9911796707
TMI Blog2025 (4) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ion process was complete and an order of penalty was passed on 27th March, 2024 the petitioner filed an application for compounding under Rule 4 of the Foreign Exchange (Compounding Proceedings) Rules, 2000 on 6th May, 2024. 3. RBI returned the said application in September, 2024 on the ground that since the adjudication order was already passed by the adjudicating authority in respect of the contraventions detected, the compounding application cannot be processed. Subsequent thereto a demand notice was issued on 17th January, 2025 directing the petitioner to pay the outstanding penalty or to submit order of the appellate authority dispensing deposit of the imposed penalty. 4. The petitioner accepted the order of adjudication and hence, not preferred any appeal from the same. Submission of the petitioner is that he may be allowed to avail the benefit of compounding at this stage. According to the respondent authority, compounding of offence is permissible prior to passing the order of adjudication. Once the order of adjudication is passed and the adjudication proceeding is concluded, there is no scope for entertaining the prayer for compounding. 5. The respondents contend that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , permit a person to borrow or lend in Foreign Exchange from or to a person resident outside India. 10. The adjudicating authority found that the petitioner contravened provision of Regulation 3 of the aforesaid Regulations. The petitioner contends that he ought to be permitted to avail the benefit of compounding the offence as adjudicated by the adjudicating authority. According to the authority, the same is impermissible in view of the provisions of the Foreign Exchange (Compounding Proceedings) Rules, 2000. 11. Stress has been laid on Rule 4 (4) of the Compounding Proceedings Rules which mentions that every application for compounding any contravention under the Rule shall be made in Form to the Reserve Bank of India along with the prescribed fee. Rule 6 of the Compounding Proceedings Rules has been placed which mentions that where any contravention is compounded before the adjudication of any contravention under Section 16, no inquiry shall be held for adjudication of such contravention in relation to such contravention against the person in relation to whom the contravention is so compounded. 12. Section 7 of the Compounding Proceedings Rules prescribes that where the compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation/ adjudication proceedings are initiated by the Directorate of Enforcement against the applicant after the date of filing the compounding application, but on or before the date of issuance of the compounding order to enable the bank to complete the compounding process within the time frame. 18. Direction 5.4 prescribes that the application for compounding will be treated as incomplete if the same is without all required details. Direction 5.6 indicates that if an application for compounding is not submitted in the prescribed format or is found incomplete due to the absence of any mandatory details, declarations, documents or the directives as prescribed, the application will not be taken up for processing and shall be liable to be returned to the applicant. 19. Direction 6.4 mentions that any case where adjudication has been done by the Directorate of Enforcement and an appeal has been filed under Section 17 or 19 of FEMA, no contravention can be compounded in terms of Rule 11 of the Compounding Proceedings Rules, 2000. The applicant shall conform in the undertaking required to be furnished as per Annexure III along with the compounding application that they have not filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and figures were not mentioned therein. The petitioner was given liberty to file fresh compounding application. 25. The learned senior counsel of the petitioner submits that, as per legal advice, the petitioner did not file any further application for compounding the contraventions. The adjudicating authority proceeded with the adjudication proceeding and passed final order on 28th March, 2024 imposing penalty of rupees ten crore. After the adjudication order was passed, application for compounding was filed by the petitioner. 26. It has been submitted by the petitioner that the petitioner is not aggrieved by the order passed by the adjudicating authority and hence, did not choose to prefer appeal against the said order. The petitioner, at this stage, seeks compounding of the offence. The prayer of the petitioner seeking compounding stood rejected and returned as not maintainable on 11th September, 2024. Writ petition was filed by the petitioner challenging the same being WPA 30030 of 2024. 27. During the pendency of the said writ petition demand notice was served upon the petitioner seeking recovery of the penalty amount. Challenging the same the instant writ petition has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of avoiding the rigmarole of the adjudication process that the provision for compounding has been incorporated in the Act. The moment the contravener foregoes the benefit of compounding the offence, the next step forward is to reach the adjudication proceeding to its finality. 32. The order which is executable at present is the order of the adjudicating authority. Not more than one order on the same set of facts, between the same parties, can be permitted to be executed is one of the cardinal principles of jurisprudence. If the prayer of the petitioner for compounding the offence after conclusion of the adjudication process is allowed, then there will be two orders; first, the order of the adjudicating authority and second, the order of the compounding authority. In respect of a contravention two orders cannot survive at the same time. 33. The compounding authority does not have the determination or the jurisdiction to cancel/overrule or set at naught the order passed by the adjudicating authority. It is only one order that survives and that is the order of the adjudicating authority. The petitioner took the risk and did not proceed with his application for compou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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