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FEMA - Case Laws
Showing 21 to 40 of 51 Records
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2014 (5) TMI 1192 - DELHI HIGH COURT
Jurisdiction to issue notice under Section 51 of FERA 1973 - HELD THAT:- This Court, upon perusal of the paper book, is prima facie of the view that as the impugned order is only a show cause notice and that too of the year 2003, the ends of justice would be met if the petitioners are given liberty to raise the issue of jurisdiction at the preliminary stage before the adjudicating authority itself.
The adjudicating authority is directed to decide the aforesaid preliminary issue. All rights and contentions of both the parties including the issue of delay and laches are left open.
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2014 (5) TMI 863 - DELHI HIGH COURT
Contravention of Section 9 (1) (d) of Foreign Exchange Regulation Act, 1973 - Payment made on behalf of foreign national without prior approval of RBI - Held that:- There can be no doubt that a retracted statement under Section 40 FERA, cannot form the sole basis for determining whether the maker of such a statement is guilty of contravening any of the provisions of FERA. It shall have to be corroborated by other independent evidence. In determining whether such a retracted statement can be relied upon, it will have to be examined whether the statement could be said to have been made voluntarily.
Statement made by Mr. Saluja contains a wealth of details on the transactions undertaken by him at the behest of either his brother Dr. R.S Saluja or others. He has explained in minute detail the entries in the loose sheets. The details on every page of the loose sheets could not have been explained by anyone other than one fully conversant with the transactions. It is impossible for such details to have been fabricated by the officials of the ED. There is nothing credible brought on record by Mr. Saluja to persuade the Court to conclude Mr. Saluja was under threat, duress or any form of coercion that at the time when he made the statement and that he did not make it voluntarily.
The entries/notings in the loose sheets recovered from his residence as explained by Mr. Saluja in his statement under Section 40 FERA fully substantiated the case of the ED that he had involved himself in transactions in violation of the FERA. Further corroboration was from the details of the STD calls exchanged between Mr. Saluja, Mr. Kedia and Mr. Shah. The fact that the foreign exchange may not have been recovered from the residence of Mr. Saluja does not weaken the case of the ED. According to the ED, the Indian currency paid to Mr. Saluja was for delivery of foreign exchange abroad. As noted in the AO, the details of the foreign bank accounts were available in the documents seized from the residence of Mr. Saluja.
The telephone number of Mr. Gopalani was found in the loose sheets recovered from the residence of Mr. Saluja. One of these loose sheets at page 19 contained instructions in writing by Mr. Gopalani. This was confirmed by the report of the hand writing expert. Mr. Gopalani did not challenge the report of the handwriting expert. He did not seek to cross-examine the expert. The report, therefore, corroborated the retracted statement of Mr. Saluja that he had received instructions from Mr. Gopalani to pay USD 50,000 to Geeta Soni. The aforementioned evidence was sufficient to conclude that Mr. Gopalani had contravened Section 9 (1) (f) (i) FERA. - Decided against Appellants.
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2014 (5) TMI 824 - DELHI HIGH COURT
Violation of Section 8 (1) of the Foreign Exchange Regulation Act, 1973 - allegation that appellant has exported the goods "only for availing export benefits" - levy of penalty - Held that:- From the inquiries purportedly made by CGI, Dubai, as reflected in the correspondence between it and the DRI, the consignment was probably not cleared by APL since there were legal problems regarding the copyright raised by the Dubai Customs. Interestingly, in the "brief investigation report", enclosed with the letter dated 12th April 2002 written by DRI to the ED, it was admitted that in order to establish that money laundering was the main motive behind the whole exercise of export "it is necessary to have on hand the export products, i.e., the cassettes." The report noted that "we do not have any representative sample of the export product and it is also not possible to get a representative sample of the export that is more than one and half year old." It was, therefore, stated that it may not be possible to establish a case of export of sub-standard goods and/or goods not matching the exact description. The report concluded that the non-clearance of goods "gives rise to doubts that the transaction may not be genuine and this indicates that there may be violations of provisions of FERA/FEMA."
What is clear from the document is that there were only doubts being expressed and there was no evidence as such to back the suspicion.
The AT misdirected itself in shifting the burden of proof of suspicion to the Appellants by invoking Section 106 of the Evidence Act.The reasons for APL not lifting the consignment can, by no stretch of imagination, be said to be within the "exclusive knowledge" of the Appellants. APL was a different legal entity based in Sharjah, UAE. Inquiries could have easily been made with APL itself as to why it did not lift the consignment.
The major premise of the entire proceedings was that through non-banking channels NIL paid a sum of ₹ 35,92,512 to APL. There was absolutely no evidence of any kind to back this allegation. In the absence of proof of the above alleged transaction, it could not have been concluded by the AT that NIL had improperly received USD 83,160 and thereby contravened Section 8 (1) FERA. Suspicion in this case was allowed to replace proof and this resulted in an erroneous order being passed by the AT. - Order set aside - Decided in favour of assessee.
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2014 (5) TMI 784 - DELHI HIGH COURT
Contravention of Sections 8(1) and 8(2) of the Foreign Exchange Regulation Act’ 1973 - Penalty - recovery and seizure of Indian currency - No opportunity for cross examination granted - Held that:- there was miscarriage of justice in denying the request of the Appellants for cross-examination of the ED officials. Allowing the request would have enabled the SD to determine whether the claim that the confessional statements were recorded under threat and coercion was credible - Although the mere discharge of the Appellants in the criminal proceedings will not ipso facto result in their being exonerated in the adjudication proceedings’ it is significant that even in the criminal proceedings the ED was unable to prove the so-called confessional statements of the Appellants under Section 40 FERA in accordance with law. A perusal of the original records shows that only the photocopies of the loose handwritten sheets are available. The originals of the Section 40 statements have not been marked as exhibits by examining the persons who recorded them.
The AT also erred in proceeding on the basis that the failure to supply English translations of the seized documents was not violative of natural justice since the author of the documents was Prem Singh. The writings on the loose sheets were in Gurmukhi and not Pushto as thought by the ED during the adjudication proceedings. If reliance was going to be placed on the said loose sheets’ then surely they ought to have been translated if they had to corroborate the retracted statements of Prem Singh and Tarlochan Singh - Order set aside - Decided in favour of appellant.
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2014 (5) TMI 288 - SUPREME COURT
Order of detention - Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, (COFEPOSA) - delay in passing the orders - Held that:- We must bear in mind that distinction exists between the delay in making of an order of detention under a law relating to preventive detention like COFEPOSA and the delay in complying with procedural safeguards enshrined under Article 22(5) of the Constitution. In view of the factual scenario as aforesaid, we are of the opinion that the order of detention is not fit to be quashed on the ground of delay in passing the same. The conclusion which we have reached is in tune with what has been observed by this Court in the case of M. Ahamed kutty v. Union of India, [1990 (1) TMI 72 - SUPREME COURT OF INDIA]
Undue and unexplained delay in execution of the order of detention vitiates it, but in the facts of the present case, it cannot be said that such delay has occurred. As stated earlier, the order of detention dated 6th of May, 2013 was served on the detenu on 11th of June, 2013. It is expected of the detaining authority to take recourse to ordinary process at the first instance for service of the order of detention on a detenu and it is only after the order of detention is not served through the said process that recourse to the modes provided under Section 7 of the COFEPOSA are to be resorted.
Here, in the present case, that occasion did not arise as the order of detention was served on the detenu on 11th of June, 2013. Therefore, in our opinion, the order of detention cannot be said to have been vitiated on this ground also.
We cannot expect the detaining authority to know each and every detail concerning the detenu in different parts of the country. Not only this, the conditions imposed while granting bail to the detenu which we have reproduced above in no way restrains him from continuing with his prejudicial activity or the consequences, if he continues to indulge. We are in agreement with the High Court that the bail order passed by the trial court in Andhra Pradesh is not a crucial and vital document and the omission by the detaining authority to consider the same has, in no way affected its subjective satisfaction.
There is no error in the order of detention and the order passed by the High Court, refusing to quash the same. - Decided against the appellant.
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2014 (4) TMI 1162 - DELHI HIGH COURT
Under-invoicing of the imports - Contravention of Sections 8 (3) read with 8 (4) of the Foreign Exchange Regulations Act - Held that:- There is nothing incriminating in the statements made by the Appellant under Section 40 FERA, admitting to under-invoicing of the imports. As far as the statement of Mr. Puri is concerned, it is seen that it was made under Section 108 of the CA and not Section 40 FERA and could not, ipso facto, be used for the proceedings under FERA.
The AO passed by the SD as well as the impugned order of the AT failed to address the submission made on behalf of the Appellant that the documents seized were not proved in accordance with law. It appears that there was no independent investigation undertaken by the ED. In order to prove under-invoicing, the value of contemporaneous import made from Hong Kong, and not from Singapore, had to be looked into. Moreover, these documents were not authenticated, as required by Section 72 FERA read with Foreign Exchange Regulations (Authentication of Documents).
This Court in M/s. Jain Engineering v. ED [2014 (3) TMI 678 - DELHI HIGH COURT] held that documents received from abroad cannot be relied upon without authentication. The failure of the ED to comply with the above legal requirements rendered the seized documents inadmissible in evidence. Without the ED discharging the initial burden of proving that the documents seized constitute credible evidence and were corroborated by other independent evidence, the question of drawing an adverse inference against the Appellant and shifting the burden to him to rebut the statutory presumption would not arise. - Decided in favour of assessee
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2014 (4) TMI 612 - DELHI HIGH COURT
Condonation of delay - Inordinate delay of 804 days in filing of appeal - Section 35 of FEMA - Held that:- Section 54 FERA permits an appeal to be filed to the High Court within 60 days. The proviso clearly prescribes that the High Court shall not entertain any appeal under Section 54 if it is filed after the expiry of 60 days of the date of communication of the decision or order of Appellate Tribunal unless the High Court is satisfied that the appellant was prevented by sufficient cause from filing the appeal in time. Even if provisions of Section 54 are taken into consideration, there is no sufficient ground made out by the appellant to file the appeal after an inordinate delay of 804 days. The delay has not been explained. The reasons given by the appellant in Annexure ‘B’ for delay in filing the appeal do not constitute sufficient cause. Rather it reveals that there was inaction and negligence on the part of the various officers. No sincere efforts were made to pursue the appeal even after objections were raised. No attempt was made for long seven months to rectify them and refile the appeal. There was slackness on the part of the appellant to take remedial steps. Application for condonation of delay cannot be allowed as a matter of routine as vested right accrues in favour of the opposite party and benefit of such right cannot be disturbed lightly - Condonation denied.
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2014 (4) TMI 585 - DELHI HIGH COURT
Violation of Section 8(1), 16(1), 9(1)(a) and 9(1)(c)of the Foreign Exchange Regulation Act, 1973 - Special Director purportedly issued a Corrigendum stating that paragraph No. 87 is deleted and in paragraph No. 88 in line No.2 after the words ‘Noticee No.1’ and before the name Mr. Stephen John Michie, the name ‘Shri Raman Narula-Noticee No.2’ is inserted - Held that:- no prior notice was issued to Mr. Narula by the SD when the Corrigendum was issued nearly one month after the original AO was passed. The Court has no hesitation in holding the action of the SD in issuing the Corrigendum dated 7th March 2005 to be in violation of Section 65 FERA. The said Corrigendum is, therefore, illegal.
In the first place, it must be noticed that Section 68 applies only to “companies.” Club Med India was certainly not a company or a firm under any law in India. Secondly, if it is taken to be an ‘association of individuals’ apart from the SCN stating that Mr. Narula was in-charge of and responsible to Club Med India for the conduct of its business, no documents or material have been referred to which could constitute the basis of such an allegation. In para 9 of the SCN a reference is made to the statement of Mr. Narula that he was given the authority to open accounts and operate them. It is pointed out that Mr. Narula was permitted to hold accounts only for the needs of Club Med India and he was not otherwise in-charge of its affairs which were being directly controlled by Club Med Hong Kong.
It is seen that for the purposes of Section 68 FERA, it was necessary for the ED to have laid a factual basis for alleging that Mr. Narula was in-charge of and responsible to Club Med Indiafor the conduct of its business. The reply of Mr. Narula to the SCN stated that the affairs of Club Med India were controlled by Club Med Hong Kong and in fact Club Med India was not a separate entity. Its accounts were also maintained under the supervision and control of Club Med Hong Kong. It is not possible, therefore, to accept the reasoning of the SD that Mr. Narula could be held liable for the activities of Club Med India under Section 68 FERA - case against Mr. Narula by the ED was not sustainable in law and that both the AO as well as the impugned order of the AT are erroneous.
As regards violation by it of Sections 16(1), 9(1)(a) and 9(1)(c) FERA - explanation offered by Club Med India that it was to receive 15% commission, but in fact, it was only issued credit notes as regards the bookings directly made by customers abroad was a plausible one. Further, there was no obligation on Club Med Hong Kong to pay Club Med India 15% commission on such bookings directly made by the customers abroad. The question of Club Med India seeking permission from the RBI would arise only if it claimed payment of the said 15% commission. As it turned out, the said commission was in fact adjusted against the payments which were to be repatriated to Club Med Hong Kong. It turned out to be only an accounting adjustment because in fact no amounts were remitted by Club Med India to Club Med Hong Kong. The explanation offered by Club Med India in reply to the SCN, as explained by its accounts which was available with the ED ought not to have been rejected by the SD. When, in fact, no foreign exchange has been utilised for making any remittance abroad, and the so-called payments which were to be received were in fact not owed to Club Med India, the question of a violation of Section 16 or Section 9(1)(a) and 9(1)(c) did not arise. It does appear that even in respect of the debit notes, the adjustments were part of an accounting procedure. The fact remains that the Indian branch neither remitted nor intended to remit the amount mentioned in the debit notes - Decided in favour of appellant.
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2014 (4) TMI 516 - DELHI HIGH COURT
Violation of the Foreign Contribution (Regulation) Act, 1976 - Donations made to political parties for the period up to the year 2009 - Violation of Section 293(a) of the Companies Act, 1956 - Receipt of donations from the State Trading Corporation and Metals & Minerals Trading Corporation of India - Respondent contends that M/s Sterlite Industries India Ltd and M/s Sesa Goa Ltd. are not foreign companies and are Indian companies - Held that:- The Foreign Contribution (Regulation) Act, 1976 was enacted by the Parliament to serve as a shield in our legislative armoury, in conjunction with other laws like the Foreign Exchange Regulation Act, 1973, and insulate the sensitive areas of national life like - journalism, judiciary and politics from extraneous influences stemming from beyond our borders - The interpretation of the term Foreign Source as defined under Section 2(e) lies at the heart of the present controversy and begs for judicial consideration - The term Foreign Source is not exhaustively defined under the Act and it assumes significance that the legislature has chosen to employ the word includes, which signifies that the entries contained in the said provision are only illustrative of what could constitute a Foreign Source.
Section 2(e)(iii) of the Foreign Contribution (Regulation) Act, 1976 treats Foreign Company within the meaning of Section 591 of the Companies Act, 1956, its subsidiaries and multi-national corporations as a Foreign Source for the purpose of the Act. The term Foreign Company is not defined in the Foreign Contribution (Regulation) Act, 1976, however it prescribes that a Foreign Company within the meaning of Section 591 of the Companies Act, 1956 would be treated as a Foreign Source for the purpose of the Act - A company, incorporated outside India, however in a sense domiciled within the territory of India by establishing a place of business therein, should be brought within the regulatory framework of the Companies Act, 1956 and in public interest be saddled with some rudimentary obligations.
In light of the legislative mandate flowing from clause (1) of Section 591 of the Companies Act, 1956, Vedanta is unquestionably a Foreign Company by virtue of the fact that Vedanta is incorporated outside India, i.e., in the United Kingdom and has established its place of business in India, as it operates in the territory of India through its subsidiary companies like Sterlite and Sesa - A careful analysis of Section 591(2) reveals that if more than one-half of the share-capital of a company incorporated outside India and having an established place of business in India (A 'Foreign Company', within the meaning of section 591(1) of Companies Act, 1956) is held by one or more citizens of India or by one or more bodies corporate incorporated in India, or by one or more citizens of India and one or more bodies corporate incorporated in India, whether singly or in the aggregate, such company shall comply with such of the provisions of this Act as may be prescribed with regard to the business carried on by it in India, as if it were a company incorporated in India.
Therefore, by virtue of the fulfilment of the conditions prescribed in clause (2) of Section 591 of the Companies Act, 1956, a fiction of law operates, and even a Foreign Company as defined is clause (1) is obliged to scrupulously comply with all the provisions of the Companies Act, 1956 as if it were a company incorporated in India and not merely comply with sections 592 to 602 of the 1956 Act - The nationality of a company is determined exclusively on the touchstone of the situs of its incorporation and there exists a profusion of judicial authorities to this effect. The nationality of its shareholders or directors have no bearing upon the nationality of a company, the company being a distinct jural entity having an existence independent of its constituents.
Thus, Vedanta is a Foreign Company within the meaning of Section 591 of the Companies Act, 1956 and therefore, Vedanta and its subsidiaries – Sterlite and Sesa are a Foreign Source as contemplated under Section 2(e)(iii) of the Foreign Contribution (Regulation) Act, 1976. However, in view of the operation of clause (2) of the Section 591 of the Companies Act, 1956, Vedanta would be required to comply with the provisions of the Companies Act, 1956 like a company incorporated in India.
Since more than one-half of the nominal value of the share-capital of Sterlite and Sesa is held by Vedanta and Vedanta is a corporation incorporated in a foreign country or territory within the meaning of section 2(e)(vi)(c) of the Foreign Contribution (Regulation) Act, 1976, the present case is also squarely covered under Section 2(e)(vi)(c) of the Foreign Contribution (Regulation) Act, 1976 - Prima-facie the acts of the respondents inter-se, as highlighted in the present petition, clearly fall foul of the ban imposed under the Foreign Contribution (Regulation) Act, 1976 as the donations accepted by the political parties from Sterlite and Sesa accrue from 'Foreign Sources' within the meaning of law – Decided in favour of appellants.
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2014 (4) TMI 466 - DELHI HIGH COURT
Condonation of delay - decision to file appeal was taken at various levels which consumed valuable time - Held that:- Apparently, the present appeal has been filed after an inordinate delay of 775 days. Section 35 of FEMA permits the appeal to be filed within 60 days from the date of communication of the decision or order of the Appellate Tribunal on any question of law arising out of such order. The proviso authorises High Courts to extend the appeal to be filed within next 60 days, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal. Since the impugned order was passed by the Appellate Tribunal constituted under FEMA, in my view, the provisions of Section 35 of the FEMA are attracted and the period of limitation for filing the appeal cannot be extended beyond 120 days - Condonation denied.
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2014 (3) TMI 1118 - ATFEMA NEW DELHI
Directions to summon the documents mentioned in the application and to give liberty to the appellant to file a detailed reply after the due examination of the said documents - Held that:- In the circumstances, it is not appropriate for the Appellant to contend that he is not entitled to file the reply to the notice issued by respondent under section 8(1) of PMLA till he gets the copies of documents. Appellant could not be permitted to delay the proceedings pertaining to provisional attachment order in the facts and circumstances before the Adjudicating Authority.
Consideration of another fact in the facts and circumstances shall be relevant which is that if the Hon'ble Supreme Court has not stayed the order of Hon'ble Gujarat High Court regarding the right of the Appellant to get the copies of some of the documents on payment of charges, then what steps had been taken by the Appellant and M/s. Neptune Overseas Limited from 9th February, 2012 up till the order of Hon'ble Supreme Court on 22nd March, 2012 was passed or even thereafter as according to the learned counsel for the appellant the said order regarding getting the copies of the documents has not been stayed.
Perusal of documents whose summoning or production is prayed by the appellant also reveals that the particulars given are not complete and on the basis of the information given by the appellant neither it could be inferred that they are relevant nor they can be summon easily nor the direction could be given by the Adjudicating Authority to concern authorities to produce the documents whose production is sought by the appellant. The prayer of the Appellant is liable to be declined also on this ground.
For 'reason to believe' the respondent's belief must be in good faith and it should not be a mere pretence and it would be open to examine whether 'reasons for believe' have a rational connection or a relevant bearing to the formation of the belief. On consideration of section 5 and section 8 of the Act, it is apparent that section 5 contemplates and requires that respondent not only to have 'reasons to believe', but the reasons for such beliefs have to be recorded in writing. Whereas section 8 requires that on receipt of complaint, if Adjudicating Authority has reason to believe, it can issue a show cause notice, but it does not require that these reasons are to be recorded in writing by Adjudicating Authority. The satisfaction of the adjudicating authority for having the reasons to believe is formed on the basis of complaint sent by the enforcement directorate under section 5(5) of the Act, including copy of the provisional attachment order, copy of charge sheet and other material. In the circumstances, the appellant cannot deny that he cannot be completely absolved of illegality alleged against him and the company.
The plea raised by the appellant in his defense that in respect of FIR for the commission of offence, further investigation has been ordered by the learned Magistrate would also not entitle him to summon the documents as alleged by him. Whatsoever is the relevance of such further investigation has to be canvassed before Adjudicating Authority. The Appellant, however, could not contend that he would not file the reply to the notice under section 8(1) of PMLA unless he gets the copies of the documents whose production was sought in the application under section 11 of PMLA.
In the present case this will only be for the academic purpose because admittedly 180 days have not yet expired. Whether the time of 180 days can be extended or the time taken by the Adjudicating Authority in summoning the record or to do anything in discharge of its power under section 11 of PMLA is to be excluded or not, is not to be decided in the present appeal in the facts and circumstances because the time shall be expiring on 16th April, 2014 and the arguments have been completed before the Adjudicating Authority who has been stayed from passing the final order.
It is not necessary to implead every person or company or legal entity from whom the record is to be summoned or to whom the directions are to be issued for production of the documents nor such parties are to be impleaded for the purpose of production of documents. The Adjudicating Authority and this Tribunal under the relevant provisions can summon any record and can take steps as contemplated under section 11 and/or under section 35 of the Act and such powers cannot be restricted on the ground as has been alleged by the learned counsel for the respondent. This plea on behalf of the respondent is therefore, repelled.
This Tribunal is not inclined to grant any relief sought by the appellant in this appeal.
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2014 (3) TMI 719 - DELHI HIGH COURT
Illicit sale and purchase of foreign exchange from and to unknown persons. - contravention of Sections 8(1) and Section 8(2) read with Section 64(2). - retraction of statement by the accused as having been given under the duress and coercion. - Held that:- for the statement by one noticee under Section 40 FERA to be used as evidence against another co-noticee it must be shown that the said statement inculpates the person making it. Otherwise such statement has no value whatsoever.
The statement of Shri Parveen Kumar in the present case does not inculpate him at all. Even when he admits to making the entries in the diaries, he seems to wriggle out by explaining that he did it at the instance of Shri Rikabh Chand Jain. He also does not seem to have been aware of the implications of making of those writings.
It is futile for the department in the present case to rely on the statement of Shri Parveen Kumar Mehta as substantive evidence to hold him and the co-noticee guilty of contravention of Sections 8 (1) and 8 (2) of the FERA.
The proposition noted by the SD that corroborative evidence is needed “to make the retraction meaningful and worthy of credence” is also erroneous. In fact, since the said admissional statements were retracted even the admissible portion, if any, of the said statements would require corroboration by other independence evidence. This legal position was entirely missed by both the SD as well as the AT
What is also striking in the present case is that while the Indian currency was recovered from the residence and dicky of the scooter, no foreign exchange was recovered. The mere fact that Indian currency was recovered does not establish the violation of the FERA by the Appellants. It had to be shown that the said money was related to illegal transactions falling within the ambit of FERA.
For all the aforesaid reasons, the AO dated 30th August 1990 passed by the SD and the impugned order dated 15th June 2007 passed by the AT are hereby set aside. - Decided in favor of appellant.
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2014 (3) TMI 678 - DELHI HIGH COURT
Under-invoicing of import - manipulation this under invoicing was done for foreign exchange reasons to keep their value below the licensing restrictions imposed on them by the Indian authorities. - Levy of penalty for contravention of Sections 8 (1) read with Sections 68 (1) and 68 (2) of the Foreign Exchange Regulation Act, 1973 (“FERA”) - Held that:- It was incumbent under Section 72 (ii) FERA read with Clause (a) thereof for each of the documents gathered from outside India to be authenticated by the concerned officers of the Indian High Commission in both the UK and Italy. In the present case admittedly documents were simply forwarded by the office without any authentication as such. The procedure for authentication is set out in the Foreign Exchange Regulations (Authentication of Documents) Rules 1976. Clearly the said procedure was not followed in the present case.
In the absence of authentication of the documents obtained from outside India in terms of the Rules prescribed for that purpose it was not open to the Commissioner to straightway rely on the said report as substantive admissible evidence for the purpose of holding the Appellants to be in violation of Section 8 FERA.
A perusal of the AO shows that it was based entirely on what was stated in the SCNs issued under the CA (Customs Act) and there was no investigation to verify the particulars set out in the said documents. It was unsafe for the AO to proceed on the basis of the above documents to hold the Appellants guilty of contravention under Section 8 (1) FERA. - order set aside - decided in favor of appellant.
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2014 (3) TMI 210 - MADRAS HIGH COURT
Forfeiture of property - Joint ownership being wives - scope of the term relative and the illegally acquired property - validity notice issued u/s 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property ) Act 1976 (SAFEMA) - principles of natural justice - validity of composite orders - Proceeding under COFEPOSA - Held that:- or issuing notice under Section 6(1), the competent authority need not come to a conclusion that the properties under the said notice are illegally acquired properties. Such conclusion is warranted only after hearing the person to whom Section 6(1) notice is issued. But what is necessary is that the competent authority must have reason to believe that all or any of such properties are illegally acquired properties, for the purpose of issuing notice under Section 6(1).
If the competent authority has reasons to believe that the properties under dispute were acquired out of illegal sources of income such satisfaction is enough to call upon the concerned person to show cause. Insufficiency of the reasons recorded is different from no reasons recorded. Whether reasons stated in the notice would satisfy the requirement is the question not for this Court to go into it, as the same is the subjective satisfaction of the competent authority.
The notice issued under Section 6(1) is in accordance with law and does not vitiate the proceedings. - Decided against the petitioners.
Principle of natural justice - Held that:- Apex Court has found that non-supply of documents relied on by the respondent therein will not amount to violation of principles of natural justice, where there is substantial compliance of natural justice and no prejudice is caused on account of non-supply. It is found by the competent authority that wives have no independent sources of income and they have acquired the properties only through the illegal income derived by the husband/detenu. By perusing the passports filed by the husband, the competent authority has come to the conclusion that during the relevant period the detenu was not employed in Dubai but he was available only in India and that the remittances during that period have been made not from his own earnings made at Dubai. Thus, in the absence of any other materials placed before the competent authority, he has rightly come to the conclusion that those remittances were made not through the legal source of income derived by the detenu. The petitioners have miserably failed to discharge their burden to disprove the said contention as required under Section 8 of the said Act. - Decided against the petitioners - all petitions dismissed.
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2014 (3) TMI 170 - DELHI HIGH COURT
Issue of notice at old address - principle of natural justice - proceedings under Foreign Exchange Regulation Act, 1973 imposing penalty of Rs. 50 lacs on each of the petitioners. - Held that:- though respondent no. 2 was aware as far back as 17th July, 2000 about the new address of petitioners (as is apparent from the summons issued to the petitioners by respondent no. 2 itself), yet on 20th August, 2002, it issued show cause notices to the petitioners at their old address. It is pertinent to mention that at the old address, the petitioners were not served and the service report states that they are no longer residing there. Consequently, this Court is of the opinion that in the present cases, there has been violation of principles of natural justice and the petitioners had no opportunity to defend themselves.
Regarding alternate remedy available to petitioners - Held that:- alternative remedy is only a rule of prudence and not a statutory prohibition. It is settled law that when there is violation of principles of natural justice, a writ petition is certainly maintainable as held by the SC in In Whirlpool Corpn. Vs. Registrar of Trade Marks [1998 (10) TMI 510 - SUPREME COURT] - matter remanded back.
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2014 (3) TMI 97 - DELHI HIGH COURT
Violation of FERA - hawala payments - Retracted confession - Unreasonable and excessive penalties for Violation of FERA - Held that:- With the evidence on record clearly pointing to the involvement of BTC and with the involvement of its partners also being demonstrated, there was no error committed by SD in proceeding to hold BTC and its partners guilty of contravention of Sections 9(1)(b)(d) and (f) of the FERA. There was no misapplication of Section 68 of the FERA which, in principle and by analogy, could be extended to contravention by the partnership firms. This is in consonance with Section 25 of the Partnership Act. Once it was established that the illegal acts were committed by the firm itself, then there was no difficulty in applying Section 68 of the FERA.
The order of the SD may not have explained the precise basis for arriving at the penalty amount of Rs. 2,00,00,000 imposed on BTC and Rs. 1,00,00,000 each on Mr. Lekh Raj Chopra and Mr. Ramesh Kumar Chopra. However, Section 50 of the FERA does envisage a penalty five times the amount involved in the violation. In the present case, that amount is in excess of Rs. 10,00,00,000 and, therefore, on the basis of the parameters set out in Section 50, it cannot be said that the penalty imposed on BTC and the two Appellants, i.e., Mr. Lekh Raj Chopra and Mr. Ramesh Kumar Chopra is excessive or unreasonable or illegal. The penalty imposed in the order dated 10th April 1986 by the SD did not preclude him, on remand, from determining afresh the penalty amount.
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2014 (3) TMI 57 - DELHI HIGH COURT
Receipt of payment Non-Resident External (‘NRE’) Account from Smt. Sarita Mediratta resident of UK - Making payment to Shri Sunil Narang, a resident of Malviya Nagar, New Delhi on behalf of Smt. Sarita Mediratta - Penalty for Violation of FERA - Held that:- the evidence that has come on record that there is nothing to show that the Appellant made payment of Rs.5.25 lakhs “in lieu/as compensation for” to the credit of Shri Sunil Narang on behalf of Smt. Mediratta. Neither Shri Hari Ram Aggarwal nor Shri Sunil Narang appears to have any nexus with the Appellant as such. He is not shown to have entered into any transaction with R.K. Verma, an NRI whose name finds mention in the adjudication order.
The key element for finding that the Appellant violated Section 9 (1) (d) read with Section 64 (2) FERA is missing in the present case. The statement of Shri Narang regarding arranging the NRE draft from his sister’s account does not by any mean implicate the Appellant Suresh Kejriwal.
The facts concerning Shri Narang, Shri Aggarwal and their transactions, if any, with Smt. Mediratta cannot be stated to be within the personal knowledge of the Appellant. The so-called admission statement of the Appellant, which was retracted by him, could not be relied upon in the absence of independent corroboration. - Appeal allowed - Decided in favor of appellants.
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2014 (2) TMI 976 - DELHI HIGH COURT
Foreign exchange remittance - liaison office (‘LO’) in India - salaries and emoluments of the empaloyees are payable by the Head Office (‘HO’) - contravention of Section 8(1) of the Foreign Exchange Regulation Act (‘FERA’), 1973 - Held that:- The Court finds that both the AO and the AT erred in proceeding on the basis that the employees of the parent corporation, seconded to the Appellant, were ‘borrowed employees.’ There is no question of the Appellant being an ‘agent’ of Mitsubishi, Japan. The Appellant, as a LO, is not permitted to undertake any commercial activity. The letter dated 30th January 1976, issued by the RBI under Section 29(2) of the FERA granting permission to the LO to operate clearly states that the LO would only undertake the liaison activities relating to import/export trade, collection of commercial, industrial and other business information in Tokyo etc. and that “Excepting the said promotional work, the Indian offices will not undertake any activity of a trading commercial or industrial nature without the prior permission of the Reserve Bank of India.”
Significantly, with the AO itself finding the Appellant not liable under Section 9(1)(c) of the FERA on the ground that there was no debt owed by the Appellant to the parent company, it could not have held that there was a liability owed by the LO to the parent company for the purposes of Section 8 (1) (b).
AO dated 10th February 2004 and the impugned order dated 30th October 2007 of the AT set aside - Decided in favor of appellant.
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2014 (2) TMI 929 - BOMBAY HIGH COURT
Contravention of the provisions of section 13 of the Foreign Exchange Management Act, 1999 (FEMA) - The petitioner seeks an order directing the respondents to supply all the documents referred to in a complaint dated 13.07.2011 and not annexed to the complaint and the show cause notice and an order quashing a letter dated 04.06.2013 by which the respondents refused to furnish the documents to the petitioner. - Held that:- the petitioner is entitled to be furnished the documents referred to in paragraph 3(k) of the letter dated 22.08.2011.
The respondents shall be entitled to either issue a fresh show cause notice and proceed afresh on the basis thereof in accordance with law or to furnish the documents in paragraph 3 of the letter dated 22.08.2011 and thereafter form an opinion afresh under rule 4 after affording the petitioner a fresh opportunity to show cause as contemplated under Rule 4. On Mr.Setalvad's application, the operation of this judgment and order is stayed for a period of six weeks, in view of his statement that in the meantime the Special Director, Directorate of Enforcement will not proceed with the hearing pursuant to the impugned notices. This stay will not however, prevent the respondents from proceeding with the matter in accordance with this judgment.
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2014 (2) TMI 883 - DELHI HIGH COURT
Contravening Section 8 (1) of the Foreign Exchange Regulation Act, 1973 (‘FERA’) - remittance of foreign exchange without prior permission of RBI - Held that:- The question of the Appellants “acquiring” or “otherwise transferring” any foreign exchange as a result of the foreign holding company remitting funds to the Appellants for disbursal of the salaries of the employees seconded to them did not arise. Further, the question of the Appellants having to repay the foreign holding company the sum paid abroad also did not arise. Factually, there was no attempt made by any of the Appellants to repay any such amount to the foreign holding company.
Also, no reasons have been given in any of the AOs for the penalty imposed in terms of Section 50 FERA. Consequently, in all these cases, the determination of the penalty amount by the AOs is also held to be untenable in law. - order against the appellant set aside - Decided in favor of appellant.
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