned counsel for the appellants in appeal Nos. 778/2000, 779/2000 and 780/2000 (hereinafter referred to as the appellant Company and its Directors) commences his argument adopting legal position as to the meaning of the term person resident in India as canvassed by Senior Counsel Shri Parag Tripathi and urges that the findings arrived at by the learned Adjudicating Officer as to the guilt of the appellant company and its Directors under section 19(1) of the Act are devoid of any merit and are not sustainable. Shri Sarvesh Chandra contends that para 2 of the Notification No. 114/92-RB dated 27-4-1992 issued under section 29(1) read with section 19(1) of FERA, 1973 is not applicable in the instant case. The said Notification has granted general permission to the appellant-company to allot any share to a NRI/OCB on non-repatriation basis provided the payment received through normal banking channel. In such case the appellant-company would require to inform RBI by filing a declaration in Form DIN within the prescribed period along with details of the allotment of shares. Section 29(1) of the said Act along with the guidelines issued by the RBI req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the applicant of share, if he is an NRI, comes before the obligation of Indian company starts under section 19(1)(b). Therefore, the question of making an enquiry as to whether the person is a non-resident would arise only if the applicant for shares discloses some facts which will give rise to an occasion to make an enquiry. It is further submitted that it is not humanly possible for a transferor Indian company to determine the legal status of an applicant of shares in terms of section 2(q) read with section 2(p) unless all the facts and circumstances necessary for such determinations are made available to it. Under the provisions of the relevant Act transferor-company has no authority to call for such information and that power is available only to the investigating and adjudicating authority under the Act. Alternatively it is stated that any enquiry to that effect by a transferor- company would be of no consequences as it cannot make a determinative and conclusive decision and law does not impose an obligation which is impossible of performance. 9. Learned counsel Shri Sarvesh Chandra then submitted that in such a situation the charge of contravention of section 19(1)(b) by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson resident outside India. It is further necessary to show that he had gone abroad for uncertain period. 10. Lastly Shri Sarvesh Chandra contends that according to the respondent 16,35,700 shares were transferred in favour of Neha, Kanan and Kiran. The fact is that 5,23,200 shares were transferred in favour of M/s. Kanan Trusts whereas 5,49,900 shares were transferred to Kanan Shroff and 5,62,600 shares to Neha Shroff and nothing has been transferred to Kiran Shroff. The total of all these shares makes up to 16,35,700 but out of this 5,23,200 shares were transferred to M/s. Kanan Trusts and not Neha, Kanan and Kiran Shroff. 11. Per contra Shri T.K. Gadoo, DLA contends that core issue in these appeals is whether three Shroff daughters namely, appellants in appeal Nos. 704/2000 and 705/2000 are persons resident in India within the meaning of section 2(q) of FERA, 1973. Ms. Kanan Shroff, appellant in appeal No. 709/2000 got married to Shri Vijay J. Chandran, a non-resident and left with him for USA in or around August 1994. She was to return after two years of studies but continued to stay with her husband. The appellants are silent as to whether she ever returned back to India. Obv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant-company. He had visited India in September 1995 and August 1996 and stayed about six weeks during each of the trip. Further it will be evident from the statement of Shri Kishore D. Shroff (since deceased) dated 2-12-1998 and the statement of Shri Dipesh Sheth that the appellant company had knowledge about the residential status of said Shri Sanjay Bagai and three Shroff daughters. Learned DLA points out that services of share brokers were utilised and cheques were received as consideration of the shares. 13. The admitted facts are that the appellants in Appeal Nos. 704/2000 and 705/2000 (both parents of three Shroff daughters) transferred from their own individual funds in different quantum in the bank accounts maintained in the name of appellants in appeal Nos. 706/2000, 708/2000 and 709/2000 which were operated through GPA holders who are their parents and are also appellants herein in appeal Nos. 704/2000 and 705/2000. Further, it is also admitted that certain shares were purchased in the name of three Shroff daughters where payment was made from their bank accounts by these two attorneys, i.e. their parents holding general power of attorney. The main thrust of the arguments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing stayed in India at any time after the 25th day of March, 1947, comes to India for any of the purposes referred to in paragraphs (a), (b) and (c) of sub-clause (iii) or for the purpose and in the circumstances referred to in paragraph (d) of that sub-clause or having come to India, stays in India for any such purpose and in such circumstances. Explanation : A person, who has, by reason only of paragraph (a) or paragraph (b) or paragraph (d) of sub-clause (iii) been resident in India, shall during any period in which he is outside India, be deemed to be not resident in India; 15. The definition given in section 2(p) of the Act has restrictive meaning. As observed by the Division Bench of Karanataka High Court in RBI v. Jacqueline Chandani [1996] 86 Comp. Cas. 231 that dictionary meaning of resident is not relevant for ascertaining the status under FERA. It is well- settled that term resident contemplates a purely physical fact i.e. the fact of just being a living in a place. The above definition shows that resident coupled with intention is also a relevant factor. By combined reading of both the provisions of sections 2(p) and 2(q) an Indian will be considered resident outside In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; 18. It is also well-settled that principle of interpretation that where two views are possible adopt the one which is more favourable to the subject, cannot be applied to the Act involving economic and financial interest. The Hon ble Supreme Court in the case of UOI v. Rai Bahadur Shreeram Durga Prasad (P.) Ltd. [1971] 41 Comp. Cas. 864 observed : It is true that the regulations contained in the Act are enacted in the economic and financial interests of this country. The contravention of those regulations, which were told are widespread, are affecting vital economic interest of this country. Therefore, the rigour and sanctity of those regulations should be maintained but at the same time it should not be forgotten that section 12(1) is a penal section. The true rule of construction of a section like section 12(1) is, if we may say so with respect, as mentioned by Plowman J. In re H. P. C. Production Ltd. (1962) 446, 473 (Ch. D)] therein the learned Judge observed : I approach the question of the construction of the Exchange Control Act in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced. The Hon ble Supreme Court held that adverse presumption was to be drawn from the non-production of such a vital letter. 22. Shri T.K. Gadoo, learned DLA further contends that these appellants sought clarification from RBI only after initiation of these proceedings by the Department. Shri Gadoo led us to the conditional clarification given by the RBI saying that since you have claimed that you were on a student visa etc. which shows that RBI has not accepted their contention in toto but asked them you may have to establish your status before the Enforcement Directorate through necessary documents . Admittedly no such evidence have been produced at any stage by these appellants. Thus the presumption under illustration (g) of section 114 of the Evidence Act has not been discharged. In the background of the above discussion the findings arrived at by the adjudicating authority on the question of resident status of appellants in appeal Nos. 707/2000, 708/2000 and 709/2000 cannot be faulted with. 23. As regards the appeal Nos. 778/2000, 779/2000 and 780/2000, it is seen from the import of section 18(1)(b) read with section 19(3) that the Indian company as a transferor, is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities (P.) Ltd.; that on the basis of a Board resolution passed on 3-11-1995 and on mutual understanding between said Shri Sanjay Bagai and himself; it was decided that 35,89,400 shares of M/s. DITCO Securities (P.) Ltd. would be sold at Rs. 30 per share and funds would be placed in their company out of the local resident accounts held by Shroff family members and the total value of such shares was to be Rs. 1,76,82,000; that the shares were subscribed somewhere in December 1995 and they had received cheques on local accounts held by the members of said Shroff family and these transactions did not require services of share broker s and that the amounts so received were credited in the 3 bank accounts of M/s. DITCO Securities (P.) Ltd. He has further deposed that due to fall in market of shares and loss of faith in his company and other companies, Shri Sanjay Bagai started selling shares of these company desperately ostensibly for moving to more secured investments and therefore, insisted that Sheths should buy the shares. However, as he was not having enough liquidity, they had arranged an alternative buyer namely Shri A.K. Sharma of M/s. Mahadev Group in Delhi who were having acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f s family members. The shares were subscribed sometime in December 1995 and company had received cheque on local accounts held by the members of said Shroff family. Therefore, the statement does not show the knowledge of the appellant company about the non-residential status of three Shroff daughters prior to transfer of the above named shares in December 1995. The observations of the Adjudicating Officer on this point is thus merely based on suspicion and conjectures without concrete evidence. In such a situation neither the guidelines nor provisions of section 19 read with section 29(1)(b) of the Act contemplates any deep enquiry by the appellant company. It is well-settled principle in law that court cannot read anything into a statutory provision which is plain and unambiguous. In the case of Union of India v. Braj Nandan Singh 2005 (8) SCALE 424, Hon ble Supreme Court observed as under : A statute is an edict of the Legislature. The language employed in a statute is the determinative factor of Legislature intent. 26. In the case of State of Kerala v. P.V. Neelakandan Nair 2005(5) SCALE 424, the Hon ble Supreme Court observed that : words and phrases are symbols that stimulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... safeguard itself against the danger of basing their conclusions on suspicions howsoever strong. In the said judgment the Hon ble Supreme Court referring to its earlier decision in the case of Hanumant Govind Nargundkar v. State of Madhya Pradesh AIR 1952 SC 343 cited warning given by Baron Alderson in Reg v. Hodge [1838] 2 Lewin 227, where Justice Alderson said as under : the mind was apt to take a pleasure in adapting circumstances to one another and even in straining them a little, if need be, to force them to form parts of one connected whole; and the more ingenious the mind of the individual, the more likely was it, considering such matters, to overreach and mislead itself to supply some little link that is wanting, to take for granted some fact consistent with its previous theories and necessary to render them complete. 28. Therefore, it is well-settled legal principle that a judge is not justified in deciding a case, on his own suspicions or upon mere suspicions when there is no evidence to support his finding. In view of the above finding of the Adjudicating Officer that the appellant company has violated the provisions of the Act is not sustainable and liable to set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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