1999 (4) TMI 665 - AT - FEMA

Summary

Issues:
- Imposition of penalty under section 9(1)(a) and (c) of the Foreign Exchange Regulation Act, 1973
- Dispensation of pre-deposit of penalty amount
- Violation of foreign exchange regulations due to loan transactions with non-residents
- Admittance of executing pronotes and acknowledgment of debt
- Contention regarding unintentional violation and lack of knowledge about non-resident status
- Consideration of plea for leniency based on age and health condition of the appellant
- Upholding of penalty by the Adjudicating Officer

Analysis:

The judgment by the Appellate Tribunal of the Foreign Exchange Regulation Appellate Board concerns an appeal against the imposition of penalties totaling Rs. 15,000 on the appellant for contravening section 9(1)(a) and (c) of the Foreign Exchange Regulation Act, 1973. The appellant had taken a loan from two non-resident partners and admitted to executing pronotes acknowledging the debt. The appeal involved the dispensation of the pre-deposit of the penalty amount, which was waived due to uncontested contentions. The tribunal proceeded to hear the appeal on merits, ultimately dismissing it.

The facts of the case revolve around the appellant borrowing a total of Rs. 1 lakh from two non-resident partners and subsequently repaying a portion of the amount. The appellant contended that he was unaware of the non-resident status of the partners and believed them to be Indian residents. Despite the appellant's argument of unintentional violation and lack of knowledge about the partners' status, the tribunal found that the acknowledgment of debt through pronotes and admission of receiving a foreign currency draft established a clear violation of the foreign exchange regulations.

The appellant's representative argued that the monetary transaction was natural, considering the partners' business activities in India, and requested leniency due to the appellant's age and health condition. However, the tribunal, after considering all circumstances, including the amount involved and the plea for leniency, upheld the penalty imposed by the Adjudicating Officer. The tribunal found that the penalty was not excessive, given the circumstances, and dismissed the appeal, directing the appellant to deposit the penalty amount within 30 days.

In conclusion, the judgment affirms the imposition of penalties on the appellant for violating foreign exchange regulations by engaging in loan transactions with non-residents, despite the appellant's contentions of unintentional violation and lack of knowledge about the partners' non-resident status. The tribunal upheld the penalty, considering all relevant factors, and dismissed the appeal, requiring the appellant to deposit the penalty amount within a specified timeframe.