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TMI Blog2024 (11) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... as even for non-reporting. Rule 8 prescribes the time by which information in respect of transactions is to be furnished. Thus the appellant was enjoined to furnish the information in respect of transactions every 15th day of succeeding month to the respondent. Section 12(1)(b) read with rule 3,7 and 8 enjoined the appellant to furnish the information in respect of transactions otherwise it was to attract penalty. The penalty is for each failure and in our considered opinion, the phrase each failure used in Section 13 refers to failure to furnish information or delay in furnishing the information in respect of each transaction which would be taken as each failure for imposition of penalty. The argument of the learned counsel for the appellant cannot be accepted that despite contravention of the provisions of the Act and Rules, the penalty should not have been imposed on the appellant rather it should have been a warning. The argument aforesaid could not be accepted because if the contraventions are ignored and only warning given in a non-deserving case, then would be taken as a course and in that case there would be no sanctity of the provisions of the Act and nobody would make com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty has been imposed by invoking Section 13 of the Act of 2002 in ignorance of the fact that the provision even permits warning but instead of doing it, the heavy penalty has been imposed against the appellant for alleged default in reporting cash transactions in the year 2015-16. It was in respect of Overdraft Account No. 050700000501 in the name of M/s Ansar India and another Overdraft Account No.000300003101 in the name of Shri Shyam Charan Mishra. 3. It was alleged that the appellant bank failed to make a report of cash transactions of high value or there was delay in making report, the heavy penalty of Rs. 25,70,000/- has been imposed. 4. The learned counsel submitted that the RBI made a report for default of the Bank based on the statutory inspection/audit under Section 35 of the Banking Regulation Act, 1949 during the month of March and April, 2018. 5. Two bank loan accounts in Chhijarsi and Noida Branches being Account No. 050700000501 was the Over draft account in the name of M/s Ansar India and Account No. 000300003101 was the Overdraft against Term Deposits (FDR) in the name of Shri Shyam Charan Mishra. It was reported that the cash transaction of high value was not repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 12 (1)(b) of the Act of 2002 read with Rule 3(1)(A), 3(1)(B), 7(2) and 7(4) of the Rules of 2005. For every violation towards 16 CTRs, penalty of Rs. 50,000/- was imposed making it Rs. 8,00,000/- and for cumulative delay of 167 months in filing 6 CTRs, the penalty of Rs. 16,70,000/- (i.e. Rs. 10,000/- for each cumulative month s delay) was imposed. The penalty of Rs. 1,00,000/- was imposed separately alleging that the appellant bank was not having effective internal mechanism in place, as envisaged under the Act. 10. The counsel for the appellant submitted that imposition of penalty under Section 13(2) can be minimum of Rs. 10,000/- while it can be maximum of Rs. 1,00,000/- for each failure. In the instant case, the penalty of Rs. 50,000/- for each violation has been imposed while the appellant had no intention not to submit the report, rather it occurred due to bona fide mistake. Thus, extreme penalty of Rs. 50,000/- for each violation towards 16 CTRs is illegal. 11. It was submitted that alleged non-reporting of cash transactions in Loan Account No. 050700000501 for 9 months was from the month of June to October, 2015 and January, March, November and December, 2016 whereas for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the value of which is prescribed. The appellant bank failed to make report of many transactions in the years 2015 and 2016 in two Account Nos.050700000501 and 000300003101. In reply to the Show Cause Notice, the appellant bank admitted their error in non- submission of the report of high value cash transaction in two bank accounts but it was shown to be a bona fide error and, therefore, prayed for a favourable order. 16. The reference of facts as well as the provisions was made apart from the judgements of the Supreme Court and High Court to canvass that the order passed by the Director, FIU is sustainable in the eye of law, thus interference therein may not be made by the Appellate Tribunal. The elaborate arguments to contest the arguments of the appellant was made and we would deal with while recording the finding. Finding of the Tribunal 17. We have considered the rival submissions of the parties and perused the record carefully. 18. This case pertains to the alleged violation of Section 12(1)(b) of the Act of 2002 read with Rule 3(1)(A), 3(1)(B), 7(2) and 7(4) of the Rules of 2005. For proper appreciation of the facts in reference to those provisions, it would be gainful to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cument has taken place facilitating the transactions; (D) all suspicious transactions whether or not made in cash and by way of: (i) deposits and credits, withdrawals into or from any accounts in whatsoever name they are referred to in any currency maintained by way of: (a) cheques including third party cheques, pay orders, demand drafts, cashiers cheques or any other instrument of payment of money including electronic receipts or credits and electronic payments or debits, or (b) travellers cheques, or (c) transfer from one account within the same banking company, financial institution and intermediary, as the case may be, including from or to Nostro and Vostro accounts, or (d) any other mode in whatsoever name it is referred to; (ii) credits or debits into or from any non-monetary accounts such as d-mat account, security account in any currency maintained by the banking company, financial institution and intermediary, as the case may be; (iii) money transfer or remittances in favour of own clients or non-clients from India or abroad and to third party beneficiaries in India or abroad including transactions on its own account in any currency by any of the following: (a) payment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g entity shall communicate to the Director the name, designation and address of the Principal Officer. (2) The Principal Officer shall furnish the information referred to in clauses (A), (B), (BA), (C) and (D) of sub-rule (1) of rule 3 to the Director on the basis of information available with the reporting entity. A copy of such information shall be retained by the Principal Officer for the purposes of official record. (3) Every reporting entity shall evolve an internal mechanism having regard to any guidelines issued by the Director in consultation with, its regulator, for detecting the transactions referred to in clauses (A),(B),(BA),(C) and (D) of sub-rule (1) of rule 3 and for furnishing information about such transactions in such form as may be directed by the Director in consultation with, its Regulator. (4) It shall be the duty of every reporting entity, its designated director, officers and employees to observe the procedure and the manner of furnishing information as specified by the Director in consultation with its Regulator. 8. Furnishing of information to the Director.- (1) The Principal Officer of a reporting entity shall furnish the information in respect of transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o evolve an internal mechanism having regard to any guidelines issued by its regulator for detecting the transactions referred under Rule 3 (1) for furnishing information. 21. Section 13 of the Act of 2002 confers certain powers on the Director, FIU India which includes imposition of penalty on the reporting entity or its designated director of the Board or any of its employees, which should not be less than Rs. 10,000/- but may extend to Rs. 1,00,000/- for each failure. The word each failure is of great significance and we would elaborately discuss it while dealing with the arguments of the counsel for the appellant bank in reference to the challenge to the imposition of penalty. 22. It is a case where the RBI shared inspection report with FIU India on 24.08.2018. It was in following terms: The Bank submitted CTR returns to FIU India as well as reported that there were no suspicious transactions. However, they had not reported high value cash deposited in 2 loan accounts (000300003101 and 050700000501) 23. According to the appellant bank, there was no suspicious transaction. However, the RBI found high value cash deposits in Account Nos. 000300003101 and 050700000501. On the recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling 6 CTRs. The delay to submit 6 CTRs was found established and otherwise as per Rule 8(1) of the Rules of 2005, the reporting entity has to file CTR to the Director, FIU India by the 15th day of the succeeding month. The Bank in its oral submission on 03.01.2020 admitted delay in filing of 6 CTRs and accordingly allegation against the appellant bank was found proved. Non reporting of 16 CTRs was also found proved. 26. The allegation for their failure to put in place an effective internal mechanism to detect and report CTRs was also found proved. It is a case where the bank failed to contest the allegation aforesaid and for that reason penalty of Rs. 1,00,000/- was imposed. 27. The learned counsel for the appellant bank contested the imposition of penalty on the ground that as and when statute permits for imposition of penalty, it is not necessary to impose the penalty. A reference of the judgment of the Apex Court in the case of Hindustan Steel Ltd. (supra). The relevant para of the said judgment is quoted hereunder: Under the Act penalty may be imposed for failure to register as a dealer: s. 9(1) read with s. 25(1)(a) of the Act. But the liability to pay penalty does not arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing the penalty. According to us, mens rea is not essential for imposing civil penalties under the SEBI Act and Regulations. The Tribunal has erroneously relied on the judgment in the case of Hindustan Steel Ltd. Vs. State of Orissa, AIR 1970 SC 253 which pertained to criminal/quasi-criminal proceeding. That Section 25 of the Orissa Sales Tax Act which was in question in the said case imposed a punishment of imprisonment up to six months and fine for the offences under the Act. The said case has no application in the present case which relates to imposition of civil liabilities under the SEBI Act and Regulations and is not a criminal/quasi-criminal proceeding. In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulation is established and hence the intention of the parties committing such violation becomes wholly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must made by the defaulter with guilty intention or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as may be prescribed. From plain reading and careful consideration of the language employed in section 12(1)(b), it becomes clear that the allegation made against the appellant was of delay in furnishing information of transactions referred to in Section 12(1)(a) of PMLA within such time as may be prescribed and it was even for non-reporting. 33. Rule 8 prescribes the time by which information in respect of transactions is to be furnished. Thus the appellant was enjoined to furnish the information in respect of transactions every 15th day of succeeding month to the respondent. Section 12(1)(b) read with rule 3,7 and 8 enjoined the appellant to furnish the information in respect of transactions otherwise it was to attract penalty. The penalty is for each failure and in our considered opinion, the phrase each failure used in Section 13 refers to failure to furnish information or delay in furnishing the information in respect of each transaction which would be taken as each failure for imposition of penalty. Section 13 of the Act of 2002 is quoted hereunder: 13. Powers of Director to impose fine. (1) The Director may, either of his own motion or on an application made by any authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, then would be taken as a course and in that case there would be no sanctity of the provisions of the Act and nobody would make compliances. The imposition of the penalty is to ensure firm compliances of the provisions of the Act and the rules made thereunder. 35. If the facts of this case are taken into consideration, the appellants have admitted their error though said to be inadvertent. In the light of the judgment of the Apex Court in the case of Shriram Mutual Fund (supra), the penalty for the failure of the appellant to make report of the CTRs or delay was rightly imposed. It is, however, urged that the minimum penalty is of Rs. 10,000/- as against 16 CTRs, penalty of Rs. 50,000/- has been imposed though for other 167 defaults, the minimum penalty of Rs. 10,000/- has been imposed. We do not find any substance in the argument for the reason that while adjudicating the appeal, this Tribunal has limited jurisdiction in causing interference on the imposition of penalty unless it is shown to be disproportionate. The case in hand is not of that nature because the appellant bank remained reckoned defaulter in making report of cash transaction for quite long and the report was made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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