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2019 (8) TMI 133 - AT - FEMAFDI - Automatic route or not - Inward remittances made into India in the year 2008, through normal banking channels (with relevant foreign inward remittance certificates) - bidding of IPL - It is case of appellants that the appellants’ bid in respect of the ‘Rajasthan Royals’ franchise as legitimate and successful, after due scrutiny of all the information and proposed investment structure as furnished along with the bid - contravention of the provisions of Section 3(b), Section 6(2), 6(3)b & Section 42(1) of FEMA, 1999 read with Regulation 5(1) of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, Paragraph 8 of schedule of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulation, 2000, Regulation 5 of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000 and Para 9 (1)(A) of schedule 1 to the foreign Exchange Management (Transfer or issue of Security by a person Resident outside India) Regulation, 2000 - imposition of penalties. HELD THAT:- It is not open to the Respondent to invoke Section 42 (1) of FEMA and impose penalty on individuals on the sole basis that such individuals held the position of directors in the respective companies. It has been consistently held by the Hon’ble Supreme Court and various High Courts that specific findings are required to be recorded against any individual sought to be penalized under the deemed liability provisions such as Section 42 (1) of FEMA, particularly as to their specific role and function in the company. The mere fact that individuals are directors in a company cannot be the sole basis for imposition of penalty upon such individuals under Section 42 (1) of FEMA. Test for determination. The present case is not a case where it can be concluded or any benefit of doubt is given to the appellants for automatic route. The present case cannot be compared with another case of sport event, as the facts and circumstances were materially different. The real thing is how the appellants as per facts have dealt with the matter at the appropriate time and how many times. From the entire facts and circumstances, it appears to this Tribunal whether it is a bona-fide or not, but violation has occurred. The appellants were trying to obtain the post-facto approval, but were not successful - Therefore, after refusal of approval for two times, the appellants cannot be allowed to take the benefit of automatic route. In the present case, exorbitant penalty has been imposed upon the individuals arrayed herein without recording any findings on the specific roles of the said individuals. It is also important to highlight that judicial precedents clearly establish that the onus of proving the role of an individual and specifically proving that the said person was in day to day management of the affairs of the company is that of the Respondent Department. It is evident from a perusal of the Impugned Order that the Respondent has completely failed to discharge the said burden of proof. Provisions of Section 42(1) of FEMA have been simply reproduced in the Impugned Order to justify the imposition of penalty - The Supreme Court and various High Courts have consistently held that merely repeating the golden words of the section is not sufficient to create liabilities under the section. It is something more has to be brought on record to show that the person was in-charge and responsible to the functioning of the company and noticee officers have some motive and involved in the abetment for the purpose of benefit from the transaction, in question, by themselves or for the benefit of the company directly or indirectly while imposing the penalties. Similarly, the conduct of good faith, honesty and mens rea cannot be excluded from consideration while quantum of imposing penalties. In light of the parameters clearly laid down by the Hon’ble Supreme Court and various High Courts regarding the standard and burden of proof required to be discharged for invocation of deemed liability under Section 42 (1) of FEMA, the imposition of penalty on all the individuals arrayed herein is liable to be set aside on account of non-compliance with the said established parameters. It is evident that the parameters for imposition of penalty in the present quasi criminal proceedings initiated against the Appellants under FEMA have not been complied with by the Respondent while imposing the exorbitant penalty of INR 98.35 Crores vide the Impugned Order - there are contraventions happened due to bona fide or not by the appellants and it is also settled law that the plea of mens rea cannot be accepted if contraventions have happened as it is not a valid ground to ignore the offence of committed. Still there are cases where one can conclude the said contraventions are ex facie technical and venial in nature. As far as the imposition of penalty is concerned, the appellants have already deposited a sum of ₹ 15 crores with the respondent as consolidated amount on behalf of all the appellants as a pre-deposit - Considering the overall facts and circumstances, the appeals are partly allowed by modifying the order by holding that penalties already deposited by the appellants is reasonable and the same be treated as penalties imposed in the present set of appeals. Appeal disposed off.
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